- Strategic Outsourcing
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Tony Hague, managing director of PP Electrical Systems, unpicks the productivity puzzle and puts forward a blueprint for closing the gap.
Economists have been debating for many months the possible root causes behind the productivity puzzle and how UK manufacturers can begin to embrace the missing pieces of the jigsaw.
Many run off a long list of excuses and, to be fair, a few of them probably ring true with some companies.
In every firm, the attitude is the same when it comes to increasing productivity.
The good news is that every last management team will want to do things better and achieve more output from the input their workers are putting in.
There is also a growing consensus that the only way to eradicate the puzzle is for industry to take things into its own hands and control our own destiny.
A notion PP Electrical Systems’ Tony Hague subscribes to, “I think the general rule is that SMEs have always considered themselves as not being suitable for new technology and automation.
“‘It’s something the big boys do, why do we even need to think about it?’ This has been an easy excuse for a long-term lack of investment in new machinery and the workforce – one that is now coming back to bite and bite hard.
“Years of slow spending have seen a lot of international rivals over take us and only now are we beginning to fight back. Is it too late? Probably not, but we have some ground to make up.”
PP Electrical Systems, one of the world’s leading automation and control systems specialist, has been cited as a shining light in the UK’s productivity battle.
The company has invested heavily in the latest technology and processes at its 4,500 sqm facility in the West Midlands, with dedicated cells delivering solutions to customers in machine tool, food and drink, packaging, printing and scientific industry sectors.
More than £1m has been spent on automated cable preparation equipment, including crimp force monitoring technology that allows 100% in-line process quality checking of every cable termination.
This ensures Six Sigma levels of quality for the end customer.
However, the constant spend on continuous improvement isn’t purely reserved to capital and machinery, as Hague is keen to point out.
We have to invest more, but it’s not a case of investing in just one element of the business. You need a more integrated approach that also includes developing your people and at PP Electrical we commenced our in-house training school back in 2002.
“This involved developing a structured training roadmap that challenged our people and enabled them to grow in technical and process competence, as well as confidence.
“On average, each member of staff receives more than 200 hours of training each year – a massive investment, but one that provides a measurable return.”
Hague has also noticed a growing trend in manufacturers looking to replace 100% vertical integration of production by sub-contracting out non-core competencies, something his firm is taking advantage of.
In the past twelve months, PP Electrical has secured and delivered high profile outsourcing projects to a number of world leading machinery manufacturers, with others in the pipeline.
Such projects have delivered startling results for the customer, one of which has seen its machine build times reduce by nearly 50%.
Companies can have the ‘best of both worlds’ now,” continued Hague.
“Outsourcing – when the right partner is selected – offers many benefits. It can eliminate unnecessary stock and reduction in work in progress, improves cash flow and should improve production lead times that can then translate into securing new orders on shorter customer lead times.
“Our overriding aim is to help our customers build their machinery quicker, faster, better – reducing their overall manufacturing costs, improving standardisation, modularity and the ability for late customer configuration.
“Importantly, it can also give you flexibility in capacity and that works equally well when volumes are ‘up’ or ‘down’, reducing the need for costly sub-contract labour as a reaction to increased build requirements and, equally, the issue of releasing labour if orders slow up.”
He concluded, “It’s the one factor that hasn’t been mentioned in relation to productivity, but I’m sure it could help with efficiency gains. It certainly has for our clients to date.”
In an ever more challenging business world where ‘marginal cost down’ is the norm, it can seem counter-intuitive to increase brought in costs in order to increase throughput.
This can be one of the many advantages of strategic outsourcing, where a business accepts that such a benefit is more significant and meaningful than one of simple cost reduction.
One of PP Electrical’s clients, a world leader in the machine tool market, had a manufacturing constraint that only allowed them to build four machines of a certain model each week.
They were assembled over a number of shifts, which tied up labour and space for the duration of the build.
The market demand for this successful model was outstripping production capacity and delivery lead times were extending to an unacceptable level.
Our joint teams worked together to develop a complex sub-assembly, a system that included electrical controls, pneumatics, hydraulics and mechanical assemblies.
We produced prototype assemblies and worked with the customer’s production line to perfect the solution, catering for variations in each machine specification – simplifying the supply chain and maximising productivity in the process.
The solution even included the design and production of specific build and transportation rigs that allowed easy transport and machine integration.
The benefit to the customer was an increase of 60% in production capacity, with no additional direct labour costs or production space required.
Improved throughput times and dramatically reduced customer lead times have also been secured and resulted in significant additional orders worth millions of pounds a year.