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Friday 30th Nov 2018

Productivity

Many pundits bemoan the lack of productivity in the UK. They may have a point but then again...

Measured productivity is the ratio of a measure of total outputs to a measure of inputs used in the production of goods and services. Source UK Gov’ 

International Comparisons of Productivity - Final Estimates, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Constant price GDP per hour worked

 

 

 

 

 

 

2007 = 100

 

Canada

France

Germany

Italy

Japan

UK

US

G7

G7 exc. UK

 

 

 

 

 

 

 

 

 

 

1995

85.3

80.5

80.8

92.7

81.7

78.2

77.9

79.9

80

1996

85.2

81.4

82.7

92.9

83.5

79.4

79.8

81.4

81.6

1997

87.2

83.5

85.2

94.4

84.7

81.3

81.3

83.1

83.3

1998

88.6

85.8

85.9

94.3

85.3

83.4

83.7

85

85.1

1999

90.9

87.6

88.9

94.8

87.3

85.6

86.6

87.5

87.6

2000

93.5

91

92.7

97.7

89.4

88.4

88.2

89.8

89.9

2001

94.5

91.7

94.7

98.2

90.8

89.6

90.1

91.4

91.5

2002

96

94.5

96.3

97.8

92.7

92.4

92.3

93.3

93.4

2003

95.8

95.3

97.1

97.6

94.3

94

94.5

94.8

94.9

2004

96.5

95.9

98.4

98.1

96.8

95.4

96.9

96.8

96.9

2005

99

97.3

98.5

99

98.6

97.3

98.6

98.4

98.5

2006

100

100.1

98.9

99.4

99

98.9

99.2

99.2

99.2

2007

100

100

100

100

100

100

100

100

100

2008

99.9

99.3

100.1

98.7

100

99.3

100.6

100.1

100.2

2009

100.6

98.6

97.7

96.6

99.2

97.7

103

100.6

100.9

2010

102.1

100.1

99.8

98.9

102.5

99

105.6

102.9

103.3

2011

103.9

101.3

103.1

99.4

102.8

100.5

106.2

104

104.3

2012

103.6

101.6

104.1

98.9

103.6

100

106.4

104.3

104.7

2013

105

103.1

104.5

99.6

105.7

100.4

107.2

105.3

105.8

2014

107.6

101.7

105.1

99.5

105.7

100.3

108

105.8

106.4

2015

107.6

102.1

106.1

99.3

107.3

101.1

109.2

106.9

107.5

2016

108.6

103.4

105.7

98.4

107.6

101.6

109.1

107

107.6

 

Sources: OECD, Office for National Statistics

 

 

 

 

 

And there we have it in black and white, the UK’s productivity is worse than our international competitors with the exception of Italy. Case proven m ’laud...

This is where it gets tricky. The government statistics include services and the public sector. I am not clever enough to calculate the productivity of a service, but my experience of public services suggests that productivity is not high on their agenda.

As manufacturers, I am only interested in manufacturing (someone has to be!)

Contrary to widespread perceptions, UK manufacturing is thriving, with the UK currently being the world’s eighth largest industrial nation. If current growth trends continue, the UK will break into the top five by 2021. In the UK, manufacturing makes up 11% of GVA, 44% of total UK exports, 70% of business R&D, and directly employs 2.6 million people.

Source: The Manufacture

We are simple "metal bashers” (read some of our other blogs and you will realise we are much more than that, but it helps my case to keep it simple!). As far as I am concerned, productivity is the labour input against the productive output.

As you may know, My FD and I bought out our major shareholders in 2015. We started to seriously focus on Productivity towards the end of 2016.

I looked at various publications and went to a number of seminars on the subject. Most were by their nature, generalisations, many were purely academic exercises which bore no resemblance to the real world and I gained no new insights to how we may improve our productivity.

So back to basics, literally.

Our measure of productivity is labour hours against productive output (number of parts produced in our manufacturing plant, number of despatches made in our warehouse)

We switched off half or our ERP system and re-wrote the key data requirement to enable our managers to have the information specific to them, that they used on a day to day basis, in Access. This had the effect of freeing up their time inputting information into the ERP system and saving time by them not having to trawl through reports to find the information they needed. We are an SME, this drastic course of action may not suit all companies, but it certainly helped focus departmental responsibility and accountability in the correct areas

We focussed on the simple things, why our overtime bill was static when in some months we didn’t meet our output targets, but when we exceeded them, overtime increased. OK I know you are reading this and saying "that wouldn’t happen here. Do the exercise, you might be surprised how many people come in early to avoid the traffic!!

We shared much more cost information with our employees that specifically related to their areas so they could see the costs rack up for little gain.

We employed a Coach to work with our managers to ensure they managed and gave them the support to improve in areas that they recognised their weaknesses. This was a key move as the Coach was not a member of the senior management team and was tasked with improvement not weeding out failing managers. Buy in to this took time but the results were better than I could have hoped.

Using 2016 as a base                       100%

Productivity 2017                             107%

Productivity 2018                             114%

This has resulted in higher profits, a lower break-even, better cash flow and less fire-fighting

It’s a little like sport science, get the basics right and make small steps

That’s our journey so far regarding Productivity (please note no employees were harmed during this process!!)

If you have any queries or comments call me on 0121-378-6950 or e-mail me steve@clevedon-fasteners.co.uk

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