Friday, October 5, 2018

UPDATED (10/05/2018): Unit Labor Costs suck profits from mattress manufacturers - and it may be getting worse!

(The main body of this post originally posted on June 1, 2018, but it has been updated in light of new relevant information.)


Here are some highlights from today's US Bureau of Labor press release regarding the American employment situation...

"... Total nonfarm payroll employment increased by 223,000 in May, and the unemployment rate edged down to 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in several industries...
  • Manufacturing employment has risen by 259,000 over the year, with about three-fourths of the growth in durable goods industries. 


UPDATE 10/05/2018
The September 2018 US Jobs Report show another drop in unemployment rate to 3.7%, the lowest since 1969! Likewise, as suggested in this June 1 post, annual wage growth rate rose to 2.8% over the past 12 months.

Let's repeat, fewer workers are in your area, and higher labor costs are in your future. Read the remainder of the post below for help from GSG.....


Good news for the American worker; wake-up call for the American manufacturer.
More Americans are enjoying better incomes, and hopefully the American manufacturer can benefit when the population spends that extra money on manufactured products - like new mattresses!

But as we've pointed out many times in this blog, as the pool of available workers shrink, labor costs will increase. Employers are forced to increase wages to attract ideal applicants, and keep existing employees from jumping ship for a higher paying job at a different business.

This impacts two key areas of your profitability: Unit Labor Costs (the labor cost to produce one unit of your manufactured product) go up, and Productivity (the amount of value produced per employee) goes down. That's not a good scenario for manufacturers like you.

As explained in a another recent BLS report regarding 2017 Manufacturing Productivity Costs, "... Employers experience increased unit labor costs when hourly compensation growth outpaces productivity growth. Unit labor costs increased in 19 of the 21 manufacturing industries, as hourly compensation growth outpaced that of productivity..."

Based on this most recent May report, Productivity Costs may be worse for American manufacturers in 2018 if employment trends continue this trajectory. 

Efficiency trumps Unit Labor Costs
To combat rising labor costs, you need to cut out waste, and produce more value per employee. Handling and disposing of material scraps from cut and sew operations in the mattress factory is a total drain on profitability! It adds no value to your product, and sucks money right out of your operations. GSG now offers a vacuum-powered automatic waste disposal system from Waste-exit. It literally sucks waste out of your mattress production.




Check out this video see this amazing system at work
and
learn more at our website.

Eliminating the waste is the low hanging fruit for improved efficiency, but there are many other areas to improve upon and GSG has solutions for every area of your mattress plant. Click here to see more new hyper-productive equipment from GSG.