Productivity: A Global Challenge

Simulation stands to help address the global productivity slowdown facing the manufacturing industry.

With countries across the world reporting a shortfall in productivity growth, and little improvement anticipated over the next ten years, the manufacturing industry is in the midst of a productivity crisis of global proportions.

When asked by the Wall Street Journal back in May last year what they thought was causing this productivity slowdown, economists were split into two main schools of thought. The first lay the blame with structural changes, such as the ageing global population, while the second said the business cycle was to blame, citing extremely weak demand. However, both camps agreed that weak capital spending had a ‘large’ or ‘modest’ impact on productivity, with 94% of those questioned listing this as a contributing factor.

When there is little or no capital expenditure, workers are often ill-equipped to increase output per hour, requiring up-to-date equipment and efficient supply chains in order to produce more. And, although we’re very much seeing a global economic upturn, the fact that productivity is failing to keep pace with this shows that manufacturing businesses are still cautious of making large capital investments or implementing organisational change, for fear of what might happen in the short-term. What can, at first, seem to be a straightforward yes or no, can turn into a labyrinth of tactical and strategic decisions, all of which can have a huge effect on the organisation as a whole.

However, the decisions of today achieve the results of tomorrow and, as we’re seeing, this failure to invest is leading to a major challenge for industry the world over. If manufacturers are to tackle this challenge head on, they need to optimise production without exposing the business to risk, something that many manufacturing businesses might believe too difficult a task.

Simulation based analytics can solve this problem. Developing a model of existing operations facilitates an understanding of complex environments and allows planning and investment teams to test ideas and analyse change scenarios. Finding solutions to optimise production can be done without exposing the business to unnecessary financial or operational risk. Doing this in the real world, a live production environment, would be risky (not to mention costly), a factor which deters many businesses from even contemplating change. But, by using simulation software, manufacturing organisations can fully explore all ramifications of any potential investment, be it in people, machinery or buildings, to ensure it will achieve the optimum payback in terms of increased productivity.

With the problem of declining productivity, deemed by some to be one of the greatest threats to increased wages, improved living standards and the global economy, never has it been so important for the manufacturing sector to prove its worth. Some of the world’s most successful manufacturing businesses already rely on simulation to guide their business planning, but there is potential for those who don’t to ensure that the right decisions and investments are made, creating a more solid foundation for the future.

Do you agree? Tweet @Lanner with your thoughts #industry40