The question of productivity

In my first article I discussed a model for competitiveness where competitiveness = innovation + productivity + sustainability. Then I looked briefly at innovation and its impact on our ability to compete. In this article I’ll look at the issue of productivity, its impact on competitiveness, and what we must do to improve.

If competitiveness means providing the market with what it needs, wants and demands at a price it’s willing to pay, and being able to do that successfully over time, then productivity becomes an essential part of our success. Not only must our efforts result in a price the consumer is willing to pay, but it must also be as good as or better than our competitors’ prices.

Are we productive?

If you ask whether the Canadian food and beverage industry has the level of productivity it needs to compete, the answer, in a word, is “no.” A number of productivity studies have been carried out by the likes of the George Morris Centre in Guelph, Ont. and the Centre for Competitiveness and Prosperity in Toronto, which confirm that our sector is anywhere from 15 to 25+ per cent less productive than equivalent U.S. sectors. Clearly some of that is due to smaller-scale plants and operations, but not all. And likely that differential, regardless of scale, could be overcome using the right approach.

Design it right

Productivity starts with the design of the product, the package and the process. With the right choice of ingredients and product formulation, the product developer can influence how much it costs to make the product in the plant. The design of the packaging can also influence the cost of the product, the efficiency of production, and the cost to distribute it, including the retailers’ cost to move it through their operations. The choice of technologies and equipment, as well as the layout of the plant, can also influence the cost to produce and distribute the product. Product development, purchasing, engineering, operations and distribution management must all have some influence in the design of that product and process. How would you score yourself in this area?

Make it efficiently

Going back to the days of Deming, Juran and others, there is a quality management approach that works to improve quality and reduce costs, waste and inefficiencies. All work is a process of adding value to inputs to create outputs that the final customer of that process needs. You can continuously improve the quality, efficiency and cost of that process forever by using the problem-solving, process management tools these men developed many years ago that have evolved into Six Sigma and Lean Operations. Employee involvement and process teams are also keys to this. As Philip Crosby said way back in 1979, “Quality is free.”
Today there are even more opportunities to save money and improve corporate performance. We’re now looking more at how to reduce our energy usage and process wastes to improve our environmental performance, and what companies are finding is that as they do this, they do not encounter the “great green cost burden.” Rather, they find ways to reduce their processing cost by using less energy and improve their yields by generating less waste.

Collaborate

The whole value chain management approach starts to emerge as we move into the areas outlined above because you find you need your suppliers’ involvement to improve your processes to the extent that you see possible. Maybe you even have to go back to their suppliers and their suppliers’ suppliers. Your customer needs to be involved as well. Value chain relationships have to be collaborative and seek the best outcome for the entire value chain. They can’t just be about squeezing another penny or two out of your suppliers. Just as your internal people need to be involved in product design and execution, your value chain partners also need to be involved in many aspects. How are your relationships within your value chain?

So can our productivity help to make us competitive? It certainly can, even though it isn’t now. If we use the approaches mentioned above, corporate experience shows that we may be able to improve our productivity by 25 to 40+ per cent.

Can we do it? Of course we can. We just need to commit ourselves to doing so, and then get on with it.

Gary Fread is president of Fread & Associates Ltd., consultants to the food industry. He has spent 25 years in management positions in the food processing industry, with a background in sales, logistics, purchasing and technical areas. He has worked with Procter & Gamble, Campbell Soup and Morrison Lamothe, and is the past president and CEO of the Guelph Food Technology Centre. He is active in many food industry associations and organizations, serving on the boards of several. Contact him at gfread@sympatico.ca

Click here to go back to the Manufacturing Leadership report on productivity.