January 26, 2018
When is the Last Time You Performed a Productivity Assessment on Your Operations?
Manufacturers and distributors often find themselves encountering multiple problems on a regular basis – these problems should not only be evaluated on an individual basis but also evaluated on a system-wide basis. Was the poor fill rate, inadequate margin, or loss of market share indicative of a system-wide problem?
Management should meet regularly to evaluate the overall productivity of the operations – evaluating as a whole the difficulties and obstacles encountered by the company over recent months – are they recurring? Do these problems indicate that the company’s operations have a bigger issue, a weak point in the operational structure that should be addressed. Focus should be on productivity improvement, which will then address the systemic problems encountered.
Let us explain a few of the productivity improvements that can create dramatic positive change in a variety of environments. These areas should be discussed and evaluated at the management meetings.
Stabilize Operations’ Processes
A manufacturing environment that is too reactive and in a constant crisis mode loses productivity. When there is continuous variability within a production process, it becomes difficult to plan resources, including labor and materials.
One key to productivity improvement is to even out the demand. Meet with your customers to understand their business cycle and their purchasing methods. Do they have a weak point that you can provide guidance on? Do they have a purchase budget that they can share with you? By improving the predictability of the demand, you will stabilize your processes and create a proactive approach.
Being proactive instead of reactive will have a significant positive impact on your operations. It will save time, money, alleviate problems and issues before they happen, recognize a need for change, foster creativity, and allow for flexibility, self-improvement and awareness. Your employees will start seeing the big picture and gain a better understanding of the long-term goals. Your company will become forward thinking.
To make this improvement, an estimate of periodic demand must be made. Even if this is a guess, it at least provides a starting point from which to measure actual performance.
Costs drive everything. It determines the sales price, the contribution margin, and ultimately your bottom line. With that in mind, at these regular meetings, discuss costing, specifically, how accurate and current are:
bill of materials,
direct labor rate,
perpetual inventory system, and