By Richard Elmitt, Sustainable Scale Up Cluster Operations & Productivity Lead
In my last blog, we looked at defining productivity and the factors which need to be measured in order to identify improvements. In this blog, I’ll be looking at how to improve productivity and dispel the myth that productivity improvements are out of reach of small businesses who maybe do not have the capital to spend on new kit or expanding premises.
At its most simplistic, productivity improvements can be gained by making more using the same level of inputs or reducing the level of inputs to achieve the same (or more) outputs. There has been lots of media attention on the 4 day week which many UK businesses across different sectors have been trialing, and for some companies this means achieving a working week in 4 x 8 hour days. However another option might be operating 4 x 10 hour days, which can be more efficient than 5 x 8 hour days – think about clean down time. If this takes an hour each day, then clean down now only accounts for 10% of the 40 hour productive time, not 12.5%.
Longer production runs are inherently more efficient (productive) than short production runs which require multiple change overs, different batch sizes, label changes, potentially increased wastage and machinery down time. But consider whether there is a trade-off to be made if the short production runs are for customers offering a much higher margin on those products.
Selling to a customer with the understanding that each additional piece of processing comes at a cost, short runs are less efficient and will squeeze productivity can ensure pricing takes account of this and secure those higher margins which will make shorter production runs more worthwhile..
If you have the space to store finished goods, then investment in packaging which prolongs shelf life can help make longer production runs more feasible, but only if you’re confident that there will be no unexpected changes in, for example, labelling legislation which would make these finished goods obsolete and you have sufficient working capital to fund higher levels of stock.
Thinking about reducing inputs, the essence of lean manufacturing is to make the lives of the production team easier. Planning the factory layout to reduce movement, handling and ensuring tools and equipment are easily accessible not only reduces costs but also risk – a double win. If your business has the space and working capital, can you buy ingredients in bulk to secure economies of scale and reduce the cost of some of your inputs (as long as the cost of financing that bulk buying doesn’t exceed the savings made). Reducing pack sizes and flavours can also reduce wastage and input costs.
It is also worth considering contract manufacturing if you can find a partner who is more efficient and productive than you can be.
Improving productivity starts with understanding what factors are relevant to your productivity and needs to be measured, finding ways to measure those factors and, based on these measures, identify how to become more efficient by increasing outputs, reducing inputs or both. Sounds simple? Well, like most things in life, there are trade-offs. You could have a super-efficient factory, making one product for one customer and with very high levels of productivity. But the risk to the business of that customer switching its manufacturing partner, failing or simply deciding the partnership has run its course is, for most businesses, an unacceptably high risk and therefore trading off high productivity for a more balanced, less risky customer/market portfolio is one that many of us find acceptable.
If you want to understand more about how to improve productivity in your business, then join us at our Shape Up to Scale Up conference in February.
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