productivity leader - may 2011

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Implementing continuous improvement programmes

Barriers to a productive environment

Knowledge exchange yields results

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CEO’s desk

Ed’s note

Letters to the editor

The Kaisen Project Method

Winds of change blowing in Africa

Barriers to creating a productive and efficient environment

Productivity is a collective

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When you are not walking the talk

Case studies

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Productivity SA Acting CEO: Bongani Coka

Productivity SA Executive Manager:IggySathekge

Editor: Maupi Monyemangene

Email: [email protected]

Sub-editor: Chris Whales

Contributing writers: ChrisGilmour,FrancesWright,

MokgadiMahlakgane,PeetDorfling

Photography: ProductivitySAandPhotos.com,

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01CONTENTS

2

MAY 2011 productivity leader

CEO’SDESK

According to the Adcorp Employment Index, employ-ment remained generally weak in February 2011 with only temporary employment showing a more substan-tial increase of 6.1%.

Theindexalsoshowedthatworkintheformalsectorroseatanannualrateofjust1.4%,whilepermanentemploymentdeclinedby1.3%inthesameperiod.ThereleaseofStatisticsSA’sQuarterly Labour Force Survey stands to shedmorelightonhowwearefaringbutbasedonthelatestindexweseem to be on the back foot.

Productivity SA’smandate is to improve productivity inall spheres of the nation’s economic and community life and when the tide is turning against us in terms of jobs sustainability, our task becomes even more pertinent.An increase in productivity stands to address the issue of unemployment.

Forinstance,inour‘ConciseHandbookonProductivity’compiled by Mr Sello Mosai and Dr JLW de Jager, weput together a booklet intended to widen productivity knowledge. We look at productivity as a measure used to produceoutputs.Anynation‘scompetitivenessisingrainedin its ability or its enterprises’ ability to gain global market

shareforinputs,productsandservices.Productivity SA’s ‘Concise Handbook on Productivity’,

indicates various productivity principles such as:a. Increase output by using fewer inputs. This method usually produces the largest productivity gains but may not be the ideal way to realise productivity growth in countries with unemployment problems as job losses could follow.

b. Increase output by using the same quantity of input. Thismethod could imply no change in employment, and itmay not be suitable for enterprises with a bloated labour force,oritcouldimpedetheintroductionofnewtechnology.

c. Maintain the same output with fewer inputs. Thisispossiblewithoutreducingemployment,byreducingother inputs such as raw materials or capital services. This methodexcludesanincreaseinoutputandmostlikelyalsoemploymentandgrowthand, therefore,doesnot addressunemployment.

d. Produce a smaller output with even fewer inputs. Fromamacropointofview,thisoptionistheleastdesirablein developing countries, which need labour absorptioncapacity. The reduction of products and services, aswellas resources needed to produce these, could aggravateunemployment. In mature, overheated economies withlabour shortages, this could alleviate both problemssimultaneously and maintain or enhance competitiveness.

e. Produce a larger output with more input. In this scenario the marginal increase in output is greater than the marginal increase in input resulting in a larger number, which is, therefore, an increase in productivity.This is the ideal way to improve productivity in developing transitional economies because it integrates economic growth, employment creation and higher productivity, oncondition that the growth output can be maintained at a faster rate than the growth in inputs.

Productivity SAwould like to encourage enterprises tocontact the organisation for assistance in diagnosing issues affecting productivity in their establishments.

CEO’s desk

Bongani CokaActingCEO:ProductivitySA

3

Welcome to our second issue of Productivity SA Leader for 2011 and as per previous issues we aim to ensure that the publication continues to generate debate, but even more crucially informs you the reader on the various trends, methods and tools that can be used to promote productivity. Whether it is personal productivity whereby an individual is grappling with issues of time management or complex matters that involve enterprises that require an industrial analysis to diagnose potential pitfalls, this publication aims to inform and educate on productivity-related issues.

On page 5 we resume our line-up of articles with alook at the Kaizen Project Method and our productivity consultant, Peet Dorfling, takes us through the paces ofthis productivity method that aims to ensure continuous improvement in the workplace.

On page 9, our guest writer, an investment analystwithABSABank,ChrisGilmour,givesanoverviewofthepotentialthatAfricaholds.GilmourcitesAfrica‘srealGDPgrowth in the past decade as a cause for optimism and delvesfurther intothefactthatofthe10fastest-growingeconomiesintheworldin2008,fivewereinAfrica.

On page 10 we feature an article that looks into thebarriers to creating a productive and efficient environment. The article, drafted by Trinitas Consulting – a supplierspecialising in creating profitability through the integration of communications, marketing and operations, looks atthe pros and cons of employment equity. While this is not an easy subject to address, the article gives a balancedopinion on the issues at hand.

Onpage13wediscussproductivityandwhatitmeansfor business, labour and government, which have bothsimilar and different interests in relation to the concept of productivity. The common interest is to increase productivity in order to promote and generate economic growth and we discuss productivity at length in this article.

We round off our pot-pourri of articles with a look at case studies from the actual work performed within industry by our colleagues from the Turnaround Solutions andWorkplace Challenge programmes (WPC). In their line of duty, our colleagues from these pro-grammesconsultwithindustrytoimplementproductivity- improvement techniques.

Turnaround Solutions is a Department of Labour pro-gramme,designedtoput inearlywarningsystemstopre-vent job losses and return failing businesses to health and profitability. This programme has been managed and imple-mentedbyProductivitySAwithsomeexcellentresultsforthepasteightyears,asindicatedbythecasestudies.

Withthehelpofadiagnostictool,TurnaroundSolutionsis able to perform quick diagnoses to identify crisis areas within the company. Management and employees are then encouragedtoworkincollaborationwithProductivitySAtodevelop and implement a turnaround strategy.

On the other hand, the WPC is changing the wayenterprises are managed by promoting participation of all employeeswithinthecompany.Throughthisprogramme,management is encouraged to introduce progressive management techniques and work systems, includingpositiveworkattitudesandteamwork.ThroughtheWPC,Productivity SA outlines how companies should find theright responses to various competitive imperatives at all steps of the value chain that include: originality, speed,customerfocus,qualityandproductivity.

We hope you find this issue as enterprising as the previous issues and for any comments or enquiries please contact me on [email protected].


ED’SNOTE

Ed’s note

Maupi [email protected]


4 LETTERS

DearEditor

Inote that inyourOctober2010editorial,youdiscuss theissue of Productivity Month at length. In your editorial you mentionthat‘OctoberhasbeendeclaredProductivityMonthby Productivity SA and is a yearly campaign that focusesprimarily on the promotion of the importance of productivity to every South African. The purpose of the month is tohighlight the importance of productivity in the country and treating productivity as an enabling tool for transforming our economic growth and the creation of jobs’.

For a second, reading about October Productivity Monthreminded me about a programme by government and if I recall it iscalled‘16DaysofActivismagainsttheabuseofwomen and children’.

When I read about that campaign, I thought it should besomething that is carried throughout the year. I tend to think the same of Productivity Month. In a country that used to exportwheatbutisnowdependentonwheatimports,onewould assume the promotion of productivity should be an all-year-roundissue.

However,Ifindyourpublicationveryinterestinganddokeepthe debate on productivity ongoing.

Regards,Ms Puleng Maseko

Dear Ms Maseko

I thank you for a rather forthright letter and it definitely puts important questions on the table. While Productivity Month has been chosen to take place in October, productivity is actually promoted throughout the year. Without a doubt it is important for the nation to be aware of productivity and understand the need for productivity as a method of enhancing the standard of living in the country. While we intensify our drive to promote productivity during October, we are involved in the promotion of productivity throughout the year and to give one example, the organisation is involved in workshops throughout the year. We also engage media stakeholders consistently. We acknowledge your concern and we aim to intensify productivity awareness and thank you for your letter.

Regards,Editor

DearEditor

Thearticle‘Zoninginonproductivity’byProfessorRaymondParsonsinyourFebruary2011issuewasveryinteresting.Itwas a very informative article even though it shows that in the fight to createmore jobs, the country is facedwith aserious challenge.

I am not much into statistics nor do I generally find it easy to understandtheirmeaninginrealterms,butImustsayitisquite a huge task when one is made to realise that we might needa6%annualgrowthratetocreateanextra400000to500000jobsperannum.

My input would be that we need to support the growth of Small,MediumandMicroEnterprises(SMMEs)toseebetterprospects in job creation. It is a tall task for government and big business to produce the number of jobs required and the growthoftheSMMEsectorcanhelpalleviatetheproblemof unemployment.

Regards,Name withheld

Dear Sir

The article indeed dealt with a critical issue and painted a scenario where the country needs to up its game in terms of economic growth; however, we must take into consideration that various factors influence growth.

