Engineers' Angle | Increasing GDP by lifting productivity
The Government is celebrating a two per cent increase in gross domestic product (GDP) for the fourth quarter of 2018 as published in The Gleaner on April 15, 2019 (‘Growth of 2% in last quarter of 2018’). While the growth reported is commendable and good for the country, the question can be asked, ‘Is this growth sustainable?’
With our national debt, does the economy need to grow faster? A resounding ‘yes’, I think; but how?
The economy could have grown further if the goods-producing and service sectors made productivity improvement a higher priority.
The importance of improving productivity at the individual, company and national levels cannot be overemphasised. Many managers will speak about the importance of productivity, but lack the know-how to effect increase. Some even attend workshops on productivity improvement strategies but return to do things the same old way. Others increase production while productivity is placed on the back burner.
Productivity vs production
Is there a difference between productivity and production? Are these concepts interchangeable?
Productivity is a measure of how efficiently a process runs and how effectively resources are being used. Productivity is output divided by input, while production is the amount of goods manufactured or grown. Production deals with the quantity of goods while productivity assesses the efficiency and effectiveness of the means of achieving the output. Therefore, production is a requirement in the process of measuring productivity and it should not be substituted.
Does an increase in production guarantee an increase in productivity? No, but an increase in productivity guarantees either an increase in production with the same levels of input or a reduction of inputs with the same levels of output.
Consequences of neglecting productivity improvement
Do businesses really ‘count the cost’ of neglecting to fix productivity issues? It is unwise to randomly adjust system parameters to supply higher demands for products or service in the short term. Some companies temporarily speed up processes, skip scheduled downtimes for maintenance activities, require staff members to work extended hours instead of hiring new ones, ignore vacation leave policies, and ignore standard operating procedures and safety guidelines.
When companies neglect to fix productivity issues, starting with management and filtering down, the consequences are felt at all levels in the organisation. These may include high costs for downtime, loss of production time, high staff turnover rate because of illness, low staff morale, and greater frequency in absenteeism. Eventually there will be an inability to meet customer demands and a loss of competitiveness in the market.
Low productivity in business over time will lead to bankruptcy, inability to pay workers, suppliers, shareholders and service loans.
Improving productivity steps
1. Develop or adopt a productivity metric relevant to your business. Productivity metrics are ways to measure how much is inputted to a system, how much is processed, produced or used for a given input of resource.
2. Perform measurement periodically. If you cannot measure it, you cannot improve it. Measurement is fundamental to productivity improvement. Measuring the parameters for inputs, process and output is fundamental to fix productivity issues. Measurement must be done accurately.
3. Record, maintain and protect your data. The data should be protected from the risk of loss, change, stolen and unauthorised personnel.
4. Analyse your data using the right statistical tools. Perform calculations and graphical analysis with spreadsheet applications.
5. Interpret your data analysis and examining the trends and patterns. Compare your results against local or international standards if you are producing a standard product. If it is a new product, compare to the customer specifications.
6. Decide on a course of action based on the results. Identify and removing non-value-added activities or waste in the system. Is the system capable of producing product to quality standards? No. Then overhaul or improve the system, invest in new technologies or machinery, change raw materials and train workers.
7. Continuously improve the production process or service system by repeating the previous steps. Examine and implement new strategies for improvements using with creativity and innovations.
To sustain growth in GDP to meet our 2030 vision, fixing the productivity issues at all levels must be a priority for both public and private sectors. Otherwise, we will continue to face the consequences of our negligence.
- Junior A. Bennett, PE, is a lecturer in industrial engineering at the University of Technology, Jamaica. Email feedback to email@example.com.