Policy

Policy

Productivity can be improved anywhere, including the board room.

Basic policies set in place the mechanisms that control costs up and down the P&L and balance sheet. Be sure those policies serve the organization, and not vice versa.

Any cost item is a part of an organization's productivity picture. The person responsible for the cost is usually considered to be responsible for the cost and the variance it produces. But actual cost is only a result of some policy, which may be officially set at a level well up the chain of command; or it may be just a practice set in place by custom ("we've always done it that way"). Following are some examples of policy with a direct, but not always obvious, effect. Do these relate to your productivity?

1. Start production without all parts

The vendor hasn't delivered yet, or the parts are in inspection, or on hold. But policy or practice is to start production anyway; the parts will come in, or they will pass inspection, or we'll inspect quality into them.

You have just removed responsibility from someone who did not perform, and placed it on someone else. Is it the sales forecast; or purchasing system or performance; or poor vendor  output or quality; inspection performance or specs or workload management? Any or some combination, or another issue altogether.

The point is that the policy removes attention from the problem, where it might contribute to the solution. Now the focus is on the process, where some but not all materials are on the way down the line, to be held up later because not everything is there to complete the job. So the order goes on the sidetrack, and a machine has to be re-set up twice, and parts retrofit, damaged in re-handling, done on overtime,. And the order is at least as late as it would have been otherwise. Oh yes, you might get lucky and everything works out, or some heroic effort saves the day but that is no way to manage. Change the policy. 

2. Lack of a frozen schedule production for the near future

If production schedules are changed, up until the time of issuing parts, there will be inefficiency in operations without doubt. There will be unnecessary changeovers and therefore lost time and lost production. Longer and more efficient runs will be less frequent. Vendors will be subject to frequent schedule change and shorter runs, often at your cost. Overtime will become the normal technique to catch up.

Your operation may operate most smoothly with a week frozen schedule, or two weeks or a month, depending on in-house and supply chain variables. Find out what that lowest cost configuration is and legislate that into policy.

3. Quality standards and specifications

Consider what your organization produces, and how it specifies the attributes of materials and products. Do you produce thumb tacks and have a set of pharmaceutical quality specs? Two major factors tend to dictate which specs are appropriate; a regulatory body, and what the customer will pay for. If you produce medicines, or military parts, the specs will be imposed for you to meet. But if you can essentially set your own specs, consider your reputation in the market, what the customer wants and will pay for, and internal costs.

Is your product considered a commodity by the market? Is it possible that by adding features, or specs, or real quality, you can become a premium supplier, able to command a higher sales price?

4. New product introduction

Preparing new products for the market can be a long, expensive process at best. And products may fail because of marketplace acceptance. A good introduction system will have these characteristics: transparency among the several groups involved; as compact a time line as possible; an ability for each of the stakeholders to have an un-coerced say; the ability to recognize reality. Often you will have to estimate time and ability to perform tasks without much history to go by, so recognize that as an exposure; compensate by developing timelines based on clear, reasonable and agreed assumptions. Please avoid the temptation to legislate results.

5. Revision level

In the documentation that support the product and process, there will be a set of policies that state when revisions are required, how often, what justification is required, and who can authorize them. Such policies don't often make it to the board room for review. But they are important because spec changes will always cost money to implement, and may or may not save production cost.

Also rev levels may determine how parts fit together, or interrelate, with existing products or against an industry standard. This relationship is very important and is worthy of the highest visibility.

If your organization has many changes, and some industries do, consider signing parties to accelerate the physical approval process; otherwise weeks may go by as proposed changes are discussed. Once a week, get together those authorized to sign off for different disciplines in one room, hash out the differences, get the signatures or a commitment to check out a point then sign or reject.

6. The one best way, or ad lib

Is an employee required to perform a task one particular way, or allowed to ad lib? In some industries, pharmaceuticals for instance, there is only one way. Period. A non-standard method may lead to a fatal problem.

How about making thumbtacks, or ad spots, or sales calls? Uniformity is valuable there too, for practical or financial rather than life threatening reasons.

Your organization may have invested to develop a process that will produce the greatest efficiency, or success rate, or quality level, or customer service, or acceptance. You may ask a trainee to use the method that produces best results. If the trainee uses another method and does poorly, you will want to require the approved method to be used. 

7. There's always a better way.

Even though you require employees to use the one best (approved) way, allow for continual improvement by having a formal system to encourage innovation, and to approve a replacement for the one best way. 

Thanks for your attention; I'm happy to add to your perspective of industrial engineering and productivity.