Productivity SA agrees that SMMEs is a sector that needs adequate support and as an organisation we support this sector through action learning solutions to assist SMMEs, including co-operatives, aimed at equipping SMMEs with the right skills, knowledge and attitudes to implement systems and procedures to improve productivity, profitability, growth and employment creation. We run Business Performance Improvement Workshops (BPIW) and the Productive Capacity Building Programme (PCBP) which provide SMMEs with productivity competencies that can be applied immediately to improve productivity within their businesses. These partnerships initiate a journey for SMMEs towards improved performance, service delivery, profitability, growth, employment creation and organisational competitiveness.

Regards,Editor

Letters to the editor



5FEATURES

By PEEt DorFLIng

During the past four years, the collaboration between the Pan African Productivity Association (PAPA) and the Asian Productivity organisation (APo) has seen Africa’s Asian counterparts contribute to the productivity movement in Africa. Since the collaboration, the APo has offered over 164 training places to productivity practitioners in Africa.

In the ensuing exchange of knowledge, one of thetechniques adopted from the APO, the Kaizen ProjectMethod, was put through its paces in a South Africancompany by the Workplace Challenge Programme (WPC).

ThepurposeofProductivitySA’sWPCistohelpSouthAfrican enterprises to implement lean /world-class / bestoperatingpractices/continuousimprovementprogrammesinanetworkingcontext.

The Kaizen Project Method was presented to Productivity SA by the Japan Productivity Center (JPC) around twoyears ago. Kaizen is the Japanese word for continuous improvement.

The Kaizen Project (KP) MethodAttheheartoftheKaizenProjectMethodisthe‘KPSheet’which is a short andpowerful problem-solving frameworkdeveloped by the JPC. It is similar to the A3 process ofthe lean manufacturing discipline. It is a simple means of summarising and communicating about a Kaizen Project.

The KP Sheet’s purpose is to guide a problem-solvingteam(KaizenTeam),andtohelpdisplay(tomanagementandother stakeholders) simply and with impact:• Thevariousproblemsexperiencedbytheteam• Therootcausesofproblemsasdeterminedbytheteam• Theactionsplannedandtakenbytheteamtosolvethe root causes of problems• Thedirectresultsoftheactions• Theimpactoftheactionsonpeople,costs,etc• Futurecontinuousimprovementactions

The Kaizen Project Method

Following the KP Sheet Method, a Kaizen Project involves10steps:1. IdentifyKaizenProjects*forqualityimprovement (*Short-termprojectsandmedium-termprojects)2. SetKaizenGoalbasedontheprioritisationofproblems3. Focusonspecificdefectstobeaddressedbylookingat thecurrentsituation(Genjitsu)4. Uncoveringthecausesofdefects5. Formulate‘hypothesesabouttherealcausesofdefects’ basedonactions3and46. Gatherfactsanddata,andconductexperiments to‘confirmhypothesesrightorwrong’7. Takecounteractiontoimprovethesituation8. MeasurethedirectresultofKaizenActions9. MeasureothereffectsofKaizenActions10.Takeactiontopreventareturntothepreviousstate

Let’s look at these steps one by one:

STEP 1: Identify Kaizen Projects* for quality improvementTo be able to deal effectively with company problems (especially quality problems), the JPC suggests a smallKaizen Team be appointed. We will look at each of these steps in some more detail.

(Example) Problem evaluation table (10: maximum score)

Importance Urgency Company policyPossibility of achievement

Effect on investment

Total score *

Problem A 8 9 8 10 8 43

Problem B 8 6 7 4 6 31

Problem C 6 3 0 2 7 18

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The JPC advises that it is necessary to evaluate the company’s current situation to prioritise problems to target through Kaizen Projects.

*Continuous Improvement Projects – key questions toask are:• Whichqualitydefectsaretroublingthecompany?• Arethereanyproductsproducedbytheenterprise wherequalityisunstable?

STEP 2: Set Kaizen Goal based on prioritisation of problems • Usuallyweselecttheproblemswiththehighestscores outof10todealwiththroughtheKaizenProjectMethod.• Agreeonthegoalsof‘Kaizenforqualityimprovement’.• Atthispoint,anygoalmaybeseenastoosteep because people may have grown used to the specific problem,butitisimportanttosetagoaltomotivatethe team members involved.

StartfillinginthedifferentpiecesofinformationontheKPSheet(seebelow).Thissheetisavaluablecommunicationinstrument,because itwillshowthewholeKaizenProjectat a glance.• Thewordingofeachstep(especially4,5and6)mayhave to be rewritten from time to time during the project as a resultofnewinsightsorinvestigations,butthisisnormal in Kaizen Projects.

STEP 3: Focus on specific defects to be investigatedTo be able to understand everything around the defects troubling the organisation, it is important for the KaizenTeam to make observations of the current situation (the JPC callsthecurrentsituation‘Genjitsu’).Tomakesenseofthe observations,theseactionsmightbehelpful:• Collectsamplesofnormalanddefectproducts (Genbutsu):makesureyoucandistinguishbetween normal products and all types of defects. You can collect samplesforaperiodofonemonth,onedayoronehour, etc. Keep samples of defect products for future reference.

• Classifythedefectproductsbytypeandcountthe number of each type.• Calculatethedefectrate(defectperproduct)foreach type and produce statistics.• AnalysedefectsstatisticsanddrawaParetodiagram. Thishelpstoidentifythe20%oftheproductsthatmake up80%ofthedefects.Ifyoucansolvetherealcause ofthisdefect,youwouldsolve80%oftheproblem. UponinterpretingthebluelineontheParetodiagram below,itbecomesclearthatDefect1representsabout 60%oftheproblem,andDefects1,2and3together makeup90%oftheproblem.

STEP 4: Uncovering the causes of defectsThe JPC suggests four useful techniques to help the Kaizen Team get to the root cause of the problem:• Lookatsamplesofnormalanddefectproducts(Genbutsu)• Observethemanufacturingspace(5M&E,or Men,Machine,Materials,Method,Measurementand Environment)(Genba)• Analysethedistributionofproductqualitydata,or• Analysesimultaneousdataofproductionfactors(5M&E) vs quality

Step 4.1: Looking at samples of normal and defect products will help the Kaizen Team to understand the real nature of defects, andassuchwill help todetermine thecausesofdefects.Considerthefollowingexample:

* Compare and determine the difference between samples of normal and defect products

Normal products

Defect(2)

Defectsample

Defect(1)

Defect(3)

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Step 4.2: ObservingGenba(manufacturingspace),focusingon5M&E,canbedonebymeansofatouroftheproductionfacility,bytakingphotosorvideos,andbytalkingtooperatorsor team leaders.

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Step 4.3: Checking the distribution of product quality data may help to determine why the defect products are below or above the standard specifications:

STEP 5: Formulate hypotheses about causes of defects based on actions of steps 3, 4.1, 4.2, 4.3 and 4.4The JPC relies on the tried and tested fishbone diagram to guidetheKaizenTeam’sbrainstorming,butyoucanalsouseotherhypothesistechniquessuchasthe‘5Why’techniquetoidentifywhydifferentdefectscanhappen,andthinkthroughwhat the root causes of defects are. The fishbone chart (see bottomleft)helpstheteamtofocusagainon5M&E.

The5WhytechniqueusedbytheWorkplaceChallengeProgrammealsohelpstheKaizenTeamtofocuson5M&E:

STEP 6: Gather facts and data, and conduct experiments to ‘confirm hypotheses right or wrong’ The JPC experts stressed the importance of gatheringfacts and data, and conducting experiments to provehypothesesrightorwrong,inotherwordsmakingsureoftherootcausebeforeembarkingonanexpensivesolutionthat might prove ineffective!

Thekeyistoconductanexperimentandtogatherdatawith the purpose of making sure one has found the real cause(s).Thisshouldbedoneforeachtypeofdefect,againfocusingon5M&E.Considerthediagrambelow:

Fishbone Chart

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1234567891011Quality(sizeetc.)

Lower limit Standard Upperlimit

Number of products

QualitydataMethod data Machine data Material data Environmental data

This means the company must start to record real-timedataofoutputaswellasinputs

Lower limit

Product Lot

Man (Operator)

1 2 3 4 5 6 A B B C B A

Specoutdata

Method =Cause of

defect

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Material, Method

Factor and Product QualityINPUT OUTPUT

Step 4.4:Bycheckingsimultaneousdataofproductquality,5M and environment factors, one can often see patternswhichmayindicatethereasonforcertaindefects.Seethediagram below:

MeasurementMan Machine

Material Method

Defect

Environment

Defectrate

Cause = Man (Operator)?

By gathering data or doing experiment

MrA MsB MrC MsD

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Cause = Machine?


