“The biggest room in the world is the room for improvement.”
- Helmut Schmidt
Although these words, attributed to the German statesman Helmut Schmidt, were originally spoken in a political context, they’re equally true when it comes to manufacturing. In this sector, continuous improvement is critical to refining processes, making operations more responsive and ultimately, becoming more competitive. To achieve continuous improvement, your management team must take the lead in driving change.
Understand Your Current State
It’s important to understand that when you want to improve, your organization has to be receptive to change. As Inc. reports, five factors impede an organization’s ability to change: the rigidity of the company culture, the strength of the culture, contractual agreements, sunk costs, and entrenched interests. No matter how much resistance you encounter, you need to find a way to facilitate change — otherwise, you run the risk of becoming obsolete in this fast-paced, highly competitive market.
In general, three factors drive change: loss of revenue, employee feedback, and analysis. Driving change hinges on process improvement, which in turn begins with examining your current state.
Examine Your Current State
To examine your current state, you need production data. If you’re not collecting production data, you should start doing so immediately. If you do collect production data, what are you doing with it? Note that data collection in itself isn’t sufficient — you need to analyze your data and use the insights you glean to determine your current cost per unit (CPU), as well as analyze your processes to pinpoint inefficiencies, identify opportunities for improvement and assess what a realistically improved CPU would be. Remember: Without data, you can’t see — let alone understand — the impact of significant changes, and minor tweaks become virtually invisible. To collect and analyze all your data, you need a system that uses the data and actions you input to generate output or results. By changing your input, you can glean insights into the different outcomes and select the best course of action accordingly.
Hourly Pay, Salaries, and Incentive Costs
You should also calculate what you’re spending on hourly pay, salaries, and incentives. This calculation is a critical step in determining whether there’s an opportunity for cost savings or to leverage remuneration to improve outcomes. For example, if you have a workforce of tenured employees, the average salary may be well over the industry standard due to years of raises. If this is the case, you might want to reconfigure your workforce to retain your top performers, retrain employees who can improve and let underperforming workers go. At the same time, if your objective is to increase production speed, it could be a solution to tie incentives to performance, since increased remuneration is a powerful motivator for workers.
Evaluating Labor Sources
Finally, evaluate your labor sources. Do you use temporary labor or seasonal workers? If so, evaluate how that impacts workforce spend, as well as safety, production speed and product quality. For instance, you might be using temporary workers during peak times and busy seasons, but if their lack of experience adversely affects product quality, it could impact your bottom line. If that’s the case, you might benefit from recruiting and training additional full-time workers.
How to Achieve Your Desired Future State
As we’ve seen, to improve, your organization has to be receptive to change. That’s why, when working towards your desired future state, it’s important to take a top-down approach. By first securing executive buy-in, you encourage your managers to be champions of change who communicate the reasons for process improvements to your employees, inspire them to get on board with the change initiative and guide them through the transformation process.
Once you’ve pinpointed areas that need improvement and secured executive buy-in, take an in-depth look at the challenges you’re facing. For example, you might have ineffective tools and technology that yield incorrect or skewed data. On the other hand, you could be dealing with human-related issues, such as data manipulation or playing the clock — a term that refers to manipulating time cards or even committing fraud.
Analyze these challenges, and determine how to overcome them. You will need a winning team and a detailed strategy that clearly outlines all the necessary steps to achieve your objectives. At nGROUP, we utilize a model that’s gaining popularity among the Japanese — who have been leaders in the field of sustainable production practices since the mid-20th century — called the cost-per-unit (CPU) labor-management model. In a nutshell, we assume responsibility for the workers and the production floor involved in a specific process and deliver a guaranteed CPU for our clients.
Be an Instrument of Change
When driving change, the status quo is your biggest obstacle. Stakeholders may resist change because they don’t see it as beneficial; in fact, they may even perceive it as a threat to their departments, projects or influence. Employees often resist change because it intimidates them or threatens their jobs. At the same time, they may simply be comfortable with the way things have always been done. Even the smallest changes can lead to significant results that benefit both your workers and your business. For example, for one of our clients, we studied a process that involved picking parts from either a pallet or a shelf. After analyzing the data, we found that picking parts from a shelf allowed employees to work between 25 and 30 percent faster.
It’s important not just to discuss challenges and areas that need improvement. Instead, you have to be an instrument of change and ensure that action is taken to advance towards your desired future state. Because whether you choose to lead change internally, hire an external consultancy firm or opt for third-party human logistics (3PHL), you need to ensure continuous improvement to drive change and help your business advance.