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Advance Payroll, Ltd. features Mr. Cavalluzzi's article: "ARE YOU THE PROBLEM OR THE SOLUTION" in their August 2009 newsletter.
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Mr. Cavalluzzi's article "LEAN MANUFACTURING, ARE YOU READY?" is the featured article for Septemeber, 2007 at     View the Article.
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James Cavalluzzi, Expert Author                            James Cavalluzzi, Expert Author at Scopulus Business Articles




"FORMAL REPORTING IS AN ESSENTIAL TOOL"    ©  by James Cavalluzzi:  September 24, 2009 
  Formal progress reports may seem tedious and unnecessary to some, but they are a important and useful tool in today's fast paced business.       DOWNLOAD    READ

"PREVENTIVE MAINTENANCE PROGRAMS - A LOW COST SOLUTION"    ©  by James Cavalluzzi:  August 31, 2009 
  You don't need to purchase those expensive software packages to establish a workable preventive maintenance program.  You can create a ...       DOWNLOAD    READ

   ©  by James Cavalluzzi:  August 04, 2009 
  Today, more than ever, keeping up to date in your field is essential to success.  We all must continue to impact the bottom line to demonstrate...   DOWNLOAD   

"POSITIONING YOURSELF DURING A RECESSION"    ©  by James Cavalluzzi:  April 27, 2009
  It is inevitable that some companies will not weather the storm.  Those that have ignored implementation of continuous improvement and lean ...     DOWNLOAD    READ  

"10 REASONS TO OPTIMIZE INDIRECT LABOR"    ©  by James Cavalluzzi:  February 12, 2008 
  One of the most overlooked costs to production is indirect labor.  It is easy to dismiss indirect labor as a necessary evil that companies must ...     DOWNLOAD    READ  

"GETTING A HANDLE ON PRODUCTIVITY"    ©  by James Cavalluzzi:  October 10, 2007
  Your business is growing, you are hiring more people, everyone in your organization has gained responsibilities you are working overtime, yet ...     DOWNLOAD    READ

"ARE YOU THE PROBLEM OR THE SOLUTION?"    ©  by James Cavalluzzi:  June 26, 2007
  It is usually not what you are doing, but what you are percieved to be doing; not who you are, but rather, who you are percieved to be.  Most ...       DOWNLOAD

"ISO FOR THE SMALL BUSINESS"    ©  by James Cavalluzzi: June 05, 2007
  As daunting as the problem mayseem, with a little planning it can be much easier than you might think.  The usual route to ISO is to enroll in ...     DOWNLOAD

"GROWING YOUR EMPLOYEES"    ©  by James Cavalluzzi:  May 31, 2007 
  The importance of reinvesting in your business is no secret.  If you want to remain competetive, you need to ensure thatyou are using the latest ...  DOWNLOAD

"OFFSHORING - ARE THE SAVINGS WORTH THE COST"    ©  by James Cavalluzzi:  May 24, 2007
  The low cost of labor in many foreign countries makes expanding operations outside of the U.S. an attractive idea, but as the old saying goes ....    DOWNLOAD

"THE HIDDEN WORKFORCE"    ©  by James Cavalluzzi:  May 08, 2007
  Contrary to popular belief, their is a very large and growing source of quality recruits out there waiting for you to find them.  Do you have a plan ...    DOWNLOAD

  What is Lean Manufacturing?  We all have our ideas, however, if you haven't been formally trained or deeply involved, odds are, you are thinkin...     DOWNLOAD


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© by James Cavalluzzi: September 24, 2009


Are there merits to formal reporting or is it just a waste of everyone's time?  When reporting is done for the sole purpose of reporting, it usually will become nothing more than a nuisance.  It will become a waste of time and energy, not only for the people who have to write them, but also for those who have to read them.  Eventually they stop being carefully read.  Then, since they are no longer being carefully read, they will cease to become carefully written, and thus, lose their importance and often times are abandoned altogether.  The typical argument against formal reporting is that it allows much more time to get the actual work done; and isn't that what we're all about anyway?  Though on the surface this may appear to be rational, in the long run it will severely undermine your ability to perform up to management's expectations.  Formal reporting is a proven stopgap against all the things that stand in the way of success.  They may seem tedious and unnecessary to some, but they are an important and useful tool in today's fast paced business environment.


