1. 1 Siecap Logistics © 2014
A STRATEGY TO INCREASE ORGANISATIONAL PRODUCTIVITY
Abstract
As organisations recognise the need to increase productivity rates they are increasingly
looking to broaden their understanding of the drivers and activities required to achieve this
goal. To assist in this process, this whitepaper will step through some of the influences and
drivers of productivity together with strategies to improve.
Productivity is the efficiency with which an economy transforms inputs
(such as labour and capital) into outputs (such as goods and services).
When a nation achieves productivity growth, it is able to produce more
goods and services from the same quantity of labour, capital, land,
energy and other resources. In turn, improved production efficiency can
generate higher real incomes and lead to long-term improvements in
Australia's living standards - . ABS Oct 9 2012
Since the collective productivity of an economy is the summation of its individual elements
the above statement is as equally relevant to an individual organisation’s understanding on
steps required to increase its own performance.
Productivity is essentially a measure of how much output producers
obtain from a unit of input, and thus is a measure of productive
efficiency. Productivity increases when producers use a lower quantity
of inputs to produce a unit of output, or generate a larger volume of
output from a given bundle of inputs. - Productivity Commission Update
May 2013
As this paper steps through the productivity journey it is worthwhile taking into account as a
first step that the influencers on productivity are as much about environmental factors as
they are about dry measures of inputs and outputs. For instance consider in the Australian
context the following;
 Productivity in Australia continues to lag compared to other regional markets.
 A significant component of the productivity gap relates to the tyranny of distance.
 At best Governments can encourage productivity through establishing a benign
regulatory environment.
 A key component of addressing productivity shortcomings lie in a creating flexible
and innovative organisations.
 Since many organisational processes have evolved as opposed to have been
designed they contain a substantial element of waste.
 By applying a structure that challenges process a means to address productivity
shortcomings is enabled. For instance harnessing the power of Business Process
Re-engineering will lead to the development of innovative business processes that
facilitate productivity growth.

2. 2 Siecap Logistics © 2014
An Overview of Productivity
.
In the continuing debate over the competitiveness of nations, no topic
engenders more argument or creates less understanding than the role of
the government……..Government’s proper role is as a catalyst and
challenger; it is to encourage—or even push—companies to raise their
aspirations and move to higher levels of competitive performance, even
though this process may be inherently unpleasant and difficult.
Government cannot create competitive industries; only companies can
do that.
And reinforced by Saul Eslake.
‘At the outset, it is important to keep in mind that productivity
improvements occur as the result of decisions taken by and
implemented in enterprises and workplaces, not as the direct result of
public policy initiatives.’
However even where there is an understanding that quantum changes in productivity have
to driven at an organisational level Australian wherewithal to achieve this is lacking. This is
by reason of a lack of understanding of what are the productivity drivers and what are the
approaches, tools and resources required to solve and to sustain the achievements.
For an example of one of the factors impacting on Australian productivity was highlighted by
Bryn Battersby in his Treasury submission ‘Does Distance Matter? The effect of geographic
isolation on productivity levels’ this work sought to confirm the truth of the adage concerning
the ‘Tyranny of Distance’. Indeed the finding was that around 45% of the productivity gap
Despite recent good news from the RBA
relating to a recent increase in labour
productivity performance from 0.7% per
annum to 2% per annum, the reality is our
Asian competitors are growing at rate of
between 3% (Vietnam) and 8% China. As
a consequence Australia continues to fall
behind in this area. At the same time the
news for other productivity measures such
as capital or multifactor is no better.
Where does the solution to increasing
rates of productivity lie? Is it the role of
Federal and State governments? Is it as
simple as establishing a regulatory
landscape that frees up industry from
regulation and thereby automatically
increases industry competitiveness?
According to Porter in his book The
Competitive Advantage of Nations