Machine condition


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STEP 7: Take counter action to improve the situationOncetheKaizenTeamissureoftherootcausesofdefects/the problem, they can have a brainstorming session tocome up with ideas of counter actions to eliminate the root cause(s)andsoimprovethesituation.Then,ofcourse,theymust agree on actions to be taken (Kaizen Contents) to addresstherealcause(s),andthenthelaststepistocarryout the actions as planned.

STEP 8: Measure the direct result of Kaizen ActionsThe direct quality result the Kaizen Team wants from Kaizen Actions is a reduction in the number of defects produced. Less defects means less customer complaints.

STEP 9: Measure other effects of Kaizen ActionsTheJPCdistinguishesanumberofareasof‘othereffects’where the Kaizen Project may have had an effect. While monitoringtheimpactoftheKaizenProject,oneshouldlookforeffectsintheareasofeconomicimpact(profitandloss),improvement inhuman relations, improvement inpeople’sability/skillorimprovementinteamwork.

The WPC measures impact in five easily definable areas followingtheacronymQCDSM:• Q=Quality.Thiscanbedonebymeasuringthenumber ofdefectsasinstep8,orbycountingareductioninthe number of customer complaints.• C=Cost.Thiscanbedonebymonitoringthecostof

productionandspecificallythecostofdefects,andeven increases in profit.• D=Delivery,meaningimprovementsinleadtimesasa result of a reduction in rework.• S=Safety.Perhapsthedefectswerecausedbyan unsafeprocedure,inwhichcaseareductionininjuries may be regarded as a result of the Kaizen Project.• M=MoraleorPeople.Thiscanbemeasuredin aspectssuchasabsenteeism,numberofgrievances or improvements in skills levels.

STEP 10: Take action to prevent a return to previous state and to ensure continuous improvementWhen the Kaizen Team has dealt with the 20% of theproblems causing 80% of the defects (refer back to step3), theycanturntheirattentiontotheremainingproblemsto attempt to reduce defects to zero. They can do a Kaizen Project focusing on those other causes.

They should also remember that once they turn their attentionawayfromtheproblemtheyhaverecentlysolved,it may resurface if they do not take action to sustain the solution, especially if the problem was rooted in humannature.Therefore,topreventarelapse,theJPCconsultantsadvise the Kaizen Team to:• FormulateaPointCard(thissimplymeansrevisingthe work standard or standard operating procedure).• EducatetheworkersonthePointCard(revised work standard).

Consider the diagram below:

PresentationIn presenting the results and actions followed during the Kaizen Project tomanagement or other stakeholders, theKPSheet (seediagrambetweensteps2and3)andeverystep mentioned above can be captured in a PowerPoint presentation.

Bysimplycreatinginternallinksbetweentheslides,theKaizen Team can present the whole project with impact byusingtheKPSheetasthecentralslideandjumpingtothedifferentslidesdisplayingeachofthe10stepsoftheKaizen Project.

Compare procedures betweenMrAandMsD

Cause = Method?

By video camera observation or experiment, etc

Defectrate

Cause = Material?


Material character


9OPINION

Winds of change blowing in AfricaBy ChrIS gILmour

Change is the only constant and, true to form, new winds of change have been blowing throughout Africa in recent years. Although not all the change has been for the better, the winds of a new order have generally been whistling in the right direction.

Political and economic developments reached a somewhat unexpected peak this year with the uprisingsin Tunisia, Egypt and Libya. The eagle eye of the mediahas brought to our homes images of how those who once wielded unquestioned political might have succumbed to the willofthepeople.However,beyondthechangeinpoliticalpower, there has been less visible changewhich is equally if not more significant than the current political musical chairs taking place. The change stands to be more significant in the long run and the change is predominantly economic.

On the face of it, Africa is on the brinkof waking up and demonstrating to the rest of the world that it is a nascent economic superpower. It may well be that because Africa’s rise seems to have occurred so suddenly and coupled with a heavy dose of scepticism regarding Africa’s ability to break free of the shackles of poverty and disease, the scale of the ‘African renaissance’ has largelygone unnoticed.

However,thechangehasbeentellingandtopickoneofthemanyexamples,asrecentlyasthedecadebetween1990and 2000, Sub-Saharan Africa’s real GDP growth in totalwas around 25%. In otherwords, between the beginningandendofthatdecade,Africaonlygrewby25%intotal.Bycomparison,theAsiannewlyindustrialisedcountries(NICs)grewby75%andtheworldgrewbyalmost35%.

Bythefollowingdecade,however,thathadallchanged.Between2000and2010,Africahadgrownby85%,theAsianNICsandLatinAmericaby45%,theUSAbyjustover20%andtheEuroareaadismal14%.Africawasthestarperformerand this view was endorsed in the Economist magazine’s supplement‘TheWorldin2009’whichhighlightedthefactthatofthe10fastest-growingeconomiesonearthin2008,five were in Africa.

But this is no flash in the pan. Africa’s strong GDPgrowth is underpinned by improving macroeconomic fundamentals.Collectively,Africa’stradebalancewentfrom

beingreasonablynegativeduringthe1990stobeinghugelypositive last decade. African debt climbed sharply during the 1990sbuthasfallenequallysharplysincethen.

Lastyear,Africacaughttheeyeofinternationalconsultingfirm McKinsey, which published an insightful survey onthecontinententitled ‘LionsontheMove’.This reportputnumbers to the African renaissance.

For example, at around $1.6-trillion, Africa’s collectiveGDPisapproximatelythesamesizeasthatofRussiaorIndiaandnotthatfarawayfromBrazil’s.Andeconomicgrowth,ataround6%to7%perannum,isverymuchonaparwiththose countries.

Africa’spopulation,too,isgrowingrapidly;ataroundonebillionatpresent,itseemslikelythatAfrica’spopulation will surpass that of China’s by 2030.Whilemostpeopleintuitivelyassociateresources with Africa, McKinsey’s reportpoints out that only about 24% of Africa’sGDPemanatesdirectlyfromresources.

The largest component of GDP comesfrom consumer-facing industries, such asretail, ICT and banking.McKinsey believesthatAfricanGDPwillballoonto$2.6-trillionby 2020, with consumer-facing industriesleading the charge and heavily aided by infrastructure, agriculture and, of course,resources.

AkeyareawhereAfrica’spotentialliesisinagriculture–thecontinent’shighlyfertilelandforms60%oftheworld’sarable and uncultivated land. But there are formidable obstacles to surmount before Africa’s undoubted potential can be realised.

For example, Africa comprises 53 separate countries,each with its own political and economic agendas and many of them with highly different languages and cultures. ComparethiswithSouthAmerica,forexample,wherethereareonly12countriesandtwomainlanguages(PortugueseinBrazilandSpanisheverywhereelse).

In infrastructure there are key developments taking place.TheNorth-Southcorridor,whichlinksthecopperbeltof theDRC and Zambiawith ports in Tanzania and SouthAfrica,iscurrentlybeingupgradedandthisshouldfacilitatesignificantly faster transport times and reduce delays.

IfAfricacanmaintainaneconomicgrowthrateof6%to7%compoundedforthenextcoupleofdecades,thenthewinds of change would have yielded positive avenues with social issues such as poverty.

The writer Chris Gilmour is an analyst with ABSA investment.


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FEATURES

Barriers to creating a productive and efficient environment

A: Productivity and the management of employment equity and diversityEmploymentequityinSouthAfricais,forobviousreasons,apolitical necessity in that the inequalities of the past must be addressed so that people have the opportunity to participate equally in both society and in the workplace. There are those that argue that legislation regulating employment equity in the workplace is an unjustifiable restraint on the freedom to contract and will be both costly and burdensome. This will therefore have an impact on productivity and will restrain economic growth. At the same time it has been argued that discriminationisbothunproductiveandcostly.Discriminationresults in a loss of productivity rather than its increase.

Globally, employment equity is in fact now widelyrecognisedasafundamentalhumanright;employeeshavethe right to achieve theirmaximumpotential atwork.Butit is also recognised that equity in the workplace is more than just an issue for the proponents of human rights and freedoms. It is no longer an issue for the social activists. In fact the achievement of employment equity and diversity in the workplace is more than just the achievement of human rightsintheworkplace;itisnowwidelyrecognisedasbeinga competitive necessity and a strategic business response to the multiculturalism of the global economic environment andmarketplaces.Diversityinthefuturewillbedrivenbytheimperatives of competitiveness, demography, immigrationand globalisation.

Discrimination is both costly and economically in-efficient. It costs employers to discriminate in a number of areas,including:

• In the language of economists, in order to sustain a workforce that isnotdiverse,orwhere there ispersistentdiscrimination against a particular category of employees,for instancewomen and black people, an employermustbe prepared to pay for his or her ‘taste in discrimination’.In otherwords an employermust pay, either indirectly ordirectly, to continue to be associated with some personsrather than others.