Effective project reporting is an invaluable tool for keeping management up to date on what is happening in their departments and a great source of pertinent information for relaying progress to upper management.  Not only does it create an opportunity to get hard facts, but it is a good means of keeping those facts at hand and in one convenient location.  Reports facilitate the continuous monitoring of departmental workloads.  This makes it much easier to assign new projects while balancing current work.  By continually monitoring workloads you will have the ability to adjust staff and budgets accordingly.  How can you tell what your budget concerns are if you do not have an accurate handle on the progress of your workload?  These reports are an efficient means by which to judge the effectiveness of an individual as well, affording a simply way to discover dead ends, bottlenecks, and misdirection before they get to far out of bounds.


Formal status reports work as a log or record of past endeavors which is useful in several ways.  It keeps us from reinventing the wheel by providing detailed documentation of the reasons something may not have succeeded or been applicable in the past.  They are quite useful when you run across a problem that seems to have occurred before.  You can go back over your notes and reports to determine what was previously attempted, both successfully and otherwise.  I have worked places where the same ideas seemed to pop up every few years, (usually when a new manager is in place), I could then bring forward valid reasons for determining whether or not the project should be undertaken.  Then you can check to see if circumstances have changed or if the controls are no longer in place.  When reviewing a project that may not have been feasible previously, It allows us to save a significant amount of time by highlighting technology that did not exist before, but now just might make the project goals attainable.  These reports are also a wonderful template for projects that are "similar to" work we have performed successfully in the past and, therefore, can be a great time saver as well as helping to prevent us from running into any of the brick walls or pitfalls we may have encountered earlier.


Accountability is another practical use for formal reporting.  I myself discovered a long time ago that we are really capable of doing much more than we thought we were.  By pushing your employees forward they too will accomplish much more.  If you give someone a month to do something that should take two weeks, it will take a month.  Likewise, if you give someone a month to do two months worth of work they often will get about six weeks of work done.  What would you rather see accomplished in a month; two weeks work or six weeks work?  It is rather easy to say you have too much to do; it is quite another to prove it on paper.  Some individuals need that little push now and then to keep them on track while others may need to be reined in from time to time.  Requiring employees to keep a log of project events causes them to review project status and to develop contingencies.  You really don't want to wait until the project is at its deadline to find out that it is far from complete and worse yet, over budget.  Similarly you shouldn't wait until review time to admonish someone for past mistakes, when you can easily minimize or avoid that damage by promptly addressing them now.  It is much wiser to slow the train before it jumps the track.  This accountability allows us to keep those small or undesirable projects in the spotlight and progressing smoothly.  By staying on top of these projects we will have the ability to reprioritize while it is still useful to do so and we can readily put a stop to those projects that eventually get mired down or offer diminishing returns. 


Carefully written reports are handy at employee evaluation time.  They are an excellent source of past accomplishments as well as a valuable record of the progress made in meeting assigned goals, and not just for an individual employee, but for the department as a whole.  These reports will help to define the strengths and weaknesses of your department or of an individual.  They will help to expose those areas that may require improvement.  Since priorities within companies are often changing, formal reports afford management a means of determining if a project should be shelved or if additional resources should be assigned.  They remove the emotion from a manager's assessment of an employee's performance.  You will be hard pressed to find better evidence of an employee's worth than what is outlined in their project reports.