3. 3 Siecap Logistics © 2014
between the USA and Australia was as a result of our geographic isolation. Given this can
this and similar other factors be overcome? Or should Australia resign itself to a low
productivity future?
Fortunately there are solutions. The May 2013 Productivity Commission Update identifies
areas within the conduct of an organisation’s activities that have a direct impact on
productivity performance. Some of which are:
• Company organisation, its management practices and work arrangements
• The resource allocation within the firm and associated prioritisations
• The flexibility by which resources are deployed and redeployed to meet altered
trading conditions
• The organisational capability to change and embed changes
Added to these should be Michael Porter’s observation that innovation is also key to
increasing productivity.
‘But when companies face a selective disadvantage, like high land costs,
labor shortages, or the lack of local raw materials, they must innovate
and upgrade to compete.’
In summary there is extensive material on factors that lead to suboptimal productivity. What
though are the practical solutions to increase and exceed productivity levels to beyond those
of our competitors?
The next section of this paper sets out to provide an overview of an approach that Siecap
deploys to support its clients increase their productivity.
Business Process Reengineering Overview
The first approach is through the application of Business process Re-engineering (BPR).
Traditionally the main approaches to process redesign have been BPR, Lean (5S) and Six
Sigma. In considering these Siecap supports the view that whilst these tools are
complimentary in terms of their end objective it is the application of BPR techniques that
achieves the greatest impact. This is because when setting out to achieve exponential
changes in organisational performance BPR is structured to consider the end to end
organisational perspective.
Whereas, it is the experience of the Siecap team that Six Sigma and Lean techniques have
typically been deployed to resolve functional or tactical issues. Therefore when
transformational change is required, BPR is the more appropriate tool as it represents;
‘the fundamental rethinking and radical re-design of business processes
to achieve dramatic improvements in critical, contemporary measures of
performance, such as cost quality, service and speed.’ 1
The implication being that change and improvement will be required as part of the redesign
otherwise Einstein’s definition of insanity will come to the fore once again.
1
Hammer & Champy ‘ Re-engineering the Corporation’

4. 4 Siecap Logistics © 2014
The way BPR supports the resolution of the areas identified by the Productivity Commission
and improve business value is by substantially enhancing current processes, or designing
new processes. Not only will this assist an organisation to achieve its stated goals it also
allows for outcomes be measured in terms of;
• Service Level – ensuring response times are appropriate
• Effectiveness – the extent to which processes achieve their intent
• Efficiency – operating at a cost that is below that achieved by ones competitors
When one considers that the majority of processes within an organisation were never
engineered at the outset but have evolved over time then clearly there is plenty of scope for
re-design. Further as a consequence of the process of evolution versus purposeful design,
many processes have evolved to include a substantial element of waste
7 Wastes
Defect
Inappropriate
process
Transportation
Unnecessary
inventory
Over production
Waiting
Unnecessary motion
Examples of which include;
• Mistakes which require rectification;
• Processing steps which are not required;
• Movement of employees and equipment without a clear (value adding) purpose;
• Employees downstream standing around waiting because upstream processes have
not been delivered on time;
• Goods and services which do not meet the needs of the customer;
• Maintenance of equipment which is not required
It is our experience that with rigour, 30% of the waste within a process can be engineered
out when re-engineering principles are applied.
How then is this to be achieved? A good start is to ask the ‘why’ question as it is a useful first
step to developing innovative processes.
Indeed the experience of Siecap’s
team members is that it is not
unusual to find that across the
spectrum of an organisation’s
processes, 70% will contain
activities that are wasteful and
add no value to the outcome. As a
consequence process re-
engineering has as one of its
objectives the elimination of
waste. The Japanese refer to
waste using the term Muda and
have gone as far as categorising it
into seven forms.

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‘Redesigning the ‘Why’ will generally produce more change, requires less
capital intensity & achieves more rapid reduction in the cost of delivery.’
Why is
this so?
What is
done?
How is
it
done?
Existing
State
Where
is it
done?
Future
State
Change
By
whom
is it
done?
Therefore this is the area from which the initial savings or productivity increases are to be
unlocked. Savings which when applied to fund strategic investment in innovation enable the
process to shift to longer term, low cost positions that provide strategic flexibility. Porter
again provides a useful summary of this concept.
‘But when companies face a selective disadvantage, like high costs,
…..they must innovate and upgrade to compete.’
Indeed this is reinforced when one considers one of the themes in Reserve Bank Board
member John Edwards recent book ‘Beyond the Boom’,
“In the end, succeeding in Asia is not going to come down to reducing trade barriers
but how effectively you deliver services and their cleverness.”
Yet is the totality of the strategy as simple as asking ‘why’? In reality the answer is no.
Invariably having posed the question and obtained an answer the natural inclination of the
time poor executive or the results driven manager is to immediately enter into ‘solution
mode’. This ignores the necessity to spend the time capturing and understanding the overall
process intent (what it aims to achieve and by which outcomes can be measured), its
dependencies and organisational interactions. As a consequence whilst some improvements
are possible the real opportunity to achieve a quantum rate of change is lost.
Therefore Siecap recommends that tackling the ‘why’ in a way that does not cause
unforeseen consequences requires the deployment of a structured review framework that by
unbundling and rebuilding the process allows for innovation to be included into the future
state.

