The minimum wage is set to increase again in April 2024.
While a minimum wage increase represents a significant cost, it does not have to translate into an automatic price increase for customers. Take a holistic look at your operations, get creative, and identify areas where you can drive internal savings. With some process improvements, companies can absorb higher labour costs and remain competitive.
Here are some strategies:
Streamline Operations
Take a close look at all your operations and identify any redundant steps or inefficient workflows. Improving workforce productivity - getting more output per hour worked - is another way to neutralise increased wage costs. Are there processes that can be automated or consolidated? Can you cross-train staff to reduce labour needs? Streamlining operations is one of the most effective ways to drive internal cost savings that can offset external cost increases like a minimum wage hike. The key is ensuring any rise in wages is matched or exceeded by gains in productivity.
Reduce Waste
Implement Lean manufacturing and operations principles to identify and eliminate any types of waste in your processes, anything not used optimally equates to excess cost. This includes waste related to overproduction, waiting times, excess transportation or motion, excess inventory, defects, and overprocessing. The less waste, the better productivity you can gain from labour. The savings generated can be applied towards covering the increased wages.
Renegotiate Supplier and Vendor Contracts
Go through all your supplier and vendor contracts and look for opportunities to reduce costs through improved terms. Renegotiate prices, shipping costs, frequency of deliveries, or service levels. Work with suppliers to identify alternate materials or processes that cost less. Even small savings per contract can add up.
Invest in Automation
Consider making capital investments in tools, equipment, and technology that can automate certain tasks and reduce the amount of human labour needed. For example, installing robotic arms for repetitive production line tasks or using automated inventory management systems in warehouses. The upfront costs will pay off long-term through labour savings.
Optimise Shift Scheduling
Use data and analytics to better align staffing levels with peak demand periods. Avoid overstaffing during slower times and optimise shift assignments to best leverage your workforce. The more you can stretch labour hours to cover peak times, the less you may need to add payroll overall.
Improve Training and Development
Ensure your people are working as productively as possible by providing training in process improvement methods and best practices. Also implement talent development programs to build skills. The more skilled your staff becomes, the more output you will get per labour hour.
By taking a strategic approach and making operational improvements, companies can avoid simply passing minimum wage increases onto customers through price hikes. Work smarter by streamlining, automating, and boosting productivity. Your bottom line will thank you.
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