In manufacturing terms, productivity means money. It affects costs, profitability, and the ability to remain competitive. In an increasingly tough global marketplace, having a competitive edge can be a make-or-break factor.
The definition of “productivity” from a manufacturing perspective is “the ratio of output to input in production” and is a measure of efficiency. When something is produced, how much time does it take? What is the quantity not quality of the production rate? Think of it like this: Your manufacturing line produces 500 units in one week. If you boost your production rate to 700 units in the following week, your productivity has increased by the amount of goods or 200 units. You have increased the amount of goods produced in the same unit of time. This is an increase to your productivity levels. This applies for both goods and services, even though we’ll talk primarily about manufacturing production efficiency in this article.
Source: ptc.com
Multifactor Productivity
In the real world, labour is not the only factor that affects productivity. Multifactor productivity (MFP), also known as total factor productivity (TFP) or the Solow residual, compares the amount of output to the number of combined inputs used. Inputs can include capital, labour, energy, materials and services.
Multifactor productivity = Units of Output / (Units of Labor + Units of Capital + Units of Materials) Most businesses use the MFP ratio to determine if productivity has changed from one period to another:
MFP index = (Output index / Combined input index) x 100 Using this method results in a more accurate ratio than using labour alone because changes in capital and materials used in production may also increase or decrease labour costs.
Mary’s burger bar Where inputs are labour in the form of staff, capital in the form of ingredients, energy in the form of electricity, materials in the form of a grill, and services in the form of an accountant. Production happens when Mary and her staff grill the burgers, resulting in the output burgers!
Let’s look at how to calculate multifactor productivity for Mary’s burger bar. Mary needs ingredients like burger buns, meat, cheese and lettuce. She also needs equipment like a grill, as well as kitchen staff and an accountant to manage her finances. These resources are her inputs. With this, she will serve up some tasty burgers.
One year later, a leading food magazine mentions Mary’s burgers and it grows in popularity. To keep up with demand, she buys more ingredients, upgrades her machines and hires more staff.
Remember, we’ll be using indexes to calculate MFP. Suppose that year one is the base year when an output index and a combined input index for the burger bar are both set to equal 100. In year two, Mary’s output index increases to 150, as she is now producing 50% more burgers, and her combined input index increases to 120.
The MFP in year one is MFP index = (Output index / Combined input index) x 100 = (100/100) x 100 = 100 The MFP in year two is MFP index = (Output index / Combined input index) x 100 = (150 / 120) x 100 = 125 The growth from year to year is calculated as:
MFP Growth = ((MFP Year 2 – MFP Year 1)/MFP Year 1) x 100 = ((125-100)/100) x 100 = 25% With all her factors of productivity considered, Mary has increased productivity by 25%.
Labour productivity
Labour productivity is the most commonly used productivity measure. Labour productivity measures how efficiently a business uses human inputs to produce outputs. At a corporate level, labour productivity is calculated by measuring the number of units produced (or net sales) relative to employee labour hours.
The labour productivity ratio is simply output over input, where labour input is normally measured in hours worked or dollars, while the output is usually measured in units.
Labour productivity = Units of output / Units of input Measuring labour productivity:
Mary’s burger bar Where inputs are in the form of labour, production is Mary’s staff grilling to result in the output burgers.
Mary owns a burger bar that specialises in grilled burgers. She employs two staff members to help her. They work eight hours each, a total of 16 hours, and produce 80 burgers. Mary’s inputs in the form of labour help her sell burgers her output.
In a given day, they make 80 burgers using 16 hours of labour. Labour productivity for the burger bar that day is therefore 5 burgers per hour:
Labour productivity = Units of Output / Units of Input = 80 burgers / 16 hours = 5 burgers per hour
How can 5,000 men deliver 200,000 lunch boxes every day in Mumbai, India, the fourth most populous city in the world at 12:30 noon sharp with almost zero mistakes for more than 120 years?
According to Shobha Bondre, the author of “Mumbai’s Dabbawallas – The Uncommon Story of the Common Man,” “Today they have one simple aim, get the dabba on time. It’s a simple faith. They follow it every day and try to decrease the time every time, as the tiffin passes hands like in a relay. It’s one business where they deal with humans every day and they cannot afford to get it wrong.”
