From the US Department of Energy to Cambridge University’s Institute for Manufacturing and the Green Alliance, numerous institutions have highlighted the wide performance variation between rates of resource efficiency improvement at manufacturing sites. With total resource inputs making up around 50% of production costs on average, there is an obvious advantage of improving efficiency and reducing waste.
The best in class are consistently cutting resource use at a rate of >5% per unit per year, rendering themselves >20% more efficient per unit over a 5-year period than the average site (which achieves a rate of around 1% per unit per year).
While variation between sites is well documented across different businesses and sectors, our observations and these studies also highlight that such variation is just as common within a business.
Through Manufacture 2030, we work with a broad range of manufacturing businesses across multiple sectors. From the behavioural and performance data behind this, we’ve attempted to dig through the many compounding factors and identify the most common underlying root causes for the variation in internal improvement rates, and some ways to address these.
Most common root causes of performance variation within a business
1. 'Unique circumstances' syndrome: Entrenched view that you can’t compare sites
There’s no getting away from the age-old argument that ‘our site is unique & different’. For example:
a) Old sites with old equipment versus newer sites with newer equipment: Do old sites have greater opportunity to make improvements, or less incentive to invest in improving old kit? Have newer sites matured into incredibly efficient operations, hitting diminishing returns on improvement projects?
b) Shampoo versus sandwiches: Different production processes come with their own theoretical potential for improvement – and not all processes are born equal.
c) Location: Local weather and infrastructure. Some variation between your sites’ improvement rate can certainly be attributed to their unique circumstances, but letting this take a foothold in your culture is a big factor in creating potential for a wide performance gap opening up.
We’ve seen it go both ways - teams at some ‘older’ sites almost give up on improvement projects while they wait for transformational investment (...which is always just on the horizon...), and others in similar circumstances keep looking for, and finding, efficiency gains (often on the periphery of the main equipment if that due to be replaced). We’ve also seen some newer sites with far higher recent investment get complacent, and others stay hungry as continuous improvement is integral to their culture.
Creating a culture that overpowers the ‘you can’t compare us with them’ mentality isn’t easy – but it is possible.
2. Measurement not management
Many multi-site manufacturing businesses have established, and ingrained means of measuring resource efficiency KPIs, be it through utility use per tonne of output, production costs, CO2e, OEE... there are numerous. While some of the data measured is likely to be used at an individual site level regardless of the wider corporate agenda, the best of these measurement programmes informs proactive central management, and the worst simply create noise rather than action.
By their nature, measurements are retrospective, tracking past achievements and deviations. Of course, much of the picture they give is crucial to tracking against targets and informing decisions, but in our experience it’s rare these measurement programmes help to proactively address improvement rates.
Relying on measuring rather than managing is an extremely common contributor to the performance gap.
3. Individual leaders and team members
The way in which individual leaders at site level approach continuous improvement has a huge impact on site performance; the consequent variation this creates is as broad as the types of personalities on the planet.
We’ve been lucky to work with some of our partners long enough to observe the impact that one great individual can have. Without naming names, we’ve watched as a really proactive site manager is moved from one site to another, breathing life into a new culture of continuous improvement.
While this is most easily observed at leadership level, it’s also just as prevalent at more junior levels, as individual engineers and project managers can also have a huge impact on site performance.
Interestingly, while knowledge and expertise difference are a factor in performance variation, our observations are that attitude is a greater deciding factor in driving performance. Highly experienced teams can become entrenched in their ways of working and fearful of change. New joiners can be overwhelmed by the task in hand, or lack the skills to drive change. The differential is the attitude of key individuals who challenge and retain the desire to improve.
People aren’t robots, so you’ll always have differences in personality and attitude (essential for sanity at least). You can, however, mitigate the impact of different personalities by identifying your ‘star performers’ and their common traits. Then encourage these traits in everything from recruitment to recognition.
4. Lack of central unifying targets
A lot of the manufacturing businesses we work with have corporate goals & targets to improve their efficiency and sustainability for shareholders & customers. I think many will admit these don’t always connect well with the objectives of each individual site teams. But some businesses don’t have any set unifying targets. (Being fair it’s often due to the effort it takes to get them set up, robust, and signed off.)
