Improving Productivity To Gain Competitive Advantage
In today’s competitive market, businesses understand that adopting measures to boost productivity can have a direct impact on the bottom line. In this scenario, it becomes crucial to understand ways to improve productivity in order to gain a competitive advantage.
Productivity in simple terms can be measured as output value divided by total input cost. Pursuing productivity means improving one of two variables in the equation: output value or the input costs (Exhibit 1). A sustainable competitive advantage will be the result of management’s decision as to which of the two variables they focus on: the numerator or the denominator. In order to be successful, a company must be able to differentiate itself and truly excel by picking the right levers.
Factors Influencing Productivity
Calculations for productivity can be tedious – factors such as opportunity cost, cost of labor, cost of time and others need to be considered. However, the most rudimentary calculation is just as relevant where the basic definition adds value to the way we work.
Healthcare Productivity Example
The company designs and manufactures medical devices. Most of the suppliers are domestic. The company produces specialized medical devices with very limited volumes of about 1,000 total machines per year. All the medical devices are manufactured in house. Broadly speaking, the input costs are driven by five areas:
- Assembly (Labour costs)
- Manufacturing (Production costs)
- Domestic suppliers (Raw materials costs)
- Delivery to healthcare facilities (Distribution costs)
- Improvement of design (R&D costs)
The CEO and board want to keep the company in the specialized medical devices space. They have defined the positioning of medical devices as such. The management team must maintain this position but has quite a lot of autonomy in how to proceed with production.
At the highest level, an organization is either trying to raise productivity by competing primarily by raising output value or lowering input costs. While they will pursue a combination of both, only one lever is the goal that cannot be compromised.
For this example, the company is clearly competing on the output value side. They incur steep costs to design and produce a machine that sells for the highest possible output value. That is not to say they ignore input costs, but it is not their point of differentiation. If they must spend more on R&D and manufacture the device, they will do it provided the return is very high as evidenced in the sales price and margin.
The author of this blog – Chiran Sodhi is a consultant at Trindent Consulting.
Kuboresha Uzalishaji Kupata Faida ya Ushindani Katika soko la leo la ushindani, biashara zinaelewa kwamba kupitisha hatua za kuongeza uzalishaji kunaweza kuwa na athari ya moja kwa moja kwenye mstari wa chini. Katika hali hii, inakuwa muhimu kuelewa njia za kuboresha uzalishaji ili kupata faida ya ushindani. Uzalishaji katika maneno rahisi inaweza kupimwa kama thamani ya pato kugawanywa na jumla ya gharama ya pembejeo. Kuongeza uzalishaji ni kuboresha moja ya vigezo viwili katika equation: thamani ya pato au gharama za pembejeo. Faida ya ushindani endelevu itakuwa matokeo ya uamuzi wa usimamizi kuhusu ambayo ya vigezo viwili wao kuzingatia: numerator au denominator. Ili kufanikiwa, kampuni lazima iwe na uwezo wa kujitofautisha na kweli kufanikiwa kwa kuchagua levers sahihi. Sababu zinazoathiri uzalishaji Hesabu kwa uzalishaji inaweza kuwa tedious <unk> mambo kama vile nafasi ya gharama, gharama ya kazi, gharama ya muda na wengine wanahitaji kuzingatiwa. Hata hivyo, hesabu ya msingi zaidi ni sawa na muhimu ambapo ufafanuzi wa msingi huongeza thamani kwa njia tunayofanya kazi. Mfano wa Uzalishaji wa Huduma za Afya Kampuni hiyo hutengeneza na kutengeneza vifaa vya matibabu. Wengi wa wauzaji ni wa ndani. Kampuni hiyo inazalisha vifaa maalum vya matibabu na kiasi kidogo sana cha karibu mashine 1,000 kwa mwaka. Vifaa vyote vya kitiba hutengenezwa ndani ya nyumba. Kwa ujumla, gharama za pembejeo zinaendeshwa na maeneo matano: Mkusanyiko (Gharama za Kazi) - Utengenezaji (Gharama za Uzalishaji) - Wauzaji wa ndani (Gharama za Vifaa vya Raw) - Utoaji kwa vituo vya huduma za afya (Gharama za Usambazaji) - Uboreshaji wa muundo (Gharama za R&D) - Mkurugenzi Mtendaji na bodi wanataka kuweka kampuni katika nafasi ya vifaa vya matibabu maalum. Wao wamefafanua nafasi ya vifaa vya matibabu kama vile. Timu ya usimamizi lazima kudumisha nafasi hii lakini ina kiasi kikubwa cha uhuru katika jinsi ya kuendelea na uzalishaji. Katika kiwango cha juu, shirika linajaribu kuongeza uzalishaji kwa kushindana hasa kwa kuongeza thamani ya pato au kupunguza gharama za pembejeo. Ingawa watafuatilia mchanganyiko wa zote mbili, ni kifaa kimoja tu ambacho hakitaweza kuathiriwa. Kwa mfano huu, kampuni ni wazi ushindani juu ya upande wa thamani ya pato. Wao huchukua gharama kubwa ili kubuni na kutengeneza mashine inayouzwa kwa thamani ya juu zaidi ya pato. Hiyo si kusema wao kupuuza gharama za pembejeo, lakini si uhakika wao wa tofauti. Ikiwa wanahitaji kutumia zaidi juu ya R&D na kutengeneza kifaa, watafanya hivyo ikiwa faida ni kubwa sana kama inavyoonekana katika bei ya mauzo na faida. Mwandishi wa blogi hii <unk> Chiran Sodhi ni mshauri katika Trindent Consulting.