These common men are called Dabbawallas. The Hindi word “dabbawalla” translates into dabba = lunch box, and walla = man or “the lunch box man.” Dabbawallas deliver hot, home-cooked lunches from home to office in Mumbai with clockwork precision. They have one simple aim: to serve their customers accurately and on time, every time. Customer satisfaction is paramount for Dabbawallas
What intrigues many people is the timely delivery of 200,000 dabbas at 12:30 noon sharp daily by 5,000 largely illiterate dabbawallas in the congested city of Mumbai for the last 120 years. This is achieved with zero fuel, zero investment, zero technology, zero disputes, and effectively zero mistakes, with one error in 16 million deliveries.
How can the army of 5,000 dabbawallas stay true to the century-old purpose and productivity culture? These “foot soldiers” rush through city traffic in their trademark white Gandhi cap, work six days a week, despite monsoon floods, riots, terrorist bombs, and the general chaos of Mumbai. Lunch always gets to its man at 12:30. Dabbawallas have continuously strengthened a process that is simple and works for everyone, every day.
First, they have a stringent selection process. They recruit from the villages around Pune only because they suit the working culture easily. Each new dabbawalla goes through a six-month probationary period. They must believe in the mission and adopt the productivity culture to fulfil customers’ satisfaction, no matter what. To the dabbawallas, work is “workship”. This means that they value the work like “workship” and they almost never fail. In short, they choose the right person for the work.
Second, they are not employees, but entrepreneurs who are equal shareholders in Dabbawallas Trust. They develop a “no undercutting” process whereby everyone will make the same money. They make sure everyone has a peace of mind in a stable reward and focus to achieve the purpose as a team. Every dabbawalla is a stakeholder in the system. Every member in a team manages their own finances, operations, and customers.
Third, they operate in a small team of 25 to 30 dabbawallas. Each team has a team leader who was chosen from the team and by the team. They will abandon bad customers who delay while collecting dabbas. The reason is that one delay will cause thousands of delays if they miss the train.
Fourth, to instill good discipline, they have a strict code of conduct. They are required to wear a Gandhi cap, always carry ID, no alcohol, and no undercutting. While dabbawallas are mainly illiterate, they are highly disciplined. Consuming alcohol while on duty attracts a fine of Rs 1,000. Unwarranted absenteeism is not tolerated and is treated with a similar fine. Discipline is the bridge between the goal and the result.
Fifth, they truly internalize their operational mottos, “Error is horror.” They have a standard time for each activity, as illustrated below. According to Nutan Mumbai Tiffin Box Suppliers Association, dabbawallas start their journey at 9:34-10:30am. They collect the dabbas from different places at 10:34-11:20am with bicycles. They travel by local train and choose the last compartment. Between 11:20-12:30, they unload all the dabbas, rearrange, and deliver according to their destination area and destination building. Then, the collection process starts between 1:15-2:00pm. They pick up all the dabbas they had delivered one hour ago. Now, the group members start segregating the dabbas according to destination between 2:00-2:30pm. Between 2:48-3:30pm, the return journey by train takes place after the routine task of dispatching and collecting. Finally, between 3:30-4:00pm is the sorting stage, where the final sorting and dispatch of dabbas take place, as per their original area. Productivity and punctuality are always in their mind and heart to serve their customers daily.
Sixth, they have a simplified coding system that operates flawlessly among the illiterate dabbawallas.
All these standardized processes become the pillars for the dabbawallas to achieve punctuality, productivity, and reliability. This simplicity of the dabbawalla management system has also earned its praise and admiration from Prince Charles and Sir Richard Branson, who watched the men at work at the city’s Churchgate Station.
How do you calculate manufacturing productivity?
In the simplest terms, manufacturing productivity is the ratio of output to input how much a company can produce based on a given amount of input and it focuses mainly on throughput and quantity. Input covers factors including labor hours, capital resources, and natural resources, while outputs are normally measured by the quantity of goods produced. So, the formula is:
Manufacturing productivity = Output / Input For example, let’s say that a factory produces $10,000,000 worth of laptops in a month by employees whose total labor hours came to 5,000 hours. Using the formula above, Manufacturing productivity = 10,000,000 / 5,000 hours = $2,000/hour.
From the calculation above, we see that the factory is producing $2,000 worth of laptops per hour. Not that this does not equal profit as there are various costs from overhead to wages that aren’t accounted for here; but this formula makes it possible, for example, to help track increases and decreases in manufacturing productivity over time.
