Articles, Guiding Principles
Manufacturing productivity, or productivity of any type, Is composed of a large number of moving parts. We will explore some of them later, but this particular section is about guiding principles of productivity. These principles are composed of a mixture of concepts and actual practice, because, just as in real life, it may be difficult to delineate clearly which is theory and which is practice.
We will lead off with the Pareto Principle (a few items will constitute a large amount of the value), which leads to the task of setting priorities, then motivation, then into some of the practical detail such as productivity improvement; the cornerstone practices to set expectations, measure, and communicate because after all Results Count. Then we’ll wrap up this section with the discussion of Industrial Engineering, which is a very useful and practical mechanism with which to administer the concept of productivity. Somewhere in here we will get into another efficient tool, that of reducing waste.
Priority, Pareto, and the Gorilla List
Someone has to set the priority for actions, and if management doesn’t do it the guy with the wrench in his hand, or the gal with the I-phone will.
What’s next, boss? The question may come up as soon as the last task was done, or after a break or lunch, but it will come up. And if you are not around, the employee will provide the answer. Let’s make sure that the next job is the one at the top of your list.
To determine what should be at the top of the to-dolist, lets consider Pareto, and ABC.
Vilfredo Pareto, a 19th century, Neo-Classical economist mathematically described the unequal distribution of wealth that he observed in the world around him. His observation, known as Pareto’s principle, has been profitably extended into other fields of inquiry: in business Pareto’s principle tells us that a few of the inventory items will constitute most of the value; a few processes will give most of the trouble; a few line items will generate most of the cost; a few constraints will control the entire pace of operations; a few misdirected efforts will create the most issues. Expressed most simply, priority focuses on those few items that influence the largest result. Show me the money.
Another common technique is often called ABC. Each line item, on an inventory or an action list, is rated A, B, or C; A being most important. Sometimes a super B category is created. Items are rated A or B or C because of importance defined in some manner; inventory for instance may consider price, usage volume, floor space consumed, lead time, number of vendors who can make the part, technology, complexity, potential of an interruption to production.
Don’t forget an item because it is a C; today it needs no attention but ignore it and it will become an A some day. For want of a nail the shoe was lost, etc.
- Assignment and expectations
At the time you give instructions, be sure to couple assignments and expectations. Clearly identify who, what, where, when, how. When means both start and expected completion, The level of detail will vary with the individual and with experience. Communication may be formal or informal, although some written record is better for all concerned.
After all, this kind of communication is not unusual, is it? Your spouse will instruct you to take out the garbage now, then walk the dog, then get the oil changed on the Mercedes, and be back in two hours. Maybe not in writing, but pretty definite.
- Gorilla list
The most effective system I ever saw to assign management’s project priority, set milestones, record progress and react to issues was called the Gorilla List. And it governed resource assignment for hundreds of resources, in engineering, research and development, quality, and production people in the complex and regulated pharmaceutical environment.
The name came from the question, “where does a 900 pound gorilla sit?” and the answer, “anywhere he wants.” Senior management set priorities for projects at the division level, from one through twenty. Project number one received any help it needed from any resource, now. Project two got any help it needed except when number one was using that resource. And so on. The project manager had a good idea of how to set the schedule, milestones, and assignments from the assigned priority. The project manager selected and utilized individual resources, working across different disciplines, within their management structure.
Other projects, rated below number 20, got along as best as they could. But it was an acceptable answer for a lower priority project manager, that his need was superseded by a higher project. The system served top management priority. It was constantly reviewed and modified as projects were completed and new ones introduced or upgraded in priority.
I ran a project rated number 6, and was able to obtan and utilize resources in all disciplines just by the accepted influence of the project ranking. Progress was smooth and predictable because of the resource allocation mechanism. Even lower ranking project managers seemed to prosper, using the resources remaining.
