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In pursuit of efficiency - The power of efficiency = E4

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Operations Excellence by Sepp Gmeiner
Sepp Gmeiner is a partner with Lignum Consulting. For feedback, questions and/or suggestions please email s.gmeiner@lignum-consulting.com
The meaning of efficiency boils down to how much you get out of  what you put in, or how much can you achieve with what you have?
This applies  to our personal everyday  life and, especially, business. This is also nothing new. The past years were generally marked by  economic prosperity and a corresponding build-up of new capacities. The speed of building additional capacities often trumped  the need of building efficient processes. Now, that the order situation is somewhat cooling down  in our industry, the created capacities are often no longer fully utilized, or delivery times are normalizing to manageable periods.
Companies must now focus on using their existing resources more efficiently along their entire value chain. It is important to scrutinize all cost-driving factors. Specifically, I would like to address four relevant focal areas that have a significant impact on profitability in the wood and furniture industry.

Urgency: there is no time for procrastination – act now!
Manufacturing companies are increasingly needing to focus on optimizing their resource usage in terms of economic efficiency and sustainability. The past few years have made this necessity more than evident in the form of expensive energy, raw materials, supply shortages, and a shortage of skilled workers. Our work as consultants has clearly shifted to efficiency improvements. The commonality of experiences lets us summarize the approach and present it with the slogan: “Power of Efficiency = E4.”  
Any company seeking sustainable efficiency improvements will come across the same four focus areas of personnel, material, process, and technology. Each company is different, however a systematic improvement approach to a complex task  always has the best chance of success. In my experience it works best when internal resources are combined with external resources to keep any program on track. This works when implementing a QA program, safety program, Lean manufacturing or a focused efficiency overhaul.

Material
Material typically represents the largest line item of the cost structure. Therefore, we need to give material  importance accordingly. In the field of material efficiency, we pursue three aspects:
Use of material-efficient production processes
Substitution of material-intensive products
Reduction of residual and waste materials
A material efficiency analysis makes it possible to capture and analyze all material flows in the company to uncover savings potentials and reduce waste. This creates the basis for transparency and visibility of material waste in the company. Based on this, specific measures are defined and established to reduce material consumption.
It would be important here to also bring up circular economy concepts. This refers to strategies and practices that aim to reduce waste and minimize the use of new resources by keeping materials in use for as long as possible. This involves designing products with recycling and repurposing in mind, creating closed-loop supply chains, and promoting a shift from the traditional linear "take-make-dispose" model of production to a more circular and sustainable approach. By applying circular economy principles, industries can not only reduce their environmental impact, but also create economic value and generate new opportunities for innovation and growth.

Personnel
We all wonder where  all the people have gone!
The prevailing shortage of skilled personnel necessitates efficient personnel planning. It is of crucial importance for every company. The goal is to use existing personnel as effectively as possible by training them strategically to avoid competency/skills shortages and ensure smooth production. Developing, for example a skills matrix, will help determine the strengths (depth) and weaknesses of the staff skills and allow targeted measures to increase personnel skills and flexibility, which will lead to higher efficiency.
In addition, companies need to assess which tasks can be automated in the future and which should/must continue to be performed by qualified employees. With artificial intelligence (AI) entering our industry quickly (see  the column by Peter Mate in the last issue), we need to prepare for the impact. How it will impact is currently still a discussion at the highest level. We can expect it will be a major disruptor. It is clear that it will  impact white-collar workers. Difficult tasks like contract review ,which takes groups of highly educated, trained and experienced people, can be converted  to AI within months to reduce weeks of analysis to mere hours and a few people to oversee the results. Fighting progress did not work with the (first) industrial revolution either. In my opinion we need to learn it, embrace it and make it work for us. We need to prepare our staff for the required flexibility.
Understanding the demographics of our workforce is important. Ergonomics especially in view of an aging workforce must influence equipment selection and workplace planning. Computer literacy (or the lack of) in light of ongoing computerization of the shop floor needs to be dealt with.
Again, the work force as a precious and limited resource needs to managed and developed. It will not happen by itself. We may also need to push-the-envelope in updated/contemporary design of remuneration, time and employment models.

Process
Efficient and  Lean processes are essential for improving competitiveness and reducing costs. It is important to identify and eliminate wasteful activities, redundancies, and unnecessary waiting times. By analyzing and optimizing the process steps, significant savings potentials can be identified and realized. The use of digital tools and the implementation of automation measures play a decisive role in this context. Whatever you’re doing in Lean manufacturing implementation – don’t stop – double down!

Technology
Technology refers to the use of automated systems, robotics, high-performance machines, and self-driving logistics systems to improve efficiency in the production process. This also includes integration of ERP and MES software as well as scanning technology. Not all manufacturing tasks are suitable for automation. However, if correctly planned, selected and implemented, high levels of automation will minimize human error and increase throughput. It is important to determine the optimum level of automation for each application, optimize the processes and ensure that required infrastructure supports it.
The value creation, productivity, and output are not always related to the age of a machine. Just throwing money at a problem does not guarantee a good solution. A high budget sometimes stifles creativity.
In this technology category, there are various solutions available for Lean-oriented production (tools in the toolbox), like set-up time reduction (SMED), Workplace improvement(5S), Continuous Improvement (KAIZEN),  Machine optimization (TPM), and others, to increase efficiency. These methods and tools can significantly improve existing productions without expensive investments in technology.

Summary
After years of capacity building in our industry, it is important to emphasize improving and optimizing existing resources along the value chain. These four areas and categories need to be analysed and strategies developed for material, personnel, processes, and technology.
Don’t get discouraged by the size of the mountain you need to climb. Get a map and follow the trail one step at the time.

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