Cadtales

Productivity – A Primer

Productivity – The quality of being productive, is understood by most people to be a relative measure of output per unit of input. We readily apply such measures to all items manufactured or produced for sale. It’s applied less often to designers and drafters. (Our work may be considered more esoteric and not actually part of the manufacturing cycle.) In this lesson we will deal with “cost” associated with the input side of the equation – with our eyes always on the ultimate goal: Customer Satisfaction.

Company management is principally concerned with controlling costs to increase productivity. CAD managers and operators should be equally as concerned by increasing skills and utilizing available resources. (In a future lesson we’ll explore how to increase productivity by improving operator skills and refining the process.)

In general, productivity increases help us by lowering cost of living, improving health and lifestyle and generating more discretionary income. On the other hand, increased productivity by our business competitors can “steal” livelihood, reduce profits and make products less valuable.

To better understand productivity we’ll review the basic properties of a simple pricing formula and how the various elements of cost help to quantify and analyze productivity.

A simple formula for pricing is: CF(M+L+B)=SP

Where:

CF is a Catch-all Factor for general & administration expenses, profit, taxes, etc.
M is material and may include a markup factor for obsolescence, spoilage, etc.
L is labor and may include payroll taxes, insurance, medical, retirement, etc.
B is burden and may include overhead, equipment, other business expenses, etc.
SP is the selling price for a product of service.

 

There is no specific element for productivity in the formula above but it will help us to identify the costs that impact productivity, namely: labor and burden. As productivity rises or falls adjustments would be made to the catch-all and burden factors in the formula.

As many of my customers will testify, I’ve often said, “If the hardware and software were free it would not make a dent in a company’s bottom line.” (Operator costs can be 10-20 times the cost for computers and software, and over 3-4 years it maybe 30-70x.) Our best prospect for productivity improvement then is in the area of operator skills and processes.

Consider an engineering environment where the product is a service, the material component is zero, and labor & burden are the chief components over which the CAD department has control. Labor is composed of salaries and related expenses. Burden is the cost of computers, software & training, combined with overhead costs (OH, the bricks and energy to sustain the business environment).
 

Labor and OH costs tend to increase over time.
Hardware and Software costs tend to decrease over time.
Training is more likely to be a one-time expense.

Hiring operators with better skills – increases labor and OH costs, but produces greater output. Training operators increases output with a smaller increase in OH costs. Updating hardware/software and training, will also increase productivity with a smaller increase in OH and CF costs. (This is enhanced by the fact that state and federal laws reward companies for buying “stuff” and punish them - thru taxes and regulations - for hiring people).

Now we have an overall vision of this giant puzzle and can readily see that although we control fewer pieces we can have an important impact on the company’s success.

Analysis and Justification – Michael Gerber, in his book, “The E-Myth Revisited,” outlines the three phases for revitalizing a business: Innovation, Quantification and Orchestration. In the innovation phase we look at process, the people skills, equipment and information flow that creates the product or service that is our business. In the quantification phase we design and implement a system that measures & reports and, finally, in the orchestration phase we apply what we’ve learned & developed to our business as a system. The objective is to have a “business” that sells rather than “selling” a product. (It’s difficult to compete with a successful business model and easy to copy or duplicate a popular product.)

To accomplish the objective above, Mr. Gerber also says we should be “working on the business [as well as] in the business.” This means that we should all set aside some time to observe and question the why and how we do “stuff.” Put everything on the table. Every business is analyzed and justified on a regular basis – by the CFO, CEO, shareholders, lenders and customers; and in the CAD department by your boss, his or her boss and company management.

Software in general and AutoCAD specifically, lends itself readily to analysis and productivity improvements – mainly because operators use so few of the available features. This does not imply that using all features would be more productive. It means that software features should be evaluated and judged to what extent they can and will improve the process.

Start with your own area of responsibility regardless of your level on the “work” chain. Ask yourself these questions (or formulate your own):

1. Is there a documented process for the work I do?

2. What causes delays in my work process?

3. How much re-work do we incur & why?

4. How can we improve initial quality?

5. How can I improve my personal skills?

6. Why do our customers buy from us?

If you don’t know the answer to that last question then someone (not necessarily you) should go ask them. The answer should be a part of this productivity improvement plan.

Here is a list of topics that may be a good starting point in analyzing and justifying a CAD operation:

Suggested topics:

1. Project setup – What do we need to know.

2. Project Integrity – Validating files.

3. Project Templates & Tools.

4. Redlines & Editing guide lines.

5. Production, Scheduling, Revisions, and Sheet Log files.

6. Output, PDF, DWF, ZIP, Etransmit.

7. Integrity Check, Final Review, Product Delivery.

This process should involve all participants (employees, suppliers, customers, etc.) – designing a workable scheme and schedule, with the least impact on current & future project schedules and immediate benefit as portions of the plan are developed and implemented. Use the participants energy and talents to shape the program; design, test and use templates, check lists and forms; and, to “own” the finished product.

What inhibits us from MAXIMIZING productivity?

1. Fear, Inexperience, Lack of Knowledge/Understanding

2. Hostile Taxes, Laws & Regulations

3. The Political/Academia Complex

4. Complacency. “We’ve always done it that way.”

5. Can’t leave our Comfort Zone

6. Absence of Competition

7. Lack of VISION

Closing words by famous people:

• Warren Buffett – Warren invests in a consumer monopoly business with outstanding management that is selling at a discounted price.

• John Mackey – “Investors, Labor, Management and Suppliers – They all need to cooperate to create value for their customers.” (We would add Engineers to the list).

• Khalsa - “To increase your bottom line, work to increase your customer’s bottom line.”

• Gerber - “Deliver customer satisfaction on time, every time.”

To be continued.

Do you see a productivity and quality benefit in improving productivity in your design and drafting environment? Call your Hagerman sales representative about software upgrades, training and customization.

We want you to succeed!