- Real time scheduling
One effective application of the concepts in point 2 above is real time scheduling. It is especially suitable for an operation which has regular work tasks that occur on an irregular schedule, such as demand maintenance, or a warehouse put-away or picking crew. A real time scheduling program should be organized, with one source to issue instructions, a formal paperwork system to issue work and then to record completion, an estimator to define the work time expected and keep track of performance (and update the files to aid later estimates).
- Your own personal priority
Today if you only work on one thing, and that item is at the top of your priority list, you were successful. But it can be hard to focus on priority, as there will be distractions. Be sure to control your own plans, don’t cede control to others. Don’t let others fill up your calendar, electronically or otherwise, without your full understanding.
Thanks for your attention; I’m happy to add to your perspective of industrial engineering and productivity.
Jack Greene Jackson Productivity Research
There are employee engagement and motivation programs from ABC Analysis to Zero Defects, and many work well at least for a time.
My experience tells me that any program can really succeed only if it supports an otherwise sound management structure, with good products and quality and customer support; with decent forecasts and good controls, equipment and overhead structure; with modern technology, standardized and documented processes, and good materials scheduling.
In such a context perhaps any performance improvement program will work well. Or perhaps in such a context one does not need an improvement program. But employee motivation is pretty complex. This article outlines classic ideas, and insights into current times.
These comments on classic motivation refer to three well known sources, and two sources I have just read.
- Abraham Maslow, in his Hierarchy of Needs theory, explained the five needs as: physiological; safety and security; belongingness and love needs; esteem and reputation needs; the need for self-actualization. In this day and age we like to think most U. S. workers have satisfied the first two needs and so their needs are somewhere in the third, fourth and fifth levels.
I personally think Mr. Maslow is correct in all levels of human motivation, and his ideas should be considered to apply not just to individuals but also to international dealing between have and have-not nations, for instance.
In the modern workplace, perhaps we assume that employees are further up on the hierarchy than they really are, especially in difficult economic times. If a worker perceives that his job is threatened, that is a level one issue because his very survival is at stake. Are you motivating a person to keep his job or to perform better? A different motivation will be effective in each case. A client a few years ago was a unionized textile company in Rhode Island. Sounds like three strikes, right? But both company and employees realized that the existence of everyone was at stake, and with active cooperation were making a success of what they could do, seeking out the niches they could fill, and meeting the orders with quality work, on time.
- Frederick Herzberg in the Harvard Business Review, January-February I968 wrote One more time: How do you motivate employees?
He identifies job dissatisfiers as separate from job satisfiers, and rated achievement, recognition, work itself, and responsibility as the most significant satisfiers. Pay was recognized by Mr. Herzberg as a corrector of dissatisfaction; more pay would bring an employee back up to even, but did not cross into satisfaction.
I am in solid agreement with Mr. Herzberg on his views except for pay, in which case I am more inclined to agree with James Lincoln.
- James Lincoln founded Lincoln Electric of Cleveland which from the 1930’s until recently was generally regarded as the most productive company in the world. Mr. Lincoln promised that no one would lose their job because of productivity improvement, and the company routinely paid annual bonuses to all levels greater than the already generous base wage. Not coincidentally Lincoln quality led the industry.
When I called Lincoln Electric years ago to ask about their plan, I was told that hundreds of companies inquired, but that to their knowledge none, zero, had emulated the “no lay off policy”, and very few offered such substantial bonuses. The company I was employed by was dumbfounded by both those ideas. Needless to say, no company achieved the Lincoln level of productivity of those years.
- Just recently I have read two more sources, one scholastic and one more practical. You might want to look at a paper published in 2003, “Evolution of human motivation theories: An examination of human motivation theories in the twentieth century” by Kenneth S. Rhee and Tracey Honeycutt Sigler, Department of Management & Marketing
at Northern Kentucky University at www.midwestacademy.org/Proceedings/2003/papers/rhee.doc. It mentions all the sources I know and many others, from Frederick Taylor on, and the phase of the evolution they came from or caused.
See also the book “1001 ways to energize employees” by Bob Nelson, Workman Publishing, New York, which is a summary of practical applications that companies have implemented. Mr. Nelson has published many other books.
