Hiding deep in the tall grass of profits are opportunities to better attain more profitability. If leadership recognizes this fact, they can ensure each area in manufacturing operations contributes to overall profitability. Supply Chain can tighten relationships with ever-improving suppliers that bring competitive advantage with them. Engineering can design and execute parts rationalization strategies to reduce material and labor costs, as well as provide a quickly available outstanding product.
Production can identify potential for quality, supply chain, and productivity improvements. After all, they comprise everything you make. Distribution, quality, resourcing...the list goes on. Each can help you succeed.
But, has leadership considered the value of safety? Often viewed as a cost center in most organizations, safety and health can be turned on its head to increase the bottom line. When leaders look at their P&L, do they consider the negative impact of workplace injuries? Investing in strategies to avoid them can lead to a considerable ROI.
Everyone agrees that safety makes good sense from a moral standpoint, but it also makes good financial sense. If a worker is injured on the job, it impacts the company in terms of direct medical costs, lost man hours, increased insurance costs, workers' compensation premiums, indemnity, legal costs, and numerous indirect costs.
These direct and indirect costs can have a tremendous impact on a company’s profitability. For example, a company with a 10% profit margin would need $100,000 in additional sales to cover the cost of a single $10,000 injury. Even with high profit margins, no one wants to see their hard work wasted paying for preventable injuries.
Two expensive reasons to work proactively on safety programs are Worker’s Compensation and OSHA Compliance. But, a more profitable reason is the connection between safety hazards and operational wastes.
“One of the hardest tasks of leadership is understanding that you are not what you are but what you’re perceived to be by others.” – Edward L. Flom
Many manufacturers applying lean thinking are aware of the eight types of waste commonly found in production environments: Defects, Overproduction, Waiting, Not Using Employees/Ideas, Transportation, Inventory, Motion, Extra-Processing. Often known by the acronym DOWNTIME, each type of waste is somewhat different, but ALL have one thing in common - they add no value to the product.
Non-value added activity can comprise up to 95% of a process! It’s important to identify those NVA activities and eliminate or minimize them. Waste is often disguised as Scrap/Rework, Machine Setup/Downtime, Supplier Lead Times, Inventories, Lost Time/Injuries/Accidents, Material Handling, 3rd Party Inspection, Inventory Storage, Counting Inventory, Calibrations, Order Processing Time and Low Morale. The goal of lean is to deliver the highest possible quality, at the lowest possible cost, with the shortest lead time possible.
The question lean thinkers are constantly asking is, “Is it value-added?” Now, the question becomes, “Is safety value-added?” If hazards are waste, then as shown above, we can agree that safety is, too! The connection to make is that since hazards are NOT value-added, any “lean” effort should be engaged in identifying and correcting safety hazards.
Lean and safety can indeed work together to expand the profitability of your organization. The Lean and Safe philosophy, developed by Damon Nix at Georgia’s MEP, is that most safety hazards have a lean waste source as a root cause and most injuries occur during the performance of non-value added activities.
The problems that plague productivity and quality in organizations are inextricably connected to safety hazards. As leaders of the lean and safety movement have noted, “You cannot get lean without safety.” Operational wastes and safety wastes are highly correlated. Just as “DOWNTIME” summarizes the eight common operational wastes, the acronym “SAFETY”, developed by the Georgia Tech MEP, categorizes safety wastes as:
- S – Slip, Trip and Fall hazards
- A – Actuation, Machine, Laceration and Crushing/Pinching Hazards
- F – Fire and Explosion hazards
- E – Ergonomic hazards
- T – Transportation hazards
- Y – Yuck; Hazardous Substances and Atmospheres (chemicals, electrical, etc.)
Here are some examples to demonstrate how safety wastes have a strong correlation with operational wastes:
- Trip hazards (Safety) may be correlated to excess or cluttered inventory (Operational)
- Bypassed machine guard hazards (Safety) are often related to jams and clogs during processing (Operational)
- The occurrence of a fire or explosion (Safety) may be related to under-maintained equipment creating excess heat or sparks (Operational)
- Awkward postures (Safety) are a sign of a poorly designed workstation that leads to unnecessary motion (Operational)
- Forklift hazards (Safety) such as vehicle accidents or product spills can be related to both non-value added transportation of materials and large batch production models (Operational)
- Exposure to chemicals (Safety) during cleaning operations can be related to using unnecessarily toxic products or higher concentrations of products than required (Operational)
From the other perspective, operational wastes can also strongly correlate with safety wastes:
- Poor quality (Operational) leads to rework that could in turn lead to increased repetition and frequency or even more exposures to machine operations (Safety)
- Welding more components than are needed during a shift (Operational) increases the operator’s exposure to atmospheric hazards (Safety).
So, how do you make safety a value-added part of your bottom-line work? Start by integrating four basic principles into your organization’s continuous process improvement system.
- See safety waste – this is critical…safety and health hazards are waste.
- Connect those safety hazards to operational/process sources
–(Question the process first, instead of the employee.)
- Apply lean and safety principles to develop collaborative, integrated solutions. (Then go test them!)
- Ensure solutions hold all interests in alignment. (No safety solution is sustainable if it results in negative effects for productivity or quality.)
Decision makers cannot afford to overlook the impact of injuries/incidents on the company’s bottom line profitability. Effective safety programs don’t stand alone, rather they are integrally integrated into a company’s operational systems to maximize efficiency and improve bottom-line profitability.
We’ve all heard the slogan “Safety First”, encouraging the proactive prevention of accidents and incidents. Too often, companies are reactive to safety, and that can have a dramatic, negative impact on their bottom-line profitability. It’s a fact that it’s difficult to see some possible safety hazards when you’re deep in the throes of production. It’s best to seek the outside eyes of a Certified Safety and Health professional to help you assess the true state of safety in your workplace.