Systematically managing productivity

Illustration | Bosch Rexroth AG
Marginal Column

Industrial Engineering: Productivity can be raised over the long term by conducting systematic efficiency analyses for people, machinery and organizations.


The crisis has acted like a magnifying glass, revealing both strengths and weaknesses in stark clarity. Corporate management identified savings potentials and slashed costs through short-term actions. But just like the weight often gained after a starvation diet, these quick effects are not necessarily going to endure. Production has barely come back up to full speed and we find not only that the cost savings are melting away. In some cases additional costs are being encountered. Economists and production specialists agree: The decisive cost reduction lever is a systematic increase in productivity. Only solid analysis, measurement and improvement of the efficiency achieved by people, machinery and organizations hold long-range promise for a strengthened position in global competition.

Productivity is the key

In the last three years events have followed in quick succession. Many companies have experienced an unprecedented roller coaster ride in terms of utilization levels for production capacities. Management had to react quickly and without any solid forecasts for the upcoming months. A return to “normal”, and quieter, times is improbable. Experts are assuming that business cycles will become shorter, the ups and downs more severe. Over and above that, the crisis has once again aggravated price pressures. Many industries are also having to turn out a significantly larger number of versions of any given product and, as a result, are manufacturing ever smaller batches. According to a poll conducted by the Roland Berger management consulting company, most firms have already realized that productivity is the critical key to mastering these challenges. This is confirmed in the responses by finance mangers in German companies. More than half of those queried are planning programs to boost efficiency in production operations.

Two areas for action have emerged for far-reaching productivity management: machinery and plant, and human labor. The indicators developed to assess these areas show advances and deficits all the way from the individual workplace up to the plant as a whole. One crucial distinction to pure cost-cutting programs: Productivity and quality are inseparable. A systematic approach has proven valuable to achieving this unity in practice. Here only the number of conforming parts is used as the basis for all the indicators.

The right machine for the right purpose

When considering the productivity of machinery, the cycle time is important but it is not the only aspect. Output per unit of time has to be seen together with quality data and actual machine availability in everyday production. “Overall equipment efficiency” (OEE) has gained acceptance as a key indicator. It calculates efficiency, individually for each machine, by analyzing availability, output and quality. Non-productive periods devoted to retrofitting, troubleshooting, repairs and maintenance reduce the “availability” value. A higher reject ratio depresses the OEE in the same way as low operating speed.

The OEE value will be highly dependent on the specific task within the manufacturing process. A machine might attain a very high OEE value in long production runs. But if setting it up for a new task is complex, then the OEE may fall when many variations are being produced. Conversely, machines that are highly flexible and can handle small batches suffer clear disadvantages when compared with highly specialized machines. But speaking in quite general terms, progress in automation technology brings about considerable potentials for improving OEE.

Efficiency can be boosted by up to thirty percent

Modern machinery concepts make it possible to raise the OEE by thirty percent and more. Innovative software features improve availability thanks to shorter set-up times. Intelligent safety concepts speed return to operation following manual interventions. Condition monitoring continuously measures wear at shafts and cylinders. The operator is alerted via the machine’s control interface. This reduces the likelihood of malfunctions and permits scheduled replacement of critical parts during nonproduction periods.

When looking at multi-stage manufacturing and assembly processes, we find that the interplay of the various machines and operating resources is decisive to the OEE for the entire line. A reduction in availability at any given workplace will have an immediate negative effect on overall output. Even if all the machines demonstrate superior values individually, the line as a whole will reach ideal efficiency only if all the workplaces operate synchronously, using highly transparent streams of data and materials. Here it has been found that open communications standards, supported by numerous manufacturers, offer the best protection against obsolescence. Such standards eliminate dependency on a single supplier and, over the long term, promote consistency within the system.

Reducing costs through labor efficiency

Illustration | Bosch Rexroth AG

Industrial Engineering joins people, machines and the organization to achieve greater productivity.