• In a discriminatory environment where there is lesspossibilityofpromotion,partialandunequalwagelevelsfordifferent groups of people and a failure to accommodate the needsofdiversegroups,thereisgenerallyahigherturnoverofemployees,greaterabsenteeism,lowmotivationamongemployees to be productive and a difficulty in recruiting the best employees.

In relation to the productivity and effectiveness of the enterpriseorsectormoregenerally,adiverseworkforceisnecessary for the following reasons.

A business must anticipate the needs and aspirations of adiversecustomerorclientbase,whetherthisisinrelationtoservicesorgoodsproduced.Thenatureoftheworkforce,whether this is in relation to management or any other em-ployee,must reflect themarketwhich thatparticularbusi-ness caters to. This is essential if the needs of the customer aretobetranslatedintoeitherproductsorservices,whichin turn is essential to make the business more profitable. In relationtoservices,employeesmustunderstandtheneedsof the customer in order to serve them better. An organisa-tionwithadiverseworkforce is thereforebetterable,atastrategiclevel,tomakefundamentaldecisionsbaseduponitsin-depthunderstandingofhowdifferentpeopleperceivethe world and what their particular needs are.

In an organisation it is also imperative for business efficiency to maintain effective linkages with all in the valuechain,includingsuppliers.Inaglobaleconomywheresuppliers of raw materials come from different communities and in some instances different parts of the world, it isnecessary to anticipate the way in which the suppliers interact with the world and how they do business. In SouthAfrica,where thedevelopmentofsmallbusiness isemphasised, a relationshipwith a diverse set of suppliersisessential;anunderstandingofthisisthereforeessential.

In order to assess whether to invest in a country,foreign investors often look at the reputation of particular businesses. The achievement of a better reputation for diversity and tolerance may attract investors in the particular enterpriseorsectorinboththelocalandtheglobalcontext.In South Africa this is of particular importance given itshistory of intolerance and discrimination.


11FEATURES

The ability of both management and employees more generally to comprehend and respond to an increasingly multicultural world is essential to increase productivity. It hasbeenarguedthataglobalcompany,whichisessentialfor economic growth, cannot be run solely in terms ofthe values of a particular community. This is of particular importance inSouthAfricawheremanagers and strategicdecision-makers are often drawn from a particular raceand gender. It has been argued that it is impossible for this particular group of people to understand and be sensitive to other global and cultural values.

B: Productivity and social equityIn order to achieve a higher rate of productivity, a moreefficient use of resources is required. These resources include capital, land, raw materials, information, energyand,mostimportantly,labour.Itiseasytoidentifythecostof ‘hard’ factors in relation to productivity, for instancetechnology,equipmentandrawmaterials.It isnotaseasyto identify thecostof the ‘soft’ factors, for instanceworkorganisation,workmethods,environmentandmanagementstyle. Productivity is not, as it is sometimes thought, theintensity of the labour or the speeding up of work for less. Productivityisaboutworkingmoreintelligently,orcreatinganenvironmentconducive tomore intelligentwork, ratherthan simply making employees work harder.

Employees,whoaretheprincipalresourceinrelationtoproductivity,haveakeyroletoplayinincreasingtheproduc-tivity of the particular business or enterprise. This role may beanalysedintermsofbothapplication,andthedegreetowhichpeopleapplythemselvestotheirwork,andeffective-ness, this being the degree towhich people are applyingthemselves in relation to the quality and output of their work.

Motivation plays a key role in creating a productive environment. Employees who are dissatisfied and unhappy at work are less likely to be productive employees. It is obvious thatinordertoachieveaproductiveworkforce,thequalityand environment in which people work must be conducive to a higher level of motivation and a concern for the output of the particular enterprise. Attempts to decrease inputs in theformofsocialbenefits,lowerwagesandtheprovisionofa safe working environment must necessarily decrease the motivation of employees. Employees who are poorly paid or not remunerated appropriately are generally less productive

than those employees who are relatively satisfied with their remuneration. In order to increase productivity it is necessary to introduce creative pay systems through which employees feel that they have a stake in the business or enterprise. The payment of ordinary wages cannot in itself be sufficient to motivateemployees.Havingnostake in theproductivityofthe enterprise ensures that employees are not motivated to work better or more efficiently.

Inanenvironmentthatishostile,oranenvironmentwhereit is unpleasant to work, employees are more likely to bepersistentlyabsentfromwork,therebycostingtheenterprise.Forinstance,wheretherearenowelfareprovisions,childcarefacilities,waterorcanteenfacilities,employeeswillconstantlytake time off work to attend to legitimate needs. Unsafemachinery not only leads to accidents that may cost the enterpriseintermsofsickleaveandcompensationpayments,it also demotivates employees. If they are constantly aware that they are unsafe, they are reluctant to work with theidentifiedmachinery.Inadditiontothis,unsafemachineryandthe lack of maintenance of machinery leads to breakdowns and therefore loss of the productive time of employees.

The monotony of unskilled work leads to poor organisa-tional design and development which is less productive than an efficient organisation in which there are more trained and skilled employees who are able to undertake a diverse na-ture ofwork. In addition to this, organisations need to bedynamically operated and reorganised to meet new market needs.This includes introducingmoreflexibility in relationto the actual work people are engaged in and therefore the creation of a workforce that has diverse skills. The legacy of apartheidinSouthAfricahasleftuswithaskillsbacklog.Inordertocreateamoreproductiveenvironment,oneofthekey challenges is to ensure that employees are skilled. Pro-ductive employees work with management to innovate and develop productivity.

International evidence suggests that productivity must not onlybetheresponsibilityoftheindividualemployee;thekeyto improved productivity lies in the innovative management of employees. In order to improve productivity, improvedmanagement is required to lead, innovate and respondappropriately to changes in the market for goods and services,aswellasthelabourmarket.

Impact figures

Target Sep Oct Nov

Quality Collection of impact statements 100% 70% 85% 80%

Cost Variableexpenses(officecosts) R2000pp R1477 R1688 R1931

Delivery No of companies nurtured 4companiesperCFpermonth 1 5 0

Morale Innovations 1perpersonpermonth 6 4 0

1implemented 4implemented

articles used courtesy of trinitas consulting


12 OPINION


13


OPINION

Productivity is a collectivegovernment, business and labour have both similar and different interests in relation to the concept of productivity. the common interest is to increase productivity in order to promote and generate economic growth, but following this, their interests begin to diverge.

Forgovernment,thedebateonproductivitymustinclude a debate on unemployment and employ-ment creation. The most unproductive person is an unemployed person. In a developing country with high unemployment figures, this obviously reso-nates with the public. Consequently, any accordor agreement on productivity must include mecha-nisms for job creation.

For business, the debate on productivity is focused on the increase in profitability in order to interact visibly and meaning-fully in the global economy. Any accord must therefore include mechanisms to mea-sure productivity against global benchmarks. These benchmarks must then be linked to the overall eco-nomic growth of the country. Any accord must also seek to accommodate both large and small businesses, andallow for the introduction of sector-specific productivityagreements.

For labour, theword productivity evokes an al-mostunanimousresponse,thisbeing,yesproduc-tivity must increase in order to grow the overall economy,butatwhoseexpensemustproductivitygrow? In this regard, labourwill cite the statisticson dismissals for operational requirements,whichinSouthAfricaareextremelyhigh,andtheconstantbattle with employers to develop a better working environment. A better working environment will include higher wages, shorter working hours andmore social benefits.

This article aims to generate a range of ideas relating to productivity that may be used by all parties.

Productivity: grappling with the conceptThere is no single definition of the concept of productivity. The most well-researched definitionof productivity to have emanated from South

Africa appears to be the one that sees productivity as ‘the ability to combine and convert inputsof labour, materials and capital into outputs of goods and services’. Productivity improvement would imply an increase in such ability and the same would apply to a decrease.

The above definition is an economic definition,which essentially characterises productivity as some-thing that can be accurately measured statistically by calculating the output and input costs in a particular enterpriseorsector.Economically,ahigherproduc-tivityratewillbeachievedbydoingmorewithless,or at least accomplishing more at a constant or im-provedquality,withthesameamountofresources.

As a result of the inadequacy of the purely eco-nomicdefinition,amultifaceteddefinitionofproduc-

tivity has been determined.This definition states that pro-ductivity is creating wealth through the generation and application of knowledge to make available products and services that meet the needs of the user and are consistent with social, environmentaland economic goals of the society.Recognisingthatthehuman mind is the source of productivity, endeavours tocreate a mindset that continu-

ously seeks improvements and reacts effectively to changeare fundamental.Toachievethis,manage-ment dynamism is required to inspire people to ac-celerate economic and social development to pro-vide material wealth.