However, manufacturing productivity is more than a simple numbers game. If, for example, the strive to increase throughput causes quality to nose-dive, the ratio of output to input will take a hit and productivity will drop. Therefore, we need to examine how to improve productivity while maintaining quality.
Source: ptc.com
Pizza Delivery Experts: “30 Minutes or Free” Delivery Guarantee!
Founded in 1960, Domino’s Pizza’s vision illustrates a company of exceptional people on a mission to be the best pizza delivery company in the world. In 2011, Pizza Today Magazine named Domino’s its “Chain of the Year” for the second straight year, making the company a three-time overall winner and the first pizza delivery company to receive the honour in back-to-back years. Today, Domino’s Pizza is the world’s no.1 pizza delivery company with over 10,000 restaurants in more than 72 countries around the world.
How can Domino’s Pizza deliver one million pizzas a day through 10,000 stores worldwide with its “30 minutes or free” delivery guarantee?
“Standard operating procedures (SOPs) must be very clear cut. Once you believe in SOPs, you should not deviate. The moment you deviate then your direction starts to shift. All these years, I am very focus on what I do and build a team that has no compromise on productivity and quality.” Dato’ George Ting is the Executive Chairman of Domino’s Malaysia and Singapore. He emphasized that training and discipline are crucial to strictly maintain SOPs for the Domino’s system and sustain the productivity culture.
“To translate the mission into action, a simplified and standardized process is needed. There are specific steps during ordering, preparing before delivery, and delivery stage. Each activity has a specific time frame for a person to complete the task. All the staff and delivery personnel will undergo training and adhere to the strictest compliance to the rules and standardized processes. All these activities add up to one focused goal: to deliver in 30 minutes or less consistently and productively,” Dato’ George said.
During the Vistage business visit to Domino’s Pizza HQ in Malaysia in 2012, my business associates and I were introduced to the Domino’s call center. When I entered the call center, I was impressed with a big pool of staff answering calls from all over Malaysia and Singapore. The calls were non-stop. They had a comprehensive computer software program to manage all incoming orders which contribute to the success of Domino’s pizza delivery consistency.
On top of that, the employees were well-trained to handle different situations, be it normal orders or complaints. How are they able to handle hundreds and thousands of incoming calls? These are made possible by the step-by-step process on which the employees are trained by the competent trainers at the call centre. While the call centre is the “brain” of the operation, the kitchen is the “heart”, and the delivery personnel are the “body” that ensure the pizza will reach your house in 30 minutes or less. All these would not be possible without a highly coordinated and aligned process in these three main operations. Productivity mindset is a top priority.
“I tend to be a fairly process oriented person. That is the reason I have worked with different franchise businesses since the early years. Whether it is with one restaurant or a hundred, it doesn’t really matter, because as long as you have the right processes and systems in place, you are able to manage consistency, quality, productivity – and ultimately the customer’s experience,” Dato’ George added.
“I have gone through that many times over the past thirty years. I know that if we stay focused and know exactly our mission and business positioning, the chances of us failing are very negligible. Once you know where you are, the next thing is the management of finance, people, facilities, and finally the customers that follow you,” Dato’ George shared with me the importance of process thinking and productivity culture in franchise business.
2. Invest in maintenance
Maintaining an organization’s physical assets its equipment, plant, or facilities helps maximize their lifespan, reduce downtime, and improve quality and efficiency. An effective and planned program of enterprise asset management will reap measurable productivity dividends. Source: ptc.com
Cleaning 989 Seats in 10 Minutes
At 10:57am, Taipei High Speed Train Station, there are 26 cleaners with smart uniforms, holding their toolbox and walkie talkies, standing in a few rows, awaiting the arrival of the bullet train. At 11am, the bullet train arrived.
These teams of cleaners will get ready to complete their task the moment all passengers come down from the train. Their daily task is to clean 989 seats and 17 washrooms in just 10 minutes. On a daily basis, an average of 126 trains stops at the station, and may reach 140 during prime time.
The cleaning company set a clear goal: safety, on time, and accuracy. How did the cleaning company convince the High Speed Train company that they can perform the task daily and consistently in order to secure this “big” cleaning contract?
They sent a study group to Japan to study the best practices of their counterpart in Japan. After learning the know-how, a committee was formed to develop the flow chart. Each step has a specific time limit in which it must be completed. The committee will zoom into the details of each step by sending the cleaners to do real observation on the train. These cleaners are required to understand the real execution situation and highlight their requirements and feelings. From there, the study group will challenge, improve, and standardize the activities, tools, and methods in order to shorten the total time needed whenever possible.
