Understanding the difference between Direct and Indirect labor allows you to identify where the frontline team is spending their time. This helps you to determine inefficiencies and make adjustments.
Indirect labor includes vacation and sick time, load and unload labor, training, and equipment maintenance. When it comes to managing indirect labor, you might consider evaluating your load/unload and equipment maintenance processes. Training is very important, so creating an efficient training program will help you manage the time (and money) spent on training. The goal here is to have as little indirect labor as possible. By implementing a standard process, your frontline team will be much more efficient and waste less time on indirect labor. Consequently, you should see an increase in gross margin.
Direct labor can be defined as estimated labor, which includes when the team is clocked into a work ticket and mobilization time. Mobilization is a direct cost of traveling from one job site to another. By setting it up as direct labor you can recover the cost, while having access to the data. Direct labor should be managed to the time estimated– assuming it was estimated correctly. Click here to read our blog on production rates.
To learn how Two Twelve Advisors can help you implement processes to review this data within Aspire Software, schedule a consultation.
FREE DOWNLOAD:
Future-Proof Your Landscaping Business in 6 Easy Steps