However,despitedifferencesindefiningproduc-tivity, there is general consensus among differentproductivity commentators about the measurement of productivity as a ratio of output over input:

Productivity=Output/Input(In thisdefinition,output refers to thegoodsor

services produced by an enterprise and input refers to the resources used to produce the outputs,includingcapitalexpenditure,rawmaterials,energy,information and labour costs.)

In a given context, for one to fully appreciateproductivity, one needs to look at three essentialelements:• Firstly, thenatureof theproductionsystem that

Government,businessandlabour have the common

interest to increase productivity in order to promote and generate

economic growth.

14


OPINION

is dealt with must be characterised appropriately, be itinternational,national,regional,anenterpriseorindividual.Attheenterpriselevel,thesystemmaybeagoodsorservicesproduction facility forprofit,agovernmentdepartment,anNGO,aschooloranyotherunitatwhichsomeresourcesaremobilised and organised to generate certain output.• Secondly, the fact that productivity needs to bemea-sured as a ratio of output over input strongly suggests that it is equally important to understand the desired outcome of the process in order to measure the right outputs.• On the input side, an important consideration iswhatcriteria one uses to decide which resources to account for when measuring productivity. To the extent thatproductivity is the ability to mobilise and use resources well inordertoachievespecificoutcomes,anyresourcethathasthe potential of being used towards the desired outcome (available and relevant to the production process) should be considered. This is notwithstanding the possibility that at the timeofmeasurement, the resourcemaybe100%underutilised;ifit’spotentiallyusable,thenitisimportant.Infact,theexclusionofaresourcethatiscompletelyunderutilised but relevant and available for use towards specific outputs will inflate the productivity measurement, thusdistorting the picture.

Government, business and labour have the commoninterest to increase productivity in order to promote and generate economic growth. To ensure the active participation of all contributors and beneficiaries in productivitygrowth,thefollowingguidelinescanfacilitatethe process:

Accepting that productivity is measured as the quotient ofoutputdividedbyinput,itfollowsthatproductivitymaybe improved in five different ways:

The first three options imply reduced inputs. This is associated with cost-cutting exercises, and the mostvulnerableresourceinthisregardislabour.Option4impliesanincreaseinoutputwhileinputsremainstable,andoption5 impliesan increase inbothoutputand input.However,the increase in output should exceed the increase ininput.Option4andespeciallyoption5representthemosteffective ways of sustainable productivity improvement and it is suggested that these approaches to increased productivity should be followed.

As high output growth will need accelerated input growth, it isnecessarytoselectoutputgenerationmeth-ods that would not involve job losses because productivity has improved.

The third prerequisite for sustainable productivity growth isthatcustomers,providersofcapitalandemployeesshouldbenefit from the additional wealth that is created.

Understanding how to measure productivity is not asubstituteforthetheoreticalgraspoftheconcept.Ideally,such understanding should precede and predetermine themeasurement issues. Conceptually, there are certainsalient features of productivity that have become apparent over the years:

Productivity has a holistic nature characterised by the fact that the different production factors that impact on the total productivity of a system are also interdependent on each other. Such factors include behaviour, methodsofproduction, technology, values,managementsystems,productsandtraining/skill,etc.

15the dti’s B-BBEE Website & IT Portal Revolutionising the National Transformation Agenda

The Department of Trade and Industry (the dti), as the custodian of the economic empowerment policy, has revolutionised the manner in which it communicates its B-BBEE mandate to the eco-nomic citizens of the country, via the recently launched national Broad-Based Black Economic Empowerment (B-BBEE) Website and IT Portal.

the dti B-BBEE Website and IT Portal offers you:

• Centralised, government and standardised B-BBEE informa-tion resource;

• Publicly accessible B-BBEE information and educational scorecard simulators;

• Free registration of your company’s BEE Scorecard and Cer-tificate on the IT Portal;

• Facilitation of an Exempt Micro Enterprise (EME) BEE Cer-tificate, by providing you with a standard template as proof of your BEE status;

• Secure access to a free, customised B-BBEE Toolkit, with an online self-assessment calculator, and submission of verified credentials,

• Answers to ‘frequently asked questions’ on B-BBEE and the opportunity to pose your own questions;

• Easy-to-use functionality for increased B-BBEE compliance (including EMEs with a turnover under R5m per annum);

• Marketing of your company on the B-BBEE Opportunities Network, which can be freely searched by your procurement/transformation managers to source procurement/trading part-ners;

• Ratings of entities and access to Verification Agencies;• Optimised flow of B-BBEE information from the public and

private sectors to the dti;• Optimised flow of information between entities and their cur-

rent or potential suppliers, clients or trading partners;• Sharing and networking of B-BBEE opportunities; • Reporting of B-BBEE fronting practices (window-dressing),

and much, much more. • OPTIONAL: Listing of your company’s profile (at a marginal

fee to cover third-party costs) on the dti National Registry – for business opportunities and marketing purposes

Join the transformation revolution, by visiting the only official government B-BBEE Website and IT Portal at: http://bee.thedti.gov.za

BeeITPortal.indd 1 2011/01/25 4:22 PM


16


NEWS

By moKgADI mAhLAKgAnE

When the Pan African Productivity Association (PAPA) was formed in 1992, its driving agenda was the need for productivity improvement on the continent to create more jobs and to sustain those jobs in the face of increased competition.

Nineteen years later and the organisation is relentlessly pursuing its objective to promote productivity on the con-tinent,andthiswasfortified in2010during the 16th Ordinary Sessionof the Executive Council, Heads ofStates and Governments when theAfrican Union (AU) requestedmem-ber states to accelerate the imple-mentation of the Productivity Agenda for Africa.

In the latest move to ensure that the Productivity Agenda is pursued,PAPAsignedaMemorandumofUn-derstanding with the Korea Productiv-ityCentre (KPC) inDecember 2010.The Areas of Collaboration are: • Topromotetheexchangeofinformation,best practices,benchmarkinginformation,knowledge,tools andexpertiseinrelationtoproductivityimprovement for enterprises and industries.• Toidentifyanddevelopcommonprojectsofinterestsin productivityresearch,developmentandpromotion.• Tofacilitatetheexchangeofinformationandcontact

points in the government and private sector in the areas of mutual interest.• Toexplorejointprogrammesoftrainingorhuman resource development when appropriate.

TheKPCwasestablishedinAugust1957asanon-profit,non-governmentalorganisation.Subsequently,inJune1961,the KPC was designated as the implementation agency representing the Korean government, when the Republicof Korea joined the Asian Productivity Organisation (APO)

as one of the first signatories to the Convention.

South Korea, often referred to asKorea, is located inEastAsiaonthesouthern half of the Korean Peninsu-la. The country is neighboured by Chi-natothewest,JapantotheeastandNorth Korea to the north. The popula-tionofKorea isestimatedat50-mil-lion, which is 0.7% of the world’spopulation.

Korea boasts some of the world’s best-known brands including Sam-

sungElectronicsandHyundaiMotorCompany,whichwerethe only two Korean companies to make it into the world top 100brandslistedbyglobalbrandingconsultancyInterbrand.

The KPC became a special corporation under the Ministry ofCommerce,IndustryandEnergyin1986inlinewiththegovernmentinitiatives,andhassincebeendesignatedbytheKorean government to support productivity improvements across the country’s economy.

Strengthening productivity partnerships globally

Nineteen years later and the organisation is relentlessly pursuing its

objective to promote productivity on the

continent...


17NEWS

Strengthening productivity partnerships globallyThe KPC trainsmore than 130 000 people each year,

disseminatingworld-classinnovationmethodsintoKoreanindustry,inpartbyconductinginternationalcomparisonsofthelabourproductivityindex,andannouncingtheNationalCustomer Satisfaction Index (NCIS) and National BrandCompetitivenessIndex(NBCI).

Over the last five decades, the KPC has played a pivotalroleinincreasingproductivityinKorea,thusgrowing the national economy. Under the leadership of Dr ChoiDong-Kyu, the organisation’s services comprise consult-ing, education and training, as well as support for the implementation of quality and environmental management systems.

Since its foundation, theKPChasplayedavital role inincreasing productivity of industries to promote the rapid growth of the national economy. The KPC is currently undertaking the following various services to support globalisation efforts and new management innovation movements of business enterprises to meet the challenges ofthe21stcentury:• Nationwidepublicservicestoincreasethe productivity of industries.• Consultingservicesaimedatrationalising corporate management.• Educationandtrainingofspecialisedpersonnelinall fields of business management.• Guidanceandeducationonfactoryautomationand information systems.• Accreditationforqualityandenvironmentmanagement systemssuchasISO9000andISO14000.