For the economic situation arising today, do these classic answers apply? And did these motivations cause the actions that precipitated the mess we are in?
he Maslow Hierarchy of Needs theory is dominant today in the minds and actions of most people and companies, it seems to me. People and companies have quickly jumped to safety and security levels from the warm and cozy levels of belongingness, esteem, reputation and self-actualization. Even if they are actually safe and secure, companies and people act, intelligently, as if they are threatened. And of course many are threatened, in fact. The U. S. auto companies for instance have abandoned the need for esteem and reputation that they so carefully cherished a few short months ago. It seems pretty logical for a company to act to protect its own safety and security, and to recognize that their employees desire the same protections.
There is nothing obvious in motivation theory to have caused the economic failures of this century; greed and hubris don’t appear in the theory. Safety and security depend on good management and perhaps that has been overlooked in the race for continual short term profits and growth.
Security can mean against outside aggression, but also security from crime or disease or hunger. The one word “security” has too many meanings to deal with on a national level I think.
Politicians are well aware of the high place that security holds in concerns of the electorate. Since the Caesars, politicians have countered internal ills by blaming outside influence, and spent on defense to appeal to the security minded. However, if there is no security, there will be no higher levels of motivation to enjoy.
So, somewhere in this lies truth. Maybe the boss should just pass out coffee and doughnuts, because I have seen that as very motivational. After all, that is Maslovian and Herzbergian, and occurs many times in “1001 ways”.
Thanks for your attention Jack Greene
Set expectations, measure and communicate. Results Count
You, and I, and the people in your company want to know what is expected of them (and their group and the company) and how well they do against expectations. Measure productivity and see how well you produce results.
In this economy, people are more apprehensive than usual, so expectations and measurement and communication are even more important.
One of my good bosses, and I have been blessed to have a few, gave out wall plaques that said Results Count. I believe that once you learn that lesson it stays with you forever.
One of my good clients, and I have been blessed to have a few, asked me to set up an incentive system for his construction supervisors. And we did, but he really wanted, first, to establish a reporting system of work done, blocks laid and slabs poured and time lost, as a visible record that highlighted problems and usually solutions.
What results do we measure? Aim for a total productivity measurement
Generally when “Productivity” is discussed, we really mean “Labor”, the people side of the manufacturing enterprise. But if we measure only labor we get information that is useless at best and misleading at worst. One company may be highly automated, so their labor productivity is very good compared to a more manual company. But the automated company may be unprofitable because it has so much money invested in equipment, or runs higher expense to maintain equipment. Delphi in 2005 sought bankruptcy protection at the same time that many of its factories were winning Lean Manufacturing awards.
Measure total productivity in an organization to capture the comprehensive effect, but also individually measure labor, executive prowess, waste, equipment utilization, inventories, effective automation, employee input, sales and marketing, new products introduction, product quality, customer service. See how the result tracks with the bottom line of the P&L and other financial results in use already.
What result is a good productivity index? What is bad?
Is it possible to look at one productivity number and learn if it represents an acceptable rate or not? No. There is not one magic number because are too many variables involved. One can at best measure productivity over a period of time and determine how much it changes. Even then, an arithmetic result does not indicate what actions caused the change.
Just because there are complicating factors to productivity measurement, do not stop the effort to measure. Recognize that answers may not be perfectly accurate, but still can be a good indicator of productivity change. And you can fine tune the initial mechanism to yield ever better results.
Cut the waste
A new idea? No, even though it is a pillar of the Toyota Production System and credited with much of their success. Frederick Taylor cut the waste, as did Lillian and Frank Taylor, and Dr, Edwards Deming. Your organization should do likewise, as the first step in improvement. Don’t set an expectation before cutting.
Oh yes, the other pillar of Toyota? Respect for humanity, Surely you know that, and practice it yourself.
