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For a manufacturing company, the strategy about the number of plants, their location and their efficiency is perhaps the most important aspect that decides its success

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Productivity Improvement Manufacturing essentials The way to enhanced plant performance

Sep 18, 2018

For a manufacturing company, the strategy about the number of plants, their location and their efficiency is perhaps the most important aspect that decides its success. Manufacturing business leaders need a few key elements to uphold solid steadiness as they increase more products in their offerings. Without this, productivity goes down, the management can be unsatisfied, and the company could be at risk. The cover story examines the case of companies that set up plants for ‘chasing efficiency,’ one of the many reasons that they set up plants and how various plants do not give in the same type of performance.

While there is bound to be a difference in performance across plants, there are cases where the company has a ‘problem’ with some of their plants. What is the difference between the plants – those that work well and those that do not? In my experience, there are five essentials for a plant to perform well.

Clarity in organisation structure

The organisation structure of the manufacturing plant should be very clear. There should be a clear leader and there should be one leader. Let’s take the following examples of plants:

• Mother plants

My observation is that more often than not, plants that are close to headquarters do not perform well. In some companies, there are mother plants that were set up when the company started off and in many cases, the company leadership sits there along with plant leadership. In these types of mother plants, there is always confusion in the organisation structure. The head of company usually becomes the de facto plant head, the HR head becomes the de facto plant HR head and so on. Resultantly, the plant is not allowed to function as a plant. The organisation structure becomes messed up with corporate structure and hierarchy is not respected. The plant performance becomes the casualty of the structure problem.

In such types of companies, most of the top layers do the work of at least 1 or 2 layers below. As a result, there is a good chance that the company itself loses its direction or does not take full advantage of the market opportunities. These internal issues are quite seductive and the top layer gets ‘high’ on these issues. There is no difference between mother plants where the owner of the company sits and mother plants where a professional head of the company sits. This is not a problem faced by owner-driven companies alone, but just a problem of hierarchies getting mixed up.

• Remote plants

Very often, a plant that is at a distance from the headquarters happens to perform very well. And as long as there is a good team and the plant is left alone to perform, it will give a good performance, day-in and day-out. The headquarters may impose their organisational agenda to the plant, which the plant will be able to absorb and do better than the mother plant. The plant head of these plants needs to be dynamic and diplomatic. Although, it is not easy to find such people, it is not impossible, as there are a number of competent executives available.

While there are advantages to a remote plant, many of them suffer from the same ‘remoteness’. It is not easy at all times to find competent people to go to this remote area, as in these days of rapid urbanisation, most youngsters choose to live happily in bigger cities. So, the company needs to spend some resources on making the team comfortable in the remote area and invest a good amount of time in building the team and preserving it. This effort is well-worth it as it pays back in terms of decent profits.

At the same time, all manufacturing plants also need stability, for which the plant has to focus on ‘what should not be done’ more than ‘what should be done’. It should not have confused hierarchy, not have inconsistent or delayed decision making, should not be near the headquarters, etc. Eventually, the default status of a manufacturing plant is stability; companies only mess them up with some mistakes and are sometimes unable to correct those mistakes.

Relationship with blue collar force

Sometimes plants that do not have a stable relationship with blue collar workforce or do not take advantage of human talent on the shop floor and are not able to turn in a good performance.
Once the trust element is broken with the blue collar workforce, the relationship seldom turns normal. While it is possible for a plant to turn the corner and better the relationship, it is rarely allowed to happen by all the parties involved.

Also, very often, the plants that have bad relationships with blue collar workforce and the plants that have more involvement from the top management are the same. This is because of the fact that an empowered plant head / plant team can deal with collective bargaining much better than the top management of a company, which is away from the action on the shop floor.

Plus, many plants happen to have temporary manpower in various forms. Most managements do not realise that whether the manpower is temporary or permanent is only a ‘method of employment’ based on their constraints. They ignore the fact that the shop floor workforce needs to be engaged fully and their expertise is absolutely essential to make the plant effective and consistent.

Many of these plants do not engage in the shop floor workforce and they treat them as ‘disposable’. The only relationship that they have with them is in terms of ‘daily output’. They do not realise that while they may be saving some amount of money in terms of paying a higher wage to a permanent workman or in terms of training this work force, they are losing much more in terms of higher quality costs, lost opportunities in terms of not being able to supply to customers, higher break downs and more.

Hence, it always helps for companies with a large temporary workforce to have a well-equipped modern training school. There are IT tools available today that help in teaching employees the process and maintain their skill levels. The workforce on the shop floor that touches/manufactures the product should have the necessary skills. Besides, it should also be engaged to tap in to their knowledge about the process. This is quite a foundation for a good manufacturing company.

Balanced product portfolio

Generally, the mother plants are loaded with the complete new product development for the company. The R&D is usually located at the mother plant due to historical reasons. This puts a lot of strain on the plant as it takes a lot to handle the new product development. Usually, this plant would have the responsibility of developing and transferring the new products to the other plants, which would require many more program managers to be located at this plant and hence, making the organisation structure more complex.

While closeness to the customer plays a big role in deciding what products will be manufactured at a plant, it is desirable that the plants are loaded with something from all product/market groups. Apart from being equipped with resources to manage this diversity, a plant also needs to be a ‘company within the company’.

It is very seductive to just put a simple agenda in terms of products in front of a plant. But then, we will be creating serious disparities among the plants of the companies. A plant can start with a simple agenda and it has to be developed to handle all types of products over a period of time.

New Product Development (NPD) has to spread to more plants. Again, this may have to be done in phases. A manufacturing plant should develop consistency in producing good quality before we can put the NPD agenda in front of it. There can be limitations to the extent to which we can achieve this objective in many companies. However, one should avoid the extreme where the plant manufactures only a few types of products.

Focus on people development

Those plants that are focused on people development tend to do well in manufacturing. This leads to the team becoming more stable and getting highly motivated. People love to know that they are being valued and trained to perform better. This brings out the positive energy from all team members. People development has to be focused upon by the company as a whole; by the plant management and by each of the HODs. The plant needs to focus on behavioral as well as functional/technical training.

When it comes to functional training, many a time, some remote plants are considered ‘weak’ in terms of functional skills / product knowledge / technology knowledge. It is quite possible for the plants to become weak in these areas unless they focus deliberately on the development of the team in these very areas. This training is very important in order to ensure that the plants are developed in a balanced manner, handling all types of products. If this is not done, quite often we would hear that as the plant is weak, it cannot be given ‘xyz’ products.

As for behavioral training, it proves to be necessary as well in order to keep up with the needs of a growing company. Many Indian companies grow at a brisk pace. This requires the leadership of a plant to continuously sharpen its saw. It needs to learn how to grow into the next level or role continuously.

Focus on process

Often times, the top management of a company or that of a plant does not focus on the process but only the results. A factory that does not develop a strong process towards results will not have a consistent performance. With the quarterly results culture and lack of focus on the medium term, companies tend to not worry about the process.

Every company needs to develop its own business system that will have a written down process for every area of business. There has to be a full-time business excellence team at the corporate level of a company, with suitable structure in each plant. This is very essential in the Indian context, where there is continuous growth in the company and most companies that do not yet have written down business systems.

The management of companies and plants should turn around the non-performing plants with a medium-term vision and conviction that plants need in order to be developed consciously over a period of time so as to be good parts of the whole.

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  • Sometimes plants that do not have a stable relationship with blue collar workforce or do not take advantage of human talent on the shop floor are not able to turn in a good performance

  • The shop floor workforce needs to be engaged fully and their expertise is absolutely essential to make the plant effective and consistent

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