In manufacturing, identifying ways to increase productivity, efficiency and profitability is often not that difficult. In fact, manufacturers typically don’t need to look further than equipment, process or supply chain improvements.
However, in today’s competitive and increasingly complicated business environment, it can pay to look beyond the obvious bottom-line-boosting initiatives and into ways that can reveal hidden and even more significant gains.
In 2017, one of our clients did just that and found a surprisingly high return on what, at first glance, might appear to be almost pure expense.
Here’s what happened and the result:
In conjunction with an effort to obtain OSHA VIP certification, EFI Group’s client undertook a million-dollar project that involved upgrading over 500 machine shaft guards to meet or exceed the OSHA standard.
While it was clear that this effort would not directly improve our client’s productivity, what also needed to be considered were the multiple cultural and financial outcomes and impact of what would be a major management commitment to improving the engineered safety of the operation.
In terms of organizational culture, it has been shown that when management makes a tangible commitment to worker safety and backs that commitment with real money and a sound effort, worker satisfaction and commitment increases.
The indirect positive impact on productivity, quality and cost flow that stems from increased dedication to excellence by the workforce cannot be underestimated.
Financially, according to Safety and Health Magazine, the average cost per injury is $39,000 and various studies have shown that every $1 invested in injury prevention returns $2 to $6 to the employer.
Simply put, a safer workplace is a more profitable workplace.
Our clients’ program has been structured on a priority basis, with the highest-risk machines receiving the first treatment.
During implementation, we have found that our presence and engagement during the sizing, specification and installation of the guards has increased employee awareness of the hazards of rotating equipment.
The interaction we’ve had with operators, mechanics, engineers and supervisors has both enlightened the workers and led to additional hazard findings.
It is clear that when the project is completed, our client will have a safer plant with a more hazard-aware and engaged workforce – which translates into hard numbers: reduced absenteeism, decreased healthcare costs and more. But what’s also evident is how far-reaching the impact of this initiative has already been and will continue to be – even though its full ROI can never be precisely calculated.
When ROI cannot be directly connected to an initiative, it can be easy to reject it in favor of projects where the payoff is more immediate and tangible. But what if the biggest gains you stand to make as a manufacturer are actually hiding in the reject pile – or are never even surfaced?
This happens because many of the root causes of cost drivers aren’t calculated in common business metrics, or are perceived as a normal part of how a company works.
Following are our recommendations on where to look for additional increases in productivity, efficiency and profitability – beyond the obvious:
Searching Activity: This waste looks normal simply because, as people, we are used to looking for things. The place the waste actually shows up, though, is in efficiency variation and it’s the cause of many common problems such as schedule disruptions and late orders. Yet this expense is fairly simple to decrease through easily implemented visual workplace solutions.
Information: Waste from flaws in information are ongoing and exponential. Yet this hidden expense never shows up on the bottom line. The solution is standardizing information so that it’s timely, accurate, clear and actionable by anyone – meaning the information will result in the same action regardless of who is doing the task.
Batching Processes: There are many hidden costs related to batching processes that, if analyzed, might result in adoption of a continuous improvement strategy. One of the simplest examples has nothing to do with manufacturing processes – at least not on the surface: Performance evaluations are typically batched. Employees wait an entire year to receive feedback that could have improved their performance and increased their productivity and efficiency immediately. Take one employee’s improvement percentage and multiply that by the total number of employees and you begin to see how much impact batching can have on the bottom line. Another example is batching that creates a back up for a downline internal customer – one part of the process may be creating gains that are eaten up in the next.
Downtime: Big machine breakdowns are obvious cost drivers, but there are other times machines are down that are not so obvious and which have a significant impact on the bottom line. Reasons for downtime might be related to availability of materials, unmeasured changeovers and even searching. Because the root causes of “other” downtime are so hidden, the problem is typically addressed by adding new machines and human resources to create more capacity. However, it’s capacity that already existed and could have be leveraged – if you had dig deeper.
Smart Manufacturing: While we’ve discussed the value of moving toward the future of manufacturing in many previous articles (including Preparing for the Future: Are You Ready for the Next Step?), it’s important to include smart manufacturing in this list of recommendations for finding hidden gains for two reasons: First, because of how significantly this one (albeit extensive) shift will impact the bottom line and, second, because the majority of manufacturers have not yet implemented smart manufacturing technologies – or even begun the research phase. Of course, the ability to implement smart manufacturing successfully relies heavily on how ready for it your company is. You can assess your company’s readiness using our Move Toward the Future of Manufacturing Readiness Checklist.
The list of where to find hidden gains goes on, and including everything possible would make for a painfully long article indeed. So the most critical takeaway is not necessarily within the specifics of the recommendations we did include, but in the importance of adopting a broader view when it comes to increasing productivity, efficiency and profitability – as well as how valuable an objective perspective can be in prioritizing, scoping and implementing improvement projects.
EFI Group’s expertise is helping manufacturers take on their toughest improvement challenges in a way that minimizes project risk. The client we showcased in this article provides just one example of the impact of our work. We would enjoy talking with you about your next steps toward greater profitability and determine how we can help you achieve even greater gains. To schedule a conversation with our leadership team, contact Jim Solich at firstname.lastname@example.org.