Units of measure
You will probably need to apply different units of measure, because the groups being measured are different, and their output is expressed differently. If possible, relate units to the business of the entity, tractors produced per man hour, insurance policies written, ads sold, packages delivered. Measure a factory by units of tractors produced per man hour, but the sales organization by tractors sold, and the customer service group by tractors maintained.
Compare results over time periods
A productivity value as stated has no meaning alone. Measure again in a month using exactly the same procedures, or last year, and the values start to have significance as they are compared.
Apples to apples
Comparisons tend to be inaccurate unless they are “apples to apples”, with factors the same from one comparison to another. Yet comparisons over time seldom involve purely identical sets of variables. We all know that does not happen, even on this morning’s breakfast or trip to work. Don’t obsess over the lack of absolute consistency because you will never have it; merely state assumptions, calculate carefully, check answers, and use what you find.
One significant variable in productivity measurement is sales volume. Sales volume will always affect productivity measurement; incrementally more volume will cause more direct cost of materials and labor, but usually no more plant managers or corporate aircraft or receptionists. Most companies will therefore convert added sales to better productivity, as well as better overhead absorption and better profits. Incrementally less volume will have the opposite effect.
Busy versus productive
A group may be busy but not productive. If output is measurable but has no value to the business entity, then the group that generates such output may have 100% busy-ness but zero productivity.
Another group may not be always busy but at the same time contribute extensively to the productivity of their overall organization. Examples are maintenance people who keep their equipment in good repair so that they can stand by while operators produce. A busy maintenance person usually means the equipment is not at work and that is bad.
Other groups who should be idle for good overall productivity are security guards, police and firemen. And maintenance mechanics.
Preventive maintenance hours may take the place of demand maintenance, and crime prevention and better building codes may take the place of emergency reactions. Costs may be shifted but still be present.
Be advised that the results of any measurement, productivity or otherwise, can report only part of the story, the final result; it does not report what caused the result. For instance, the much emulated Toyota Production System emphasizes personal development of line workers and supervisors, which is usually accomplished by training. In a productivity measurement result, training will appear to be unproductive time but would shortly lead to even higher productivity as learned lessons are put into effect.
Jack Greene, Jackson Productivity Research
Practical Productivity Improvement and Cost Reduction
Inexpensive and quick actions to raise output and / or lower input in your organization, whatever your line of business.
Act to raise profits or output, to ease bottlenecks, to refine operations that have lost their sharp focus over time or start effective new ones.
Productivity Improvement or Cost Reduction
Different sides of the same coin or two separate activities? Pretty much the same to me, some may call it one thing, some another.
Classically, productivity is defined as Output divided by Input.
-or- A second definition is, productivity is the same as profit, selling price minus all costs
-or- Toyota sees Profit = (Price – Cost) x Volume, assuming that the manufacturer cannot dictate the sales price.
Different mathematics, same theory:
To improve productivity or gain profit, raise output and / or lower input.
Now that we have the theory out of the way, these actions will stress inexpensive and quick ways to raise output and / or lower input in your organization, whatever your line of business.
Act to raise profits or output, to ease bottlenecks, to refine operations that have lost their sharp focus over time or start effective new ones. Operations are most profitable when they have the least waste, and that is the heart of the Toyota Production System.
Maximize capacity and equipment capability, manage constraints
Match throughput to customer demand
Cut cycle times for quick response to market conditions
Lower input, not only direct but administrative and indirect
Minimize facility capital and operating costs
Optimize manufacturing and processes
Simplify logistics, shipping, warehousing
Define the process for high quality production
Establish standard costs and measure against them
Adapt inventory to continuous manufacturing practices
Match overhead to throughput
Balance inventory levels to output
Get the most out of material purchases
What first? Apply the Pareto Principle
Vilfredo Pareto, a 19th century, Neo-Classical economist mathematically described the unequal distribution of wealth that he observed in the world around him. His observation, known as Pareto’s principle, has been profitably extended into other fields of inquiry: in business Pareto’s principle tells us that a few of the inventory items will constitute most of the value; a few processes will give most of the trouble; a few line items will generate most of the cost; a few constraints will control the entire pace of operations; a few misdirected efforts will create the most issues.
