“Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.” Paul J. Meyer
Productivity is an essential component in organizations nowadays. It allows us to measure the efficiency of our business in converting inputs into useful outputs. Also, it is a high level view of how well the resources are managed within the system.
Productivity measurements can help you to answer several questions such as:
- How effectively are you managing your assets?
- Are you improving in key areas?
- How are you doing compared to your peers?
By answering these questions, your company can: Assess its performance and eventually boost its position in a more and more competitive market.
The importance of Productivity in business
We can summarize the importance of business productivity for every organization as follows:
Efficient utilization of resources
Productivity in the workplace increases the overall efficiency of a business. Indeed, it maintains efficient utilization of the available resources. In other words, the production capacity of the company is utilized to the optimum level. Thus leading to higher profit due to larger production scale.
More competitive price
Efficient utilization of resources lowers the cost per unit of a product resulting in lower selling prices while maintaining the same quality. In this aggressively competitive market, selling products at more competitive prices give a more profitable edge to businesses to attract more customers and make greater sales.
Empowerment of team members
Making higher profit as a result of enhanced production allows the business to share the gain earned with its employees. This boosts the spirit and attitude of the employees towards the job. As a result, their working efficiency tends to increase which in return can be reflected on the company’s revenue and profit afterwards.
A success case: ArcelorMittal current and future practice
Companies nowadays not only target to meet demands, but also to satisfy customers’ requirements in the most cost-efficient and energy-efficient way.
As a matter of fact, in February 2016,  ArcelorMittal, which is one of the leading steel producing companies worldwide, with annual achievable production capacity of approximately 114 million tonnes of crude steel, announced a 5 year business strategy in order to boost productivity and profitability called Action 2020.
The scheme included efficient utilization of financial resources by focusing on investing in high productivity assets and using fewer assets in the United States which will lead to higher profit and increased financial and economic viability.
An ArcelorMittal factory in France where steel coils are stored
Source: The New York Times – Steel maker ArcelorMittal narrows its net loss. Published: February 7, 2014
Action 2020 plan also takes into consideration ensuring higher utilization of resources and efficiency rates. In fact, the hot strip mills (HSMs) in the U.S. average only 70% utilization. This means that the HSMs aren’t functioning roughly 30% of the time which is a large financial loss because the company is still paying for the electrical cost during this period.
Larry Fabina, manager of continuous improvement of ArcelorMittal, acknowledges  the importance of operational efficiency within a company stating that efficient allocation of financial resources helped them save up to $ 19.8 million dollars in electrical energy cost per year.
How to improve Productivity within your company?
The methods used to improve productivity have existed for years and they widely differ from one firm to another depending on the business structure. However they all use the same systematic approach called  Operation Research which is consists of 4 steps. Every step is crucial and requires a minimum amount of consideration and attention while performing it.
1. Identifying the problem
Identifying the problem includes determining the target goal or objective, which can be minimizing total cost or maximizing the total profit. This step also includes knowing the specific factors that are influencing this objective. As well as knowing the constraints that limits the capacity of each resources within the firm.
2. Mathematical model formulation
This step requires a lot of mathematical development. It is characterized by three main elements: decision variables, constraints and objective function.
3. Solving the problem
Various researches have been conducted in order to solve these mathematical models. Indeed, there are plenty of methods and techniques developed. For instance Integer programming is a modeling optimization technique dealing with integer restricted variables. Whereas Stochastic programming is an optimization approach that deals with variables under uncertainty conditions.
4. Implementing the results
This is the last step of O.R. which consists in implementing the final recommendations and establishing control over the process.
As a conclusion, in this competitive market productivity improvement plays a crucial role in the success of our organizations and businesses. As we are busy working on a daily basis and struggling to meet our clients’ demands, it is essential to recognize and implement the right tools in order to increase the efficiency of our operations.
Please notice that you might be interested in the productivity-related articles we have published:
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