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Cost reduction and operational excellence, but is safety paying the price?

by Adam Kurdas

cost reduction at the cost of safety in Australia

There’s little doubt that Australian manufacturers are doing it tough.

The cost of manufacturing in Australia is high comparative to the manufacturing mecca of Asia, industrial relations are complicated, we’re receiving more imported products and retailers are driving an agenda that’s squeezing manufacturer’s margins. This is one of the most challenging environments that the manufacturing sector has ever seen.

In response, manufacturers have widely embarked on driving large scale cost reduction and operational excellence programs. They’re looking at every crack and crevice of their businesses to become leaner, more efficient and highly cost effective. We’re seeing this at the coal face; whether it be when we’re interviewing senior operations leaders or when we’re working with them to support their businesses, their message is loud and clear:

“we need to do more with less”

Worryingly though, there’s an undercurrent of something significant missing. Amidst the desire to achieve the lowest cost and embedding best practice operational excellence programs, safety appears to have taken a back seat. In over a decade working in manufacturing and having hundreds of meetings with senior leaders, safety has been priority number one for the majority of that time. When asking operations leaders what they were there to deliver, the immediate response would normally, and rightfully so, be something in the order of ‘sending people home, unharmed, at the end of a day’s work is mission critical’. Zero harm was atop the agenda and this response was one of the major signs of a great leader in operations.

I fear the narrative and priority is shifting. Operations leaders, through fault of their own or by direction of executive teams and boards, aren’t talking about lead focused safety programs as a first port of call, if at all. It’s all about cost, cost, cost! I understand, manufacturing is a commercial enterprise. Organisations exist to generate profit. Ideally, they do so by having a low cost base and highly efficient processes. But in the search for profit in response to a more challenging Australian manufacturing environment, is it fair on the people that help deliver those profits, to put their safety aside? Again, it’s an undercurrent right now, but it has the potential to turn ugly if gone unchecked.

If you’re an operations leader, ask yourself this. What are you doing to ensure that your people’s safety remains your priority, regardless of the pressures to deliver more for less?

Adam Kurdas

Associate Director