Productivity vs production
Despite the difference in product and production, process industries share several broadly similar challenges. You must overcome these challenges to achieve greater efficiency and drive digital transformation of the organization. But sometimes you're too close to the problem to understand it.
Below are some common challenges facing process-based industries – and how you can address them.
Within the process industries it is common to confuse "productivity" and "production". Production is nothing more than generating an end product. If you throw enough resources (usually workforce) at a process, you can increase production – but the escalating costs will negatively impact profitability.
Productivity on the other hand is concerned with the efficiency of production. Typically you achieve this by reducing one input (again usually workforce) without affecting output.
Every process-based business needs to develop new ways of working that deliver efficiency gains now and into the future.
Innovation and disruption
Disruption has become a factor of every industry. New market entrants use their small size to create new processes and techniques, making them more agile than established players. That's not to say established businesses cannot become disruptors, but they face challenges to substantially change the way they work.
The biggest efficiency gains are typically as a result of adopting new technologies and concepts. This will require capital expenditure for new equipment, training, devices or software. It is only when people, machine and technology work in concert that an organization can realize a productivity gain. Digital technology is simply an extension of the machine.
The role of management
To drive efficiency gains, management must implement control processes to maintain or improve productivity. In fact, the COO's central responsibility is to find ways to streamline internal operations to minimize cost, limit resource use and optimize performance (quality).
The COO needs to take a lead, analyzing control systems, finding potential areas for improvement and spearheading the implementation of new technology. They become the driving force behind process disruption.
They will also need to ensure their reports are accurate, up-to-date and include the right information. As you move towards becoming a data-driven organization, increasingly accurate information allows better decision making to meet demand and enhance productivity.
Challenges that your competitors are already addressing
The truth is that disruptive businesses are already aware of these challenges and using them to establish new competitive advantages. Every new innovation or disruption places them a step ahead and prepares them to face the economic headwinds that appear to be gaining in strength.
You improve productivity and output in three stages. First, your senior management team needs to be clear on the difference between production and productivity, and to start planning accordingly. The next stage is to look at ways to use technology more effectively, increasing automation and consistency to improve productivity. Finally, the management team needs to be engaged in measuring and reporting on incremental process improvements to ensure productivity levels continue to improve.
Perhaps it's time to start looking at your processes and how you could improve them?