Labor is the second-largest expense on dairy farms, and labor costs are frequently a target for cuts. However, any attempts to reduce labor expenses must be weighed against the impact on quality and the quantity of the farm’s output, warns Jason Karszes, Cornell University’s PRO-DAIRY farm management specialist.

Karszes, speaking at the recent Operations Managers Conference, presented by the Northeast Dairy Producers Association Inc. and PRO-DAIRY, urged dairy producers to answer three questions when considering labor cost-reducing decisions:

  • Where are the labor hours going?
  • How is the labor being used?
  • How do we start doing that labor efficiently?

Labor costs, allocation

Nearly every aspect of operating a dairy farm that involves people affects labor costs, whether it’s due to the quality of work performance, how labor is allocated or the environment in which a job is done. “Labor can impact every cost on the farm,” Karszes emphasized.

Labor costs are increasing and at a faster rate than many other farm expenses. From 2012 to 2017, the hired labor costs expressed as a percent of total farm operating costs increased by over 2 percent on a sample of 126 dairy farms in New York.

Additionally, data from a 2016 study revealed that across dairy farms monitoring labor allocation for hired and family help, approximately 10 percent of labor hours were “missing” or unable to be connected to any given task.

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Labor trends and costs as a percent of total farm operation costs.

With labor costs rising, and yet some aspects of how labor is being utilized an unknown, there’s opportunity to improve labor efficiency.

The first step is to measure what is already happening. Selecting an area to benchmark – such as milking, feeding or manure handling – over a period of time and establishing a baseline for each activity can reveal where bottlenecks are occurring.

Then, if changes are made, the effects of those changes on labor efficiency can be measured. However, the measurements should go beyond labor efficiency. Whether measuring growth rates, pregnancy rates or milk output, “we can’t sacrifice quality or quantity” just to increase labor efficiency, Karszes said.

Potential solutions

Some changes involved in increasing labor efficiency and reducing bottlenecks might require a capital investment, such as different equipment, new automated technology or a new milking parlor. Others can simply involve human resource management changes, focusing on how the job is performed, by whom and when. For example, if fewer steps are wasted per hour, then labor efficiency improves.

Producers might be able to save labor hours by doing something differently. To increase labor efficiency, the first step is to eliminate waiting time. This includes time spent turning equipment in the fields or the time feeders spend waiting to deliver the feed to the bunk, for example.

Paving roads can help equipment move faster and last longer, cutting down on both chore time and maintenance hours. Changing the ways cows are bedded, milked or moved could make the job more efficient, and changing the time some activities occur so they aren’t interfering with other jobs can reduce wasted time.

“We can’t necessarily make our hay acres bigger or put them closer to the farm,” Karszes said. “But knowing where the hours are going gives a starting point to see if the system is working well and to discuss potential changes.”

If the rate of the work is sped up, then labor efficiency increases. But there is a diminishing rate of return, Karszes warned. Getting more done per hour by increasing output or work rate can cause burnout and often is not sustainable.

Making changes

Observing how much wasted time is actually occurring on any given task begins with examining the process itself, the organization of the work environment and the work flow. Cameras work well when performing assessments. Do not yell or criticize, but watch employees and see where there is inefficiency.

Karszes recommended soliciting employee input, asking why they are doing what they are doing as well as what changes they would make to the process. Getting employees involved makes it much more likely they will be on board with any changes being made and increases morale.

The next step is to hire the right people, put them in the right job, train them properly and hold them accountable. Regular evaluations and ongoing training and employee meetings are imperative to keep the workplace running smoothly and keep labor efficiency high.

Once you have well-trained, good employees, take steps to minimize disruptions in the workday. This involves organizing the workplace, keeping things clean and accessible, decreasing time spent finding items and reducing downtime when a needed part isn’t in stock. Supplies used for each job, as well as time spent on each task, should be tracked and traceable to each employee to increase accountability and decrease waste.

Investing in automation, new equipment or new facilities has the potential to allow more to get accomplished with the same amount of labor hours. These improvements can also often replace labor. But that expensive new barn won’t increase labor efficiency if all the other aspects of the process are overlooked. New technology can also mean a change in the type of labor needed.

These types of capital expenditures may or may not reduce overall cost. It’s a question of money versus efficiency and whether or not these investments will actually work day-to-day on the farm, Karszes said.

Another option to consider is whether or not to do the job at all. Hiring another business to perform some aspects of the overall farm operation may be a way to save time, labor and equipment costs. The labor normally needed for a job that could be hired out may be better utilized elsewhere, increasing efficiency in other aspects of the farm and making custom services a good investment.

Exploring custom service options is something “we’re just not good at,” Karszes said.

A final option to consider is collaboration – joining with a neighbor to share certain services or equipment can be an effective way to reduce operating costs and increase labor efficiency. Sharing equipment, or sharing an employee who performs the job for both farms, can be a solution.

“We’ve got to do the budgets. We’ve got to do the analysis. We have to have a baseline,” Karszes said. If not, there can be costly mistakes, and changes meant to increase profitability can too easily become a liability. The goal is to continuously improve on-farm efficiency without sacrificing quality.  end mark

Tamara Scully, a freelance writer based in northwestern New Jersey, specializes in agricultural and food system topics.