From the SOP, the challenge is how to ensure all the cleaners learn all the steps.
There are 5 simple steps to train the cleaners.
No.1: I train you
No.2: I show you
No.3: You show me
No.4: You train me
No.5: I show you how to inspect
Pictorial coaching is used extensively to improve the effectiveness of the SOP and, thus, complete the routine task of cleaning 989 seats of the bullet train in just 10 minutes.
The above three stories of Dabbawallas, Domino’s, and Cleaning Company emphasize on the crucial point of Process and SOP to ensure the consistency and reliability of quality and delivery to customers, which is the third pillar towards SME success. Productivity mindset and productivity culture are the backbone of business success.
Productivity vs Efficiency: How to Find Balance
Finding a steady balance between productivity and efficiency is crucial to making your manufacturing company function at its best. Emphasizing one over the other is a dangerous game to play. Imagine ignoring the quality output of your items just to simply churn out enough to meet the demand, only to realize that quality is poor? Now you have lost money and the trust of your consumers and you may never be able to get them back. It is not simply about the number of units produced or maximum production, these goods must also maintain high quality and pass customer inspection.
Conversely, becoming strict about efficiency may result in frightening employees. This is where we need to be careful when implementing LEAN methodologies properly so that workers are not concerned about losing their jobs due to increased efficiencies.
So, how do you merge the two? A common practice is to increase output while investing in your employees simultaneously. Whenever changes are made, it is natural for employees to be uneasy.
Effective training and understanding of the entire production line, right down to how important they are in making the product or delivering the service, will help. It is just as important for employees to know how the product is going to be used so they can contribute to improving the product or service first hand. Employee empowerment is key.
To sum it up, productivity is solely about output versus input. Meanwhile, efficiency deals with doing the correct things the right way, minimizing mistakes and losses while maximizing the use of valuable resources. When these two concepts come together harmoniously, the company will see an increase in both quantity and quality. Though different, productivity and efficiency rely on one another greatly. Source: rhythmsystems.com
Dr. Deming’s Three Priceless Lessons to Japan
How did Japan create an economic miracle after it turned into ashes during World War II?
Dr. Deming gave three invaluable lessons, or “three special gifts,” to Japan, thereby helping to accelerate its economic recovery and eventually achieve a post-war economy miracle.
No.1: Kaizen thinking and productivity culture
No.2: Plan, Do, Check, Act Cycle (PDCA)
No.3: Constancy of Purpose in improving products and services
Dr. Deming, the “Father of Quality”, made significant contributions to and transformations in Japan since the 1950’s. His philosophy is simple: Kaizen – continuous improvement. From the Kaizen philosophy, it leads to the PDCA Cycle. Four steps in PDCA Cycle are Plan, Do, Check, Act. Kaizen is the philosophy and way of productivity. PDCA is the systematic steps to continuously improve quality and productivity. Toyota leveraged on the Kaizen culture which led to the development of Toyota Production System and seven waste reduction methods.
Do Kaizen daily, consistently, and persistently. Do Kaizen individually, in a small group, project team, or large group, consistently and persistently. Turn the daily habits into productivity habits and eventually into productivity culture. From top management, middle management, and frontline workers, everyone practices productivity daily.
Japan adopted Dr. Deming’s teachings and emerged as a world economic power within 20 to 30 years. The secret of Japanese organization success in the past few decades is cultivating Kaizen as the manufacturing productivity culture that shapes the right mindset among employees at the very beginning. They do not treat it as a method only or an ad hoc basis as per needed. Instead, everyone consistently thinks, believes, and implements Kaizen. Constancy of Purpose to improve product and service is another contributing factor to Japan’s economic strength and resilience.
In 1982, Malaysia implemented the “Look East Policy.” The ultimate objective is to learn the Japanese value system, work ethics, and the discipline of the workplace. Since then, Malaysia had benefitted greatly and tremendously from the strong investment and technology transfer from Japan. Today, we successfully transformed into an industrialized country.
