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5 Manufacturing Errors That Kill Your Profits

ByKen Gosnell,
business.com writer
|
Sep 08, 2019
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> Business Basics
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Are little errors in your production process adding up to hurt your bottom line?

Unexpected or uncounted errors can sabotage the success of a company and its leader. Any number of errors can also hurt production and profitability. When companies look to grow profits, they can turn the focus to improve management to ensure tasks are being done with excellence and not errors. 

To improve performance and become a highly profitable company, consider the five places where mistakes are most evident. These five areas are what this author calls "the fatal five."  

1. Processing errors 

These are errors made by individuals who do not follow standard operating procedures or companies that have never established set procedures and clear processes to follow.

Clear standards are essential in the error reduction process. Many companies continue with a high level of errors because they have no model to set the standard for production or performance. Helping the whole team commit to the standard is a vital but often overlooked component of small businesses. A necessary step in overcoming processing errors is to explain to all team members why the standard process has been created and why it is essential that the team member follow it.  

Great companies work to build effective and repeatable processes. Companies that spend time on process improvement often find a higher level of buy-in from employees. When employees are engaged in following and then improving the processes, a company will realize real profits and a reduction in processing errors.  

2. Part errors 

Equipment and its components can and will fail. Every item and every person has a limited production capacity. Companies experience a higher level of errors when people or equipment are pushed past their capacity to produce. When a part has reached its capacity, it is doomed to fail.  When people are past their level of capacity, they also tend to make more errors. 

It is imperative that every leader and every organization know which parts and people are critical for success and what the limits of those vital parts are so that a plan can be put into action before unnecessary errors are committed. The proper care of equipment can extend its life and usage. Team members should be trained and encouraged to extend the life of equipment, and treat it carefully so that more can be produced with fewer errors.  

3. Production errors

Companies that wish to provide continuous operations will learn the art of redundancy. Smooth operations occur when every aspect of production has a backup in case of failure. A backup or contingency plan ensures that production won't lag if something goes amiss. 

Many things can hurt an organization's production, from a late employee to a breakdown in the system. To ensure smooth operations, emphasize the critical aspects of production. Smooth production happens when strong plans are in place to keep production moving. Good processes and good planning make for great companies. CEOs and leaders should review production methods and metrics to ensure operations are running at peak performance.  

4. Portion errors 

Errors can happen in production when a wrong measurement causes a machine breakdown or stoppage of production. Signs and checklists are two excellent tools to help employees determine what portion sizes should be used in various equipment along the production line.  

Signs in a workplace can be a simple solution to spread awareness of how to operate equipment effectively. They should contain the key messages that will help team members stay focused and complete the task at hand without placing the wrong part or wrong amount of a part in a piece of equipment.  

A simple checklist can go a long way in helping people take the right action or follow through to the next step. Checklists should be placed along the production line to serve as a tool for any employee running a piece of equipment.  

5. People errors 

People errors are often the least expected and the most costly. Sufficient training and clear processes can reduce the element of human error, but no company can avoid errors from individuals forever. What you can do is learn from these human mistakes and develop stronger processes to reduce future errors. One tool that has proven effective in reducing individuals' mistakes is the concept of poka-yoke.  

Poka-yoke: Become an error-reduction engineer

The idea of poka-yoke (poh-kah yoh-keh) was first discovered by an industrial engineer for Toyota named Shigeo Shingo. His goal in poka-yoke was to reduce the number of errors in the Toyota production to zero. Shingo was passionate about reducing all errors in the production process.

One statement that communicated this passion is when he wrote, "The most dangerous kind of waste is the waste we do not recognize." It is good for companies to track errors and to become aware of where errors are happening in the production process. 

Poka-yoke is the process to prevent mistakes and, if possible, eliminate them from the final deliverables. Many manufacturing companies have used this process, or one closely related to it, to enhance their performance.

Poka-yoke can be used in many industries and processes and is an excellent model to consider for reducing errors in your company or processes. It's a straightforward process with six steps:     

  1. Establish a perfection model or strong standard to measure against. In other words, your company should examine the goal for production and describe that goal for your whole team in clear and concise terms. 
  2. Examine all the ways that your process has previously failed, both during and after implementation. It is also wise to create a list of all potential failures you can think of.   
  3. Expand possible solutions through the Five Whys question process to find the root cause of the original failure. If you're ever going to successfully reduce errors, the root cause must be identified and corrected. 
  4. Employ corrective action. The use of a sequencing method or a checklist that highlights the complete process might be the most useful course. Another possibility is to commit to a consistent action that is triggered when a certain number of errors have been made. 
  5. Evaluate outcomes through testing and documenting actual results and real numbers.   
  6. Inform your employees, operators and supervisors of your findings during performance reviews.

There are many ways to apply the poka-yoke model in service businesses. A focus on reducing errors can lead you down the path to turning around a poorly performing company. 

An example of this process in practice is Delta Air Lines. CEO Ed Bastian developed a turnaround strategy using the poka-yoke model that led Delta back from the brink of bankruptcy to sustainability. In 2010, Delta canceled thousands of flights due to mechanical and maintenance issues. Under Bastian's leadership, the company understood that it had to reduce the number of canceled flights to improve its profits and bottom-line performance. After reshifting the focus to reducing maintenance issues in planes, Delta reduced its number of flights canceled due to maintenance issues to less than 100 in 2018. Great plans lead to great performance.

Errors and mistakes can always be reduced. A focus on numbers can help you measure your execution and progress toward being a zero-defect company or organization. How people have come to make errors is also essential to consider as you strategize on how to become an error-free organization.   

Ken Gosnell
Ken Gosnell
See Ken Gosnell's Profile
Ken Gosnell is the CEO and Servant Leader of CEO Experience (CXP). His company serves CEOS and leaders by helping them to have great experiences that both transform them and their organizations that enable to go further faster. Ken is the publisher of the CXP CEO Executive Guide that is designed to help leaders learn faster by encouraging to give themselves a monthly learning retreat. His monthly CEO retreats have helped thousands of CEOs and their leadership teams to enhance strategic, operational and people accomplishments. He is an author, keynote speaker, executive coach, and strategic partner with CEOs and successful business leaders. Connect with @ken_gosnell on Twitter.
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