• Researchandsurveystoincreaseproductivityfor improving the efficiency of the industrial policies ofthegovernmentandcorporatemanagement,and thedevelopmentanddisseminationofproductivity- improvement methods.• Overseastrainingandinternationalexchangestosecure manpower to effectively meet the needs of the globalised age.

The business of the KPC is outlined below. FormoreinformationontheKPC,visitwww.kpc.or.kr.OneoftheprojectsapprovedbytheAfricanUnionLabour

andSocialAffairsCommissioninits2011AnnualWork-planisprovidingtrainingonproductivitytoinformaleconomyunits,SMEsandthepublicsectorinAUmembercountries.TheKPCis one of the international partners that indicated willingness toshareitsexpertisewithaviewtomobilisingtheresourcesrequired for the implementation of the Productivity Agenda forAfrica.ThenextstepofthePAPA/KPCpartnershipwillbeto cascade the collaboration bilaterally with individual PAPA member countries, who will define in detail the areas ofinterest for their respective countries.

MAY 2011 productivity leader MAY 2011 productivity leader

18 OPINION

When you are not walking the talkBy FrANCES WrIGhT

Every company that embarks on a marketing campaign is doing so to make more money. there are many clichés about enhancing the brand and market presence, but at the end of the day stakeholders want return on investment in hard cash and on the balance sheet.

There are only two ways to affect the bottom line: increasing turnover and decreasing costs. Everybody knows that to increase turnover you sell more and to sell more you spend more on marketing. It is also common knowledge that to decrease costs you operationally re-engineer thecompany. For centuries professionals have been debatingthe concept of return on investment on marketing spend andtheincreasedoperationalcostduetoinflatedmarketingbudgets, but few companies have implemented stepstowards a solution.

The solution is simple and lies within the integration of marketing and operations. Three out of the four aspects in the marketing mix – product, price and place – arecontrolled by operations, while marketing only handlespromotions. During a recent study it was found that76.2%ofrespondentshaveanawarenessoftheneedforintegration between marketing and operations, but only40.5% of companies have formal touch points in place.Thosethatdohaveformaltouchpointsaremoreprofitable,witha.44positivecorrelation.Althoughonlyonesignificant

correlationcouldbefound,respondentshave listedmanyproblems due to a lack of integration.

Whenamisalignmentexistsbetweenmarketingandop-erations,marketingwilleitherover-orunder-sellorthecom-panywillnotwalkthetalk.Deliveringtheproductorservicethat marketing is selling is the responsibility of production and is achieved through standardisation, sound processesand systems. Production is responsible for ensuring that there is enough capacity. A lack of capacity will affect quality or result in late deliveries and customer complaints. As has beenprovenbyGoldratt,whencapacityistrimmedexactlytomarketing demands (nomore and no less), throughputgoesdown,whileinventorygoesthroughtheroof.

Mobley, Wang and Fang researched a company inChinain2005whichrealisedtheimportanceofintegrationin achieving business success. Their primary objectives were focused on seeking closer integration of marketing and operations, sourcing strategic alliances, and buildinga cohesive leadership team with a high-performanceorganisational culture. They found that marketers need to have a broad view of the product or any strategy is likely to bedisjointed,poorlytargetedandunsuccessful.

When embarking on marketing and production, themarketing manager should determine the company’s overall marketing objectives while operations decide on the resources to be committed. Customer expectationsshould be managed by marketing, and production should

19


OPINION

Frances Wright is the MD of Trinitas Consulting, a supplier specialising in creating profitability through the integration of communications, marketing and operations. Wright is currently doing her PhD on the Effect of Processes on Business Success.

Visit www.trinitas.co.za for more information.

deliverexactlyonwhatwassold.Operationsshouldfocuson minimising operating costs and delivering according to customer requirements in order to achieve pricing in line with competitors.

Physical distribution management is also a critical part of marketing management. Marketing cannot sell the product if operations cannot deliver at the right place and time. The integration of processes ensures that operations will process the order and deliver the product that marketing sells. The operations department needs to be aware of inventory levels and inform marketing accordingly to avoid back orders and customer dissatisfaction.

Marketing and operations have to work together to accurately forecast inventory and capacity needs. Changes in methods of operation can have a considerable bearing on costs and output and therefore affect the forecast. New machine tools or a new material handling system can significantly affect both material requirements and future sales. A disconnect between marketing and operations could leadtomarketingbeingunawareofexpansionplansandunder-selling.

The entire business process by which the company delivers a product or service is a marketing process. It starts with attracting the customer, quoting, selling, delivery,invoicing and receipt of payment. It is the price to payment process and essential key process that runs through every business. The level of integration of that process will determine how successful the business will be.

Itisimportanttolookattheentirebusiness,incorporatingthe six areasof operations through the lensofmarketing.Marketing provides a distinctive and essential manner of looking at thewhole enterprise, enabling the company tobuildaneffective,high-performancemarketingorganisation.While it is up to operations to give the company a competitive edge,itisuptomarketingtocommunicatethecompetitiveedge to the target market. Operations determine the efficiency and effectiveness and produces what marketing should sell.

While there are challenges with regard to the integration ofmarketing and operations due to different orientations,personality types and cultural differences, the lack ofintegration will result in waste, misalignment of strategy,and misalignment with customer requirements. To cope with thesedifferences,anequitablesetofmeasurementsto evaluate performance in each area should be developed. Stronglinesofcommunicationshouldbeinplacetoensurethat everybody contributes to reaching the firm’s goals. Joint decisionsshouldbemadeonprice,capacity,schedulesandother sensitive matters.


20


CASESTUDIES

PG Shoes turnaround by Business Success Centre Pg Shoes CC was established in July 2007, in response to an opportunity to open an independent Cmt busi-ness. Pg Shoes is owned by Preven govender, a young Durban-based entrepreneur.

Due to a strategic decision by a leading footwearmanufacturer to outsource its production requirements to smaller, owner-managed footwear manufacturers, severalCMT operators have been established in the Estcourt and Durbanareas.Thesebusinessesarededicatedtomeetingthe production needs of the manufacturer and typically have the following characteristics:• Theyperformworksolelyforthemanufacturer• Allmaterialsandmostmachineryrequiredare provided by the manufacturer• Theyemployabout120people• Themarginsmadeonmanufactureareverysmallandmany of these business are operating very close to or below the breakeven position

Preven approached Productivity SA in 2008 to obtainassistance to improve his company’s profitability, therebyensuring the long-term viability of the business andpreservingapproximately60jobs.Giventhattheentityhadonlybeenoperatingforayearatthatstage,itwasidealtoimplement management systems and internal controls so that the growth of the entity occurred in a controlled and coordinated manner.

The challengeAn assessment of the business operations was conducted to obtain a better understanding of the important aspects ofthebusinesscycle.Inaddition,meetingswereconvenedwith management, the Future Forum and other workers.Duringtheassessmentphase,awalkthroughtheproductionprocess was performed to determine aspects of the business that could be improved.

The major problem areas that were identified were:

StrategicThe entity did not have a strategic plan that served as a roadmap for the business. Although the opening of a CMT operation may have seemed to be a prosperous opportunity for Preven, evidence from other CMT operators indicatesthat there is always the danger that the entity will incur significantlosses,therebythreateningthelong-termviabilityof the entity.

Discussions with Preven indicated that the business appeared to have been established without much consider-ation of the following strategic issues:• Analysisofmarketconditions• Impactofrelyingonamajorcustomer• Managementstructure• Breakevenanalysis• Operationalbudgets• Infrastructuralrequirements

It was imperative that the owner develop a strategic plan that took into account operational risks and the long-termobjectivesof thebusiness.Suchaplanwouldprovide thenecessary framework and guidance in the medium term.

OperationalSomeofthemajoroperationalproblemsthatwereidentifiedduring the assessment phase were:• Lack of internal controls: management had not imple- mentedasystemof internalcontrols.Suchasystemis necessary to ensure that the assets of the business are safeguarded and that growth of the business occurs in a controlled manner. The system should provide a frame work for working capital management.• Businessacumen:itisimportantthatmanagementview the business as an opportunity to earn profits and that


21CASESTUDIES

they understand the importance of profitability as a key factor in running the business. • Costing:mostofthepricespaidbythemanufacturerare negotiatedbymanufacturer’smanagementona‘take it or leave it’ basis and often these prices result in a significantloss.Unfortunately,themanagementdoesnot have the skill and technical knowledge to properly cost the work that will be performed for the manufacturer.• Worker training: in order to reduce the gap between managementandtheworkforce,itisnecessarytoensure thatbothmanagementandstaffshareacommonknow- ledge relating to the objectives of the business. Work shops will therefore be arranged to educate the staff on key aspectsofthebusiness.Factorystaffneedtorealisethe important contribution that they can make towards the long-term viability of the business. It is also important that management create a culture whereby they are perceived as being fair and equitable to the workforce.

