Total management of business productivity

During the 1950s, companies' management concentrated their efforts and strategies in the manufacturing area, and in the following decade, given the prevailing market conditions, the focus on marketing gained momentum.

During the 1970s and early 1980s, financial management occupied a relevant position, given the importance that corporate mergers, acquisitions, and risk diversifications took. With the invasion of Japanese products, and given the continuous loss of market share by companies, the growing concern for quality and participatory management became critical and fundamental.

Given the existing gap between Japanese and American companies, the latter tried to achieve or maintain a competitive advantage, if appropriate, by implementing process reengineering, which implied a quantitative leap and qualitative in the management of the company's production processes.

From the last years of the nineties and in the first decade of the present century, strategic concentration concentrated at the same time on quality, technology and total productivity. The need to achieve balance and harmony both in terms of strategies and in the framework of business management gave rise to the need to develop total productivity management (also known as total productivity management).

Total productivity management can be defined as the administration process that follows the four phases of the "productivity cycle", in order to increase total productivity and reduce the total unit costs of products and services within the highest possible level of quality.

The productivity cycle is made up of activities for measuring, evaluating, planning and improving productivity. Measuring productivity is the first critical phase in the productivity process. The evaluation activity is a comparison of the achievements obtained both against the planned levels, as well as against the values recorded in the past by the company and those verified by competing companies.

Productivity planning deals with levels of productivity determination. This planning aims to improve the performance of the various indicators in both the short and long term, in order to improve the company's productivity and profitability.

As the last activity we have the concrete actions for the implementation of the plans drawn up.

The development of this new management methodology is due to the drive and creativity of Dr. David Sumanth, who articulated and combined a series of work systems and methodologies such as TQM, TPM, "Just in Time", reengineering, quality circles, benchmarking and Organizational Development, to give rise to this new management and analysis system. Although Dr. Sumanth gave his method the name of " Administration for Total Productivity " we consider it necessary that, as in the matter of Quality, Productivity Management should be a problem and objective of all the sectors and individuals of the organization For this reason, the concept of "Total Management" is in principle clearer and more appropriate.

The lessons that should not be forgotten around this new philosophy are:

Quality is not a luxury but an absolute necessity, this being a necessary but not sufficient condition. If the products and / or services do not incorporate total quality, the future of a company is undoubtedly uncertain. In markets exposed to With global competition, companies that are not willing to make a continuous commitment to high quality will have to "throw in the towel."

Productivity and its importance

The level and rate of productivity growth of any country have a lot to do with its level or quality of life, inflation rate, unemployment rate and with all those economic indicators that provide a semblance of the degree of social and economic well-being. Today, productivity and quality are considerations of national interest, both for developed and developing countries. In the effort to achieve productivity goals and objectives, the efforts of both leaders, leaders, businessmen, technicians, scientists and workers must converge.

At the company level, those that achieve a level of productivity higher than the national average of their industry tend to have higher profit margins. And if that productivity grows faster than the competition, profit margins will increase even more. While for those whose levels and rates of productivity growth are significantly lower than their industrial averages, they run serious risks regarding their competitiveness and permanence.

Quality and productivity have a fundamental relationship, which in turn is reflected both in costs and service levels, which ends up being reflected in competitive advantage.

A traditional factory typically invests an average of 20 to 25 percent of its operational budget to find and correct quality errors in its products. For this reason, the majority of experts in the field of Quality Cost indicate that losses due to defective products are between 20 and 30 percent of their sales. Therefore, the improvement in quality directly generates a notable increase in productivity levels.

Contrary to the widespread myth that quality improvement affects productivity, productivity will improve dramatically as product and process quality improves.

Efficiency and effectiveness

An improvement in efficiency does not guarantee an improvement in productivity. Efficiency is a necessary but not sufficient condition to achieve higher productivity. In fact, both effectiveness and efficiency are necessary to be productive.

Effectiveness means defining the relevant goals or objectives and then achieving them. If nine out of ten goals are achieved, the effectiveness is 90%. You can be very efficient without being productive. A classic example is that of the doctor amputating a patient's leg in half the usual time and then bragging that it has been doubly efficient than it was. However, nurses have a different view of the matter, due to the fact that the professional amputated the wrong leg. Thus, the effectiveness of the doctor was zero, since he did not achieve the proper objective of operating the correct leg, even though his efficiency improved by 100%. It is therefore obvious that the doctor was anything but productive. In other words, to be productive you have to be both effective and efficient, in that order.

