Improve Profitability in China: Blue Collar Productivity

The days of working fat and happy in China are over. It’s time to get LEAN. For many years increasing productivity has been at that forefront of any plan to increase profitability where manufacturing is involved. This applies in China and everywhere.

Much of the low-hanging fruit in China is dwindling.  China is no longer the land of cheap labour; and as a result, there is an ever-growing importance on productivity. A key way to achieve it is through a solid, robust culture of continuous improvement.  I say culture because of continuous improvement, and specifically Lean, is much more than a collection of tools.  Sure, you can use some of the tools and get a benefit in an area or two of your business.  But at the end of the day, you’ll be left with a collection of minor tweaks.   In my many years of working manufacturing, we learned that when we really want to deliver value, we had to infuse continuous improvement as a culture change across our enterprise.

Eliminate blame

At the core of any lean culture is the establishment of a blame-free environment.  This allows issues that are discovered by operators to be raised up, acknowledged, analyzed, and resolved.  Without a blame-free environment, operators simply won’t bring up issues, period.  It’s about failing faster.  Bringing up issues must be encouraged…and rewarded.

Here’s a real example.  An industrial consumer products company used to design production lines from the top down. Issues were constantly coming up during normal production.  When asked, engineers and operators knew of issues but were too afraid to raise them for fear of being blamed for problems.  Management committed to creating a Lean culture and used GEMBA (a systematic way of empowering operators as equals with managers) and Kaizen (an organized way to implement change) which encouraged everyone to speak up early.  The results: lower project costs and higher measurable productivity.

Get feedback

We found operators to be our best source for feedback, suggestions, and ideas.  Why?  No one else on the shop floor has more hands-on experience with a product and process.  They know both inside and out, yet few companies are willing to do the very simple thing of asking for their input.  Operator engagement has been and continues to be our most powerful way to drive a lean culture forward.

Here’s a real example.  A heavy industrial company was saved by their Lean culture when a planned US $30K investment was aborted during the planning phases by an operator who proposed a $1K solution.

Advanced techniques

As changing labour laws lead to rising wage and social costs, advanced techniques like level-loading and optimizing production schedules are increasingly used in China.  Both require a lean culture to implement.

  • Level-loading helps reduce overtime costs and risk of quality to overwork, driven by spikes in demand.
  • Production schedule optimization focuses on optimizing cost-effective shift schedules while still meeting statutory requirements. One company, for example, found a third shift could be eliminated and replaced by two full shifts over 24 hours. That’s when optimization truly delivered value.

Other options to consider includes production and quality incentive schemes to improve the bottom line and reward the employee at the same time.

Help suppliers save money

We’re also seeing successful companies roll out lean upstream and downstream in the supply chain, requiring use of processes, tools, and techniques during daily interactions.  At CMD, we’ve infused Lean tools into our Corrective Action Reports (CARs), and we share this information with our suppliers and customers.  When we help a supplier improve a process, typically quality for that supplier increases –for not only our portion of their business—but across their enterprise. As suppliers save money, they pass along savings to us, which translates to higher profitability for our clients.

As we’ve helped our suppliers save money, they’ve become more receptive and responsive to our suggested improvements. Relationships like these are built on trust that is earned over time.

Want to hear four more ways to pump up profitability in China? Get the infographic…

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