Staying Competitive: It's All About Productivity

Many U.S. manufacturers are taking a short-sighted view in not pursing longer-term productivity gains in favor of short-term cost reduction.

With apologies to the great Jane Austen, “It is well to have as many holds upon plant productivity as possible.” That’s a message U.S.-based manufacturing would be wise to heed in the face of increasingly efficient, low-wage offshore production options.

Instead, it appears just the opposite is happening.

U.S. manufacturing sectors almost across the board are often snubbing productivity-enhancing tools and services as part of cost reduction efforts and bypassing more reliable quality components in favor of cheaper machine parts.

In the short run, such savings might drop impressively to a manufacturer’s bottom line.  But while the cost-cutters take a bow at quarterly management meetings, the real cost of doing business is growing in terms of added maintenance needs, component replacement expenses and, worse, lower productivity.

A fixation on lowest possible price is evident in manufacturers’ relationships with professional distribution businesses. Here, demands are being made on distributors for ever-diminishing component prices in ways that reduce high-value supply sources to order takers and damage a process that has delivered vital services to manufacturers for the better part of a century.

It is time for U.S.-based manufacturing to reverse course. The most secure road to productivity goes through established distributors. Consider authorized distributors, for example: those that have met a quality technology supplier’s requirements for product knowledge, training and service offerings. They can deliver a potent combination of their own logistics expertise with quality components and specialized engineering support from their suppliers.

A case in point:  A biotech facility recently increased plant reliability from 86% to 92% largely through a machine health and reporting program offered by its distributor’s supplier of rotating equipment technology. The increase was calculated with figures from both plant availability and equipment reliability—two keys to increased productivity.

The program, in this case one designed primarily for small- to mid size companies with 500 or fewer critical machines, provided the biotech with equipment, training and data analysis services at a set monthly fee. The package was available to the biotech only through the technology supplier’s authorized distributor.

The program required no capital investment. It included the supply of advanced data logging instrumentation and live data logger training on a predefined collection route schedule. Collected data was then uploaded for analysis and reporting by the rotating equipment firm, which generated monthly machine health reports. Quarterly reliability reports and plant visits by engineers rounded out the agenda.

The comprehensive program helped the plant to avoid unexpected machine breakdowns, identify opportunities for continued reliability improvement and establish a schedule for critical equipment upgrades in areas such as balancing, alignment and lubrication. The bottom line was a 6% increase in plant reliability and a corresponding increase in productivity.

Bargain Hunting Versus a Competitive Advantage

U.S. manufacturers who continue to sidestep quality in favor of lower cost equipment, components and services are likely missing an opportunity to secure a competitive advantage. While bargain hunting currently dominates spend thinking, businesses that lead the trend back to buying quality will outperform, out streamline and outproduce their price-fixated competitors in the U.S. and keep pace better with both sister plants and competitors’ manufacturing sites offshore.

Rather than thinking of your supply source as a way to obtain products at the lowest price, consider your distributor as an enabler of productivity. Authorized distributors, for example, are positioned to bring in engineering expertise to fix problems that dwarf the advantages of low cost parts. They can also provide guidance and expert assistance on dedicated machinery, like gearboxes and motors, and help you develop a strategy for the best component replacement cycle.

The bottom line is measured not by how much or how little is spent on acquisition of parts and equipment, but by how much sales revenues exceed costs.  You can only sell as much as you produce, and buying a cheaper bearing system is pointless if it results in work stoppages, fewer products to sell, and a higher ratio of production cost to revenue for every product sold.

Lower cost providers do not generally have the depth of resources to help manufacturers with their most vexing  problems. For example, can your low-cost supplier help identify a problem with a process pump when the root cause needs to be traced back to input piping? Can your low cost supplier bring in someone who will increase mean time between failure on standard equipment--or help develop a solution to that equipment’s breakdown so it lasts longer? The answer is almost certainly, no.

The Brain Drain

A final point:  If your plant is suffering from a knowledge shortage that comes with the retirement of an aging U.S. work force, your supply specialist should help counterbalance that loss. Deep knowledge resources are an integral part of an authorized distributor’s product offering. 

For this they charge a reasonable, but not the lowest, price for components, while maintaining the human resources needed to help deliver great services. When distributors are forced to conduct business exclusively on the basis of pricing, they no longer can afford to spend additional time serving your business.

At a time when finding capable replacements is more difficult, the importance of human resources who work outside your plant walls becomes increasingly critical to productivity. 

Bill Moore is senior vice president, Sales Development and Channel Management, Regional Sales and Service, SKF USA Inc.

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