Income and productivity

Every company sets goals for sales revenue. In fact, most companies seem obsessed with discussing their sales levels on a monthly, weekly, and even daily basis. However, they seldom demonstrate the same zeal for monitoring their productivity levels. Performing a correlation analysis between income levels and productivity levels is clearly essential to effectively monitor the performance of the company.

From partial to total productivities

Addressing the measurement of only one component of those involved in the generation of production is feasible if all the “n - 1” components are kept fixed over time, something that is certainly initially difficult to conceive. Many factors affect productivity, so if for example the number of hours remain fixed but the amount paid is altered, a motivational effect will be generated within certain conditions that will increase the performance of the workers. In this way, if we calculated the amount of “x” product manufactured per hour and divided it by the number of hours consumed, we could see greater productivity reflected. But if we took due account of the salary increase, we could observe an increase or not in productivity,depending on such situation if the increase in the quantity produced was greater than or equal to the salary increase.

Another issue to consider is the increase in labor productivity generated thanks to the incorporation of higher technology machinery, but it is no longer considered in such calculations what happens with the productivity of the machinery. Thus, if the increase in production does not offset the increase in capital, we would be faced with a decrease or decrease in the productivity of capital.

The complexity that is characteristic of productivity measurements is reflected with what is exposed in the previous paragraphs. In order to overcome such circumstances, a formula has been developed that covers all the inputs.

Total Productivity = Total Tangible Result / Total Tangible Input

Total productivity is also known as multi-factor productivity. Multifactor productivity is calculated by adding all the input units to form the denominator:

Productivity = Output / (Labor + Material + Energy + Capital + Miscellaneous)

To make the multifactor productivity calculation feasible, the individual inputs (denominator) can be expressed in monetary units and added together.

Need for total productivity management

Although many companies analyze productivity in a partial way and calculate it in relation to a single factor (monofactorial), doing so is not only incorrect and inconductive, but also contributes to confuse and distort the analyzes. Very little attention is paid to a comprehensive and comprehensive analysis of productivity and costs, when this should be one of the critical objectives to monitor. Permanently controlling the performance of productivity, costs, quality, level of services and degrees of satisfaction is essential if it is to achieve a sustained competitive advantage.

In a world in constant and profound changes in the technological, social, political, economic and cultural aspects, the needs of consumers change, the technological bases of products and processes change, the environmental and psychosocial needs of consumers change. These changes then result in modifications to the legal norms and regulations. The world is constantly boiling for such reasons, and companies are caught in it.

The only way to achieve success is through a radical change in the way of thinking of its managers and officers that must then be transferred to the rest of the employees of the corporations. A new and different way of seeing and analyzing productivity, a different way of managing and promoting it, will be the basis on which the competitiveness of the present and future of the company must be built.

Abandoning old patterns of thinking, refocusing productivity on thought oriented processes, focused on systems and based on concrete data and not on assumptions, is key to achieving continuous improvement in productivity levels and thus in levels of costs, allowing in this way to make effective the “experience curve”, with which it is possible to displace competitors from the markets, consequently obtaining a greater market share.

Only a total management of productivity that avoids on the one hand the unproductivities in the various processes, whether they are directly linked to production or not, and achieve through the teamwork of the organization as a whole increase the productivity of the company by greater and better fluidity of resources and energies must allow profitability that is compatible with conquering markets in the medium and long term.

Improving productivity

Improving productivity under Total Productivity Management (GTP) involves systematically taking the following steps:

1. Select the most appropriate set of techniques for improving productivity based on the characteristics of the company and its environment.

2. Develop an implementation plan conducive to putting the selected techniques into practice.

From the study and research developed by Dr. Sumanth there are approximately 70 techniques divided into five fundamental categories based on: technology, materials, employees, product and processes or tasks. (See Annex).

For the selection of the most appropriate set of techniques it is necessary to duly consider:

Common sense, often backed by experience, Use of mathematical models, and semiquantitative methodologies, resulting from effectively combining the best of the above two considerations.

