A Formula That Pays

_Take steps today to ramp up productivity in your business so you can weather the recession and come out stronger_

Jim Rakievich, CEO and president of McCoy Corporation, credits his company’s investment in productivity for keeping it competitive. Based in Edmonton, 85 per cent of McCoy’s revenue is generated from manufacturing and shipping specialized products to oil and gas clients. McCoy used to operate according to what Rakievich calls “the North American style of manufacturing.”

“We’d calculate the cost of materials and labour,” he says, “and put in a profit margin above that, then convince a customer to buy it. But if someone new comes to town or a foreign company shows up with cheaper labour, you’re left trying to make a profit on a non-competitive cost base.”

In the midst of growing success, McCoy embarked on an overhaul of its plant in 2004. Rakievich had been to visit a busy plant in Washington and was stunned by how spotless and quiet it was. He learned it had undergone productivity improvements and set out to find out more.

At McCoy, Rakievich targeted the manufacture of power tongs, drilling equipment used on rigs worldwide, for productivity improvement. “We looked at manufacturing, what the guys were doing on the floor,” Rakievich says. He found he could eliminate steps by purchasing new equipment: water jets.

“Then we watched the technician — assembly took a long time. We said, ‘What if we went the Ikea way?’ We got our engineers to design in little tabs, so everything snaps together. When the tong’s finished, you wouldn’t notice the difference. Assembly takes a third of the time,” says Rakievich.

Rakievich credits productivity investment for McCoy’s success. “In one of our plants, we have the exact same square footage we had eight years ago, but we’ve doubled revenue. We employ a few more people — but not double. With the current economic climate, if it weren’t for productivity innovation,” he says, “our business would be in jeopardy.”

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**Step 1: Do a quick calculation**
You can do this whether you have five or 5,000 employees. Say your revenue-per-employee calculation is $200,000 a year. If you’ve got five employees, your revenue is $1 million, but what if, with your existing plant and workforce, your revenue was $1.4 million? “What does your bottom line look like then?” asks Rakievich.

**Step 2: Educate yourself on productivity**
“Buy a book called The Goal and read it,” says Rakievich. “Get your accountant and plant manager to read it. You can’t change anything in a business unless leadership is prepared to change.”

**Step 3: Assess your operations**
Do some simple exercises, such as a spaghetti diagram, of one of your processes. Take a measuring tape to the shop floor and track a part through the plant. Document its path on a floor plan. “How much of that movement is because your plant layout is wrong? It’s humbling, and the cost to you is the time you take to carry out the assessment.”

**Step 4: Make the call**
After you’ve educated yourself and done some initial assessment, visit a company that has implemented productivity measures. “Most people will be happy to show you,” says Rakievich.

**Step 5: Pick the low-hanging fruit**
Simple changes can be undertaken before you get deep into productivity improvements. “There are all kinds of things you could apply now that would cost you five cents,” Rakievich says. “It’s just reading to educate yourself, doing a few quick calculations, then rolling up your sleeves.”

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