How Can Manufacturing Increase Profits and Reduce Waste?

New efficiencies are possible by realigning organizational structure

by N. Satishkumar

Roundtable_0813In an organization’s functional terminology, we refer to “money” as the finance function and “manpower” as the human resource department; “machineries” represents the plant and “materials” stands for the inputs required for the final product. In our present organizational set-up, the operations/manufacturing, engineering, quality control and R&D are combined under machineries, and procurement, warehousing and logistics are combined under materials. A department head oversees the specialized function of each of these four major resources. We have marketing and sales as a different function, by itself.

A new business management concept — in this case tailored to manufacturing — Materials Resources Deployment, or MRD promotes a paradigm shift in the present organizational structure that would ultimately help in the efficiency of these vital business functions, resulting in higher productivity, reduced waste and increased profit.

The MRD Concept recognizes marketing, finance and HR as indirect materials users. These would remain as their separate departments. A newly created MRD department would bring together the four major direct materials resources functions of manufacturing/operations, engineering, materials and sales.

The coming together of these four departments collapses the supply chain within the organization to form a seamless department with individual functional responsibility and combined responsibility for the other three functions. This results in synergizing the abilities, strengths, capabilities, knowledge, experience and expertise of the leaders to perform as a team and achieve results better than they are achieving as individual departments and functions. In other words, the best of technological and commercial brains would be working together and taking charge of the entire materials resources of the organization.

This business structure also helps the environment. Pollution of the environment by the industry is often caused during the process of manufacturing. At a macro level, we can have rules and regulations, penalties and legal action on the polluting industries. However, at a micro level, we must look at how we can reduce or remove the problem from the pollution creation point. This is where the MRD department comes into play.

Today, we have a scenario in any given organization in which, if we ask the operations or manufacturing why they have waste in any form in their process, they will cite inefficiencies in the engineering department not providing them with the right technology. Engineering will see a deficiency coming from manufacturing and operations in the level at which the process is operated, and from procurement in lack of access to the right technology manufacturers. Procurement will cite its limited budget.

But under the MRD Concept, all these functions come together under one head, providing opportunity to brainstorm and debate about the right technology before procurement. Leaders can ensure selection of a process that will minimize process pollution. Even the unavoidable pollution that still occurs will be looked into by the MRD department for its reuse, ability to be sold for reuse, or disposed of in an environmentally friendly manner.

With all of the concerned functions working together, actions taken will not be a one-time shot, but a sustained effort that will avoid waste and pollution as well as increasing profits through improved efficiency and supplier-customer relationships.

N. Satishkumar, author of recently released The MRD Concept, has worked in the materials and supply management field for more than 25 years. Experience in various industries that include engineering, electrical, electronics, chemicals, FMCG and hospitality, has given him a wide-angle view of the functions and applications of many industries. Satishkumar has professional qualifications in the fields of materials management, business management and foreign trade. He currently heads the Materials Management division at a chemical company in Kuwait.

 

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