Business Optimization

Optimization of processes is one of the fundamental elements in any entity, where the management is interested in development and increasing the competitiveness of products.

By expanding facilities, the level of costs and expenses rises, which ultimately lowers the profitability. This can be avoided by applying optimization techniques and tools. We’ll talk about the main ones herein.

What is Optimization?

Such measures are essentially about finding the most balanced way to execute processes and operations, and also on eliminating errors within the entity. By optimizing, you can deal with management mistakes that lead to lower profits or even straight loss and waste of resources. It also helps to decrease production expenses and boost corporate income.

Purpose and Objectives of Optimization

It should improve the efficiency of technological process by increasing the volume of production, minimizing the use of raw materials and preserving the quality of goods/services. Improvement of one factor can sometimes negatively impact another, so finding a balance or compromise is necessary.

Every item should have its own goals, but they should not conflict with each other. Improving productivity and reducing expenses is not achievable by saving money. The best approach is to enhance production methods, also referred to as reengineering, rather than cost-cutting on raw materials.

Principles of Optimization

Observing the following basics will assist you throughout the whole stages of optimizing:

• Comprehensiveness. To increase profitability, expand low-production facilities and enhance the quality of output to raise the prime costs.
  
• Identify the reason for cost reduction. To understand the target, you need to audit the competing businesses and based on this information, reduce separately for each sector.
  
• Introduce New Ideas. Sometimes an average worker who is deeply immersed in specifics and details of a process can come up with something that will save the company a great deal of money, so engage your staff in discussions about optimizing production.
  
• Capture the Results of Optimization. All relevant tasks should have specific measurable metrics that need to be tracked during the plan execution. For this, a monitoring team can be established to identify discrepancies and correct them promptly.
  

To optimize manufacturing, changes are necessary at the levels of personnel (employees must adopt new ways of working), processes (eliminating bottlenecks and ensuring consistency), and technology (using tools to speed up processes and enable new ways of working). Changes in three areas — people, processes, and technology — are crucial for improving production and achieving digital transformation as a primary goal for the enterprise.

Levels of Optimization

Optimization can be classified into three levels, which the enterprise should follow in turn, gradually applying algorithms and improving skills.

• At the first, a new foundation for organizational system shall be formed by auditing the processes, identifying nuances that need to be upgraded, and creating a list of tasks. Here, the study focuses on equipment and process steps.
  
• The second is based on improvement of individual production shops. This level develops performance standards, sets the stage for improvement, and puts the plan into practice.
  
• The third level involves improving the functional component in production, optimizing the stage of supply, management, etc.
  

Methods and Tools for Optimization

An effective optimization requires suitable methods and tools. Below we outline the options for your project.

Tools for Optimization

• Directive Approach. It's the most effective tool that saves significant time, but it doesn't work for the long term. If you cut the budget of divisions, it may affect the efficiency of entire production, because if you cut the wrong division, company's position in the market may be shaken. You need to choose the area to be cut with great care to avoid damaging yourself.
  
• The “bottom-up” tool provides improvements in production technology without affecting the main stages, but only divisions themselves. It’s the safest option that provides long-lasting results without serious risks. All stages of implementation involve as many employees as possible for reorganization processes. Employees help create and implement ideas to improve the manufacturing efficiency.
  
• Re-engineering aims to reduce costs in production and ensure competitiveness. This tool needs serious investments and is very slow due to global redesign. Just like the proverb "slow and steady wins the race," this tool has a lasting impact on the entire organization. It can be applied if the entity is in stagnation or protracted crisis.
  

Stages of Optimization

There are three stages to find solutions for optimization:

• Planning and Analytics. This item includes studying information about production and analyze how efficient the employees are, data on spending and income. Once the lagging structures have been identified, investments can be made therein. Carefully examine every detail, find all the reasons for the decrease in production efficiency.
  
• Drawing up an Optimization Project and its Approval. When you find the lagging areas, you will need to develop a roadmap for innovation, procurement of tools, their adaptation, and incorporation into the company's processes. Next, calculate how long the optimization will take and estimate the costs involved.
  