Nevertheless, in terms of cultivating Kaizen as the manufacturing productivity culture, we are behind the times, especially among the SMEs. Most of the SMEs look at Kaizen as a method as per needed, rather than a manufacturing productivity culture for the whole organization. Majority of SMEs that implement the PDCA and Kaizen are successful in the short-term but fail to sustain long-term. The main difference is whether your ultimate objective is to instill the Kaizen culture or merely Kaizen methods. Only through instilling the Kaizen culture will you make the people believe the significance and meaning of Kaizen. This is the opportunity for SMEs to move to next level of success by cultivating Kaizen as the manufacturing productivity culture. This will serve as a strong foundation for business growth, manufacturing productivity, and sustainability in these times of highly competitive global economic challenges.
See “Kaizen: The Key to Japan’s Competitive Success,” by Masaaki Imai, to learn more about the little secret that transformed Japan.
Process is the Highway to Manufacturing Productivity
Except for the few who are rich in cash and taking over the family business, a big majority of people who want to start a manufacturing business have many constraints and limitations in various resources, especially monetary support. Similarly, many have little or no strong business network and people support.
After you have set your mind clear about your Purpose, the starting point of your achievement, the next step is to set up your Process, which is the “highway to manufacturing productivity.” This is the most cost-effective, yet most simple and reliable step. Nevertheless, many people have overlooked it. Franchise businesses leverage Process to ensure a higher success rate. Many independent business owners do not work stringently on the process, so their failure rate is higher than that of the business owners who do leverage on the process.
How can McDonald’s (34,000 outlets), Starbucks (23,000 outlets), and KFC (18,000 outlets) duplicate outlets worldwide and yet maintain the consistency of quality, productivity, and delivery? Franchise business owners generally believe in the Process: make it simple, and make it work for everyone and every day.
They challenge their process to make it as simple as possible by eliminating the non-value-added activities, combining, and shortening the activities. The world-class best practices that are often used are lean practices, computerization, and automation. Their main objective focuses on simplified, standardized, and systemized processes. With this, they can easily and effectively train new employees productively.
Why is the process vital for manufacturers? Your process will assist you in eliminating and reducing non-valued-added activities and wastages. This will create more time, space, and resources to focus on the vital activities and plan. There are two great and powerful assets for manufacturers: an idea and time. So, it is vital to create more time through a simplified process from your innovative ideas.
For existing businesses, the process will assist you in cutting down on the manufacturing and service lead time; reducing the number of manpower hours required and improving the speed of delivery to constantly stay ahead. In this Internet age, the competition is all about speed with quality and cost as the prerequisites.
While the Process is the highway, the Standard Operating Procedure (SOP) is the “secret code” of the highway. Whether you are in the manufacturing, retail, or service industry, the more you focus on strengthening your process, the wider and straighter your highway will be. Will this help to attract and retain better employees, supportive suppliers, and more customers along the way? This is especially crucial for manufacturers to survive, as your weapons will be faster, better, and result in a closer rapport and relationships with your customers. Many successful manufacturers have leveraged on process like computerization, automation, and franchising towards greater height in their business. Thus, process is the “highway of manufacturing productivity”.
Transforming a Company with Low-Cost Investment: Process Thinking and Productivity Mindset
When Mr. Wong bought over a company with its million-dollar losses, he had lots of problems to handle and little time in which to transform the company. He was either going to make it or fail to transform.
With an engineering background, he quickly used the process thinking and productivity mindset that he was trained in university and previous working experience. He faced multiple problems, ranging from cash flow, low sales, quality issues, late delivery, and lots of customer complaints.
What was the cash inside the bank? For the first six months, first thing every morning, he asked the account officer to report the cash figure to him. This was because the company has one bounced cheque which amounted to a few thousand MYR. Therefore, he had to ensure no bounced cheque again. Then he discovered that one of the cash flow problems was due to long payment terms of 90 to 150 days. “To me, 150 days, 90 days; no way. Those 150 days cut to 90 days gradually and 90 days to 60 days. The consequences were very fast. Immediately, we solved the cash flow problem and we had positive cash flow in a short period of time,” said Mr. Wong.
“Which customer should be terminated? The next task was to create a set of criteria on how to disqualify a customer. For example, low price, small quantity, long payment term, late payments, and a lot of complaints. If a customer falls into these five categories, I have no hesitation to terminate them immediately. I set the criteria in written and explained to the relevant staff. Then, I delegate them the power to execute the decision,” he emphasized.
