What is process optimisation?
Process optimisation means looking for ways to improve the energy and/or materials efficiency and productivity of a business’s processes. The objective of process optimisation is to reduce process cycle times, reduce wastage, improve the quality of products or services, and reduce costs. Process optimisation could involve actions from plant re-layout based on improving material flow and productivity, to redesigning a process line to eliminate or reduce process wastage or energy used.
Process optimisation doesn’t only apply to manufacturing businesses, the majority of businesses have processes and operations that can be improved and made more efficient. For service industries this can involve improvements to customer focus, gaining control over process complexity, and improving performance and response times for targeted services or processes. It could mean changing the ways things are done; reducing the amount of handling involved; reducing delay times; or introducing smarter systems to manage operations.
Australian Bureau of Statistics (ABS) data suggest that material and water costs for businesses range from 10% to more than 50%, or an average of more than 30% of business revenue. Data obtained by Sustainability Victoria from its resource efficiency program which worked with businesses between 2012 and 2015, and other national and international research, backs this ABS data.
The high cost of materials is especially true for manufacturers, where it was found that for some businesses (e.g. plastics and chemicals and furniture manufacturers), the cost of materials can be as high as 80% of operating costs. For example, wastage from production lines can cost manufacturers tens of thousands of dollars per year, especially when the ‘real cost of waste’ is considered. The real cost of waste accounts for costs associated with the purchase of the materials, labour and handling costs, and the operating costs to handle or finish the wasted material (energy, water, transport, fuel).
Sustainability Victoria’s data has shown that the real cost of wasted resources is anything from twice to hundreds of times the cost of merely disposing of the waste. See case studies below.
For manufacturing businesses there are opportunities to save tens of thousands of dollars per year by reducing the amount of materials used, reducing the amount of wasted materials, or producing more with the same amount of materials.
It is recommended that businesses interested in reducing materials or energy costs conduct a mapping exercise to understand their operations, resource intensity and waste hot spots. Although not essential if good in-house expertise exists, an energy and/or materials assessment will help identify opportunities to improve efficiency and provide an estimate of potential savings and associated costs.
A global leader in process optimisation is Toyota. Its ‘Kaizen’ principle of improving or changing the business’s operations to always drive innovation means that Toyota is always looking for ways to reduce the amount of materials, energy and water it uses, reduce the amount of energy, materials and water wasted, and to produce better products.
Implementing process optimisation
A typical implementing process optimisation involves the following steps.
- Map the business’s current processes or operations. This will help understand processes, resource intensity and wastage. Involving any in-house experts in this activity is crucial as much of the detailed knowledge about the processes is often not documented, but is knowledge held by staff. See the Lifecycle process mapping tool and other resources.
- Identify the process(es) to be optimised. An energy or materials assessment conducted by a consultant will identify the process(es) to be optimised. The consultant may also be engaged to assist with implementation of process improvements.
However, there are ways to identify processes to be optimised in-house:
- Use the process maps produced in step 1 to help identify what process(es) are highly resource intensive and where wastage points are.
- Talk to employees, not just operations managers but operators, as they will have a good idea of operations that could be improved and waste hot spots.
- Look in waste bins to see what high value wastes are being generated in quantities, then trace these back to processes to identify why wastage is occurring.
- Plan the optimisation process. Once the process/s to be optimised have been identified, develop an action plan which:
- Defines the process boundaries.
- Defines the scope, objectives and timeframe of the optimisation initiative.
- Establishes a process optimisation team including a champion, a team leader and the people that do the work (may also include an external consultant). It will also be referred to throughout the implementation process, to ensure the optimisation initiative is still on track.
- Determine the metric to measure success and conduct baseline measurement. It’s important to establish at an early stage how the performance of your processes will be measured, and what the starting point is (base line). Metrics would cover facets such as reduced quantity of input materials, spoilage rates, energy consumption, and product quality. In the service industry it could involve delivery time-frames, reduced cost of delivery, complaints to your customer service area, or the number of times a service has to be repeatedly provided to a customer.
- Conduct an analysis to determine why a process is especially resource intensive and/or why wastage is occurring. To maximise returns for time and money spent it is important to understand the root cause of problems. Manufacturers should focus on visible symptoms such as poor quality, rejects and spoilage. For service industries it may be based on ‘gut feelings’ or on trying something that worked for another organisation. However, without understanding the root cause of performance problems, actions taken may not result in any improvement.
- Develop a set of actions/solutions to eliminate or reduce the identified root causes of problems. You should involve your subject matter experts, as they know the processes in detail and often have already thought about the problems and possible solutions.
- Prioritise actions. A value/effort exercise here will help to identify actions that may have low value. Again, subject matter experts will need to be involved here, to ensure all the essential elements of the process are retained.
- Select and recommend the best action/s to deliver the desired process optimisation. Develop a business case clearly stating the cost of implementation and the benefits to be delivered to get approval from senior management for the actions to proceed.
- You may wish to pilot the selected action/s to validate that you will actually achieve the benefits identified and to fine tune as required.
- Refine the actions required based on the outcomes of the pilot and plan the roll out including any staff training required.
- Monitor and evaluate the optimisation.
Sustainability Victoria has a number of published case studies featuring businesses across many sectors, many of which have carried out actions to improve the efficiency of their operations.