A WHITE paper recently released by Drake International suggests Australia's major manufacturing companies are wasting millions of dollars each year on consultants, contractors and other flexible staff, due to a lack of visibility for labour costs at the senior management level.
The white paper, The unreported costs of contingent staffing, shows businesses in the industry spend 35 to 75% too much on procuring and managing flexible staff. For companies with an annual spend of $10m on these workers, excess costs can range from $350,000 to $750,000.
Flexible or contingent staff pools are made up of fixed term, seasonal, part-time, limited tenure, maximum term, casual employees and trainees.
Ron Urwin, chairman of Drake International, said managing flexible staff costs was a seriously overlooked issue. "Our market research shows CEOs, CFOs and CIOs of large organisations such as manufacturers are 'flying blind' due to the complex and fragmented nature of their people costs. One company we spoke to didn't accurately know within a million dollars what their overall flexible workforce costs were.
"The problem lies in not how much companies spend on their flexible staff, but that top-level management don't know the detail of this spend," Urwin added.
He warned businesses in the manufacturing industry were particularly at risk because they were generally large organisations, made up of several business units, which each operate multiple preferred supplier agreements.
With 20% of Australia's workforce currently casual, and this figure predicted to grow, Urwin says this matter will worsen if left unaddressed.
"Flexible workforce costs have long been a detail below the attention of senior management," Urwin said. "The harsh reality is that consultants, contractors and other flexible staff are the single biggest spend on the corporate balance sheet for manufacturers. Effective management of this resource can literally mean the difference between operational profitability and bottom line losses," he said. "Our white paper shows there are millions of dollars at stake for companies who get it wrong."
To avoid these rogue costs Unwin urges companies to adopt a solution that controls and reports the total cost of an organisation's flexible workforce spend.
According to Unwin, Drake's Managed Services offering, which can work in conjunction with a company's existing ERP system, has consistently saved Drake's clients 35 to 75% on their total cost to hire.
This is achieved through the full automation of the flexible staffing supply chain plus a reduction in transaction costs which enhances visibility, provides instant KPI reporting and improved supplier management.
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