Expressed most simply, productivity focuses on those few items that influence the largest result. You may know Pareto as the 80/20 rule, or ABC. Show me the money.
Specific ideas, In management practice
- Product pruning
A thousand years ago when I was with ITT in the Harold Geneen days, there was a practice called product pruning. Each company was required to decide annually which if any products should be eliminated, based on cost versus income. That is not as simple as it sounds because it requires an accurate knowledge of real costs and net sales prices. Many times since then I have seen individual products crying out for pruning but still in the catalogue.
- Overhead allocation method, absorption
Is your overhead allocation and absorption correct? If not you can’t make a sound decision about product pruning, or product profitability, or equipment justification, or department profitability. It takes some work to sort out costs and apply them correctly, but if not you will have information that is meaningless at best, and harmful at worst. Correct decisions can only be supported by correct information.
- Lean manufacturing,
a common term for the Toyota Production System, is well applied only when it is corporation wide, encompassing admin and executives as well as the production floor. What is your controllable manufacturing cost? If you cut that by a quarter, how much do you save? Compare that to any significant improvement in the rest of the budget. Go back and look at Pareto again.
- Just In Time
inventory control principles and MRP are mutually exclusive. You can’t enjoy the benefits of both at the same time.
- Economic Order Quantity
is a proven benefit to operations cost. An excellent article by Dave Piasecki about it’s uses and misuse within modern inventory control systems is at http://www.inventoryops.com/economic_order_quantity.htm.
Specific ideas, in Operations
- Constraints management
is perhaps the most important tool to use on the shop floor, and it usually is pretty inexpensive to correct problems quickly. Identify production constraints, manage them, and staff all other tasks according to the constrained output level. Then in order, raise the constraints. Please see my article on the subject.
- Check the company’s basic outlook for production.
Is equipment dedicated to one product or flexible to process many products? Does your present arrangement match you present product mix and objectives?
- My experience says that the work pace of people is pretty good
while equipment is running and material available. The loss of productivity comes at changeover, down time, and when material is not available. Pay special attention to changeovers; question carefully why they occur in the first place, then study changes and speed them up.
- Is your materials management policy
to start a product down the line even if not all components are on hand? You can prove it to yourself that is wrong, or you can take my word for it. It is costing you money, in changeovers, idle delay, bigger inventory, rework.
Thanks for the attention
Jack Greene, Jackson Productivity Research
Industrial Engineering, a continuing productivity influence
The overall idea behind this article is that an Industrial Engineering group in a manufacturing organization is a good place to center, to perform, a successful productivity activity. The group’s name is not important, but the concept of a central, objective, engineering admin function can be very successful.
Industrial Engineering contributes to productivity in many ways because it can improve performance throughout the P&L, the balance sheet, and customer service. Industrial Engineering tools can quantify and lower costs in administration, government, health care, labs, installation, maintenance, energy, the service industry, quality, materials, facility management as well as the production floor.
Classic IE tools to define and improve operations include time and motion study, workplace and floor layout, simplification, constraints management, flow process, materials handling, and standard costing. Many successful modern practices, notably the ones which have developed from the Toyota Production System, include the principles that were first expressed by Frederick Taylor and Frank and Lillian Gilbreath. Industrial Engineering embraces all of these ideas, and whatever else will be developed to support efficiency and productivity.
See my companion article, “Manufacturing Productivity Toolbelt” for greater detail about the multitude of specialized techniques that industrial engineers practice. Learn the background in this article, then choose from the “Toolbelt” article what IE technology to apply.
Pardon me if I do not address IE in the information technology context because I am not experienced there, but there are plenty of IE’s who do very good work in IT.
What is included in Industrial Engineering?
According to our professional society the Institute of Industrial Engineers, “Industrial engineering is concerned with the design, improvement and installation of integrated systems of people, materials, information, equipment and energy.”
