In November 2016, the British government announced plans to do its bit to help cushion the impact of Brexit by investing £23bn into the national productivity investment fund (NPIF). This will predominantly focus on infrastructure projects that will improve long-term productivity. However, what steps can UK executives take right now to improve productivity in the short term and prepare their business for the post-Brexit world?
According to the Office of National Statistics, the UK’s long-running nominal productivity gap with the other six G7 economies remains broadly unchanged: falling from 16.4% in 2015 to 16.3% in 2016 in output per hour worked terms. After a weak start to 2017, there
was a rise in productivity in Q3 and Q4 as a result of a surprising drop in the number of hours worked in the second half of the year. Unfortunately, this trend has since been reversed in the first months of 2018, leaving the UK with a lot of catching up to do. If businesses are going to survive and thrive on the productivity front, they have to make finding a way to close the gap an imperative.
An ONS pilot survey of management practices in the manufacturing industry identified a significant variation in the application of structured management practices in Great Britain. For many businesses, the key to continued success lies in their ability to quickly identify and act upon areas for improvement.
As the true impact of Brexit is felt across the manufacturing sector, every function in the value chain must play its part in ensuring that the process is efficient and transparent. For Sales & Marketing this means
defining the products and packaging that optimize the load/shipment, or providing accurate forecasting to supply chain managers (SCM).
Procurement and suppliers need to create a solid platform through robust contracts with clear service level agreements and incentives to continuously improve on-time-in full supply and shorten lead times. Operations play a major role through efficient OEE that ensures a high level of plan stability and attainment and enables on-time-in-full delivery to shorter lead times. And finally, a robust Management Operating System (MOS) enables SCM to orchestrate the velocity and inventories through an efficient and transparent end-to-end process. Implementing these improvement initiatives doesn’t necessarily take as long as you may think. For example, we delivered a cash neutral project in 17 weeks for a major manufacturing client and subsequently improved EBITDA by 26%. This included significantly enhancing the skills and capability of their procurement and operations functions to ensure sustainability.
It is a post-Brexit imperative that executives demand better integration, agility, service levels and prices from their strategic suppliers. Irrespective of company size, procurement margin improvement can be achieved by evaluating and consolidating spend through fewer suppliers.
For example, we helped a manufacturing company achieve 15% annualized savings and a ROI of 6:1 by consolidating multiple vendors
and infusing procurement and operations best practices. To quickly move procurement up the maturity curve, executives need to:
As the costs of raw materials, energy and labor rise in a post-Brexit world, it will become increasingly important for executives to review and optimize their operational footprint through:
Irrespective of which end of the operational maturity curve you are currently at, there are a number of factors which executives must ensure they have in place to achieve strong productivity growth outside of the European Union:
Driving increased productivity in manufacturing can be viewed as something of a never-ending journey. However, it is possible to achieve accelerated measurable results. For example, working for a market leading manufacturer, we helped improve production throughput by 22% through enhanced end-to-end quality and operations.
Robust product lifecycle management and new product introduction processes are essential to survival in an ever-changing, post-Brexit marketplace. In our experience, executives often fall into the trap of broadening the tail to ‘fill the factory’ and chase that last £ of turnover.
However, it’s often the tail that eats into the net contribution due to frequent changeovers, start-up scrap and shorter run times. There are a number of steps that executives can take to optimize their product portfolio:
Surviving and thriving in the post-Brexit world will depend on your ability to rapidly improve labor productivity. Maine Pointe’s Total Value Optimization™ (TVO) approach can help you rapidly respond to this challenge by transforming your supply chain into a competitive weapon in a very pragmatic step-by-step and measurable way.