In most Chinese factories we visit, the labor productivity in the metal machining workshop is very low. As wages go up, manufacturing managers have to switch their mindset from ‘keep machines running’ to ‘get more pieces out by using fewer people’. But how to do that?

They need to learn how to increase labor productivity through training...

The Problem and its Causes - Overall Labor Efficiency (OLE)

A good measurement system is something that every manufacturer would like to have; however, most measuring systems only tend to focus on machinery effectiveness or product output. Manufacturers measure time and attendance carefully, but beyond that, few have other methods of understanding the effectiveness of their workforce.

If you are not measuring it, there is no way that you can improve it as you do not know what it is to start with.

Here is a typical example of labor inefficiencies.

The order books are full and projected turnover and profit is very healthy. However, at the end of that financial period, the profit falls short of the forecast and expected amount. Closer analysis shows that there were no major machine breakdowns, there were labor issues during that time, and no other obvious reason the profits did not match up to expectations.

The probable cause of this would very likely be a host of workforce-related issues that accumulate during that period where the plant ran at less than optimum capacity.

Lack of Planning and Training

If the plant’s resources are not scheduled to be where and when specific skill sets where needed, this will generate a delay. A plant is only making money when machines are producing parts!

If key members of staff are absent at critical times during production, this has a direct effect on output and efficiency of the individual machine as well as the overall plant itself.

If there are no other employees available to cover absent key workers, it shows that training is not sufficient to bring skill levels up in order for machines to keep running.

Poor Overall Labor Effectiveness

The Overall Labor Effectiveness (OLE) is a measure of three elements, utilization, performance, and quality of the workforce and the impact on productivity. Workforce productivity is the amount of goods or products that a worker produces in a given amount of time. Therefore, one of the OLE elements is not being fully understood or targets not being met, the overall productivity for the factory will be down. This is where profits can be ‘lost’ as in the example above.

So let’s look at the effects of the three OLE elements if they are poorly managed.

Utilization (Availability)

There are many factors that influence workforce availability and therefore the potential utilization of machines and their output. Staff not having the correct skills to carry out a function or operation, absenteeism from work, not having the skill cover when key staff are on holiday, as well as staff just being in the wrong area at the wrong time.

Not having the right mix of staff from a skill level will have a negative impact on the overall output from the factory.

Performance

When metal machining operators cannot perform their work within standard times, performance can suffer. If they have to carry out extended overtime hours to complete the job on a frequent basis they will get tired and performance will suffer.

Poor work performance in severe cases could lead to an increase of workplace accidents. In addition, failure to address poor performance could cause resentment and have a negative impact on those employees who are performing satisfactorily. It can also result in personal injury through poor management.

Quality

The effort to improve quality can result in a lowering of labor performance. When looking at comparing the workforce and quality it is important to consider factors such as the training and skills of employees, whether they have access to the right tools to follow procedures, and their understanding of how their roles drive and impact quality.

Lack of Organization (untidy work area)

Some people can work in an untidy and messy environment, it has even been said that “if it isn’t messy then it looks like we aren’t busy”. In reality, a messy and untidy workplace reduces efficiency simply because things can’t be found instantly when they are required. Another key aspect is Health & Safety; an untidy metal machining shop is a place waiting for an accident to happen.

Training

Before sending everyone off to complete a course and gain more skills, it is important to understand the areas of weakness and what members of staff that can be trained to improve each weakness identified.

Optimizing OLE

The ability of OLE to show the cause and effect of workforce factors in relation to profitability is the key result. OLE has the ability not only to determine workforce performance through availability, performance, and quality; but it also shows how changes made to improve one area could negatively impact another. An example could be a policy where one area of production receives incentive pay for creating more output. The result overloads the equipment, causing it to be replaced and stopping production altogether.

While all three categories are critical, availability is one area where manufacturers with in-place workforces can leverage to consistently provide and schedule the right mix of employees to enhance the number of productive workforce hours.

OLE shows how investments in training, root cause insights, and predictive measures with the workforce can increase profits.

Below is an example of what a single shift with two staff might look like after data collection and analysis (the yellow highlighted areas are variable input data fields.

In factories that our CMC teams have worked with, senior management have reported an increase in performance in excess of 10% after targeted training. With the right on-the-job coaching, the increase is even sharper.

What do you think? Have you tried to provide targeted training to your workforce? How did it work, and what were the obstacles?