Time for change

Manufacturers have four options when they're trying to increase productivity. They can automate, outsource, reduce wages or increase productivity through improved workforce management. The last of these options is by far the most positive step and brings the biggest long-term benefits to the company and the country. When you automate, it can improve safety and relieve drudgery but you're shrinking your employment base. Offshoring is a great way for a manufacturer to reduce costs in the short term. But by offshoring you extend your supply chain, increase complexity and put more things that are critical to your business out of your control. Suddenly you're at the mercy of fuel costs, exchange rates, and regulatory regimes in other countries. Manufacturers can look to cut wages, but morale will suffer. So if better workforce management has the edge on automation, offshoring and job cuts, then why aren't more companies doing it? A lot can be explained by the short-term outlook of the business world. Company valuations can jump dramatically over a few weeks and a new CEO can be in the boardroom one minute and packing his desk the next. When time's not on your side, it's unsurprising that company leaders choose to relocate manufacturing to China – that's what everyone else is doing. It reduces overheads and appears immediately on the bottom line. Trying to boost workforce productivity doesn't have the same instant payback. You might have to overcome resistance from workers who think efficiency equates to job losses. It takes time, typically many years, before you really see the gains. However, with a little patience you can have a big impact – cutting as much as 10% in unit cost. This is not a wild gamble: companies have been down this road and been successful. The overwhelming benefit for manufacturers of harnessing labour productivity is the establishment of sustainable competitive advantage. Think about it: nobody else can see the changes you've made within the factory walls, but a rival can copy your move to China. As soon as a company sells you a robot, you know the sales guy will call all your competitors, saying: "I just sold this to a business in your sector – shouldn't you take one, too?" Internal innovation is the ultimate USP. During the recent WM People & Productivity roundtable debate, I was excited to hear people saying the back office is the next area of opportunity. You can have a major impact if you lean up your back office. It's possible to cut a big chunk out of lead times because you're no longer waiting for the back office to do something that controls the flow on the shopfloor. Many manufacturers struggle with the fact that back offices are salaried so they feel there are no savings to be had. 'A salary is a salary, I can't cut half a person', is their train of thought. But it's time to challenge these assumptions and go back to the drawing board. The starting point should be: we have a 35-week lead time with one week spent manufacturing and the rest of the time on supporting processes. Therefore the first thing to do is take a lean programme to the supporting processes. If you get it right then you'll get system-wide improvement. Lead times are cut by five weeks without a single job loss and the company is now freed up to take on more business because of the efficiency gains. Potential bottlenecks Another reason why more manufacturers don't get to grips with their back office is confusion around work processes and job roles. It's important office-based staff understand which processes have the potential to halt shopfloor production. Only then can they prioritise effectively. Many back office people have no idea how their actions impact the shopfloor. I've seen office staff produce a value stream map where two people were doing the same thing. Other times you'd see loop after loop of rework because people didn't understand who had overall responsibility. By the end everyone was looking at each other thinking, 'wow, we've made this more complicated than it needs to be'. I'm sure every department could go through this and find some ways to reduce workload and boost productivity. We all think: 'I have so much to do if only I had more time'. I wonder how much stuff you're doing now that doesn't really matter. Gregg Gordon is also the author of Lean Labor: see www.leanlaborstrategies.com