Business Management Articles
/ Manufacturing Management


by Rene T. Domingo (email comments to

In this highly competitive world, manufacturing concerns can no longer consider increasing productivity an option that can be waived or postponed. It is a must for survival. Inefficient companies find it hard to grow and expand; being wasteful, they require vast resources to achieve even a moderate rate of growth. They also cannot compete; by having a high cost of operations due to inefficiencies, they cannot price their products competitively and develop new products to maintain market shares. Low productivity is an internal weakness that makes companies vulnerable to internal and external threats and forces.

Low productivity is a silent, often unseen, malignant disease that afflicts both small and big companies. Even profitable and vast concerns can be very unproductive in much the same way that a rich fat man is not necessarily healthy. It is even worse in these cases since they do not feel their wastefulness which is hidden by their size and short-term prosperity. Thinking their size and resources would protect them, they continue confidently in their own tried and tested ways of doing things until an unforeseen environmental change or internal problem to which they could not adapt to renders them extinct like dinosaurs. As for weak and inefficient small and medium sized companies, they fall in numbers by the wayside unnoticed with the slightest change in the environment. Companies suffering from low productivity either contract in size due to continuous drain and wastage of resources or simply stop growing. In either case, they can no longer play in the business game and eventually foul out - especially to the more efficient and aggressive foreign competitors.

The heaviest burden of improving productivity is on the shoulders of plant managers, manufacturing or operations managers whom I shall from hereon collectively call "production managers". These managers have authority and responsibility over the biggest corporate resources that affect productivity: men, materials, and equipment. It is ironic, however, to note that many local companies continue to pay lip service to productivity by assigning mediocre men as production managers or by not giving them the appropriate training, support, and motivation to help them accomplish their very important mission. Like in America, the superstar managers are assigned to head marketing and finance - the glamour departments that are supposed to make money for the company. Those appointed as production managers as poorly trained and poorly paid engineers - as if production is just a job for a mechanic and not a manager. Successful companies in Japan and the newly industrialized countries of Asia have shown that by focusing their strengths on manufacturing resources especially the production management staff, they could gain a competitive edge in quality, productivity, cost, and technology that could win them market shares easily and destroy competition. This strategy explains why most Japanese company presidents come from production and are well-trained engineers and managers. Unfortunately, many of our local CEO's earned their promotion and experience from marketing and finance and therefore have very vague notions of what factory management is all about and more so on how to make it a competitive edge.

This disastrous bias against the production function and career partly come from our blind adoption of Western business practices that overemphasize the marketing function (because it yields results) and finance function (because that's where the money is). Production is just supposed to follow and execute orders. After taking a beating from the more production and technology-oriented Japanese competitors, Western companies are beginning to talk about quality, productivity, and "just-in-time" systems and have started to slowly retool their organizations to rediscover the production manager and function. Sadly, many local companies have started to focus on productivity not because they themselves realized its importance, but because American businesses have started doing so.

Another explanation for this continuing bias against production is the nature of most MBA programs - here and abroad - that overemphasized marketing and finance subjects so much so that even students that are engineers or production managers are attracted to marketing and finance careers after graduation. This localized brain drain results in a tremendous loss to the manufacturing industry and the national productivity drive. Most MBA programs have weak production faculty and have continued to cater to the industry's excessive demand for more marketing and finance managers.

Finally, many owners and entrepreneurs are the "get-rich-quick" or "bottom-line" types that are more excited with short-term gains rather than long-term concerns like productivity, technology, and innovation that are vital for continued long-term survival amidst relentless foreign competition. To them, production is either too complicated and "dirty" to dabble with or too simple to deserve their attention and time. They find it difficult to see opportunities to make money in manufacturing that they can easily find in increasing market shares and in financial manipulation. In fact, however, they could make much more profits in reducing production cost than in increasing sales - a one-peso cost reduction in unit cost translates into pure profit from all current and future sales volume, whereas increasing market share will increase profits only by as much as the margins from the incremental sales volume.


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