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Productivity’s last great hope

Productivity’s last great hope

Technology can lift productivity, but you need buy-in from staff.

If talking about it were the way to crack it, New Zealand would likely be the most productive nation in the world. Productivity is foolproof fodder for this country’s politicians and the fallback discussion topic for business forums everywhere. But decades of talking haven’t proffered the nation’s highly sought prize.

Statistics released in March this year show that from 1978 to 2009, New Zealand’s capital productivity fell 0.7 percent on an average annual basis. In the year to March 2009, capital productivity fell 5.3 percent. And now, labour productivity, which has buoyed our figures with an average annual growth rate of 1.9 percent throughout the 1978 to 2009 period, is beginning to fail us — falling 0.3 percent over the last three years.

Buried inside the statistics, though, is what could be taken as a signal from business about where its confidence lies. That sharp drop in capital productivity was driven by a 3.3 percent increase in capital input and a large chunk of that was invested in IT-related assets.

Statistically speaking it’s too early to say whether the investment is paying off but there are signs technology is breathing life into New Zealand’s quest for productivity.

Bearing fruit

For staff at Compac Sorting Equipment creating a hitech fruit grading machine with the right specs used to involve sorting through a dizzying array of 10,000 parts and narrowing it down to around 3000.

The client consultation process alone took up to a week — and there was room for expensive mistakes in the subsequent selection and ordering of parts.

Now, a new software program dubbed Configurator, which prompts Compac staff to ask specific questions about the machine required by the client and then generates the right parts configuration, has turned the consultation with clients into a one-hour process.

Six months into the new system, which was built by the company, Compac director and R&D manager Nigel Beach says it is eradicating mistakes, and the time savings in the consultation process equate to 15 days per year.

In the overall scheme of things for a company that has 240 employees around the world — and given the R&D behind the system took several years — saving the equivalent of three weeks might not sound dramatic, but Beach says it is vital in terms of future scalability.

“That is one of the critical things about business — it is hard to scale if you have those jobs that need specialised knowledge and skills, so we have replaced that with a system that takes all that knowledge and turns it into a piece of software.

“Our decision to invest in building this system was based on the fact capacity constraint for the company will be anything that requires a lot of engineering time and a lot of people.

“As we grow we will have to find new people and train them up, but the ideal is that we keep our engineers for designing new things and the things we are doing over and over again, although they might be complicated, we can systemise and automate.”

Beach says as Compac expands the system will be rolled out across the company’s other manufacturing operations in Uruguay, Italy and Korea.

“Right now we are doing about 50 machines a year but with the software, whether we were doing 100 or 1000 machines it would be not a lot of extra work.”

These complex grading machines Compac creates are also out doing their own bit for the productivity of other New Zealand (and international) companies.

Named Exporter of the Year at this year’s New Zealand Hi-Tech Awards, Compac’s blemish grading technology for fruit is capable of sorting high quality fruit from bad fruit leaving only the “middle ground” fruit for sorting staff to grade.

For a reasonable-sized New Zealand apple packing house that equates to a saving of around 10 staff, so in the course of a year that’s a saving of around $300,000.”

Daily grind

Replacing manpower with technology is not the only path to productivity gains.

Revisiting how the basics of day-to-day business were being supported (or not) by technology has also yielded results for Compac.

The company built its own time tracking and billing system, CeeTime, for its field technicians after failing to find an off-the-shelf solution that didn’t have to be

connected to the internet.

“We have a lot of customers who are far away from anywhere and don’t even necessarily have good cellular coverage. Without a system in place our staff were recording the work they had done for clients, and then having to load that information into our system at a later date.

For Compac, this translated into delays in the billing process and for the technicians there were frustrations over the double handling of information.

The answer was a simple time tracking system that allows the client to sign off on any billable hours via

the field technician’s PDA, which then automatically updates Compac’s main system the next time it is

connected with the internet.

CeeTime has saved the equivalent of one person on manual data entry, reduced billing turnaround from six

months to one, and the centralised reporting means Compac can easily see its warranty costs and the trends

in service requirements.

Honda New Zealand’s chief information officer, Simon Gould-Thorpe, has seen substantial — and speedy — returns from technology-based changes to another, similarly mundane business process.

The system for processing new Honda car parts from suppliers in Japan and Thailand was a largely manual system involving a series of staff in checking the contents of incoming containers (against printed lists), sorting it and storing it prior to dispatch.

Under that system, unloading a 40-foot container could take up to eight days and the largely manual system (including handwritten labels determining stock locations) resulted in stock losses and delayed fulfillment for parts orders.

An inwards goods optimisation system, which called for an $18,000 investment in software, a barcode printer and a scanner, has since transformed the process.

The new system sees items removed from the container, the barcode sanned and an automated put-away label with SKU, location and stock quantity generated - a 40-foot container now takes around two days to unload. Back orders are being filled faster and customers are happier.

Savings from the system are in the order of $50,000 a year, putting the return on investment at around four months.

