There are many reasons you might be lacking labor capacity to meet the day’s demand. Workforce burnout, sick employees, religious accommodations, PTO, and a tight labor market are all common causes of labor capacity fluctuations.
The problem is being able to accommodate life's demands on your full-time employees and quickly source operational labor to execute operations. We know it isn’t easy, because even if you can find people quickly, if you have to keep them around long past when there’s a need for their work, then you’re hurting your profitability.
In this article, you’ll learn how flexible labor capacity enables you to accommodate the needs of your full-time workers, navigate a tight labor market, and respond accurately to daily demand.
In this discussion, labor capacity will be labeled “supply,” and customer demand will be labeled “demand.” As you’re already aware, it’s your job to balance the two.
Supply and demand are always changing. If you hold one fixed while the other changes, this creates inefficiencies. If they are both volatile, you’ve got a real challenge on your hands.
Unless you’re an economist, the prospect of solving this puzzle probably doesn’t excite you. But it’s important to the success of your business that you remove the inefficiencies between supply (labor capacity) and demand (customer demand). The focus of this article will be on addressing the supply side of this equation with flexibility, although we have plenty of articles focused on addressing the demand side.
On-demand labor is the ideal solution that enables you to address labor capacity fluctuations from day to day, as well as daily changes to demand. But before we explore how, let’s examine your other options for addressing supply volatility.
When you’re alerted to the unexpected absence of one of your employees, you have a few options. You can try to get by without them, ask other employees to work overtime to pick up the slack, or quickly find a worker from outside your company to fill the gap.
Getting by without the employee usually means pushing out customer demand, which you don’t want. Asking other employees to work overtime is costly in terms of wages and employee morale, so you don’t want that either. Quickly finding a worker is great, but you won’t necessarily want to keep them on payroll if your capacity is only temporarily insufficient.
The right solution would address the shortcomings of the latter approach by allowing you to quickly find operational labor to respond to the gap, but only for as long as you need them. That’s why on-demand labor exists — to match labor capacity to demand in real time.
Vacation, sick leave, maternity/paternity leave, and any other form of PTO that your employees are entitled to are situations you must be ready for. When you need to cover for these workers, you can avoid overworking your FTEs and having to pay overtime by using on-demand labor to gain flexibility.
Likewise, when you accommodate religious holidays, practices, or observances such as seasonal fasting (e.g. Ramadan, Lent) and prayer, you need a plan for how you will remain productive. It is not considered an undue burden on your business to pay other employees overtime to cover the gap left by religious accommodations. Instead of paying overtime and stretching your FTEs thin, you could use on-demand labor during these times.
Addressing supply volatility is only one part of the equation. On-demand labor addresses this, but it also addresses demand variation.
Simply put, flexible labor capacity gives you the ability to respond when you find a mismatch between supply and demand.
The practical execution of this looks like a labor pool, a concept we’ve written about in detail. Read our blog about the concept of a labor pool to learn how you can leverage this powerful operational tool to adapt your operations in real time to meet customer demand.
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