Do continuous-improvement initiatives drive financial benefits for manufacturers? And if they don't, why bother with them?
The answer to the first question is an unequivocal "yes," according to recent research, which renders the second question moot.
The survey, conducted exclusively for
IndustryWeek and TBM Consulting, looked at the impact of continuous-improvement programs on three financial metrics -- anticipated revenue growth and operating income growth, and cash flow over the past year. Across the board, companies with no continuous -improvement programs performed worse across all three measures.
For example, more than 50% of survey respondents that have no continuous-improvement program reported they expect revenue growth to be 3% or less in 2012. This response compares with fewer than 20% of companies with mature continuous-improvement programs anticipating revenue growth of 3% or less in the coming year.
The same disparity holds true for operating income growth. Nearly half of survey respondents with no continuous-improvement program anticipate operating income growth of 3% or less in the upcoming year. Less than half that percentage of respondents from firms with mature continuous-improvement programs expected operating income to grow at that low a rate.
And cash flow for companies with continuous-improvement programs clearly has been a bright spot compared with firms that don't have continuous-improvement programs. Indeed, more than 50% of survey respondents with mature continuous-improvement programs reported that their cash flow had improved over the past year. Among companies with no continuous-improvement programs? Slightly greater than 20% report an increase in cash flow over the past year.
The results beg the question of how continuous-improvement programs, particularly more mature ones, drive financial gains. It's a topic TBM Consulting's Ken Koenemann, vice president of business development and marketing, discussed during a recent web conference.
In short, he said, improved productivity and reduced lead times generate improved profits, while better inventory management (removing excess inventory) improves cash flow. Finally, leveraging the improved measures to gain market share leads to faster revenue growth.
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