What every Small and Medium scale industry must know about production efficiency

A few months ago, we published an article Small Scale Industries, a credible option for emerging entrepreneurs and we have since received inquiries on how such small scale industries can improve efficiency. Many small and medium industries are started off by entrepreneurs who often lack necessary skills in running manufacturing enterprises.

The challenges faced by these enterprises range from inadequate financing, inconsistent power supplies, lack of skilled labor and many others are some of the causes of production inefficiencies. Well knowing that some of these factors are in their control while others are not, it is thus a tall order for the businesses to achieve high production efficiency levels. After a thorough review of different factors, we have come-up with these four practical techniques to realism improvements from the operations point of view. The four areas identified have the greatest impact on production efficiency for small scale industries once addressed.

1. Optimize raw material utilization

Profitable manufacturing businesses must vigorously pursue the most efficient utilization of raw material. Material utilization can improve with simple awareness like taking a snapshot of your current material utilization. Things like setting a company wide goal for increasing yield and reducing waste are some of the initiatives one may take.

It is also important to allow all employees to suggest improvements.

Maintain awareness by tracking and posting improvements each month, and congratulate employees whose suggestions make an impact. Doing so will not only increase material utilization inexpensively, but also increase the morale of your employees.

2. Manage labor costs

In the world of manufacturing, as competition becomes more intense and customers demand more services, it is important that management not only control its labor costs but also understand how it is assigned to products and other administrative tasks. Labour costs are divided into two categories; direct and indirect labour costs. Direct labour costs are those which are directly traceable with production of goods while the indirect labour costs come from the support functions such as administration, marketing and so forth. The entire human resource planning cycle must be evaluated to eliminate loop holes that lead to inefficiencies. Initiatives to increase labour efficiency, reducing idle time and wasteful staff must be instituted.

3. Benchmark and manage overall equipment effectiveness (OEE)

OEE breaks the performance of a manufacturing unit into three separate but measurable components:

  • Availability (Planned Downtime, Breakdowns)
  • Performance (Minor Stops, Speed Loss)
  • Quality (Production Rejects, Rejects on Startup)

Each component points to an aspect of the process that can be targeted for improvement. OEE may be applied to any individual Work Center, or rolled up to Department or Plant levels. This tool also allows for drilling down for very specific analysis, such as a particular Part Number, Shift, or any of several other parameters. It is unlikely that any manufacturing process can run at 100% OEE. Many manufacturers benchmark their industry to set a challenging target that will allow improvement. The reason for identifying the losses in these categories is so that specific countermeasures can be applied to reduce the loss and improve the overall OEE.

4. Implement continuous improvement programs

Continuous Improvement is the on-going effort to improve products, services and processes by making small, incremental improvements within a business. It is based on the belief that these incremental changes will add up to major improvements over time and it is as much about tactics (i.e. specific improvements) as it is about changing the culture of the organization to focus on opportunities for improvement rather than problems.

In Dr. W. Edwards Deming’s (an American management consultant) “14 points” he called for the “constancy of purpose for continual improvement of products, service and processes to society.” This unrelenting, unwavering focus on improvement is critical to maintaining and sustaining process improvements in the long term. Changes need to maintain momentum to ensure the changes are not forgotten and don’t grind to a halt through fatigue or resistance. Successful continuous improvement programs understand that improvement is not merely a management initiative but a long-term practice that needs to permeate everything an organization does.

In conclusion, there are many other initiatives that can be applied to your manufacturing enterprise and it should not be surprising that some solutions may apply better in different businesses. It is therefore important that entrepreneurs understand all the options available and start where the highest returns may easily be realized.

By Brian Ahabwe Kakuru

Brian Ahabwe KakuruBrian is the Managing Director at BLEGSCOPE®, and has 10+ years of management consultancy experience notably in the finance & banking industry, MSMEs, FMCG companies and in the service industry. You can follow him on twitter >> @BrianAhabweK

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