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Manufacturer Labor Insourcing vs. Outsourcing

March 21, 2020
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Manufacturer Labor Insourcing vs. Outsourcing

A tight labor market with high demand for skilled workers has manufacturers constantly searching for labor. As a traditional method for filling gaps in your workforce, temporary agencies are a familiar option for filling a variety of skilled and unskilled positions.

But there are serious drawbacks to this type of outsourcing, which is plagued by turnover rates as high as 200% to 400%, limited skillsets and poor productivity. As a hedge against such challenges, companies often have multiple temp agencies on call in the hopes that redundancy can balance out the shortcomings. Still, labor shortages persist. How do you break out of this rut?

You may want to consider an alternative solution: insourced managed labor.

Onsite Management & How Insourced Managed Labor Works

While the term is sometimes used to describe the practice of assigning an existing employee to another role within the company, third-party “insourced managed labor” is an alternative to the temp agency model. Third-party insourced managed labor providers allow manufacturers to reap the benefits of outsourced labor with an insourced model of management.

With insourced managed labor, onsite management is included in addition to the workers. The onsite manager ensures that all positions are filled by working with their corporate office to recruit new employees, then trains and supervises them daily, and reports to you weekly and monthly on KPIs that align with yours.

Onsite managers also cross-train these employees to further reduce the risk of labor shortages and this allows them to be re-deployed into other areas of the plant as a way to “flex” to production peaks and valleys and other changing needs.

Higher Morale, Lower Turnover

A higher caliber workforce reduces turnover. Temp agencies typically offer temps a low hourly rate, no benefits and no training, resulting in turnover rates of up to 400%. Insourced managed labor providers offer a full-time job with competitive wages, full benefits and opportunities for advancement. This leads to better hires, increased morale, higher productivity, and a turnover rate that is a fraction of temps.

Often, insourced managed labor also reduces the total number of employees needed in the first place as 7-8 happy, cross-trained employees can do the job of 10+ disgruntled, poorly paid workers.

A comparison:

Labor Solution
Insourced Managed Labor
Outsourced Temp Staffing
External Labor
Onsite Managers
Cross Training & Advancement Opportunities
Managed Safety (accidents do not affect your EMR)
Facility Support (painting, coating, light maintenance)
Competitive Compensation & Benefits
Daily, Weekly & Monthly KPI Reporting

3 More Temp Outsourcing Challenges

If turnover wasn’t bad enough, here are three additional temp staffing issues that can rob your managers of their productivity:

Inconsistent Attendance

With low pay and little incentive, temp agencies struggle to get talent to show up consistently. If they’re not struggling to fill open positions, they tend to overbook the number of workers needed, which can lead to overcharges.

The Training Burden

A constant flow of new temps places the never-ending cycle of training squarely on HR managers and shop managers who should be focused on improving productivity and other higher value tasks.

Poor Performance

Without fair wages or the opportunity to advance their careers, temporary workers are often unskilled and unmotivated. While this leads to high turnover, it also makes management challenging for the workers who stay. This leads to mistakes and accidents, which can be very costly when it hits your EMR and workers’ compensation rates.

Choosing the Right Labor Solution

While temporary workers can be the right solution for short-term projects and functions where only one or two workers are needed, insourced managed labor is a better way to meet longer-term labor needs on the production line, dock, warehouse, tool crib, maintenance, reclaim, and other areas of your plant.

With third-party insourced labor, you don’t have to worry about daily management of the insourced employees. Onsite management handles everything, freeing you to focus on more important things.

Onsite managers also serve as an extension of your team and are often included in plant management meetings. In our case, LACOSTA ownership – Rob and Karla – as well as district managers and executive management are also hands-on with each account, building lasting relationships with loyal, happy clients.

If you’d like to learn more about how insourced managed labor could work in your plant, contact us for a complimentary managed labor audit. The audit will identify your labor shortages, estimate the cost to fill those positions and estimate the return on investment for using LACOSTA managed labor.

Contact us to learn more about insourced managed labor solutions

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