Archive for the ‘Technology’ Category

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Productivity as Strategy

In Performance targets,Technology,UK productivity,Uncategorized on October 9, 2010 by Tim Aikens

To what extent does your organisation build productivity into its strategy?  For that matter, to what extent does the public sector overtly plan productivity into its longer term plans?  The NHS has productivity targets, but this is not quite the same as building productivity into your strategy.

Look at some of the high-tech companies.  They build a new device – the prototype is expensive.  A key part of their strategy is to lower the manufacturing cost dramatically over as short a period of time as they can.  This will be a combination of people, technology and almost certainly supply chain. Every aspect of the manufacturing process is subjected to  a review of how can something be done, purchased, delivered most cost effectively!

Then there is the other side of the coin – organisations that suddenly realize that they are no longer competitive and need to reduce cost.  The result is a flurry of activity aimed at improving their price competitiveness and increase productivity.  This process is nearly always reactive.  By definition, intervening in a process to do something that has not been planned will take longer and be less effective in the short-term.  For those who have a significant export market, the quick fix is a cry to the Chancellor to let the pound slip thereby reducing cost in foreign currencies.  Sadly, this always makes things worse in the long-term, because the root cause of low productivity is not addressed.  Fortunately, many UK companies are highly productive.  They are usually the successful ones and are not difficult to spot.

What are the ingredients of a productivity strategy?  Put simply, they are really no different from any other part of a strategy.  You need a set of targets along the time of the strategy and specific plans to turn them into reality.  It is the latter element that is most often missing.  Raise productivity by 7% year on year is a good idea, but only likely to happen if there are clear plans and specific accountability to make them happen.  These should be built into the strategy at the start, not left to operational managers to try to work out (although they should probably be involved in the strategy process).  One of the hardest parts of establishing a productivity strategy will be to get the board to treat productivity as a strategic issue.

One way out of the issue is to make and sell products and services with a high margin. The higher the margin, the less important productivity becomes.  However, in this increasingly international and competitive world there will always be new entrants to a high margin business, so sooner rather than later, productivity will become an issue.  Can you afford not to have productivity as part of your strategic plan? Better to have a strategy for productivity up front before you have to deal with the monster at the gates!

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Articles

Try some technology – it helps

In Technology on June 10, 2010 by Tim Aikens

I have just spent a couple of days helping a friend put up a (very) large garden shed.  As you could imagine, this involved a lot of wood and a lot of screws.  To help us along we went out and bought an electric screw driver, very much the industrial model with a lot of torque and a good battery.  It cost £100.  The impact was really quite amazing. Instead of the old laborious wrist turning, this machine wound in the screws in seconds.  A great piece of productivity gain that was really noticeable.  But does it pay?

I thought I would look at the economics.
Price of kit £100.
Say a workman is paid £120 per day or £15/hr for an eight hour day.  That works out at 26 pence per  minute of his time.
Now assume a three inch screw takes two minutes by hand.  It costs  52 pence to put the screw in place.
The machine takes just 20 seconds and therefore costs 8.7 pence.
The saving is 43.3 pence per screw!

So to pay back the cost of the screw driver you need to install £100/43.3p = 231 screws.
Lets say the workman puts in 30 screws per day – because he does a lot of other things too.  Then the machine will pay for itself in 231/30 or 77 days.  After that the organisation is benefiting to the tune of about £14 per day, which in a full year of 250 working days is £3,360 (which does assume full occupation).

The example is real, the price is real, some of the numbers may need a little adjustment. However, the principle is clear, technology will usually pay for itself many times over.  Now for many this is really all to obvious – look at cars, largely made by robots, or shipbuilding where large panels are welded automatically.  But in too many areas a lot of folk are not applying technology as they might and are losing the productivity benefits that go with it.   This happens even in the professional world. I remember one boss who wanted his team (including me) to analyse some computer print out by hand in order to get a ‘feel’ for the structure.  After two days we revolted.  My colleague wrote a piece of software that did the jobs in minutes that would have taken us weeks by hand!

Technology is not a productivity panacea, but we need to be prepared to look for and apply technology whenever it looks like there could be a real payback!! Do you have technology in all the right places?