". Bakery Industry: over head cost

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Showing posts with label over head cost. Show all posts
Showing posts with label over head cost. Show all posts

Why Cheap Labor Is Not Cheap For Bakeries

What   drive these  big  companies in bakery  industry  for  contract manufacturing and  co -packer arrangement is  low cost labor and cheap labor .  The Co-packers ( CP )  or  CMU ( Contract manufacturing units )  employs  several contractors  to get  workers  at  very  low salaries mostly  unskilled and  with low literacy rates . As workers are  not aware of the legal  wages  these  small companies make huge money out  of these worker .

This  is how  companies  cut  over head cost  of workers  in these units  as they don't pay for

  No ESI ( Employee  contribution  from contractors or  companies
  No  PF   ( Provident  Fund )deduction and contribution from the contractors or companies
  No  Gratuity  for  the workers who worked  for more than five years
  No  Earned Leave  for these workers
  No Standard Over time payment
  No Incentives or  Bonus linked  with  production
  No Medical or Insurance  for  the worker
  No Uniform  and Clothing Allowances .
  Deduction in salaries for  flimsy ground or absence 

( Will   State agencies  look into  these malpractices  which are rampant  in such  units some of  which mandatory by law  payable to the workers ?  )

As these workers   are  paid less  there fore the rate of attrition is very high  thus  impacting  the product quality and the process . Also as these workers starts searching for  better opportunities or  work part time doing extra jobs,  which negates what ever efforts these companies have  put  to train them  thus entering into vicious cycle of  training unskilled labour all the time

Cheap  labor has its own cost  which  companies  are aware of  but  for  profits  they try  to  run the production  with these workers .

Here  are few negative  results from cheap  labor

 Production inefficiency 
 High  Maintenance cost  due to break downs
 High   number  of  foriegn body complaints
 High cost on continuous training ( few opts  for no training )
 More Product recalls
 More consumer complaints due to defective s
 Stress on supervisory personnel .
Major  Accidents & Cuts

Hence  it can be concluded that  cheap labor is  actually costlier than skilled and qualified labor . Companies should recognize this and   aim for building  effective and productive labor in longer run

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