Furniture Manufacturer Achieves Up to 63% Productivity Gains

Key Results 

• Productivity gains of 21% and 63% were achieved at the two plants. 

• A significant cultural change was observed, including a greater sense of urgency and more proactive management. 

• An effective management control system was implemented across the organisation. 

Background 

Established for over 50 years in Cebu, the Philippines, the client is a privately owned furniture company. Its primary market segments are the high-end export markets in countries such as the United States and Europe. While the client had enjoyed healthy margins for several years, the emergence of Chinese and other Southeast Asian manufacturers created a highly competitive market. Consequently, the company sought to reinforce its leadership position and achieve superior total returns on investment for its shareholders. 

The Challenge 

Despite a history of success, the client recognised the need to adapt to an increasingly competitive landscape. Their existing processes, while often in place, were not consistently well managed, exemplified by shop floor control systems. Some critical areas, such as reliability-centred maintenance, were weak. Critically, the existing operational design was not effectively driving improvements in productivity, yield, quality, and cycle time, nor was it designed to ensure effective actions followed root cause analysis.  

A passive managerial style was prevalent, with supervisors undertaking excessive manual work and spans of control being low in crucial areas. Furthermore, routines for identifying training needs and enhancing staff capabilities required improvement. A lack of clear direction, particularly concerning customer requirements, contributed to issues with alignment and the cascading of key measures.  

Culturally, individuals showed little emphasis on understanding and meeting customer needs, and low accountability was evident, with problems often attributed to other departments. Decision-making processes were challenging, marked by finger-pointing and a lack of teamwork. 

What We Did 

To address these challenges, Renoir Consulting implemented a 30-week “Operations Excellence” program across the client’s two plants. A core strategy involved breaking down barriers between the two sites by establishing project structures with members from both. The project was overseen by a Steering committee headed by the organisation’s President, who also managed Sales & Marketing. Three ‘Management Action Teams’ (MATs) were formed in Production, Planning and Standards, working with the project taskforce to implement improvements. 

1. The Production MAT’s initial focus was on implementing an effective shop floor control mechanism that reflected daily performance. A Management Control System was introduced in all production areas, capturing hourly production throughput. Supervisors and line leaders received training to review this system and take corrective actions to minimise negative variances.
2. The Standards MAT was divided into four key areas: Product Research and Development, IE and PE. Management Control Systems, with an emphasis on the planning process, were implemented across these areas.
3. The Planning MAT developed and implemented a Daily Rolling Plan for production planning to improve control. Previously, plans were not updated frequently enough for efficient decision-making, but the daily plan ensured managers and supervisors had current information, enhancing their decision-making. 

Crucially, training was conducted at all organisational levels to support the implementation of the Management Control System. This training was particularly vital for supervisors and line leaders to ensure sound decisions and corrective actions were taken plant-wide. To ensure a unified strategic direction, Organisation Balanced Scorecards were developed and implemented, with three tiers rolled down across both plants, focusing on critical Key Performance Indicators (KPIs). 

The Results 

The “Operations Excellence” project yielded significant positive impacts for the client. Quantifiable outcomes included substantial productivity improvements, with one plant achieving a 21% gain and the other a remarkable 63% increase. Beyond these figures, the project instigated a significant cultural transformation within the organisation. This included a heightened sense of urgency and a shift towards more proactive management at all levels. 

Additionally, the implementation of an effective Management Control System provided a robust framework for monitoring performance and driving continuous improvement. Furthermore, the project led to the development of a team of skilled internal change agents (the Project Taskforce), equipped to sustain the achieved improvements and lead future initiatives. Senior managers viewed the project as instrumental in changing employee behaviour and increasing the managerial professionalism of staff. The continuous improvement team established during the project served as a valuable tool for ongoing progress.  

Overall, the project established a control and review framework with a strong emphasis on effective planning and short interval control on the shop floor, managing both tangible and less tangible indicators such as organisational effectiveness and human capital.