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.
1. Generally
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.
A. Raise Output
Maximize capacity and equipment capability, manage constraints
Match throughput to customer demand
Cut cycle times for quick response to market conditions
B. 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
2. 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.
3. Specific ideas.
A. Management practice
1. 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.
2. 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.
3. 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 manufacturing cost? If you cut that by a quarter, how much do you save? Compare that to an significant improvement in the rest of the budget. Go back and look at Pareto again.
4. Just In Time inventory control principles and MRP are mutually exclusive. You can’t enjoy the benefits of both at the same time.
5. 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.
B. Operations
1. 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.
2. 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?
3. My experience tells me 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.
4. 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.
Jack Greene, Jackson Productivity Research Inc.
Practical Productivity Improvement and Cost Reduction - To learn more about this author, visit Jack Greene's Website.
Like this article? Share it with your friends
 |
Related Businesses - Evan Elite Authors |
|
Accessible Business Consultants
Dave Turkin, President, of Accessible Business Consultants is a full service business consultant that has over 32 years of experience working with small-medium size businesses. Dave has designed and implemented numerous business and marketing plans, designed internal programs for accounting and operational procedures. He has analyzed businesses and prepared strategic plans setting budgets for growth, expansion and business restructuring.
He currently sits on the Board of Directors of various corporations as an advisor. For many years he has been the Business Coach to many executives offering advice and guidance from old and established companies as well as new companies just getting started.
Dave has the ability to analyze a business quickly and get a strong indication as to the necessary steps to improve operations, productivity and profitability. - Visit Accessible Business Consultants's Website |
|
Kim Castle
With nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation.
BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them?
If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
|
George Ludwig
George Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance.
Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson.
His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more.
George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
|
The Evan Elite Authors program is currently in beta phase. For details please contact us.
|
|
|
Jack Greene
(Visit Jack's Website)
Jack Greene is president of Jackson
Productivity Research Inc. He writes about
practical business actions which even in
today’s economy will control and reduce
costs; plant layout; time study;
motivation; productivity improvement;
capacity, constraints, and utilization;
merger and consolidation of facilities;
cost justified relocation within or into
the US.
Jack uses his experience in dozens of
productivity improvement, work
measurement, cost reduction, and layout
projects; for large and small companies,
US and international, as a basis to share
insights. He recognizes that a business
must continue to satisfy customers and
produce quality product even while
controlling costs. The articles address
all businesses because they deal with
people and the elements of work; with
efficient facilities, tools and equipment;
with successful management practices.
Mr. Greene established Jackson
Productivity Research in 1991, and
previously headed division or corporate
industrial engineering for three Fortune
250 companies; ITT, Abbott Labs, and
Bausch & Lomb.
Jack Greene Jackson Productivity Research:
Productivity is our Middle Name jack@jacksonproductivity.com jac
ksonproductivity.com
|
|
 |
|
|
|
|
![[Get Copyright Permissions]](http://license.icopyright.net/images/icopy-w.gif){kind=small}