Yet another good argument in favor of formal reporting is the dissemination of information.  Whether you need to update the rest of your department, the whole organization, or the public sector; formal reports are a valuable source of relevant information and often times this information is useful to others inside your company.  One highly overlooked asset to these reports is the opportunity to mine information and ideas from other people.  often times when you hit a wall there is nothing better than a different point of view to get you back on track and formal reporting is an informal style of brainstorming.  These records are a perfect asset in determining future quotes and estimates.  There have been numerous occasions when I have been able to go back and get costs for fixtures, equipment, services, and the like.  The truly wonderful thing is that these numbers are real, not guesses, and they are of items that are actually working in your facilities and meeting your needs.  They simply need to be adjusted for inflation and the current state of your economy. 


Status reports are a good thing, but you need to keep them simple and to the point.  It is a lot of wasted time if people are reading and writing reports just because they are required to.  Don't put it off until the last minute and just slap together some meaningless pages loaded with mindless rambling; take the time to create a document that will benefit everyone in your organization.  Try to keep in mind the real reasons you are reporting and attempt to make them as useful as possible.  Make them a great outline of your current activities while documenting an invaluable reference for the future.  Taking the time to write those reports may seem tedious and time consuming, formal reporting, if done with the purpose with which it is intended, is an essential tool for any business and well worth the effort.

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©  by James Cavalluzzi: August 31, 2009


You don't need to purchase those expensive software packages to establish a workable preventive maintenance program.  Large companies with complicated equipment and huge spare parts inventories may find these canned programs advantageous and loaded with all the bells and whistles, but if you need a system that is just as effective and is quick to implement, easy to manage, and low cost, then why not create your own?  You can create a successful program by using any spreadsheet software you already have, such as Excel or Works.


First, you will need to make a list of all of your equipment, maintenance tasks, etc. that you need to monitor and assign some unique type of identification to them.  This can be a name, however, I prefer using a numbering code that tells me what type of equipment it is, where it is located (department, facility, etc.), and how many similar items I may have.  With this code I will now be able to locate, monitor and maintain all of my equipment, while tracking costs and work performed.


Next, you will need to determine the tasks or procedures needed to be performed on each piece of equipment and their frequency.  Make sure to list every task that needs to be performed, no matter how simple or obvious it may seem.  The hardest part of the whole program will be identifying these tasks.

A good place to start is with the manuals that came with your equipment.  Round up all of your manuals and identify each of them with the same identification code you assigned to its respective equipment.  The manuals will provide the essential maintenance tasks necessary to maximize your equipment life and also to meet the requirements of the applied warranties.  These tasks will usually be the obvious ones such as checking lubricant levels or calibration procedures.

Another good resource will be your equipment suppliers.  Your suppliers will either have the information you cannot find or they will be able to get that information from the manufacturers themselves.  Many suppliers have a place on their websites where you can quickly access and download old maintenance and parts manuals.  In addition, your suppliers may have information you were not aware of regarding warranty issues or newly recommended procedures to address known problems.

Finally, state, local and federal government agencies, entities, watchdogs, societies and the like will have information you will need in order to comply with codes and regulations that may be applicable to your  equipment.  For example: certain types of equipment or chemicals are strictly regulated and have set procedures for compliance.  OSHA, the Federal Codes and Regulations, and the Department of Natural Resources are examples of places you may need to research in order to ensure you are meeting all of obligations.


Now that you know what it is that has to be done, you will need to determine when it needs to get done and who it is that is actually going to do it.  The frequency of your maintenance tasks should be outlined in the same place you found the the tasks listed.  Determining who will perform each of the tasks is a little bit more difficult since there are many ways to handle it. 

Will your maintenance workers be responsible for all the tasks?  If so, you may need to hire more maintenance personnel.  A common route is to assign the simple and menial tasks to your equipment operators.  Tasks such as checking fluid levels or belt tensions can be performed at the beginning of a shift by almost anyone.  Since the operators will typically be paid a lower wage than your maintenance workers, you can often times save money by having them perform these simple duties.  You will also save a great deal of time when numerous operators simultaneously are checking their own equipment versus having one or two maintenance personnel making the rounds and checking each and every piece of equipment themselves.  Save the more involved and time consuming tasks and repairs for your maintenance department.  In some instances items may require outside services for certain intricate calibrations or the programming of controllers.