The solutionThe turnaround strategy focused on the following:

A comprehensive business plan was developed for the en-tity,togetherwithbudgetsandcash-flowforecastsforthenextthree years. This provided management with some insight into the potential problems and the areas that had to be improved. ASWOTanalysiswasalsoperformedformanagement.• The shareholder, management, supervisors and Future Forumweretrainedinthebasicbusinessfundamentals required to grow the business.• A staffing structure was implemented to support the strategy identified in the business plan.• Several workshops were conducted between management,staffandtheFutureForumtointroduceaproactive business culture. Issues such as communication, open- ness and improved employee relationships were addressed.• Aformaldisciplinarysystemwasimplementedandstaff were trained to use the system.• Asystemoffinancialcontrolswasdevelopedandimple- mented to protect the assets of the company; this included procurement controls.• The manufacturing capacity of the business was en- hanced by undertaking an analysis of margins on all work undertaken by the business and eliminating unprofitable work, the identification and removal of manufacturing constraints and the division of the factory into separate manufacturing cells. A team leader was appointed for each cell and a system to monitor the activity of each cell was implemented.• An assessment of other business opportunities was undertaken with the owner.

results to dateAs a result of the development and implementation of a carefully devised work plan that addressed the above

concerns,thefollowingprogresshasbeenmade:• Theentityisnowconsistentlyprofitableandhas employedabout40morestaffmembers.• Theshoemanufactureralmostdoubledtheworkloadof PGShoes,toabout700pairsaday.• Thecompanyisnowproducingabout700pairsaday, whichisapproximately200pairsaboveitsbreakevenpoint.• Duetothetrainingprovidedtotheowner,supervisors andtheFutureForum,theworkforcehaveabetteridea of the variables affecting profitability.

ConclusionAlthough the entity continues to face business challenges andproblems, theturnaroundstrategyhascontributedtodeveloping a sustainable business. The strategy has had a major effect on contributing to sustainable economic development. In addition, the owner enjoys a moretransparent relationship with the workforce due to their better understanding of the manufacturing process and its constraints.


22


CASESTUDIES

Global Bag Manufacturers

BackgroundGlobalBagManufacturers,aspecialistinthemanufactureofbagsandplasticproducts,ispartoftheGlobalVisionTradinggroupthatwasestablishedin1989. Itcaterstotheneedsofahighlyspecialisednichemarket,makingitmoreservicedriven. Its products cover a wide range of bags as well as PVC heat-welded products. The group’s manufacturingcapabilities cover a vast range of different applications of PVCwhich can be welded, stitched or laminated. ThecompanyisheadedbyKarunMoodleyandissituatedat54Melbourne Road, Durban. It startedmanufacturing in theyear2000.At that time, themarketwasverybig and thecompanyachievedagrowthof50%forthefirstthreeyears.

ChallengesThegrowthcouldnotbesustainedfor thenexttwoyearsdue to imports from China and India. These imports were flooding the market and were able to compete in termsof better quality, prices and delivery schedules. This wasthe biggest threat for the company. The company applied to Productivity SA in October 2006 for assistance, whenmanagementsawadeclineinnetprofitbymorethan50%in2006,comparedto2005.

A high-level review of the businesswas conducted byProductivity SA service providers, together with a staffsatisfaction survey. There was a risk that the company wastakingordersthatwerenotprofitable,aswellasbeing


23CASESTUDIES

marginal (variable costing basis). A review of the current costing revealed that the company was using an inadequate costing system that did not include its overhead costs,and was thus selling its products at prices far lower than it should have.

Keyareasofconcernwere identifiedduringthereview,including:• LackofaformalisedQualityManagementSystem• Limitedsalesoriginationandtheneedfornew product development• Theneedforanefficientanduser-friendlyproduction monitoring system• Stafftrainingandcapacitydevelopment

Productivity SA approachThe following interventions were implemented by the TurnaroundSolutionsprogramme:• DevelopmentoftheFutureForum• DevelopmentofanISO-orientatedQualityManagement Systemthatwouldalsopreparethecompanytobecome exportready• Developmentandimplementationofamarketingstrategy for all stakeholders; this detailed plan identified niche target markets • Productionmonitoringanalysis• Trainingandcapacity-buildingofstaff

results and impactThestaffcomplementatthestartofthereviewwas44.Attheendoftheproject,thestaffcomplementincreasedto56.

FutureForummeetingshaveproventobehighlyeffective.Thesemeetings occur on an as-and-when-required basis.Members are vocal in terms of operational issues at the company and present these at the meetings so as to come upwithsolutions inacollectivemanner.Staffnowhaveaplatform to raise important matters.

WiththedevelopmentofaQualityManagementSystemforGlobalBagManufacturers,stafftrainingisongoingwithgreater emphasis placed on quality (quality checks are implemented at each stage of production). The company intendsproceedingtobeISO9000certifiedwiththisbeingthe first stage.

The factory manager is presently using the suggested cost-ing model which takes into consideration all cost variables.

Global Bag Manufacturers has started to use theideas from the marketing strategy which is proving to be of tremendous value. It is now charging a design and development cost that would be closer to the value of the order it is likely to get and samples are now charged out to clients. The company has also diversified its product range withaspecificfocusonniche,customisedproducts,aswellasexports.Furthertothis,thecompanyismakingplanstoventure into the retail market.

Thecompany,owingtoadetailedskillsauditconducted,

now operates in a much more structured, streamlinedand efficient manner. Furthermore, management haveundertakentoconductmoretrainingandup-skillingofstaff,inparticulartakingonlearnerfactorystaffandprovidingon-the-jobtraining.

Additional informationThere has been an improvement in overall production efficiencies and a reduction in production bottlenecks as a result of structured production planning meetings and the implementation of production scheduling. Owing to declining profits as a result of increased overtime, ananalysis of overtime was conducted. Management now intends using this business information tool every quarter to review production bottlenecks and to take the necessary corrective action.


24


CASESTUDIES

During August 2010, the Japan Productivity Center (JPC) gathered a Kaizen team consisting of six people guided by a Productivity SA consultant, to conduct a Kaizen Project at Adcock Ingram Critical Care (Pty) Ltd. (this was step 1 of the Kaizen Project.) In this article, we present an interesting case study of the execution of the Kaizen Project.

Company backgroundAdcockIngramwasestablishedin1948andislocatedona10-hectaresiteinAerotoninthesouthofJohannesburg.

The25286m2 factory consists of:• Warehouse:7144m2

• Plant:12609m2

• Amenities:1473m2 • QCBlock:783m2

• Admin:3277m2

The company is an integrated facility for manufacturing healthcare products and manufactures various Medical SolutionsBagsandFinalFinishedProducts.

ItsMedicalGradePlasticsOperationconsistsof:• Blending• Extrusion(sheetingandtubing)• Heatsealing(Viaflex®Bagfabricationusing RadioFrequencySealing)

Manufacturing requires compounding, fill, sterilise,pack,testandrelease:• Vacoliter®:200ml,500mland1000ml(glass)• Viaflex®(IV/PeritonealDialysisSolutions):in50ml, 100ml,200ml,500ml,1000ml,2000ml,2500ml, 3000mland5000mlcontainers• Diasol®Solutions(5l)

Thecompany’sVisionis:‘Toberecognisedasaleading,world-class branded healthcare company.’ ItsMission is:‘Addingvaluetolife.’

Knowledge exchange yields results

Above: 1 000ml bag

Above: Bag inside pouch

Kaizen ProjectTheViaflexMainLinewasidentifiedastheareawheretheKaizenTeamwoulddotheKaizenProject,withthefocusonTopSealdefectsofthe1000mlpouches.Duringextrusion,apouch issealedatthebottom.AtViaflex,after thebaghas been filled with the right solution and inserted into the pouch,thepouchissealedatthetop.

TheTeamreworkedthemonthlyViaflexdefectstatisticsforAugust2010intoaParetodiagramandcouldseeclearlythat Top Seal Defects and Cuts & Holes accounted foralmost80%ofallofthedefectsontheViaflexline.

They decided to address Top Seal Defects and Cuts& Holes first. The group decided to leave the problemof SkewSeals until later. BottomSealDefectswould behandedovertotheextrusionteam

The Kaizen Team formulated two Kaizen Objectives: one regardingTopSealDefects(toreducetherateofTopSealDefectson1000mlpouches)andanotherregardingCuts&Holes (to reduce the rateofCuts&Holeson1000mlpouches).(Step2oftheKaizenProject.)

The Team started populating the various sections of the twoKPSheets(oneforTopSealDefectsandanotherfor


25CASESTUDIES

Cuts&Holes)onPowerPointslides,andastheypickedupmomentum the KP Sheetswere used to summarise theactions taken during the different phases of the project. Each action was summarised on another PowerPoint slide usinggraphs,tables,photosorvideoclipsasappropriate.