Why quality and manufacturing productivity are inconsistent? After finding out the root cause, he fired the non-performing manager, and he became the Factory Manager. He employed the capable people and run production until 3-4am. The team quickly analyzed what could help them to have a consistently-high quality product. With the help of his friend, very quickly, the manufacturing productivity and yield efficiency improved.
“At one time, I did not actually have a lot of orders, but I made my factory run 24 hours to stand by. Very quickly, the company moved out of the red because my cash flow was under control, quality was consistent, manufacturing productivity improved, and delivery was very fast, and these led to increased sales,” Mr. Wong explained.
“Process need not be expensive and complicated just like I set the criteria to control the payment term of customers, and criteria to terminate bad customers. The process is so critical because you are not the only person. You have your team members, and you need a ‘written’ process so that everybody can follow consistently,” he added. After putting the cash flow in order and letting go of bad customers, he invested some money in the systematic process of ISO 9001 to keep the quality, delivery, and cost on the right track. To adopt a systematic approach, he immediately applied for the ISO 9001 certification in the first six months.
As the CEO, Mr. Wong has demonstrated a highly agile and resilient leadership that transform his manufacturing company from losses to profits. In the final analysis, he leveraged successfully on process thinking, productivity mindset, and cultivate a manufacturing productivity culture among the employees. Three times the company has achieved the Enterprise 50 Award and one time, it was awarded the National Mark of Malaysia Brand, both by SME Corporation Malaysia. In addition, he is ambitious to position his product as a globally-renowned brand.
Formula 1 Mentality
When you mention Formula 1, it is immediately associated with speed. If you are a Formula 1 fan, you know how fast the team can change the four tyres during the race. According to Wikipedia, a pit stop for four tyres and fuel can last few seconds.
Comparatively, when you go to a car workshop and have all four of your tyres changed, how soon will it be done? If you go to a branded workshop, perhaps it took 30 to 60 minutes. If you go to a small, personalized workshop, it will take you 1 to 2 hours to complete the job, depending on the number of customers there.
Why is there such a big difference in tyre-changing time between a Formula 1 team and a car workshop team? Formula 1 race teams have 20 technicians. They are all highly-skilled and highly-productive professional technicians, not just “normal” technicians. So, that is the common explanation, but is it the correct answer?
The correct answer is process and productivity. A small workshop probably has no structured SOP. The owner will recommend which tyres are suitable, depending on the client’s needs and budget. He will fix the tyres and invoice the clients, as well. So, the owner is Mr. Sales, Mr. Engineer, and Mr. Accountant, all in one. Therefore, the job took longer compared to a branded workshop or a Formula 1 team.
The branded workshop has separate personnel to perform the roles of Mr. Sales, Mr. Engineer, and Mr. Accountant. They have standardized and structured SOPs and the technicians are well-trained to complete the job in a certain time limit with high productivity. How about a Formula 1 team? They have simplified, standardized, and structured SOPs. Compared with a branded workshop, Formula 1 has the most stringent demand: simplify, simplify, and simplify the SOP steps. They will challenge each step and eliminate any non-value-added work; and improvise with the assistance of advanced equipment. In addition, all activities are synchronized and done concurrently by 20 professional technicians instead of four experienced technicians in a branded workshop.
With the simplified SOP, technicians are trained to complete the task in simplified steps. This is the secret of a Formula 1 team that supports the Formula 1 driver to win the race.
Of course, many SMEs in manufacturing can’t be like Formula 1. As SMEs, you tend to lack of many resources and a branded workshop may just be a dream. The point here is not to be Formula 1 team, but to understand the Formula 1 mentality and learn how to strive for simplified, standardized, and systemized SOPs in your business.
Many manufacturers are constantly under stress and pressure because new employees can’t stay long in the company, lack of time to train the employees, and they are too busy to solve one problem after another every day.
How do you SAVE your time, space, and resources with the process? For example, if you are a SME, it will be easier for you to communicate and train with a 5-step SOP rather than a 10-step SOP. New employees will be better able to understand 5 steps than 10 steps. Thus, if the employees can understand the SOP clearly, the quality, productivity, and service levels will eventually improve. You will be able to achieve higher productivity with less resources, time, and stress. Eventually, there will be a significant improvement in manufacturing productivity.
