What does continuous improvement mean to you?
How the pursuit of efficiency and effectiveness affects your answer
How do you define “continuous improvement”? Turns out, it depends on your organization and your role within it. Altogether, the mix of continuous improvement perspectives within a company should strike a balance between two concepts: efficiency and effectiveness.
What does continuous improvement mean in your organization? If you were to ask people from the top floor to the shop floor and across all functions, would you get reasonably consistent responses? This is important because the range of responses gives insight into the state of your continuous improvement “investment.” They also help guide the pursuit of two concepts fundamental to any robust continuous improvement program: efficiency and effectiveness.
Defining Some Terms
No doubt every organization supports continuous improvement. It’s hard to argue with the concept, but the hard work is in the execution. What is it we are trying to improve, and by how much? If you cannot answer these questions simply and concisely, then your organization is a candidate for operational chaos and confusion.
So in the context of manufacturing and custom metal fabrication, how do we define efficiency and effectiveness? Efficiency is about getting the job done quickly—for example, how quickly you can cut, form, weld, machine, and assemble a part at a work center. Effectiveness is about getting the whole job done well; this includes managing all the steps and movements between value-adding operations.
Most companies concentrate on efficiency; it’s a basic metric of any manufacturing operation. And we are all familiar with labor efficiency, which is the actual versus standard time it takes for someone to do the work. Did the operator achieve the standard output? It is easy to narrowly focus on efficiency, but to focus on it solely is risky.
Effectiveness, less straightforward but extremely important, is about getting the right product completed at the right time with the right amount of effort. Focusing on effectiveness can improve schedule attainment, production work order start-date performance, adherence to pull signals, and other areas. Again, effectiveness takes into account what happens between operations.
What Happens When We Lose Focus?
Efficiency and effectiveness are both necessary for a smooth, customer-focused operation. When we lose focus, it usually means we have an imbalance, perhaps too much emphasis on efficiency and not enough on effectiveness. A couple of scenarios follow to illustrate:
A fab shop focuses on the individual efficiencies. Since we are not managing the overall flow, each operation is expected to run “all out.” Laser cutting creates a large amount of flat stock work-in-process (WIP). Press brake operators create a large amount of bent-stock WIP waiting for welding. Welding happens to be the pace-setting operation to meet customer demand.
Customer demand is being met with some room to spare, yet everyone keeps running all out. The laser cutting and press brake operations continually exceed the pace-setting rates in welding … and the piles of WIP keep growing. People make products we do not need, divert raw materials and capacities away from products we do need, and congest the floor with WIP that gets in the way.
Why would anyone do that? It’s simple. Everyone from the plant manager and the supervisors to the operators are responding to what they are being measured on. With an unbalanced focus on efficiency, this is what we get. The department supervisor’s numbers look good, yet WIP continues to pile up.
Engineers are chasing the new equipment. Manufacturing engineers are focused on the new machine tool—like, say, a new laser—that will cut cycle time by 50 percent. Maybe the new machine allows for faster cutting. That is all well and good if the machine sets the pace for the entire operation. The laser’s shorter cycle time will drive up efficiencies (until someone changes the standard).
But what if the laser operation is far from the bottleneck or constraint process? Would the improvement effort be better spent focused on a real constraint so that the overall flow and operation improve?
I am not discouraging you from running the equipment to its fullest or investigating new technology to improve the operation. I am suggesting, however, that you should do so with an eye on balancing efficiency and effectiveness to optimize resources.
Strike the Right Balance
Both efficiency and effectiveness are important. Think of efficiency as speed and effectiveness as correctness. In the narrowest sense, efficiency is about techniques that optimize the local operation—faster laser cutting, bending, or welding. Think of effectiveness as focusing on overall flow from the start of the first operation to the end of the last operation; this entails good decisions, relevant priorities, and dock-to-dock measures that incorporate the entire process, from receiving raw material to shipping the finished product.
Great manufacturing organizations will find a balance between efficiency and effectiveness. Still, this balance is not a one-size-fits-all proposition. The specific approach depends on a company’s needs and circumstances.
It also varies depending on a person’s role in the organization. For instance, plant managers might focus heavily on effectiveness. They generally have broad responsibilities for a large segment of the business, from taking the customer order all the way through shipping, invoicing, and collecting cash.
Consider how a plant manager might look at order processing. Focusing on effectiveness, the manager would spend less time on how fast a customer service person works an order through a single processing step (i.e., the cycle time), and spend more time scrutinizing the total time it takes for a customer order to be converted into a production order.
The production supervisor might have a more balanced focus. He or she can influence how the direct value-adding processes are performing, such as whether the press brake has the correct tooling, a laser machine is loaded and running when needed, and that personnel respond quickly to maintenance issues. The production supervisor also influences whether material is being processed in the correct sequence and moved to the next operation in a timely manner.
Meanwhile, machine operators and other front-line personnel have limited influence on effectiveness. That’s because effectiveness often hinges on what people in supporting roles do to ensure front-line people continue performing value-adding work.
That said, machine operators influence efficiency greatly—if, that is, they are provided the right tools in the work area, are given correct and complete information about the jobs at hand (including how jobs should be sequenced), and if others have scrutinized the broader operation to ensure optimal flow. In other words, it would be impossible for the machine operator to be successful if the plant manager and production supervisor had failed to be effective.
Too often managers and supervisors get so wrapped up in pushing efficiency that they fail to manage the overall flow. They focus on efficiency to motivate the operator to finish the current job and start the next one. They don’t question whether the current job was the right one to be working on in the first place. So the operator finishes the current job and moves it to an open space on the floor where it is dropped and forgotten. This leads to lost materials, late deliveries, and people working with the wrong priorities. Put another way, people work efficiently, but all the work they produce, which ends up as excess inventory, isn’t very effective.
Efficiency and effectiveness both are critical, but efficiency is the easier of the two to measure and drive. That’s why it is common to see a business focus intensely on efficiency and yet still underperform significantly.
The way a manufacturer or job shop should approach managing efficiency and effectiveness is not one-size-fits-all. The balance will vary by the person’s role in the business. The key is to understand these concepts and then design the approach that works for your business and its customers.
What Does Improvement Mean to You?
Let’s go back to the question that started this column: What does continuous improvement mean in your organization? Before answering, reflect on how efficiency and effectiveness affect your operation and develop an approach that allows your company to focus on both. Once people understand their roles in continuous improvement and what their scope of responsibilities and limitations are, you will see greater returns from your continuous improvement investment.
The FABRICATOR is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971.