Productivity in the fourth industrial era. What changes for the blue collars?

In my long and passionate professional career as a manufacturing factory expert, I have seen all sorts of things: I have experienced the spread of many concepts, methodologies, technological solutions, operating models and, now, the overwhelming advent of digitalization in the factory. However, living the production departments closely, the question that continues to haunt me is: "but what has changed in the last 30 years for the workers in the assembly line?" In this short article, I will try to provide some answers, at least the fundamental ones, and to propose my vision of an active productivity management platform (PMP) that can close the organizational gaps limiting the development of the manufacturing industry's competitiveness.

So let's begin to tell what has changed in the factory for the workers. As the first element, I would mention the increase in the average age, a factor that has greatly pushed the need to improve the ergonomic conditions of workstations and the simplification of product assembly processes. Besides the aging phenomenon, the curriculum of the worker has also changed radically: young people who enter the factory today have at least a technical diploma and, not infrequently, a university degree. The opportunities for professional development and career have improved as a result: young people who start from the production departments and who grow in the organization to cover managerial roles are no longer an exception. The use of digital technologies in the factory, increasingly essential with the level of management complexity in exponential growth, is certainly an important element of change: workers operating complex machinery terminals are now the norm; supervisors who analyze Pareto charts of losses and take resolution initiatives are not a rarity. These are just some of the most important phenomena of change that have contributed enormously to the productivity increase. So, what is missing to achieve world-class levels of excellence? What still needs to change in the work organization to activate that enormous resource potential represented by the set of skills of blue-collar workers?

To answer this question, it is necessary to distinguish two different types of production systems:

1.       Labor-intensive production systems (manual assembly), in which work efficiency (OLE - Overall Labor Efficiency) is a critical success factor

2.      Capital-intensive production systems (process industry), in which equipment efficiency (OEE - Overall Equipment Efficiency) is a critical success factor

In this article I want to focus on labor productivity and therefore I examine type 1 production systems, in which work efficiency is a critical success factor and is a fundamental driver of productivity, together with the good Method design of work. In summary, there are two drivers to improve labor productivity: Method and Efficiency, the latter in turn is broken down into two sub-factors: Work Performance (speed, precision and effort of the worker) and Utilization of time (attendance time paid net of time not used to produce good pieces).

Figure 1 - Productivity deployment

To reach world-class levels of excellence, it is necessary to work simultaneously on the improvement of all influencing factors. If I went down a further level of detail in my analysis, the article would explode in size and complexity. Therefore, here I focus on the elements that most impact the quality of work and which today represent the main limit to productivity growth.

While the good design of the working method is mainly an engineering activity (Industrial Engineering and Technology), Efficiency is the result of a game that is played daily in the production departments, shift after shift. At the beginning of the day, the work efficiency is zero; in the end it must be as close to 100% as possible. Each percentage point below 100 means a loss caused by technical (plant stops, micro-stops, slowdowns) and organizational factors (set-up, line balancing losses, lack of materials), or a level of work performance lower than that required by the standard times (insufficient training, poor motivation, ramp up phase of a new product). The poet writes the play (Method) and the actor plays it on the stage (Efficiency). Obviously, both ingredients are needed to obtain a successful production.

Figure 2 - Planning vs Execution of Productivity

The first sign that something is not right is an efficiency value that is too low (90% is a typical lower threshold value) or, conversely, efficiency values above 100%. In the first case it would mean that the efficiency tube has leaks from which energy comes out and is dissipated in entropy; in the second case it would mean that the work efficiency is measured with an excessively slack meter (standard times that are not accurate or obsolete).

Based on my long Manufacturing experience in transforming the work organization in complex environments, I identify the main weaknesses of the "labor intensive" factory operating models in the following three aspects:

1.       Disconnection of Product Development - Engineering - Production functions and systems

2.      Insufficient skills in work analysis and process ergonomics (I combine the two skills as I consider them two sides of the same coin)

3.      Organizational mechanisms for the structural involvement of direct workers in the process of continuous improvement of Efficiency

I will try to briefly develop these 3 points.

Disconnection of Product Development - Engineering - Production functions and systems

Disconnection is a lack of integration, which affects both organizational functions and information systems. There is no continuous workflow, which arises from the conception of a new product and ends with its phase-out. Each function operates with its own KPIs, which often conflict with those of the downstream function (customer). Information systems often represent an obstacle: there is no unique and shared information flow that crosses the design, process engineering, planning and execution systems. The consequences are huge waste, generated by incorrect managerial decisions, as they are based on incorrect data, even when the quality of management is good.

Figure 3 - Example of a Productivity Management Platform

Work analysis skills and process ergonomics

The much-maligned competence of Work Analysis, too often considered out of fashion and useless in a VUCA context (Volatile, Uncertain, Complex, Ambiguous), is a critical success factor. The standard cost of transformation is the most important integration element of the Product Development and Production macro-processes. Thanks to the use of predetermined time systems (e.g. Methods-Time Measurement) and the development of standard company data (data blocks like fastening elements, cleaning, measuring, etc.) the definition of the work cycle guides product development (to support digital simulation), the definition and sizing of the process (great impact on the level of investments and ergonomics) and the identification of efficiency losses in production.

Organizational mechanisms for the structural involvement of direct workers in the process of continuous improvement of Efficiency

I analyzed and got to know the most advanced production systems in the World, especially in the Industrial Manufacturing sectors (automotive, household appliances, railway and aerospace & defense), and I was able to ascertain that the involvement of assembly line workers is insufficient. For the full activation of that ocean of intellectual and experiential potential, hidden among blue-collar workers, more courageous organizational solutions are needed. To involve line workers in a systematic and structural process of continuous improvement of Efficiency, 3 fundamental things are needed: Time, Space and Data. Time means having intervals within the working hours to devote to the analysis of the root causes of losses ; Space means having areas on the shopfloor adequately equipped for management activities; Data means being connected with the technical-managerial data workflow to access interactive Standard Operating Procedures (SOPs) and to report anomalous events.

In conclusion

For the reasons set out above, the operational factory audits, with which PwC often begins the transformation process of an industrial group, provide potential for improvement in Labor Productivity in the order of 30-40%. This potential has indirect but immediate effects also on other cost categories, in addition to that of labor costs. Work organization and upskilling of human resources in the factory affect in average 85% of industrial costs according to a survey conducted by experts from the Japan Management Association. I find myself with these numbers and believe that leaving this potential unexplored is a source of misallocations of capital, which certainly has serious implications for the creation of shareholder value.