Overcoming Conflict in Production
Any manager’s job, or even production manager’s job, is designed to balance two conflicting tasks: reducing internal repair costs and maximizing sales. Why are these tasks in conflict?
Surely if a collision shop can reduce costs and at the same time increase sales by increasing production, then there is a synergy in that process. In order to understand the reason for conflict, and the detrimental effect it has on profitability and customer service, it’s important to understand a number of issues that support our mistaken beliefs.
Most of what we do in business is based upon a series of beliefs—beliefs that are based upon us historically having success using them, in general, in isolation. We do things a certain way based upon how we perceive them to be right. Our first fundamental error is that we tend to not apply any kind of science or mathematics to our beliefs and we very rarely test those beliefs in the cold light of day.
Let me give you an example: One of the most common small issues I face when talking with managers and painters is whether wet or dry sanding is the best method. It’s quite common in collision shops for there to be a mixture of both. When it comes down to it, both methods should be tested. After all, one process surely is better than two, right?
Testing will produce a result, and a result will mean that as a team, you can decide what to do. Decisions made and applied to your process will eliminate waste, ensure continuity, reduce inventory, and create a simpler way in which to use sprint capability (helping others to speed up a job) to eliminate errors.
This way, we have removed conflicting belief and applied simple testing to ensure we know for a fact that we have the correct process to produce the desired result. So we now have a tested procedure, and rather than believing it is correct, we have tested it to find the best result for ourselves.
Here’s another belief: Because our staff is probably our most costly resource, we need to eliminate any downtime they might experience. Let’s face it, your average metal tech is probably going to cost you somewhere in the region of $50,000 to $80,000 per year, and when you add in his other annualized fixed and secondary variable costs, you probably won’t fall short of $100,000 per year. That’s an expensive resource, one you clearly don’t want to have standing around, right?
I’m going to challenge that mindset. In fact, having him standing around, in certain circumstances, will add to your productivity and workflow. Believe it or not, having people standing around is essential to achieving increased profitability. This becomes easier to understand once you can grasp how constraints control and determine output. If someone overproduces upstream of a constraint, it adds to work in progress (WIP) and costs.
The other side of the manager’s role is to increase production. The belief of most managers is that in order to increase production, or throughput, we need to increase efficiency. After all, an efficient workforce will produce more vehicles and increase production, right? Well, let’s take a look at that.
We know that higher utilization can reduce costs, because we are producing more work from that staff member. While he’s working, we increase labor sales, therefore earning the company money, right? If we can get him working at a higher efficiency rate—in other words he produces more hours for us than he works—then our labor recovery rate goes up. But again, where does that staff member’s extra work output fit into the process? What is before and after it and does it help or actually hinder the process?
The problem is that we look at each of these issues in isolation, in the belief that we are doing the right thing. We typically do this without applying math, science or any other measurements to the theory.
A manager’s job is to make decisions—decisions that will increase profitability by increasing sales and reducing costs. That’s why we focus on efficiency and utilization. Problems occur because these two things are in conflict with each other, and the system is actually broken, but our belief mechanism says it’s the right thing to do.
Once you study and understand Theory of Constraint, you will start to realize that your belief system is likely your downfall. It’s one of the mindset changes that is difficult to overcome, in that what you see as utopia is in fact adding to your misery. That’s because the key metric is not efficiency, nor utilization, nor even flow, but a holistic understanding of your production system with the correct data present to make the correct decisions.
Jon Parker is managing director of the Byteback Group, a U.K.-based information technology and services company aimed at advancing the collision repair industry. Parker can be reached at email@example.com.