Companies can increase profitability up to 20% by boosting operational efficiency of their manufacturing setup and beyond-the-factory-gate supply chain, according to The Boston Consulting Group. However, 10%-15% of value is left on the table because companies haven’t maximized return on their existing investments. They either don’t know how to make the most of their manpower and machinery or don’t realize the potential they have inside their factories. Want to boost your efficiencies but aren’t sure how to do it? Here are four strategies from experts.
1. Invest in Continual Improvement
Focusing on removing operational inefficiencies to improve business performance, lean manufacturing centers on the philosophy of continual improvement, that every process can and should be continually evaluated and improved. Lean manufacturing classifies activities as either value-added or non-value-added from the standpoint of the customer. The non-value-added activities form the acronym DOWNTIME: defects, overproduction, waiting, neglecting talent, transportation, inventory, motion and excess processing.
“Most organizations’ time from order to delivery contains only 10% of value-added time,” says Dan Burgos, president of Alphanova Consulting. “Lean manufacturing focuses on attacking the remaining 90%, which is mostly made of non-value-adding activities. The typical benefits of adopting lean principles are an increase in quality levels, a decrease in lead times and a reduction of costs – all landmarks of staying competitive in the current business environment.”
2. Communicate Honestly and Often
In order to prepare for the future, you have to evaluate the past. Shawn Rhodes, president and founder of Shoshin Consulting, suggests that management should evaluate past performance before the start of each quarter or project. “If you take an honest look at what went right and wrong on a similar project, you’ll have more than enough knowledge to improve operational efficiency in the future,” Rhodes says.
Rhodes thinks that management should remind employees on a weekly basis what their objectives are. Whether that be attaining a certain amount of sales or gaining a certain amount of clients, the objective should be the worker’s number-one priority for the week. Secondly, management needs to clearly define who is responsible for which task and by what time they need to complete it. “Don’t just say ‘Team, let’s have this done’ because then no one is responsible,” Rhodes says. “You have to make sure the foundational elements of your business are rock solid. If you give tools to a team that doesn’t know how to function, you’re going to lose profits and clients.”
3. Prepare for Mistakes
Business process streamlining is used by some, but only mastered by few. Companies tend to only dig in on efficiency issues when they’re forced to via market pressure. “When profits are high, inefficiencies typically soar,” says Dawn Roberts, owner of Dawn Roberts Consulting.
In this hyperactive digital age, Roberts encourages companies to take a breather before engaging in the next project. By analyzing the tasks that need to be accomplished beforehand, employees are better prepared for optimizing schedules, testing out machinery and double-checking the clients’ desires. It also gives manufacturers a chance to see if there are repeatable tasks that can be standardized, cutting down on delivery time and allowing for wiggle room on the back end. “If you plan for too tight of a timeline, you’ll run into issues,” Roberts says. “Build in time that will allow you to react to contingencies.”
4. Rely on the Cloud
Companies should seek to utilize one single system that would connect all its departments, control and record all processes and encourage cooperation. Information-related processes such as cloud computing are commonly used systems for optimizing the production chain.
“Companies still trying to run infrastructure on the premises are at a disadvantage,” says Phil Potloff, chief digital officer at Edmunds, an automotive resource portal. “They’re spending capital and using human capital to support servers and storage.” As Edmunds’ first chief digital officer, Potloff spearheaded the launch of Edmunds Advertising Solutions, a system that leverages big data and analytics to help auto dealers better target their marketing. The system relies upon cloud computing – an online service that stores important documents on a website or mobile application for use on electronic devices.
“By working with the cloud, you can use that human capital to develop new products, interfaces or services,” Potloff says. “The maintenance and operation of the application is much quicker than waiting for your traditional IT department.”