Now is a good time to gather up all of the specific and pertinent details required to perform your maintenance duties.  If someone needs to check something, they will need to know where that something is located.  This is very important, especially if you are going to have non-maintenance people performing tasks.  You will need to spell out exactly where they will find the fluid dip stick or sight glass, or where the fill opening is located.  You certainly don't want someone adding antifreeze to the oil reservoir because the radiator is little low.  You will need to state exactly what type of oil, etc. will be used.  You will need to explain how much tension may be required in a belt or how much backlash is allowable between drive gears.  Detailing specific part numbers of frequently replaced items such as air and oil filters is also a great idea.


Take all of the information you have accumulated and put it into some useful form such as a Microsoft Works database or an excel spreadsheet.  Use the column headings for the tasks, frequency, person, part numbers, etc.  Use the row headings for the equipment identification codes.  You now have all the necessary information in one place that can be easily updated or referenced in the future. 


Take the information from your database and create a worksheet or procedure which you can then post at each piece of equipment.  Post the sheets in a conspicuous location where operators and maintenance personnel can easily find them and auditors can verify that the maintenance is being carried out.  Include the maintenance items and other pertinent information along with a place to have each responsible person check off that they have completed their tasks.  You can use initials, clock numbers, whatever works best for your organization.  The check off area is essential to the success of your program.  Without this accountability, you cannot ensure that the required tasks are actually being performed.  It is a good idea to audit these procedures from time to time as well.  I have seen where persons were signing off that they were checking fluid levels, but when the equipment refused to run one day, it was determined that the oil reservoir was nearly empty.  No oil leaks could be found and subsequent discussions with the operator revealed that they were not checking the items, but were simply signing off that they were.


Along with your database a very useful tool is a maintenance log of some sort.  Again this can be a database or a simple spreadsheet.  Keep track of the work performed, the date of the work, the costs involved, and the hours spent on the work.  Tracking the hours will help you to more accurately determine your true costs for each piece of equipment, department, plant, shift, etc.  A log is great for determining the problems or occurrences that you are experiencing in your shop.  When you start to notice that you are performing the same tasks on certain pieces of equipment, you can use this information to schedule regular checks by adding the task to your database and equipment maintenance procedures.

You can also plan for the maintenance tasks that need to be performed.  When you notice recurring items at consistent time intervals which cause downtime or require replacement parts that have long lead times, you can now schedule these tasks for a time when the equipment is not being run, reducing lost production.  You can order parts just before they are needed, thereby eliminating the need to carry these parts in your inventory.  You are now moving toward predictive maintenance.  In addition to planning for your major maintenance tasks, you can now budget for them as well.  Since your log alerts you to the recurring costs in addition to the tasks themselves, you now have the ability to predict your expenses for quarters, years, departments, plants, etc.; and you can use this information to determine your overhead with much more accuracy. 

One more advantage of the log is the ability to determine when certain equipment has reached the end of its useful life.  You can tell, without any doubt, that a machine has become obsolete.  When the annual maintenance costs for an old slow piece of equipment exceed the cost for a new state of the art piece of equipment, you can easily justify the purchase of the new equipment.  So put together that maintenance program and start increasing your up time while decreasing your maintenance costs.

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©  by James Cavalluzzi:  April 27, 2009 

You can be ready to hit the ground running when the recession is over if you spend wisely and make use of your extra time now.  The usual response to a downturn in the economy is to overreact and stop spending entirely.  This not only fuels the recession, but severely hinders your chances of gaining a significant increase in market share. Only you know your true spending limitations. If you've done your work up front; improving throughput and eliminating waste, then you should be in a position to keep on spending.  This doesn't mean you spend unreasonably; just that you should continue to spend if you have the resources.

