REDUCING TOTAL LABOR COSTS

BY DON TYLER

 

Any producer of a commodity knows that keeping costs low is essential to maximizing profits. Labor costs continue to climb and though we are always looking at ways to reduce Worker’s Comp, health insurance and other costs, it is still essential to take a long-term look at ways to not only reduce costs per employee but also reduce the number of employees needed to get the job done.

The number of workers required for agricultural production has been cut in half in the last 50 years. Technological improvements are the main reason for these labor savings and this trend will continue.

Some ag industries are using, or will soon be using, new technologies that have significant long-term labor savings:

• Drones that will be launched in swarms to identify and kill individual weeds using the best herbicide for that plant.

• Driverless feed trucks and manure spreaders.

• Robotic milking machines in dairies that can reduce labor by 10% to 29% .

• Drones that find, move and count cattle.

• Robotic truck washes.

Gaining the full benefit from the investment in new technology requires keen management. Some managers have made  significant investments in labor-saving equipment, but then don’t follow through by reducing their total hours of labor devoted to that task. Many software programs have saved on data collection, analysis and accuracy, but months and years later the same number of people are devoted to those tasks. Larger equipment is purchased that can do the job faster and yet the hours that have been saved are not allocated to other duties.

To maximize your labor reduction strategies, look first at direct labor costs such as health insurance, company vehicle allocations, Worker’s Compensation, the number of employees allocated to each area of the feed yard, individual employee efficiency, etc. Review every individual cost associated with your labor force.

Next, look in the areas where you have made investments in technology and confirm that you have reallocated that labor to more appropriate duties.

Finally, look at new technologies that can reduce your total labor needs. Can you do more with fewer  employees in some areas by implementing some new technology or updating current technologies?

Every time that you reduce the number of employees, you reduce the expense in time and dollars of the following items and activities:

• Less time spent recruiting, interviewing, hiring and developing employees.

• Reduced benefit costs.

• Less cost to equip each employee with work clothing, safety equipment, transportation, etc.

• Reduced liability and worker’s comp costs.

• Less time and frustration managing difficult employees who consume the majority of your employee management efforts and distract you from much more productive activities.

All these time savings provide more time for managers to analyze records, improve production, create new strategies and look for future potential in the business.

Keep in mind that if the current trends continue, labor prices will be going up, and  technology prices will be going down. Each of these trends work together to accelerate your labor cost savings.

Finally, a note to current employees in feed yards. If it sounds like I am categorizing all employees in feed yards as being easily replaceable, I assure you that I am not. Over my many years of management coaching in agriculture I have had the privilege of working with hundreds of cowboys, pen riders, processors, mechanics, feed truck drivers, repair and maintenance people and anyone else employed in the feed lot business. They are great people and I have every respect for their dedication, hard work and passion for our industry. If these strategies give you a bit of concern for your future, here are a few personal strategies to utilize.

1. Show up on time and be ready to work.

2. Be coachable and take responsibility for your own development.

3. Accept and willingly learn the new skills needed to do your job.

4. Ride for the brand.

5. Be the best employee you can be.

If you do these things, you will always have a job.

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