IIE goes on to comment on the flexibility of IEs, and our goal of saving companies money and increasing efficiencies. That’s us, all right. IIE is at http://www.iienet2.org.
So, IE covers a broad field, and that is really the point of this article: The opportunity for improvement is vast, and there are many proven IE practices to employ, tools to use.
Which IE tools will be useful? Prioritize the issues to get started.
Your own circumstances will govern the potential and the tools that will likely yield the best results. First define the situation, then prioritize the issues. The Pareto Principle, or ABC, or 80/20 rule will always be the initial tool to use. Pareto suggests that a small number of problems will have a large effect; likewise a few actions will contribute the largest improvement. List and prioritize problems in order to isolate the most significant concerns for you today.
Issues in your organization may be cost, or they may be customer service, or quality, or delivery, or sales, or the current economy. Perhaps at the moment the problems are not lack of qualified people or under-capacity in output, but that day will return. After prioritization you will be ready to determine which IE tool or tools will be the most cost effective in your particular case.
Outside the box
IE tools are not outside the box; they tend to be well understood and defined, But if you will think outside the box as you consider how to use them, you can optimize effect and payback.
After you identify and prioritize the important issues, select IE tools to define the situation and quantify potential; usually the solution will be more clear once the facts are well understood. This is where thinking outside the box can help. For instance what is perceived as low output from labor can be due to another factor entirely; too frequent changeovers, or equipment breakdown, or lack of parts to process, or unevenly assigned work, or mis-managed constraints. Scope out the real problem with an IE tool that is general enough to encompass the entire picture.
As you think outside the box, refrain from “type-casting” an IE tool. Most of our classic techniques such as work measurement, methods, layout, and flow process were in fact developed for factory operations. But they are just as effective when used elsewhere in today’s economy where cost and output concerns are evident in administration, health care, government, installation, customer service, labs, new product introduction, quality, materials flow, distribution, inventory; in any part of the P&L or balance sheet.
Continue to think outside the box as you select the IE tools to quantify the situation, and then move on to solve it. For instance, consider a constraint to be any impediment to output and not just a machine; manage any constraint to reduce its effect. Your operations may be fine examples of planning and staffing and good layout and flow and safe practices and efficiency and accountability; the next step is to apply those same principles to what may be your big-ticket spending items; overhead and paperwork and customer service and energy and discretionary spending.
Differentiate the tools and the objectives
Your primary corporate purpose is probably akin to the basic Toyota objective, “making a profit, and satisfying the customer with the highest possible quality at the lowest cost in the shortest lead-time, while developing the talents and skills of its workforce through rigorous improvement routines and problem solving disciplines.” Toyota did not set out to invent just in time, or kaizan events, or value stream mapping; such tools helped along the way but were not the primary focus. Keep your eye on the broad purpose, and don’t settle for just another tool. You can set the objective, then utilize any tool in the IE toolbelt to reach the goal.
IE help is readily available
If your organization needs more IE firepower, you can acquire help from many places; consultants such as Jackson Productivity Research, college and university organizations and faculty, placement specialists, contractor services.
There are many consultants with a proprietary program to sell. My opinion about productivity is that one size does not fit all, which is why standard IE practice utilizes more than one tool. As the saying goes, “when all you have is a hammer then all problems look like a nail.”
There seems to be a scarcity of useful and specific do-it-yourself articles available, even on the internet, probably because individual circumstances vary so much. Most of the books on classic IE topics are pretty old, but the principles have not changed much over the years.
My good clients and bosses over the years have grown to expect a return of some 10 times the cost of industrial engineering. That’s valuable in any economy, especially the one we are in now. However let me point out that return requires that IE has a free hand to select the projects with the most potential.
And that most potential is where the largest budget, with the least well, hardest to measure objectives, will not be the production floor. Pay attention to the indirect costs, please.
In summary, Industrial Engineering is a rewarding, useful discipline for many business applications. Good luck in your own endeavors.
Jack Greene Jackson Productivity Research Inc.