Search
Close this search box.
Search
Close this search box.

How Manufacturers can Push their Productivity to the Max

Manufacturers should use more precise and time-sensitive metrics to boost their productivity.

While most manufacturers are engaging in multiple initiatives and investments to boost their productivity, many are falling short with large gaps between their expectations and outcomes. Even the most ambitious efforts to increase efficiencies and productivity won’t bear the intended results if they aren’t guided by precise and time-sensitive metrics.

McKinsey analysts have said the problem is that manufacturers typically lack precise enough measures to understand how real-time variations can erode returns in efficiency. But there is a solution. They feel companies can eliminate profit-draining variations by using advanced analytics to better manage performance. They recommend manufacturers refine their measures down to “profit per hour” as a means to improve resource productivity and attain a more detailed view of fluctuations in the operating environment. This also provides a clearer measure for both CEOs and department managers and can be shared quickly enough for them to affect change. Manufacturers then can use advanced analytics tools and data captured from sensors to discover patterns and create self-learning models to spur continuous improvement.

“The insights create a new information backbone, linking real-time performance at the ground level to company profitability and allowing managers time to make the necessary trade-offs,” the analysts said.

Profit per hour has long been discussed for more than a decade and often deem “the missing metric” in manufacturing. Michael Rothschild, chairman of Profit Velocity Solutions, said that while all manufacturers measure their product margins, not all use tools to precisely measure the speed of profit flowing from their equipment.

“Variations in efficiency, previously likely to continue for days, are now eliminated within hours on average thanks to new ways of working across the facility.”

Manufacturers should strive to attain visibility into not only their total profit per hour but also to break that down in even more detailed increments to identify room for improvement.

“Every CEO knows his margin level, but virtually none know their profit per machine hour…With recent advances in information technology, this is beginning to change. It is now practical to measure and manage profit per asset hour regardless of the size and complexity of a manufacturing enterprise,” Rothschild said.

Technology is certainly making this easier. Companies now have the sensors and processing capabilities to generate usable data and measure the performance of operations with real-time precision. Third party, cloud-based applications make it relatively simple and cost-effective for manufacturers to attain detailed and real-time insight into minute aspects of their operations. That data can be shared to management and staff throughout the organization to make improvements on the fly. As more effective analytics become available, manufacturers can find greater scope to widen their profit-per-hour analysis beyond simple critical processes.

Larry Fast, founder and president of Pathways to Manufacturing Excellence, said that most productivity measures at plants “are not robust enough to represent reality.” He said plants often discount for things not directly in control of the shop floor that can affect product costs. Fast said leaders around the entire business often think productivity is the responsibility of manufacturing and become cheerleaders instead of doing their part in their own functions. He suggested quantifying productivity measures in dollar results with a direct link to financials. “If the productivity you report can’t be found on the income statement and/or balance sheet, then it didn’t happen. From a financial standpoint, that’s the final word,” Fast said.

But to further refine the effectiveness, manufacturers need to refine these measures and metrics to an hourly basis. McKinsey said that doing so enables manufacturers to more rapidly identify and respond to inefficiencies. “Variations in efficiency, previously likely to continue for days, are now eliminated within hours on average thanks to new ways of working across the facility,” the analysts said.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.