It is inevitable that some companies will not weather the storm.  Those that have ignored implementation of continuous improvement and lean manufacturing will find it difficult to survive in a poor economy.  At the very least, if they make it out of the recession at all, they will not be the same company they were prior to the downturn.  If you know your competition, and you can recognize those which are faltering, then you can position yourself to take on the business they can no longer handle.


As your business begins to slow, do what you can to avoid layoffs.  Simply because everyone is doing it does not mean it is a good idea.  Short term gains most often bring long term losses.  Let the lemmings run off of the cliff without you.  A lot of time and money was invested to train those workers, so why just let them go?  You wouldn't throw away your machinery, so why throw away your employees?  Take advantage of the additional time you now have to do those things you said you didn't have time for in the past, things which will improve your bottom line.  Things which will position your company to take on the business being cast off now, as well as the business that will come after the recession.

Make use of that extra time for house cleaning.  Get rid of all those old parts that couldn't be repaired.  Sell off or recycle raw materials that you no longer have a use for.  Organize those items you still use. Re-arrange your warehouse or departments for better work flow.  Clean and paint your equipment so it will continue to serve your needs long into the future.

Now is great time to train your workforce.  Make use of the extra time you have to establish a training program.  Create those "Job Descriptions" and "Work Procedures".  Find out where you are lacking and get those people trained.  "Cross-Train" your workforce to understand and perform all the necessary jobs you have.  Teach them to run all of the available machinery.  Train them to function not just in their department, but in all of your departments.  A well trained workforce not only addresses those scheduling nightmares, but helps to motivate your employees.  By keeping your employee base intact and training them; you will have an experienced and efficient workforce in place when the recession is over. Isn't it much more attractive to have those experienced workers in place, than it is to have to go out and hire new employees and train them while you are attempting to take on new business?

Take advantage of this extra time to tackle some of those programs that will improve your operations.  Implement process improvement programs.  Get some of your employees formally trained in six-sigma or lean manufacturing techniques and start using them.  Put a structured preventive maintenance program in place.  Get those "green" programs up and running.  All of these training programs truly cost very little to nothing at all.  The large investment is time, and time is what you have a lot of right now.  Don't look at training as an unwarranted cash outflow during hard times, but a prudent and proven investment in the future of your business.


Waiting to hire new employees when the economy improves might sound like rational thinking at present; however, if you wait until then to start hiring, the pool will be significantly smaller.  Hiring those needed employees now will benefit the company now and in the future.

There are presently an awful lot of unemployed experts out there who have been recently downsized.  There are more top notch recruits out there now then there has been for nearly thirty years!  Now is the time to take advantage of the situation and put some of those great employees to work in your company.  Yes, there is always the chance that these experienced workers will leave for greener pastures once the market changes, but only if you make it more attractive for them to do so.  Train your management staff in how to retain those outstanding employees and start building a better workforce.

You can take advantage of the skills and experience these new employees have to set up your new programs or to train your workforce.  Hire a Black belt in six-sigma and let that person train the others to be more efficient and cost conscious.  Hire that experienced CNC programmer and have that employee put together and implement your DNC system.  Find that warehouse guru and let that person establish your pick and place system or that kanban program.  The examples are endless.

If adding to your payroll isn't an option at this time you might consider hiring a consultant to help out with those new projects and systems.  By using a consultant you get those things done that you do not presently have the skills for without having the cost burden of a full time employee.  When your project is complete you will not have to try and find ways to keep them busy nor do you need to pay unemployment, etc.  So use your excess time wisely and turn what seems to be a bad thing into a good one.


Another great opportunity you have right now is the procurement of new state of the art equipment.  Machine builders are feeling the crunch too.  They are reducing costs to keep their plants running and retain their employees.  As a result, there are some really good deals out there on machine tools.

Purchasing those needed tools at this time will not only save you money, but you can get what you want right now and at a lower cost.  If you wait until the economy recovers everyone will want the same things at the same time.  Selections will be dramatically reduced because it was not economical to replace the tools that were sold.  Since the manufacturers are short skilled labor from layoffs, lead times will be quite long.