In the real world of manufacturing, this is a common phenomenon; there are many non-value-added activities in the SOPs. In addition, individual employee has added in their own styles or additional steps to the same task. Let’s assume, there are 10 steps in the SOP. Firstly, you eliminate and reduce the non-value-added activities and simplify from 10 steps to 8 steps in first 3 months. Then, improve again and simplify from 8 steps to 5 steps in next 3 months’ time. Thus, in 6 months kaizen project, you have successfully reduced from 10 steps to 5 steps. To simplify the steps, you must NEVER compromise the safety, quality of product, manufacturing productivity, and service level. It is important to understand that simplified steps are not shortcuts to the process. Simplified steps are meant to eliminate and reduce non-value-added activities in the process; but NOT eliminating or reducing the value-added activities!
Process thinking and productivity mindset are the low-cost investment for both start-up and growing manufacturers because you only need to write it very detail, and then analyze and simplify what is not required, whenever applicable.
You can eliminate and reduce some non-value-added activities without incurring much cost. While some process simplification, you need to invest money in automation and computerization. “Write what you do; do what you write.” You need to sacrifice time from your busy workload and generate ideas to simplify the SOP to achieve the goal. After you have simplified the SOP, you must do it and teach it to your employees. Like the example above, when the steps being simplified from 10 steps to 5 steps, will your output increase? Will your reject reduce because the employees understand better the 5 steps instead of 10 steps? Will the production time reduce? Will your service level to customers improve? Simultaneously, you will manage the quality, manufacturing productivity, delivery, cost, and service better; all at the same time.
In summary, when you acknowledge the importance of process and apply it whole-heartedly, you are building the highway for your manufacturing productivity. Only 20% to 30% of SMEs who are performing and excelling capitalize on the process. Many SMEs treat SOP as SOP only. There are many non-value-added activities in the processes. Thus, there are great opportunities for you to take advantage to simplify process whether you are starting or growing your business. Non-value-added activities are wastages. Wastage reduction is the essence of the Toyota Production System. If you think, plan, and act lean, your business will eventually grow – steadily and successfully. Process thinking and productivity mindset is your strategic weapon. Process thinking and productivity mindset are a low-cost investment and yet many manufacturers did not optimize and focus on it to improve their manufacturing productivity. Process thinking like Formula 1 mentality is a great asset for SMEs in manufacturing before you have more capital to invest in automation and computerization which may need a considerable sum of investment.
Source: (bls.gov)
From 1990 to 2007, manufacturing productivity contributed 0.72 percentage points of the 3.5 percent growth in private business output. This means manufacturing accounted for 21 percent of the nation’s output growth. Of manufacturing output growth, nearly four-fifths of it resulted from multifactor productivity, followed by capital investment.
Outline:
Trends in manufacturing productivity, 1990–2019
From 1990 to 2007, manufacturing productivity contributed 0.72 percentage points of the 3.5 percent growth in private business output. This means manufacturing accounted for 21 percent of the nation’s output growth. Of manufacturing output growth, nearly four-fifths of it resulted from multifactor productivity, followed by capital investment.
Chart Data
Contribution to output growth Percentage point contributions
Multifactor productivity 0.57 percentage point(s) Capital Labor From 2007 to 2019, private business output growth slowed to 2.0 percent. Manufacturing multifactor productivity went from being the largest productivity driver of private business output growth to being a drag on the nation’s output. However, the nonmanufacturing economy’s multifactor productivity performed about as well in 2007–19 as it had in 1990–2007.
Chart Data
Contribution to output growth Manufacturing multifactor productivity Computer and electronic products multifactor productivity Nonmanufacturing multifactor productivity
0.57 percentage point(s) 0.44 percentage point(s) 0.44 percentage point(s) In the manufacturing sector, the computer and electronic products industry is the main driver. Of the 0.57 percentage point contribution from manufacturing multifactor productivity in 1990–2007, about 75 percent of that came from the computer and electronics products industry. In 2007–19, however, multifactor productivity contribution from computer and electronic products slowed to just 0.06 percentage points.
These data are from the Multifactor Productivity program. To learn more, see The U.S. productivity slowdown: an economy-wide and industry-level analysis Multifactor productivity slowdown in U.S. manufacturing . Multifactor productivity growth represents the portion of output growth that is not accounted for by the growth of capital and labor inputs. Multifactor productivity growth results from contributions of other inputs, such as technological advances in production, the introduction of a more streamlined industrial organization, relative shifts of inputs from low to high productivity industries, increased efforts of the workforce, and improvements in managerial efficiency. Source: bls.gov–