The key to running any business is controlling cost and increasing revenue. Be profitable or to be out of business! The way to properly control cost is to Engineer the process. Industrial engineering is a branch of engineering which deals with the optimization of complex processes or systems.Operations are complex processes. The Industrial engineering process is designed to increase safety, productivity, and control cost. In simple terms Industrial engineering makes your complex operations more efficient.
‘Engineering is the science of economy, of conserving the energy, kinetic and potential, provided and stored up by nature for the use of man. It is the business of engineering to utilize this energy to the best advantage, so that there may be the least possible waste.’ -William Smith
Let’s say for arguments sake your organization makes widgets. How do you know how much that widget should cost to make? If it take 5 different people to make the widget, how long should each job they do take? How do you break the process down into measureable hours? They say that which gets measured gets fixed. If you are not measuring anything what do you fix? If you have no engineered standards then you are missing out of large areas of opportunity.
Execution was defined by Larry Bossidy and Ram Charan in their book ‘Execution the Science of getting things done’ as follows, “Execution is a systematic process of rigorously discussing how’s and what’s, questioning, tenaciously following through, and ensuring accountability. In its most fundamental sense, execution is a systematic way of exposing reality and acting on it.”
In order to truly act on reality you must know what reality is. To control cost and run your organization efficiently you must engineer the process. You must have work measurements and time studies to create standards for each job that creates your widgets and every job there after. This is how you know what you should spend compared to what you actually spend. This is how to determine what you are leaving on the table in cost reduction opportunity.
A time study is just that, you manually record how much actual time it takes an average person to do each job, each step of the way. This is how Measured Standard Data (MSD) is created. This is then built by job into an Operating plan. Once all this data is put together you know exactly how many hours, or minutes , or seconds it should take to create one widget, pack it for shipping, and deliver to the customer. This is the only way to reduce excess hours and control your cost from the very beginning of the process. Think about it, if you have no standards then how do you know what your opportunity is reduce hours? If nothing is measured you are losing out of opportunity and do not know it.
There must be a Standard Operating Plan (SOP) built off of your MSD data that creates a measured plan to be followed by your operations. This is the function of the Industrial Engineer. The truly successful companies engineer the process in order to expose reality and act on it. The Continuous Process Improvement (CPI) cannot exist without standards to ensure accountability.
Let’s do a comparison between measured standards and no measured standards. You receive an order for 1,000 widgets. You have 3 days to complete the order and ship to your retailer to make available for purchase. In a world with no standards how long do you think the 1,000 widgets will take to complete? If you said 3 days you would be correct. In the world without standards we simply look at a dead line and not the measured standards for the job. Now in a world were the jobs are properly engineered by the work measurement process rather then focusing on a deal line we now focus on how long the job should take. Rather then using the full 3 days we now cut that time in half and reduce our cost. Also freeing up our work force to focus on more orders and there by increasing our productivity, reducing our cost, and improving our profitability.
If your organization has no Industrial Engineering process in place you are missing out on an opportunity to make your operation safer, more efficient, and to reduce your cost. No matter what type of operation you run it must be engineered to reach its full potential. How do you hold your operations accountable if you do not have a standard to hold them accountable to?
‘Scientists investigate that which already is; Engineers create what which has never been.” Albert Einstein