Hi all,

Firstly, I want to apologize if this is the wrong forum section to post this thread. I have no idea where to post this question and would be happy repost it somewhere more appropriate.

Background Assumptions:
- Automotive industry
- Switch (various signaling and interior), closure system (door latches, caps), metalworking (pressing, diecasting, wireforming) and injection moulding.
- Yearly turnover USD$19 million
- Current total employees = 600-700ppl in total
- QTY = quantity
- VS = versus
- incl. = including


My questions:
Is there an ideal or a suitable ratio or range that measures the appropriate, 'success', benchmark, or balance between any one or more of the below combinations:
i.e. there should be 1 quality control inspector for every 20 operators, OR, there should be 3 engineers to every 70 employees in the company.

Or does this ratio/range depend on other factors? if yes, please let me know and I'll provide more data.

i. Total Employees (incl. engineering, management, etc.) VS Turnover
ii. QTY of engineers VS Total Employees
iii. QTY of quality inspectors VS Total Employees
iv. or any other combinations or industry benchmarks (if any)

Thank you for your time.

This is a good question for your area university's Industrial Technology or Manufacturing Administration departments.

I know of no ideal number because there are almost infinite variables to consider, including the unavoidable like age.

Friends,

"Turnover" in the context of the OP's post means annual sales.

"Turnover" in the US has a different meaning.

Here are definitions (http://www.businessdictionary.com/definition/turnover.html).

Stijloor.

Hi all,

Firstly, I want to apologize if this is the wrong forum section to post this thread. I have no idea where to post this question and would be happy repost it somewhere more appropriate.

Background Assumptions:
- Automotive industry
- Switch (various signaling and interior), closure system (door latches, caps), metalworking (pressing, diecasting, wireforming) and injection moulding.
- Yearly turnover USD$19 million
- Current total employees = 600-700ppl in total
- QTY = quantity
- VS = versus
- incl. = including


My questions:
Is there an ideal or a suitable ratio or range that measures the appropriate, 'success', benchmark, or balance between any one or more of the below combinations:
i.e. there should be 1 quality control inspector for every 20 operators, OR, there should be 3 engineers to every 70 employees in the company.

Or does this ratio/range depend on other factors? if yes, please let me know and I'll provide more data.

i. Total Employees (incl. engineering, management, etc.) VS Turnover
ii. QTY of engineers VS Total Employees
iii. QTY of quality inspectors VS Total Employees
iv. or any other combinations or industry benchmarks (if any)

Thank you for your time.

I ran into this countless thousands of times with accountants. They state "we have too much indirect labor" and so people start losing their job. I have asked "how many are required" and they can never, ever give an answer. So I present to the accountant the following:

In the United States Army there are 11 indirect people for every one man on the line firing bullets; an obvious mis-match. What support personnel should be terminated? The medic, the guy supplying bullets, communication, food & rations? Who? (They can't answer this either).

I worked at a company the made alternative fuel cells under the ASME pressure vessel code, and 100% inspection was a must at several operations. An army (no pun intended) of inspectors (all non-direct) were needed as dictated by the code.

If it takes X people to support Y activities then that is the answer. As a company becomes Lean, the truer ratio will become more apparent.

In the United States Army there are 11 indirect people for every one man on the line firing bullets; an obvious mis-match. What support personnel should be terminated? The medic, the guy supplying bullets, communication, food & rations? Who? (They can't answer this either).



Is it, really? In one sentence you blast accountants for being unable to give you a number of people needed, and then you assert that there are too many indirect people. Where do you get your nirvana? Do you have proof? Evidence?

Welcome to a service economy.

Obviously there is a lack of understanding concerning the accountants' statement. Although I was not there, and do not know the details of your particular situation, I am familiar enough with similar situations to be better than 95% sure I know what has happened. You were dealing with a cost accountant, or at least an accountant who was working on a cost accounting system. What does this mean?

They were working off of a budget. A budget is based on a set of assumptions. With these assumptions we can come up with a projected cost per unit sold. There are variable, per unit costs. These vary directly with the number of units produced. Think raw materials. There are also fixed costs. This is overhead, mostly. Labor has a fixed aspect to it; your folks will be paid for 40 hours whether they produce anything or not, but at some point of production you will have to add another worker to produce more.

Now, if you planned to make 100 units in a year, and based your cost accounting system on the revenue from 100 units, but you produce and sell only 90, yet you have on the payroll enough labor to produce 100, guess what happens to the budget?

Gee, our labor costs per unit are out of whack.

I bet that accountant thought you were nuts talking about this ISO nonsense, too.

I
Now, if you planned to make 100 units in a year, and based your cost accounting system on the revenue from 100 units, but you produce and sell only 90, yet you have on the payroll enough labor to produce 100, guess what happens to the budget?

Gee, our labor costs per unit are out of whack.

I bet that accountant thought you were nuts talking about this ISO nonsense, too.

There is no standard ratio of workers, engineers, etc. for a particular industry, although some have attempted to develop the 'ideal' in a particular industry.

The budgets you mention are based mostly on assumptions made by a particular business. This approach has an interest in knowing the break even point of a business, and then establishing budgetary limits provided that break point is known...which it often is not. Unit-based costing is then used which is blurred since the fixed and variable costs are considered as "one"....the total cost per unit.

Labor costs / unit can only go out of whack when this number is not known under these circumstances. A minimum number of units need be produced (and sold) to support those costs involved, hence the number of functions & people involved are a particular minimum number...whatever it is...rather than a fixed ratio. The reason these "labor costs" per unit go out of whack is because the labor contribution is small, and any change will have a large impact (when measuring in percent) since the numerator (in this case labor cost) is a smaller cost fraction.

Typically, the last area of a business to use Lean methods is the accounting function, and the general area to suffer the effects of poor planning is...labor. Think of it: In manufacturing, labor costs are usually 3 to 7% of the total costs but the area that gets cut is...labor. Strange, is it not, that the greater portion of the cost contributors are accepted for what they are yet labor is not. When work is slow, these 'human resources' should be engaged in improvement projects, rather than being shown the door. The reason people get chopped off is that the savings can be shown on the P&L sheet at the end of the week...and that's not a project at all. (I can see we are getting off topic, here).

Knowing what numbers are used in making a budget, and how their changes influence budgets, is essential. True, every business wants to cut out the fat, but knowing when the "meat and bone" are being severed is a must for business survival, because each operations needs it parts to function.

I hope that helps, and am glad we agree.

It depends.

Unfortunately, compared to other industries, automotive has a high cost of servicing.

It sounds as if you have 4 business units and depending on complexity/maturity your products, this will drive staffing. If you have much automomation with very accurate + repeatable manufacturing lines, then you may not need to do so much testing + QC tests.

For customer quality side, the automotive customers are going to keep them loaded with busy work.

In my business, automotive Gross Profit margin in best year is comparable to a bad year in other commercial industries. Cost of servicing is too high.