Eventually, the two summarised KP Sheets capturedon PowerPoint were used to share the project with other teamswithinAdcockIngram,andwithotherstakeholdersoutside the organisation.

OnPowerPoint,eachsmallimagenexttoasteponthecompleted KP Sheet for Top Seal Defects was used tohyperlink through to show details of the steps:

TheViaflexKaizenTeamthenconductedabrieftourofthewhole pouch production facility (step 3) and realisedthat Top Seal Defects were produced during the sealingphase,whileCuts&Holesoccurredduringtruckloading.

TheTeamdidnotfollowthestepsexactlyassuggestedbytheJPC.Afterthefactorytour,togetanideaofpossiblecauses of each type of defect (step 4), the Team cametogether in a brainstorming session to construct fishbone diagrams about the causes of Top Seal Defects andCuts&Holes.

Next,usingadigitalcamerawithHDvideocapabilities,the Team took video snippets of the sealing operation and ofthetruckloadingoperation,andinterviewedoperators,tounderstand the manufacturing environment.

They also collected samples of good and defect pouches.


26


CASESTUDIES

Then (step 5), having grasped the big picture of all thefactorsinfluencingTopSealDefectsandCuts&Holes,theKaizen Team summarised the situation. They realised that therootcausesofTopSealDefectswerethefollowing:• ThejointoftheTeflonbands(seethetwotan-coloured bandsrotatingaroundthetwo‘wheels’inthephotograph) beingtoothickwascausingoneofthetypesofTopSeal DefectscalledPinHoles.TheydecidedtoasktheTeflon bandsuppliertojointheTeflonbandinanewway.

• The Team also realised that various factors caused undue pressure on the sealing operators, for example alackofbalancebetweenthetwofillinglines;alackof balancebetweenthetwopouchinglines;andpile-upsof defects after truck loading, causing pile-ups before rework of Top Seals, all causing seal operators to seal poucheswithoutfirstsmoothingwrinklesintheTopSeal area,whichresultedinwrinkledTopSeals.

The Kaizen Team realised that the root causes of Cuts & Holeswerethefollowing:• The Team saw with their own eyes and realised that many of the aluminium trays used to load the pouches into the trucks used for transporting and sterilising the pouchesweredamaged.Whennew,atrayhasabrace welded into a fold on the front and back edges. After long use,theweldspotmaybreakloose,leavingasharpedge which may cut a pouch. The same brace area may also sagandevencrackopen,alsocausingdamagetoapouch.

• Another problemwas that in the rush tomove trucks (actually just large trollies) from the pouching section to thesterilisingsection,trucksgetdamagedbybumping into each other. When one truck’s corner crashes into the side of another, the stainless-steel mesh gets damaged, leavingsharpwiresexposed, justwaitingto punchaholeintothenextpouchbeingloadedcloseto the sharp wire!

Step 6: The Kaizen Team formulated two action plans(Kaizen Plans) listing clear and concrete improvement actions. Over the course of four months, the team implementedmost of these actions.

Afewkeyactions(step7),including:• ImplementinganewdesignofTeflonsealingbands eliminatedPinHoles.• AchangeinworkproceduresintheformoftheQA person moving defects more frequently from truck loading pointbacktothepouchinglineforre-pouchinggenerally servedtopreventpile-upsatthesealingworkstation.• Truckloaderspickingupdefecttrendsagreedtogive feedback to the sealers which also served to reduce TopSealDefects.• Replacingmorethan2500damagedtrays.• Repairing 12 badly damaged trucks and introducing 25newtrucksdeliveredgoodresults(step8),intheformofdramaticallyreducingthenumberofTopSealDefectsandCuts&Holes:

The Team also wanted to highlight certain other effects (step9).Thegraphsbelowshowaspectaculardecline inthecostofTopSealDefectsaswellasCuts&Holes:

Further effects included the team leader being ableto improve line balancing. This, together with ‘Return to


27CASESTUDIES

WorkInterviews’and‘TeamworkMeetings’,gotthefillers,pouchers,sealersandtruckloaderstoworktogetherasonebig team and seemed to relieve the pressure on the sealers.

Step10:TheAdcock IngramKaizenTeam realise theyhavenotyet reached ‘ZeroDefects’onTopSealDefectsandCuts&Holes,andthereforetheycontinuetomonitorthe situation. They are also working to implement a few additionalactions,whichtheybelievewillmakeasignificantcontribution to actually reducing defects to zero.

To make sure the Viaflex team eradicates Top SealDefects,theywanttoimplementafewfurthersolutions:• Because Top Seal Defects and Cuts & Holes do not consistofjusttwocategories,theTeamwantstoadjust the format of defect statistics to reflect all types of defects. Then every type can be monitored and causes addressed easily.• Tomake it easier to balance all of the teams involved inViaflex,theKaizenTeamwantstoimplement‘Multi- skilling’, whereby every member’s aptitude at various skills applied in the team’s environment will be assessed. Every member can then be developed gradually until all members can perform all functions required in the team’s environment.• AlthoughSkewSealsareactuallyalsoatypeofTopSeal Defect,butwereomitted fromtheKaizenProject, the Teamwantstoaddressthatproblemnext.

•Regarding Cuts & Holes, the Team has redesigned the trucks with a ‘bull bar’ for betterprotection,likethoseon SouthAfrican4x4bakkies.•Theywillcreateaschedulefor regular inspection and repair of trucks.• In future, when trucks have togoinforrepairs,theywillbe

fitted with the bull bars. (Then maybe they will start to calltheViaflextrucks‘Bakkies’!)• TheTeamwillalsostandardisethesequenceofloading and unloading of pouches to prevent cuts and holes during loading and unloading.

Defects Statistics: Expanding Statistics Categories


28 OPINION

Improve performance with effective performance management one of the fundamental truths of total quality manage-ment is this: what cannot be measured cannot be im-proved. the same is true for performance management.

All companies measure the performance of their employeesinsomefashion,mostlybyabestguessonthepart of managers at specific points in the business year. Theseeffortsatperformancemanagementaresubjective,and usually not conducive to improved productivity.

An interesting study would be to measure the percentage of employees in the market with a comprehensive job description,aswellasthenumberofcompaniesthatmakeuse of balanced scorecards to measure and manage their performance. The reality is,without these twomeasures,the performance of neither company nor employee can be accurately measured.

The ideal performance management system is not one where the line manager quickly scores an employee once a year when it is time for bonuses or increases. Suchperformance measurement is often based on perception or personal compatibility and does not accurately reflect thereal situation within the business.

A full performance management system must consist ofvariouscomponents:acompanybalancedscorecard,jobdescriptions,biannualself-appraisalsand,mostimportantofall,ameasurementmatrix.

The measurement matrix measures two differentcomponents of performance. Firstly, the employee’scontribution towards the achievement of the company’s balanced scorecard requirements and secondly, theperformance according to key performance indicators in each individual’s job description. The matrix should beupdated on an ongoing basis.

Themeasurementsonthematrixshouldbenumerical,inotherwords, itshouldbescoredoutofamaximumoffive or seven. The current trend is to score out of seven

to avoid the typical scorer’s error, such as staying in themiddle to be safe.

Each score on themeasurementmatrix under four outof seven should be discussed with the employee. These areas indicate a need for further training and development. Inthisway,themeasurementmatrixalsobecomesatrainingneeds analysis tool.

It is only once each employee is measured in such an unbiased and scientific manner that standardisation of service can be achieved.

Other issues which should be brought into the measure-mentmatrixarewhether theemployeehashadanydisci-plinaryissues,aswellascomplaintsorcompliments.Inthismanner, the linemanager and directorswill have a bird’seyeviewoftheperformance,trainingneedsandstandingofeach employee in the organisation.

Onceafullperformancemanagementsystemisinplace,it will also be a useful tool in the avoidance or quick resolution ofanyLRAdisputes.Withongoingmeasurement,apapertrail is automatically generated showing areas of concern regarding each employee.

A performance management system will provide a numericalscoreforeachemployee,whichwillbeconvertedto a percentage. An increase in percentage can be used as a target for performance improvement in individuals or teams. Together,theentireteamcanworktowardstheachievementof the key indicators on the company’s balanced scorecard.

Whentakenseriouslyandappliedeffectively, theperfor-mance measurement system will be the corporation’s big-gestassetinitsdrivetowardscontinuousimprovement,fairincreasesandbonuses,andemployeesatisfaction.Itwilltakesubjective emotion out of appraisals as well the opportunity to conductwitch-huntsandbuildpersonalempires.

articles used courtesy of trinitas consulting

productivity leader - may 2011

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