Labor Cost Executive Summary

The manufacturing industry is a very arduous market to make a profit in and one of the ways to affect the profit margin in a manufacturing company is its labor cost. According to Wile (2017) there are four things that can affect the labor prices to be higher than average or below average, according to the article the location, supply and demand, task difficulty, and efficiency all have an effect on the labor cost. The location is something that will either help or hinder your cost of labor, a manufacturing company may look at going overseas to find a lower cost labor market verses manufacturing in the state because it could be away to lower the cost of labor. Supply and demand is another thing to consider when it comes to labor cost, if the job requires a highly skilled craft it could be difficult to find enough resource and when you do find the resource the labor cost

In 2015 Ford Manufacturing Company stated that they could cut labor cost by 16% in 2025 by utilizing robots with automation to manufactory Ford Vehicles. The key factor for Ford looking at more automation was the increasing labor cost, efficient output, and the lower cost to utilize. The example the article gave was the current cost for a welder was about twenty four dollars an hour, but a robot could do the same welding more consistent and more efficient at a cost of about eight dollars an hour. (Newsweek 2015) Labor coast are an important factor when it comes to a manufacturing company making a profit, and with the emerging new technology at a lower cost, more efficient, with other potential cost saving from no longer needing benefit packages, or continuing training cost this is a key area that they will be looking at cutting labor