4 Ways for Manufacturing Companies to Improve Productivity

Kirsch CPA Group

Jul 07, 2021

The basic formula for success in the manufacturing sector is simple: Produce more, spend less. So-called “lean” manufacturing is easier said than done, but there are several improvements that can increase your firm’s output. Lean companies operate as efficiently as possible, using the least possible staff time, equipment and raw materials.

Here are four ideas to consider implementing this summer to help boost profits for the remainder of 2021 and beyond.

1. Use of Raw Materials More Efficiently

The prices of many manufacturing inputs — such as metals, chemicals and lumber — have skyrocketed over the last year. Likewise, rising fuel prices have increased shipping costs. Plus, cyberattacks and geopolitical instability threaten the viability of supply chains due to delays, tariffs and price fluctuations.

In the current high-cost, high-risk environment, efficient use of raw materials is even more essential than before to preserve profits. The term “waste” refers to more than just scraps on the plant floor. Waste also may include excessive energy consumption, defects, motion, transport, queue time and inventory.

Analytical tools can help reduce waste by limiting the number of “touch points” that slow down the production process and complicate matters. Start by collecting data at every touch point in the supply chain and production cycle. Apply the metrics that make sense for your industry. For instance, if your processes require raw materials to cool down or heat up, factor the time into your equation. When your fact-finding is complete, assess the ways you can be more efficient in the future.

This may not require an earth-shattering solution. Frequently, you can avoid a bottleneck through a simple shift in production sequence or some other modification. It’s important to recognize that frontline workers often provide simple, but effective, solutions. As an added bonus, engaging your workers in the brainstorming process can help with their buy-in when you implement changes.

2. Give Incentives to Workers

Clearly, workers are an essential component of lean manufacturing. Financial incentives can help persuade your employees to ramp up production. If you go down this path, the main question is: Should you offer individual or team incentives?

Individual incentives. These incentives focus on specific tasks performed by frontline workers to increase productivity and avoid delays. If you can isolate certain tasks where a definitive need for improvement is identified, giving individuals a specific list of set goals may be the optimal approach.

Team incentives. These incentives reward collective efforts. In other words, your company will achieve more in less time if your entire team “rows their oars in unison.” Because most tasks are done in conjunction with others, team incentives are usually easier to implement than individual incentives.

Manufacturers usually provide team incentives to improve the overall efficiency of the assembly line. This encourages cooperation among workers that are striving for common purposes. It also reduces finger-pointing when one person, or a handful of workers, makes a mistake or fails to meet a set goal.

3. Extend Lean Principles to Offices

Lean efforts initially focus on the production process because it provides the most significant direct benefits. But the same principles can be applied to your back offices and corporate headquarters. These locations may also be affected by cost increases, supply disruptions and delays. And those risks can be costly.

Apply the principles you’ve learned on the plant floor to selling, accounting and other administrative functions. For instance, you might break office staffers into groups based on products or marketing aspects. Map out workflow to identify potential bottlenecks and sources of waste.

People in the trenches know what works and what can be done to help streamline processes. Engage your administrative staff in efforts to improve their department’s efficiency. If you’re seeking input from several departments, make sure you’ve covered all the bases before implementing any changes.

4. Seek Outside Guidance

It’s easy to miss operational inefficiencies when you’re too close to the process. At some point, you might call in external resources for guidance. This could include reaching out to industry specialists or financial consultants with experience helping companies in your niche implement lean strategies. Do your research and rely only on reputable sources.

For more information, contact Kirsch CPA Group. We can help you implement lean strategies in today’s volatile marketplace, as well as refer nonfinancial consultants to help improve the technical aspects of your manufacturing process.