Why Rising Commodity Prices Increase Pressure On Manufacturing Labor Costs

A significant increase in metal manufacturers and distributors are focusing on lowering their operational labor costs when the price of material is rising. This article discusses the reasons why manufacturers would focus on labor costs and what a company can do when commodity prices rise.

Normally these types of manufacturers have very low levels of labor compared to the cost of materials in their products. They are typically interested in talking to me about administrative efficiencies and compliance with company policy and government regulation. I’m talking about manufacturers who forge, stamp, extrude, and cast their products.

Workforce Management and Commodity Prices. What’s the Connection?
At first blush it would seem that rising commodity prices would be a good thing; manufacturers and distributors can pass them down the supply chain, and if they are fortunate, they might even increase their profits. When you read about gas prices going up, the message of increased profits at oil companies always rises to the top of the media headlines.

As I listened to these manufacturers’ stories, however, it became clear why the increased interest in actively managing their workforce was rising as fast as their raw material costs.

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