In manufacturing terms, productivity means money. It affects costs, profitability, and the ability to remain competitive. In an increasingly tough global marketplace, having a competitive edge can be a make or break factor.
In the simplest terms, manufacturing productivity is the ratio of output to input—how much a company can produce based on a given amount of input—and it focuses mainly on throughput and quantity. Input covers factors including labor hours, capital resources, and natural resources, while outputs are normally measured by the quantity of goods produced. So, the formula is:
Manufacturing productivity = Output / Input
For example, let's say that a factory produces $10,000,000 worth of laptops in a month by employees whose total labor hours came to 5,000 hours. Using the formula above,
Manufacturing productivity = 10,000,000 / 5,000 hours = $2,000/hour.
From the calculation above, we see that the factory is producing $2,000 worth of laptops per hour. Not that this does not equal profit as there are various costs from overhead to wages that aren't accounted for here; but this formula makes it possible, for example, to help track increases and decreases in manufacturing productivity over time.
However, manufacturing productivity is more than a simple numbers game. If, for example, the strive to increase throughput causes quality to nose-dive, the ratio of output to input will take a hit and productivity will drop. Therefore, we need to examine how to improve productivity while maintaining quality.
A skilled workforce is a productive one. Employees who are knowledgeable make fewer mistakes and deliver to a higher standard. A commitment to training and development also helps retain employees, reducing the cost—and production impact—of churn, and training from scratch.
Maintaining an organization’s physical assets—its equipment, plant, or facilities—helps maximize their lifespan, reduce downtime, and improve quality and efficiency. An effective and planned program of enterprise asset management will reap measurable productivity dividends.
Reviewing the entire workflow—every process and step that is needed to get a product to the customer—is essential to understanding where productivity can be improved. Workflow review is never a once-and-done exercise; it should be an ongoing exercise that results in continuous improvement.
Producing more products doesn’t necessarily equate to greater productivity if what is being produced isn’t good enough to sell to customers; in fact, it can reduce overall productivity. Employees and machines that are more capable make fewer mistakes, resulting in less waste and higher productivity.
Manufacturing is at its most productive when everyone is working together seamlessly, but increasingly complex production methods and global supply chains make it a challenge. Better communication and visibility throughout the production process minimizes the risk of productivity-damaging interruptions.
Most manufacturing equipment isn’t used anywhere near its full capacity, which has a direct negative impact on productivity. Metrics like overall equipment effectiveness (OEE) or total effective equipment performance (TEEP) enable manufacturers to understand, and then improve on utilization rates.
Industry 4.0 and technologies powered by the Industrial Internet of Things (IIoT) are already helping manufacturers tackle countless productivity challenges. Augmented reality is reducing the time and cost of training as well as improving information retention and generating more competent employees at a greater rate.
The unprecedented connectivity brought about by the IIoT (20 billion devices are expected to be connected by 2020) offers unprecedented insight into everything happening in the production process. IIoT-driven analytics are making asset maintenance easier and more effective, reducing both planned and unplanned downtime. That wealth of data about people and processes makes workflow review easier and more accurate than ever. It allows for real-time visibility of asset utilization, which is central to greater productivity. And it can be shared, meaning better collaboration across teams, plants, and even countries.
It's no surprise that tougher markets are pushing manufacturers to explore all avenues to improve performance and reduce costs. Manufacturing productivity is fundamental to this. Fortunately, new digital solutions have made it easier than ever to identify and drive productivity improvements. The answer, however, is unlikely to be quick fixes. Genuine business improvement relies on consistent effort and a continual process of review. While that may seem like a daunting challenge, it is key to keeping pace and staying competitive—and has the potential to reap significant rewards.