6. 6 Siecap Logistics © 2014
Business Process Reengineering review structure
Review
• Busted processes have the common symptoms of requiring excessive information
exchange, checking and, are complex to understand.
• Critical processes are those that involve a direct impact on external customers. When
they are not delivering the required performance or outcome for a customer they should
be targeted for review.
• Viable processes are those where a positive outcome can be achieved that outweighs the
effort required to change.
If the process you are selecting for review passes one or all these criteria then it becomes a
valid process for assessment and enables the review stage to be commenced. Here Siecap
deploys a seven stage review structure that commences with establishing a baseline and
progresses from there to segmenting customers by needs, deconstructing the existing
process, developing future process design, modelling these solutions and culminates in the
implementation and performance monitoring of new innovative processes.
      
Direction Segmentation Modelling Definition Design Implementation Performance
Establish baselines around all key
value drivers e.g.
Revenues, Margins and Shares
Costs and Funds employed
Returns
Confirm change drivers and
strategies
Document/ collate As Is Data e.g.
Products and channels
Processes and Structures
FTEs
Skills and classifications
Technology (applications, networks,
systems, access media)
Infrastructure
For each segment and for each step
in the value chain the customer value
proposition (VP) and their decision
criteria needs to understood
 It is increasingly clear that
customers weight intangible
parameters at the interfaces
 Understanding these criteria
guide the decisions relating to
capital allocation, process design
etc
 This is significant in developing
competitive advantage in both
traditional and Non face to face
channels
 Value needs to be assessed
from the end back, i.e. analysis
of the customers customers etc
These understandings drive analysis
of the current and design of the future
The steps required to redesign the
business for the new competitive
environment are:
 Untangle & Unbundle both
vertically & horizontally
 Then redefine & redesign
Then optimally re-bundle and
implement
Each process entity is defined
using an identical
convention
This enables effective
comparison between process
entities and for their interfaces to
be mapped and their
dependencies and synergies to
be analysed
Improvement outcomes support
opportunity to investment in strategic
capabilities
 Sources of Improvement:-
 Process
 Management
 Structure
 Internal
 External
 Technology
 Automation
 Process Management
Implementation is always the risk.
The approach utilises some
innovative approaches to help
Future RE-Transition Risk
Analysis i.e. what is the cost if we
have got it wrong i.e.
circumstances change
Parallelism, i.e. using accelerated
operational improvement to help
fund and inform more radical
change
Holistic transition planning
Use of laboratories to prove
design and transition plan
Post Implementation performance
management takes the form of:-
 Process Controls and
Variance Analysis
 Commercial SLAs
 Unit Cost Processing
Management
As
Is
Cos
ts
Poten
tial
Savi
ng
To
Be
Cos
ts
Cos
ts
Increa
sed
Mark
et
Sha
re
To
Be
Reve
nue
Reve
nue
As
Is
Reve
nue
Having conducted number of reengineering project our team’s experience is that it is
imperative to keep at front of mind some key elements that are too often. Therefore when
process re-engineering consider the following ten rules;
• Do not be timid. Commence with envisioning the perfect process that yields the
greatest conceivable benefit and then design from scratch to capture them. This does
involve being bold and creative.
The first stage in considering where to
start is to be clear on which processes
to review and then avoid wasting time
on the rest. As a guide to the selecting
the processes to review, a handy rule
is to consider the selection criterion of
busted, critical and viable.

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• Consider who are the customers of the process? Can they be segmented by need?
Do you understand how they assess value and then design the process to ensure
that this achieved.
• Capture and document the inputs to the process? What are the triggers that start the
process?
• What are the outputs of this process? Do support the stated intent of the process?
Ensure all the outputs add value?
• What are the dependencies of the process? What departments inside the
organisation does the process “visit” or interface with? What other business
processes in the organisation does the process interface/interact with? What external
parties (suppliers, service providers) does the process interface with? Ensure these
are also considered in your design.
• Aim to minimize the number of customer interfaces. Ensure you build in adaptiveness
and responsiveness, robustness and durability
• Can one person perform the process without requiring decision hand offs? Put
decision points where the process is performed.
• Design to use skills and experience. To do otherwise is inefficient and demotivating.
• Ensure within the process activities are only performed once. Avoid checks and hand
offs, co-ordination and expeditor positions and processes, hierarchy and sub
routines.
• Always design for the future and not the past. Take a long term view of how the
business will evolve and design the solution to be readily adaptable to handle future
change.
By adopting this framework the journey to developing an enhanced enterprise model that
addresses productivity deficiencies becomes possible. Clearly it is by no means an easy
task yet if Australia industry is to achieve productivity growth comparable with those of its
regional competitors then this challenge must be taken up.
Our next paper will take you through the journey of how to address the challenge of the
tyranny of distance through the deployment of network optimisation strategies.
Please contact Siecap to discuss might assist you in developing your understanding on how
to effectively conduct a productivity enhancing process re-engineering project.
Geoffrey.knowles@siecaplogistics.com
Mobile – (0419 551 453)