They will not be able to get the materials needed to build new tools because everything will be in short supply, and as we all know, shorter supply means higher prices.  If you buy those tools now you will have them when everyone else is waiting to get theirs.  This means you will have an opportunity to grab up more of the market share.

Having that new equipment in house now also means you can start learning to use it.  Train your operators to run the new equipment now, while you have the extra time.  Learn how to program the machines and start determining which jobs might run quicker, more reliably, or more accurately.  Train your maintenance personnel and set up your maintenance schedules.  Start saving now and position yourself to handle those new jobs when you get them.


All those skilled employees that you couldn't find before are out there now.  All that equipment that you couldn't afford is inexpensive right now.  All that time you didn't have for training and implementing those new programs is at hand.  The time for making excuses is over.  What seems like a death knell to other companies can mean new life for yours.  Look at this downturn as a long needed opportunity to improve operations, better your workforce and position yourself for growth.  So if you have it, then spend that money and set yourself up for a prosperous future.


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©  by James Cavalluzzi:  February 12, 2008 


One of the most overlooked costs of production is indirect labor. Everyone is aware of what indirect labor is and everyone can show you a number which they have associated to it, but how many of those numbers are truly accurate? Most people are astonished once they are faced with the true costs of their indirect labor.

It is easy to dismiss indirect labor as a necessary evil that all companies must endure and, therefore, not pay much attention to it. Once you actually track the amount of indirect labor being performed, categorize who is actually performing it, and assign a real dollar value to that total, you will see a very quick and easy means of lowering your production costs while improving your productivity. The following are ten brief descriptions of what can be accomplished by simply optimizing your indirect labor.

1.) MINIMIZE LABOR COSTS - When your employees are being paid to perform a specific manufacturing function, but instead are spending time doing other tasks, you are adding inflated labor to you manufacturing costs. Why pay an experienced operator a high salary to sweep floors when you can pay a much lower wage to keep your floors swept. You are paying for that experience level, so why not have those high paid employees performing the task they excel at?

2.) MINIMIZE PRODUCTION INTERRUPTIONS - Each time a production employee performs some other task such as shipping, receiving or housekeeping, your main production process is interrupted. This means your costs to produce go up and your efficiencies go down. If you can assign these other duties to a specific person or persons, other than your line operators, you will minimize the amount of downtime in your production process. This not only reduces costs, but improves throughput and scheduling as well.

3.) IMPROVE EFFICIENCIES AND UTILIZATION - By ensuring that your production employees are spending their time producing you will increase your efficiencies and utilization. Your hours to produce one standard hour will be minimized and, therefore, your throughput will be maximized. You want that highly skilled and highly paid employee continually producing parts not doing menial tasks that can be performed at a much lower cost by someone else. By having your skilled labor perform those essential tasks, you reduce the number of employees needed to meet your production demands. Additionally, when you do need to add to your workforce you can add where it is actually needed. You won't need to hire another machine operator because you have more trucks that need to be unloaded. By hiring a clerk or two you can put off hiring a programmer or operator for some time.

4.) EASE TRAINING OF NEW EMPLOYEES - By assigning indirect duties such as housekeeping to you new and lower paid personnel you will minimize the time and effort needed to get a new employee up and running. This will allow the employee to grow into your organization. You will find yourself providing the higher skilled training to those employees who have demonstrated they are both deserving and capable. As you promote from the bottom up you are replacing the lowest skilled workers in the chain. This minimizes time and expense greatly.

5.) IMPROVE EMPLOYEE RETENTION - If you allow your highly skilled employees to perform the highly skilled duties which they enjoy, they will be much more apt to remain with your organization. Likewise, if you are promoting from within, from the bottom up, then your workforce will realize that they can grow with the company. This will make them happier and will decrease your turnover rates.

6.) IMPROVE THE CAPABILITIES OF YOUR WORKFORCE - As your employees grow with your organization they will be acquiring more and more skills of a higher and higher caliber. Your workforce will be happier and considerably more skilled. This makes your workforce much more capable, not just at their specific duties, but at a larger variety of duties. They will understand the requirements and skills needed to perform their current duties and many others in the process as well. They can be more readily trained for new positions as well as being available to train others in new positions.