Optimizing machines and plants is important. But at least as important is boosting the efficiency of human labor. Systematic productivity management takes account of both activity areas. “More and more companies are setting up an industrial engineering department in order to boost productivity through solid planning for and implementation of rationalization processes,” is how Professor Sascha Stowasser, director of the Institute for Applied Labor Sciences in Düsseldorf, describes a current trend. The objective here is not purely to cut costs but rather, and quite expressly, to achieve greater labor efficiency. Rexroth, too, has since 2006 installed industrial engineering activities throughout the corporation.

Industrial engineering not only covers time management but also comprises instruments for process planning and productivity tracking. At the heart of things here is systematic implementation of carefully selected methods at all the machines and workplaces along the entire value addition chain.

Practical implementation begins with an analysis of the processes and activities at every workplace. In “Methods-Time Measurement” (MTM) a trained observer dissects all the required activities, breaking them down into defined basic motions, independent of the individual employee. This method, which can be scaled up or down as necessary, covers the entire spectrum from one-off fabrication and short lots to mass production. It uncovers activities that detract from value addition: Does the employee have to bend down to pick up parts? Do boxes or containers have to be moved? Ideally designed workplaces and procedures contribute to long-lasting efficiency increases. At the same time the analysis serves to improve each and every workplace in terms of ergonomics. Avoiding procedures and physical loads that are potentially detrimental to health is an essential entrepreneurial task, especially in view of the fact that the workforce as a whole is getting older.

Once the changes have been implemented, consistent follow-up on labor efficiency will reveal any aberrations. The number of good parts in relation to hours in attendance is used as the measure for labor efficiency. Downtimes that can occur in day-to-day work – due to retrofitting or machine breakdowns – reduce efficiency. Working with the employees on site, experts analyze the causes and devise solutions. Numerous projects have shown that reducing downtimes not only boost efficiency but also enhances employee satisfaction.

The methods and instruments used in industrial engineering mesh perfectly with production systems. In many companies they lay the foundation for process-oriented manufacturing and assembly. Industrial engineering translates the principles of the production systems into measurable and comparable guidelines and thus boosts the efficiency of human work. Industrial engineering is becoming a central interface for comprehensive productivity management in ever more companies. The methods and instruments are also being used more frequently in secondary sectors such as warehousing and shipping or product development.

Demographic change to be felt in just ten years

Systematic productivity management that lifts OEE values for machinery and plants and raises the efficiency of human work represents the decisive prerequisite for ongoing productivity increases. This management approach will also help to cope with one of the greatest challenges in coming decades: demographic change in virtually every industrialized country.

“The number of older staff members and their share in the workforce will rise markedly,” Professor Stowasser emphasizes (see interview on page 14). At the same time competition for the shrinking number of entry-level employees will increase. He has no doubt that the effects will be felt throughout the business world within the next ten years. He does, however, warn against aimless activism and recommends a deliberate strategic approach: “Even today medium sized enterprises in particular need to determine precisely which employees and skills they will need tomorrow to fulfill the corporate strategy over the long term.” At the same time, an analysis of the age structure identifies concrete needs for action to counter a retirementdriven loss of expertise in specific departments.

Standing still is falling behind

Long-lasting increases in production efficiency demand unwavering attention. Significant indicators like the OEE form the basis for methodic action and continuous improvement. New production technologies must be measured to determine to how they increase these values. Sustained productivity increases are a prerequisite for needed cost reductions since waste is identified and eliminated. One realization always stands out as a continuous admonition to management personnel: Boosting efficiency is a never-ending task. Anyone who stands still is actually falling behind.

Overall Equipment Efficiency

Illustration | Bosch Rexroth AG

The overall equipment efficiency (OEE) indicator expresses, as a percentage value, the total efficacy of machines and plants based on three factors: availability, output and quality. The data used here are values for the machine or the entire line, ascertained for current production operations. Particularly when producing a number of variations, retooling times will have to be considered.

Labor efficiency

Illustration | Bosch Rexroth AG

The indicator for labor efficiency in manual work is based on the ratio of good parts to the hours in attendance for the staff deployed directly to this production section. If numerous versions of an item are manufactured, then a weighting factor derived from the set-up time per product takes this product mix into account. Thus industrial engineering makes it possible to compare such operations with more homogenous production programs.