A Real-time boost for productivity

By : Jim Pinto,
San Diego, CA.

Today, real-time enterprise applications are cutting through several layers of previous inefficiency, allowing all segments of a business to interact in ways that were previously unthinkable. The resulting productivity boost is perhaps the key factor behind the so-called "jobless recovery".

A version of this article was published by:
Automation World, April 2004

The fundamental purpose of automation is to improve productivity – facilitate increased output with reduced costs. The intrinsic value of each and every piece of automation equipment is its ability to provide increased productivity for the customer.

Productivity has now become a global race, an international competition between regions and nations for the single reason that it is the source of the wealth, the key to improvements in living standards. Those who can make things cheaper, faster, better – win!

Automation brought less-than-expected productivity gains

For a long time, everyone thought that automation brought productivity improvements through reductions in labor. But the results simply did not emerge. Head-counts were not reduced sufficiently to keep pace with the additional costs of automation equipment – the original investment, plus operator training, maintenance, upgrades, etc. And wage inflation all but nullified productivity results.

In past decades, automation investments were typically calculated to break-even in several years, by which time the hardware and software were often outdated. In the meantime, things like operator training and procedural changes took several years to implement, and the time-delays caused performance delays. Adaptation to changing simply did not occur fast enough. As a result, in the 70’s and 80’s, after the start of widespread automation in the US, productivity inched up slowly, perhaps 1-2% annually – too slowly to be significant.

Real-time makes a difference

In the late 90’s, productivity growth rates started to move ahead and productivity has improved steadily – as much as 3-5% and more – since the start of the new century. The difference is significant. And it comes, not from manufacturing automation, but from inexpensive and effective information technology – the ability to operate in real-time.

Today, real-time applications are becoming widespread. Web services allow integration and delivery of real-time information to all parts of the enterprise. Low-cost, effective applications are available that allow cooperating suppliers and users and to monitor, analyze, optimize and adjust business processes in real-time.

Real-time enterprise applications are cutting through several layers of previous inefficiency, allowing all segments of a business to interact in ways that were previously unthinkable. The goal of the real-time enterprise is to act on events as they happen. It is all the old concepts of customer-driven marketing, on-line process automation, just in time delivery, and tactical business adaptation all rolled into one. It's about getting information in and out quickly, monitoring the business as it happens, and making quick, effective, agile decisions.

At operations level, the primary benefits of real-time capabilities are improved customer service, reduced inventory, risk reduction and lower processing costs. At the executive levels, the clear benefits are faster exploitation of emerging opportunities, less damage when things go wrong and increased agility when dealing change. At the leadership level real-time operations allow faster implementation of plans that must adapt to meet new opportunities and threats.

The root cause of the "jobless recovery"

The drive for real-time operations and services is reshaping business today. The resulting productivity boost is generating startling results. Indeed, this is perhaps the key factor behind the so-called jobless recovery. It’s not jobs being eliminated by automation, or jobs going offshore. It’s just that many jobs have simply disappeared, eliminated by productivity improvements.

Business Week estimates that 1% productivity improvement can eliminate up to 1.3 million jobs. With productivity growing at an annual rate of 3-5%, the reason for the jobs shortfall becomes clear. According to Forrester Research, of the 2.7 million jobs lost over the past three years, only 300,000 have been from outsourcing.

Management challenges

The best results have come from completely re-thinking the business and organization in the light of real-time capabilities. Productivity comes from automating routine decisions, while giving workers the information (and the authority) needed to make on-the-spot decisions, in real-time. The most successful are those who combine understanding of overall objectives with the ability to implement information-technology solutions to meet always-changing needs.

To sustain this productivity surge, today’s managers must develop incentives that encourage people – from design engineers, to manufacturing process planners to production workers – to be more creative, adaptable, willing to change.

The challenge for today’s managers is to use real-time operations and services as a means to generate a spirit of change and innovation throughout the organization. It’s no use going only partly through the process, using new systems to automate functions in the home base, while chasing cost-reductions through offshore production.

Inevitably, routine jobs that call for simply following policies and procedures will simply be shunted offshore, where cheaper labor is all that is required. But, it’s an innovation-driven workforce that will continue to generate productivity growth. The companies that succeed in this new age will be those that understand how to combine and coordinate new organization and new thinking in the real-time environment.

The concept of real-time has been a dream for a long time. But now, technology has evolved and penetrated to a level of usage where it is inexpensive, effective, practical and generating immediate results. Now, that’s productivity!

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Copyright 2003 : Jim Pinto, San Diego, CA, USA