7.) IMPROVE QUALITY - When your highly skilled workers are performing the highly skilled tasks you will find that your scrap rates will be greatly reduced. When they can concentrate on the task at hand, rather than be distracted by other duties, they will make fewer mistakes and often times will be more prone to catching those mistakes they do make. When you have less skilled operators performing skilled tasks and being continually distracted, the level of quality will be reduced significantly.

8.) DELAY NEW EQUIPMENT PURCHASES - If your machine operator spends half the day performing duties other than operating the machine, then you will need twice as many machines to make the same number of parts. If you can keep that operator machining parts the entire shift you can put off those expensive capital equipment purchases for a much longer time.

9.) DELAY PHYSICAL EXPANSIONS - Just as indirect labor takes away from your capacity and requires you to obtain more personnel and equipment; you will also need more floor space to accommodate the increase in equipment and personnel. Keeping your indirect labor in check can delay the need to add that costly manufacturing space.

10.) INCREASE MARKET SHARE - By keeping your indirect labor costs at a minimum you will be able reap the benefits of increased productivity and efficiencies as well as minimize your labor and capital expenses. This allows you to decrease your sale price while maintaining your profit margin, thereby, gaining market share over your competitors.

Stop accepting all that indirect labor. Understand what your indirect labor truly is and optimize it so you can start reaping the rewards of a cost effective labor force.

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©  by James Cavalluzzi:  October 10, 2007


Your business is growing, you are hiring more people, everyone in your organization has gained responsibilities, you are working overtime, and yet, you are experiencing new problems that threaten to undermine your business plan. These growing pains are keeping you from your regular duties; you are running around putting out fires, forcing orders through your system, responding to customer inquiries about late or missed shipments, looking for solutions, and trying to determine how you are going to reorganize your business structure to better respond to this increased workload, but whatever you try you can't seem to get out from behind the eight ball.


As is often the case, you have probably assigned someone to monitor your production process and track your orders throughout the system so you can better balance the workload across shifts and across departments. You attribute these new problems to the increase in business, too heavy a workload, new employees who are not quite up to speed yet, and you are certain that with a bit more attention and a little more time these problems will go away. Perhaps you need to hire a few more people to handle the increased responsibilities and to help put those fires out.

The truth is, if you are like nearly every other business that has experienced these growth spurts for the first time, these problems will not simply go away, but will most likely get worse, and merely throwing more personnel at it is not going to help.


I have been in a great many facilities with this problem and in the vast majority of instances I see the same red flags: people running around franticly addressing the same recurring issues, manually tracking production in an attempt to head off log jams and smooth out production, hourly employees working overtime and moving from one production area to another to address the local production bottlenecks. But you are on top of it, you have assembled those cross-functional teams to look for a better way to deal with customer issues and backed up work cells, to address the need for even more employees, but odds are you are addressing the symptoms of a much larger problem and not the root cause. All the work you are doing is simply a band-aid on a gaping wound that is not going to heal.


Your real problem is labor, and not labor in the sense of the volume of labor, or the quality of your work force, but the means, or the lack thereof, as it applies to monitoring and managing the labor portion of your production processes. When you were smaller you could easily see the problems start to arise and you could quickly address these issues with a short term fix, but as your production increases dramatically, you find you are overburdened by these daily hiccups as they begin to snowball out of control. You are certain that the problem is not your workforce; they all work hard, they all work steady and they all work efficiently, but in nearly every case, once you actually start to manage your labor correctly, you will see that this misconception could not be farther from the truth.

There are four main components to your product sell price: overhead, raw materials, labor and profit. Of these four items the most volatile and usually the largest percentage of your costs will be labor, yet this is more often than not the most overlooked component of your process.

