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Dinesh DivekarDear Rahul,
There is no hard and fast rule for the manpower cost against net sales value. The manpower cost depends on the following:
a) The volume of the operations. Higher the volume, lower the manpower cost
b) Capacity of the capital equipment used and their quality also
c) Maintenance of the capital equipment used. If there is an unreasonable downtime, then the cost of manpower will go up.
d) Quality of the manpower. How far they are skilled? To assess the skillfulness, find out what % of the time is spent on rework. Higher the rework, the more the manpower cost.
e) Availability or non-availability of the raw material. If there is downtime because of the non-availability of the material, the cost of the manpower will go up
f) Manpower cost also depends on how the orders are scheduled. If the right mix of techniques of production scheduling like FCFS, EDD, LPT etc. is used, the manpower cost comes down.
One of the metrics of the measurement of the effectiveness of the manpower is the calculation of HCROI. Earlier, I have given an exhaustive reply on the concept of HCROI. You may click here to refer to it. The points given from (a) to (f) above, will increase the HCROI.
From India, Bangalore