• Implementation of the Plan. Once the plan is drafted and approved, implementation begins. The first necessity is to accomplish the highest-priority complex tasks. You must implement optimization gradually and control the changes, otherwise there is a risk of failing the very production algorithm you are consider.
  

Methods of Optimization

Methods for manufacturing processes are divided into the following two:

Lean production stops all actions that put extra pressure on the company's finances and makes a change to creating goods based on customers’ requirements, instead of how much can be produced.

• The cycle is shortened, and there is no need to keep raw materials in storage as they are used immediately in production.
  
• Investments in logistics and transportation are reduced when equipment is put in the best place.
  
• Finished stock is decreased, therefore decreasing the possibility of faults and establishing a situation where employees can work more effectively.
  

Thanks to this method, you can achieve significant savings for the long term without losing the quality of original product.

In total optimization, the full staff is involved. As a rule, professional analysts are hired to develop the project. Its principles are:

• Here, the ideas for modernizing processes are left to the workers, as they know the workflow from the inside and have a better understanding of what needs to be rearranged and know how to rationalize the use of space and resources.
  
• With financial incentives, you motivate your staff to generate ideas that will potentially cut your losses big time.
  

How Lean Manufacturing and Total Optimization Works

The peculiarity of lean manufacturing is that all processes are considered using two questions:

• Value to the Customer;
  
• How to minimize muda (this is one of the Japanese words, means loss, waste, that is, any activity that consumes resources but does not create value, it’s a useless loss in production).
  

Based on these issues, the firm tries to identify and remove from the process those activities that do not add value and quality to products.

There are seven kinds of muda:

• Overproduction;
  
• Protracted wait for the next production stage;
  
• Storage of raw materials and parts between production chains;
  
• Non-optimized layout of shops and apparatus;
  
• Superfluous processes;
  
• Availability of surplus spare products or raw materials;
  
• Defective parts.
  

There are several approaches to combat these problems:

1. Value Creation Stream. When describing the production, it is necessary to analyze the time the machines take to process and the amount of semi-finished products waiting in the entity's warehouses for the next stage of production.
   
2. Pull production. It is a system where products do not go to the next stage until the shop next in the chain reports a need for parts. This method is known as kanban. Kanban is a card that informs the previous stage when it’s time to start making a particular part. The insurance order will help to continue production in case of equipment failure. To reduce defects and avoid operational delays, implementing a quality management system is crucial. It’s a set of techniques that keeps the hardware in working order without interrupting the whole process. It’s necessary to keep an extra supply of materials in stock for urgent requests. Complete avoidance of surplus is not feasible.
   

Introducing this principle starts with instructing the employees and implementing ongoing enhancements in production to increase the product's worth to customers.

Total optimization works through the creation of governance mechanisms, which puts forward optimization proposals from the “bottom-up”, that is, through workers to managers. This option is aimed at reducing production costs, increasing the reliability of supply, and improving the quality of initial product.

First, all production shops are analyzed and it is decided in which of them to implement optimization, after which a working group and a governing board are created to decide which improvements to implement. Analyzing reduced and nonreduced costs allows us to understand which expenses can be reduced without harming production.

After the theoretical stage of preparation, the working groups develop alternative ways to optimize production and create their project. The amount of investment is predicted, the approximate result of implementation is calculated. These ideas are then voiced to the governing board, which decides whether to implement the idea or reject it. During implementation, a team of observers monitors compliance with the new algorithm and evaluates the effect by comparing pre- and post-implementation performance.

Successful application of this method involves the following principles:

• Production workers are the best at what they do. The job of externally hired consultants is to guide and organize the optimization.
  
• All ideas need to be taken into consideration. Even though they may appear illogical, in reality, they can skyrocket.
  
• Material rewards motivate employees to generate new ideas. You'll save a lot more on a good idea than you'll spend on employee bonuses.
  
• The optimization program should be continuously monitored by managers.
  

Заключение

These types of optimization are based on creative interaction with workers and are not highly regulated. The absence of increased control and the presence of material motivation attracts employees from all shops and levels, which has a greater effect because the latter are involved in process and have the opportunity to influence, improve working environment.