Productivity? What exactly do we mean?
In our projects, we first clarify what actually constitutes overall productivity for this company or this site. And here the underlying question is: What is actually the limiting factor for output? Where are the bottlenecks?
Is it all about:
Output per input – A metric for entrepreneurial success
Productivity this is “Output : Input”. Output is above the “fraction bar”. Which specific output is important for the business? – This must be above the line. Under the bottom line there must be the critical, scarce resources. This critical scarce quantity is often so critical and scarce precisely because we lose and waste much of it. For example: Critical equipment needs maintenance. Scarce staff need meetings, breaks, training and, above all, spend a lot of time in the processes with non-value-adding activities. We want to use the entire theoretically available capacity as much as possible. We want to use the entire time in which we pay our staff. Therefore, this total size must be the bottom line. Without cuts!
If our “fracture” correlates with our business goals, we managed to select the right numbers.
The result is a metric that stands for entrepreneurial success.
Work with counterweights
Caution: A metric alone can be very misleading. That is why we recommend a balancing second metric. Why? For example, an outstanding improvement in productivity can also be achieved by “producing as much as possible – no matter what”. Of course, this usually is not such a great idea considering profits! Suitable as a counterweight is often delivery reliability, delivery backlogs or stock levels in production. Or for Quality Right-First-Time, deviations or yield.
Measuring productivity on site-level?
Across a plant or across an organization – very high-level – productivity can more or less be tied to one metric. Such a metric aggregates productivity from all relevant areas.
We need such high level metrics to create clarity about goals. It facilitates communication in all areas. And through this productivity metric, we’ll see later if we’ve taken the right actions. It helps to continue improving in the long term. Thirdly, building on this high-level metric we can see which areas are contributing how and where we need to attack.
Transparency on productivity for value creation
On top level it’s the overall productivity that counts. But if you really want to improve productivity, you have to understand exactly how the value-added level contributes to this. This is only possible directly at the process level, because this is where the value is literally added.
At process level, transparency must also be created as to learn which improvement measures are actually effective. The process level needs indicators that show the improvement. Interestingly, however, such indicators at process level are often not productivity indicators in the sense of “output : input”.
– It may be that productivity increases enormously just because paperwork has been well prepared and on time. In this case we would want to measure the planning department by what % of the orders were handed over to production completely prepared by a specific day of the previous week.
– The productivity of an entire packaging line can depend on the quality of the prepared data matrix codes. Errors would be a metric here.
– The output often simply stands for the productivity of critical systems. Such simple metrics make it much easier for everyone.
Let’s look next into the different levers of productivity.
Is your productivity determined by the output of critical assets? Then it is best to start with the classic OEE. OEE for Overall Equipment Effectiveness. (Free information about OEE can be found in our glossary). Is it a critical system that should run 24/7 if possible? Then we strongly recommend working with OEE1. If the output needs to be increased within limited shifts, OEE2 should be applied.
It is absolutely critical to the success of the OEE calculation to select smart input variables.
OEE – also to improve people productivity and materials productivity
Interestingly, OEE, i.e. overall equipment productivity, is often a viable indicator for working on people productivity. Why? Because the output per capita is often limited by the system.
For example, if a piece of equipment which is critical to the output is constantly malfunctioning or not running at peak output, it needs to run in three shifts instead of two. Otherwise the output quantity is not sufficient. If the system needs personnel for an additional shift, the output per capita drops. Conversely, staff productivity improves by improving equipment productivity (OEE).
Material productivity is also often closely related to equipment productivity, because material is still consumed during unproductive plant times.
Examples: The longer the running-in procedure, the worse the OEE, and the greater the waste of material. Material consumption and rejects are often much higher if the equipment is running with many breakdowns. The yield / scrap rates correlate directly with the OEE.
Levers of people productivity
– Processes: How complex and confusing are the processes? How much walking & transporting can be observed, how much searching, asking questions, how many errors and loops? All of these are simple indicators of what can be achieved with process optimization.
– Standards: How big is the variation in output – per day, per shift, per hour, per project or per batch/lot, depending on the person and the day? How good is the output “when everything goes wrong” vs. “when everything goes perfectly”? The difference shows what Standard Work could bring.
– Planning: How much is actually value-added work at process level – measured as a percentage of the time actually available?
How much could you produce if everyone worked continuously to add value? At the value chain level, how much time is spent reorganizing? How much time is wasted with products not getting to the line in an efficient sequence? How often do processes have to be stopped?
Such an assessment shows the potential of improved planning.
– Process overview and motivation: How well do employees understand why they do what they do? For example, how relevant is the quality, the speed of activity for downstream processes? Why is “it” so important and what exactly is important? There is often a lot of potential buried here for more motivation and, above all, for better individual decisions that would lead to more productivity.
No matter which lever, leadership – lean leadership – and good board management always play a decisive role in developing potential. We have always been highly successful building on this when it comes to implementation. Shop floor management or board management anchors continuous further development.
A final point on material productivity
The classic DMAIC approach is almost always excellent for improving material productivity or productivity at the level of technical processes. You can achieve great success with this!
Metrics are important to identify the levers for productivity. Above all, for the respective area we must create clarity as to which productivity is critical to success. If these levers are crystal clear for everyone, it is usually obvious what needs to be done. Further development of classic board management structures brings the required implementation success. The relevant productivity indicators must of course be anchored in the process and combined with structured problem-solving methods.
Increasing productivity is exactly our field of competence. We would be happy to give you tips on your specific challenge! Contact us!