Adding Employees or Technology

Most of us have seen shops that are very labor intensive and others, doing similar volume with far fewer employees, as a result of technology investments. Compare for example, the casework manufacturer with CNC, where high volumes of precision parts are made with only a few workers, as opposed to another company, cutting on table saws, and then boring and grooving using several other manual machines. The labor content, part quality, and overall throughput will be substantially different, making the CNC operation much more cost effective.

This comparison is well-known and often taken for granted in our industry. It has become “conventional wisdom” for companies to make these kinds of machinery investments, as a safe and effective way to improve productivity. Companies that take these steps will enjoy much higher output, better and more consistent quality, all with fewer employees. As a result, more work can be taken and higher profit margins will follow.

However, that same conventional wisdom is often forgotten when it comes to front office productivity. When companies need more estimating, more purchasing, more project management… an ad is placed for an additional employee. The cost for such skilled workers is high in terms of wages and benefits, plus there will be extensive training and acclimation before the new hire becomes productive. And in such specialized areas, there is a high risk that the new worker will not fit, wasting huge amounts of time and money as the search starts again.

Just as technology investments reap large returns in the factory, the same can be true in the front office. In fact, implementing an integrated ERP system properly, will almost always produce more measurable productivity gains and cost reductions, than comparable investments in machinery.

So why do companies still seem to favor adding staff over integration of software systems? it usually comes down to fear and lack of knowledge. Manufacturers are reasonably comfortable investing in machinery, but software is scary stuff, an unknown and risky investment, with no clear guidance to help with selection and implementation.