Lower productivity and rising labor costs: What operations can do in this unexpected market

May 31, 2022 Casey Nighbor

A man in a warehouse grabbing a box off a conveyer belt

Running a business has arguably never been more difficult. Not only are operations dealing with navigating a post-pandemic world, but they are also trying to hire and recruit in one of the toughest markets in recent memory.

On top of all of this, new reports show that workforce productivity has dropped 7.5% in the first quarter of this year—the biggest decline since 1947.

Additionally, inflation is high and labor costs measured against productivity soared to 11.6%, the fastest rise in 40 years.

All of this equals a giant headache for operations. But there is a solution. An output-based staffing model can help mitigate these new challenges and get your operation back on track.

What is output-based model

An output-based model focuses on mirroring our partner’s KPI goals related to throughput, quality, and safety. This is different from a traditional staffing model that focuses on headcount, fill, and attendance rates.

For example, an output-based model would manage staff based on the volume of returns you need to process, the number of packages that need to be shipped or loaded onto trucks, etc.

An output-based model offers complete accountability within your operation and increases output while meeting quality standards.

But what are the ways an output-based model can help with productivity and rising costs due to inflation?

Pump up productivity and save some $$$

Some key benefits of an output-based model during market volatility, like what we’re seeing now, are cost and production guarantees.   

Regardless of circumstance, an output-based staffing partner like SIMOS, charges based on output and not headcount. This means that despite headcount swings, variance in production levels or market changes, your cost does not fluctuate.

On average, SIMOS clients see an increased output of 10-25% while their costs are reduced by up to 20%. This can be critical right now when productivity is at an all-time low and costs are at record highs.

Create certainty in an uncertain market

Our team works to create predictability during uncertain times. 

We take on the responsibility and accountability of onboarding, training, managing, meeting your KPIs and relieve the burden of increased costs and output during unstable times.

Managing a workforce based on output means that you have budget certainty during unpredictable times.

Take on turnover

During unexpected peaks and low productivity periods, high turnover becomes a huge risk. Due to quick turnaround times, the chances of overworked employees and more demands increases.

Couple that with an unprecedented job market and you have the recipe for a high turnover rate. You may be able to quickly fill positions again, but it takes time to fill and train for those new positions, reducing your productivity even further at a critical time and increases cost.

With an output-based model, your staffing partner takes on the responsibility of finding and training new staff to be efficient and your cost does not change. New associates will get up to speed faster without any risk to you of money lost.

Want to learn more about how an output-based model could help during market instability? Download our free guide here.

About the Author

About Casey: Content marketing manager, frequently reading, aspiring chef, failed plant mom, connoisseur of tater tots, beauty products and airplane food.

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