How can you verify your productivity and efficiency if you do not track and monitor your labor? How can you accurately estimate your costs if you do not monitor, measure and control the labor portion of your costs? How can you effectively address your production problems if you cannot accurately pin point where they are? How can you schedule your workload to meet your demand if you do not have a handle on what you demand is? And lastly, how can you determine if the time and money you spent on improvements actually made a positive impact if you cannot measure the results?


You need to map your processes and measure the actual time spent on each and every activity within that process. You need to record those times on your routings or travelers and within your MRP system. You need to monitor and verify those times against your estimates. And most importantly, you need to control and adjust those times on a continuous basis. Only then will you be able to estimate accurately, plan accurately, and ship on time. Only then will be able to determine where and what your real problems are. Only then will you be able to verify your improvements and justify those new expenses. Only then will you truly know your capabilities.

Monitoring labor accurately:

  • Will provide checks and balances to estimating
  • Will allow for efficiency monitoring (across stations, groups, shifts, locations)
  • Will allow for production and process scheduling / loading
  • Will allow for production and process monitoring and control
  • Will allow real time access to actual part / process status
  • Will allow real time access to actual part / material / process location
  • Will facilitate future labor / process planning

Implementing a labor reporting system:

  • Determine if current MRP can be reconfigured to add labor or if a new system would be required
  • Automating a system to track labor
  • Use bar coding, RFID, etc. to input labor
  • Employees would scan at start providing location, start time, employee, physical location of in process materials
  • Employees would scan at end of each completed part providing location, end time, employee, physical location of in process assemblies
  • Employees would scan last part at end providing sequence end time
  • Real time location of components and all in process / completed assemblies is now available to all with MRP access (i.e. one part in shipping staging area, one part in inspection, three parts in process at assembly station, etc.)
  • Will allow for determination of bottlenecks
  • Will allow for determination of needed process improvements
  • Will allow for audit of process improvement effectiveness


The following are a few useful indices:


Based on routed standards

  • Performance / Utilization
  • Hours to produce (1) Standard Hour


  • Performance = (Earned Hours) / (Actual Hours on Standards)
  • Earned Hours = (Standard Hours / 100*) X (QTY Produced) [ * or other quantity dependent on your volume]
  • Actual Hours on Standards = only hours clocked on Direct Labor which have established standards. They can be measured or estimates.
    • Measured Standards = must have documentation to back up the numbers through actual time studies, YTD data, or standards data.
    • Estimates are based on: similar to, educated guesses, or unverified data.
    • Cost Standards: can be measured or estimates.


  • Utilization = (Hours on Direct Labor) / (Hours at Work)

Hours to Produce (1) Standard Hour:

This index reflects the total labor hours, direct and indirect, expended at a plant, measured against the hours earned on cost standards. It is a useful index in that it allows you to benchmark your percentage of labor hours against your billable hours.

EXAMPLE: YTD / Weekly department performance analysis:

  • DL = Hours on Direct Labor
  • EH = Cost Standard Earned Hours
  • IL = Hours on Indirect Labor
  • Direct Labor Hours to produce (1) Cost Standard Hour = DL/EH
  • Indirect Labor Hours to produce (1) Cost Standard Hour = IL/EH
  • Total Labor Hours to produce (1) Cost Standard Hour = (DL/EH) + (IL/EH)
    • Reliance upon accuracy of standards and reporting practices. These are not always very accurate, but you can look at trends.
    • Things that affect the indices: Changes in standards (increases or decreases); accuracy of reporting, when an operator is on Direct Labor and when an operator is on Indirect Labor.


Avoid falling victim to the standard excuse that you cannot afford the time necessary to track your labor. The only way you will ever create time to get the job done is to monitor and control your labor. So don't put it off. Embrace it and start increasing your productivity, lowering your costs, and satisfying your customers. You must fully understand what your earned hours are and what portions of labor make up those hours since it is the earned hours that produce your revenues, not the number of hours your employees are at work! Understand your labor, take control of your production, and start growing your profits, not just your business.

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