We have productivity crises in almost every sector of the British economy. But these are dwarfed by the very low productivity levels achieved in some of the biggest spending areas of the 40% of the economy which is controlled by the Government – secondary education and the NHS. This situation is not new. There has been a relative decline in productivity for more than 100 years.
At the beginning of the 1990s, London Business School and IBM undertook a study which showed that just 2% of UK companies were world-class – although 73% thought they were.
Two years later the study was repeated and the figure of 2% increased to 2.3%. The White Papers on competitiveness reinforced this message.
Andersen Consulting benchmarked the UK component industry against its Japanese counterparts and discovered that the Japanese were twice as good as us on every key measure of performance. On quality they were 100 times better.
Andersen repeated this study two years later and discovered the UK component makers supplying the Japanese manufacturers in the UK had improved 36%, whereas the Japanese component manufacturers had improved 38%.
The Economist Intelligence Unit report comparing productivity in the car industry also makes frightening reading – Japan is number one and the UK is bottom.
I see little evidence that this message has been truly understood and acted on in the state-run sector.
With commitment and the right attitude we can succeed. The SMMT Industry Forum, conceived about four years ago, has the potential to transform not just our automotive industry but also the UK at large. I believe we should replicate this model across the private sector and the public sector in Britain.
The forum’s lead body is the Society of Motor Manufacturers and Traders and the board comprises motor industry leaders from the vehicle manufacturers and the component suppliers. It receives matching start-up funding from the Government and expertise from Honda, Toyota and Nissan engineers.
A team goes into a component supplier for a week and prepares it for a breakthrough event to be held soon after. This exercise typically lasts from Monday to Friday.During the event, shop-floor employees are taught about world-class production tools and techniques. Performance targets are established for quality, productivity, space saving and lead-time reduction.
The real fun begins when everyone gets onto the shopfloor and measures what is really happening. They then start to apply their new knowhow to the process as well as the layout of equipment and working methods.
By Wednesday, mild panic sets in and it is normal for the team to be working through the night. But instead of team members becoming exhausted and demoralised, they are energised and motivated. By Thursday they know they are going to succeed.
Thursday afternoon and evening is devoted to various team members preparing presentations to their colleagues and senior management for the Friday celebration of success.
The industry forum team has worked in more than 100 companies and the results are sensational. On average, productivity increases by 30% with achievements as high as 72%. Space utilisation improves on average by 40% but it goes as high as 58%.
Average stock turn improvements of 135% are being achieved with the best score nearly twice this at 260%. Quality improvements, measured as not right first time, show average gains of 25%, with improvements recorded as high as 65%.
Delivery schedule achievement improves on average by 40% with the best result being 100%.
Toyota and Honda have been carrying out this sort of exercise for nearly 30 years and the US automotive industry has been doing it since the early 1980s. Porsche in Germany and Volkswagen have also applied this thinking.
The tools and techniques which are being used by the industry forum can be applied to every sector of British industry as well as to the state-run sector.
The savings could fund the huge improvements which we know are so vital to Britain’s competitiveness in the new knowledge-based global economy.John Neill is group chief executive of the Unipart Group of Companies