Sounds obvious to say, but no wonder sites will improve at different rates if they don’t have a common marker to aim for.
Knowing the most common root causes, what levers can you use to help all your sites improve at best in class levels?
While the most common reasons for performance variation probably come as no surprise, making a material difference to tackle them isn’t easy.
Availability of capital will always play a role in improvement rates, but assuming this is common to all your sites, here are 3 ways to start unlocking progress…
1. Identify: Who are your talents
One of the most important things you can do is to acknowledge that individuals have a huge impact – so first, identify your star performers from your site leaders, engineering, HSE, and operations colleagues who make progress despite of any ‘unique circumstances’ at their site.
- What makes them star performers?
- How do they maintain their performance?
- What makes them tick?
- How can you use them at other facilities (without risking losing their impact)?
A star performer in one business, may fail in another due to cultural constraints, so knowing what works in your business context will allow you to better nurture & retain talent, as well as identify and fill gaps.
2. Manage through culture
There are various ways to manage continuous improvement across a portfolio of manufacturing sites – often complicated by factors such as working cultures, reporting lines, and central/group teams.
Navigating this within a big business isn’t easy – but there are levers you can use to indirectly manage through business culture:
a) Training: Does your colleague training plan provide the skills needed for individuals and teams to affect change? Review & amend accordingly – who gets trained, and what on.
b) Common Vision/Targets: Does your business have a clearly articulated performance target that helps to entrench within your culture the importance of continuous improvement?
c) Incentive & reward: Is there a fair recognition and reward system for positive performance? This shouldn’t be purely financial, and should apply to all those needed to drive improvement at a site level.
d) Involvement & buy in: How engaged are site operators, engineers, etc in your continuous improvement efforts? If performance is a management concern only, then don’t be shocked that some sites will take a wildly different approach to others.
e) Tools & Techniques: Are your sites trained and using any of the common lean or continuous improvement methodologies or techniques? There are numerous methodologies designed to inspire high performing teams when it comes to continuous improvement and achieving goals – be it 4DX, 5S, etc. These all have their own merits, providing they are supported within the business. Having a consistent approach across the whole business offers the advantage of transferability, and it makes central intervention simpler than if you have to deal with multiple different methods.
3. Visibility: Create a sense of both competition and collaboration
Visibility can be both a powerful force for change, and a cue to cultural importance that your teams will pick up on.
a) League Tables: The temptation can be to put sites in a simple league table benchmarking performance improvement – however from a psychological perspective we’d caution rushing into this approach. Those at the bottom are likely to be demotivated if they feel they can’t make significant progress or efforts they have made aren’t reflected as the table is updated.
If taking this approach, consider basing it on relative performance improvement (i.e. put into the context of each site’s history), take into account effort as well as output, and be sufficiently flexible to ensure it does move & change – even if this means it’s quasi, rather than fully, automated.
b) Project Mapping & Playbooks: Providing a sense of who in the business is working on which continuous improvement projects, and crucially a simple and encouraged way to contact them, can help to spread knowledge across the business and inspire performance.
Some businesses may do this through an intranet or a workflow management system, or via our M2030 bee, whatever you do, try to minimise any additional administration burden for obvious reasons.
You might simply need to dust off the playbook you have stored on your intranet, ensuring it’s refreshed and put into the right hands from time to time. Don’t assume people know it exists if you haven’t shared it recently.
c) Internal Recognition: Are you using all the channels at your disposal to promote & recognise those making a difference? Again, it sounds obvious, but everything you can do to recognise those managing to balance production demands and continuous improvement are worth doing – you’re aiming to entrench culturally that it’s what the business aspires to do.
Again, the only caution we’d offer from a behavioural psychology perspective is to use a variable reward & recognition system to ensure you don’t create unwanted expectations.
Can all your sites be best in class?
Kick-starting resource efficiency improvements & cultural changes within your business can be daunting. If you want a simple way of doing it across one or multiple manufacturing sites, I'd suggest taking a look at the M2030 bee platform, which has been designed specifically for this purpose, with input from teams in manufacturing businesses as diverse as Mars, J&J, DuPont, Allergan, Rolls Royce, ABP, and many more.