In Honda’s service workshops a web-based graphical user interface (GUI) used to manage bookings has yielded better bookings management, an increase in the number of bookings taken by workshops, a decrease in the number of jobs running late and the flow on of higher customer satisfaction.

Gould-Thorpe says the improvements yielded by the GUI have been marked — in part because they replaced incredibly inefficient paper based systems (think A2 booking sheets) and in part because it was an intuitive system that required very little training and offered obvious gains for the workshop staff.

The system offers different views of the same information depending on the role of the user — service receptionist, call centre staff making bookings, workshop controller, service technician — making it easy for them to find what they need to do their job.

“This is the way Honda makes changes to its business: changes are made to its technology and systems in partnership with business process change, each reinforcing and enabling the other.”

At the core of this and other changes that have delivered productivity gains for the business, Gould-Thorpe says, is a highly adaptable information system.

“You need an agile system to move as fast as the business and that’s been key to the success of Honda.”

Banking on communication

Agility is also an ingredient for technology innovation and productivity gains at the Bank of New Zealand (BNZ).

CIO Peter Yarrington, a recent import from the National Australia Bank where he was general manager of technology, says BNZ has adopted the ‘Agile methodology’, which looks to get the company’s business and technology people working together to

hothouse ideas.

“The idea is to have projects run like a business startup, with a business owner who is completely accountable for the outcome, a very small team around them of technologists and business people, short timeframes, intensive work, real focus on the benefit flows and avoiding bureaucracy as much as possible.

“So it’s a minimum amount of paperwork being done, maximum amount of conversation and outcomes being produced.”

Yarrington says that methodology has been central to the development of BNZ’s new branches, which do away with the traditional teller-behind-a-desk setup in favour of more fl exible interactions with customers.

“The things that have been done in terms of changing the store design, changing the store technology and the way stores work — making use of mobile computing, digital signage and workflow technology — have come out of pieces of Agile work.”

With more than 5000 staff spread around 182 branches in New Zealand, getting timely feedback on the business could seem like an impossible task, but Yarrington says BNZ’s technology based solution is faster and more effective than the face-to-face alternative.

Company wide ‘jam sessions’ offer BNZ employees the chance to log on and provide feedback on the business and raise issues directly with senior leadership who take part in the sessions and answer questions in a live online forum.

Each jam covers a different area of the business such as culture or customers. “It’s the equivalent of holding a virtual town hall with, potentially, thousands of BNZ staff at the same time. In some ways it’s an improvement on traditional feedback sessions because it takes away that fear staff may have of standing up in front of everybody and ‘asking a dumb question’.

“It does away with the time and cost that would be associated with trying to coordinate that many people to come together physically and it shortens the time to

feedback. There is real accountability in a setting like that too and an impetus to act on the feedback.”

BNZ also asks its staff to provide feedback through its ‘Thoughts into Action’ (TIA) database about what is impacting on their time or on customer satisfaction, unproductive processes and waste in the business.

One suggestion that came up in a jam session and was raised through TIA was to remove unnecessary passwords on internal feedback databases.

BNZ has made the change after calculating that if 250 staff access the database on a daily basis, taking 30 seconds to enter the password and proceed to the next screen, that equates to ten hours a week or 400 hours a year.

“Removing the password step is a trivial change but it is saving us 50 person days.

“If I can get 50 person days back by doing that, and I can do it a hundred times over in other ways, suddenly the technology of gathering input and turning it into action has massive significance to the productivity of the business.”

But if staff can be the source of great gains they can also be a barrier when it comes to the adoption of technology based solutions.

Yarrington says the buy-in for the jams and TIA at BNZ is good because the culture around the programmes is positive, but warns that if technologies don’t fi t with existing culture and business processes, they won’t deliver productivity gains.

Dell’s VP of large enterprise marketing, Andy Lark, says low levels of competence among users also stop businesses making the most of technology.

“Users continue to only use a fraction of the productivity on offer from technology.

“More organisations need to create a technology competency bar that all employees are required to hit.

At the end of the day, all the CIO can do is arm the company to win. If the users don’t want to grow at the same pace of technology innovation going on around

them, then the business won’t grow either.”

Other barriers to productivity-bearing technologies fall into the standard New Zealand barriers category — size, distance to the world and money.

New Zealand’s size — and the size of its companies — means it is a poor fi t with many of the international vendors’ products and, even if the product fi s, there is

no local support on hand.

Gould-Thorpe says that lack of presence and support is his most common obstacle.

“A number of products I would have chosen would rely on fl ying skills in from overseas, making the cost prohibitive.”

Even setting aside cost, distance makes international suppliers an impossible choice, he says.

“Having a local presence has been a critical success factor over the years. Even in today’s world the difference of cities can make or break a project.”

Access to capital is another thorn in the side of New Zealand businesses according to Beach, and Yarrington describes the level of investment in technology

innovation as a challenge.

Even with these barriers, technology looks like a fair bet in the country’s pursuit of productivity. Unlimited

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