It is essential to always take into account when selecting the most appropriate techniques:

Budgetary or financial limitations The minimum time established for the recovery of the investment AND, the maximum time to implement the selected techniques

Regarding the strategies to consider to increase productivity levels, the following are available for this purpose:

Strategy 1: Increase production, using the same level of inputs Strategy 2: Increase production and decrease inputs Strategy 3: For the same level of production, decrease inputs Strategy 4: Increase production at a faster rate than inputs.Strategy 5: decrease inputs at a faster rate than production.

Strategies 3 and 5 are reactive, especially number 5, while strategies 1, 2, and 4 are proactive. In general, companies characterized by poor management and leadership adopt strategy 5 as their last survival resource. Instead, excellence companies select those considered proactive, with strategy 4 focused on increasing production at a faster rate than the inputs used, being the best or ideal.

With the passage of time and given certain technological conditions, characteristics of the system and processes, and socio-cultural framework, every company develops a “total productivity” curve, and must then determine its location in said curve in order to apply the most convenient strategy.

Principles of Total Productivity Management

The twelve principles on which the GTC relies to generate products and services with superior quality, low unit costs and fast response times are:

Principle 1: Quality / perfection. Search in the quality (perfection) of the design the quality of conformity and the quality of the performance. Principle 2: Orientation towards the client. Listen carefully to what customers are saying, learn diligently from them, give them what they want instead of what you can offer without upsetting them. Make a positive impression on their minds about the company, its products or services, and the organization. Focus on delighting them, not just satisfying them. Principle 3: Employee Value. Consider people who work in the company as an asset, providing them with harmony and security at work. Principle 4: Learning curve. Whenever possible, productivity levels and production costs should be planned based on learning curves. Principle 5:Design products and services with a deliberate strategy to standardize and simplify their components. Principle 6: Benchmarking. Take the best of the technologies from at least three competitors in terms of product design, services and production processes, and try to improve what the competition has already achieved. Principle 7: Miniaturization. Try miniaturization whenever feasible, using microprocessor-based technology in service and process design. Principle 8: Research and Development. Aggressively pursue product and process research, working closely with academic and general research institutions to develop ideas that improve productivity. Principle 9: Product Mix Planning.Create a mix of products or services that are winners in total productivity and market share on a consistent basis. Principle 10: Secret. Novel ideas and strategies to improve productivity, especially those developed in the company, must be kept absolutely secret. Principle 11: Mutual benefit. For each action or decision taken, ask yourself how this benefits the company, its owners, staff, customers, suppliers and the community. Principle 12: Consistency. It is much better to be consistent than to be perfect occasionally.especially those developed in the company, must be kept absolutely secret. Principle 11: Mutual benefit. For each action or decision taken, ask yourself how this benefits the company, its owners, staff, customers, suppliers and the community. Principle 12: Consistency. It is much better to be consistent than to be perfect occasionally.especially those developed in the company, must be kept absolutely secret. Principle 11: Mutual benefit. For each action or decision taken, ask yourself how this benefits the company, its owners, staff, customers, suppliers and the community. Principle 12: Consistency. It is much better to be consistent than to be perfect occasionally.

Rules to achieve success in Total Productivity Management

Rule 1: Treat people with respect and trust. Rule 2: Be innovative and not an imitator, be a leader and not a follower, in all products and services. Rule 3: Systematically apply the rule of "3 P", for which Success depends on Planning, Preparation and Patience. Rule 4: Implement a profit-sharing program based on total productivity results. Rule 5: Be fully optimistic in managing change.Rule 6: Manage technology with a total and integrating sense. Rule 7: Focus and think in systemic and interdisciplinary terms, and not in functional thoughts and attitudes. Rule 8: Make teamwork prevail over individualistic attitudes. 9: Practice administration by example. Rule 10: Set high goals.Permanently seek quantitative and qualitative leap.

Annex - List of techniques to improve total productivity

Technology-based techniques

1. Computer Aided Design

2. Computer Aided Manufacturing

3. Integrated CAM

4. Robotics

5. Laser

Technology 6. Power

Technology 7. Group Technology

8. Computer Graphics

9. Simulation

10. Maintenance Management