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How Productivity Equals Profitability in Manufacturing

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  • Indium Corporation
  • Just 1% more productivity in a factory line can equate to 3% more profitability. Dr. Ron Lasky, Senior Technologist at Indium Corporation, explains to interviewer and SMT Industry expert Phil Zarrow how to make your productivity equal profitability.

    Phil Zarrow: Ron, you’ve been interested in productivity for quite a while. Can you tell us how this interest started? 

    Ron Lasky: I’ve been interested in line balancing for quite a while. And so, when I would tour factories, as part of my job, I would usually go out and look at the component placement machines to see that they were taking the same amount of time. And, as you’re not surprised, I found it very seldom where the lines balanced, that was one thing. But often when I would go out to see this on the lines, the lines weren’t running, and it just caused me to be curious, you know, how often were lines running?

    Phil Zarrow: Was there a particular event that brought this interest to a head?

    Ron Lasky: Yes. Somewhat later in time, I was asked, as part of my job, to set up a tour for some new executives. They really didn’t know much about electronic assembly, so we wanted to show them the assembly line running. So I got with a company I knew that had six assembly lines. And we took the executives there. We arrived at about ten and wanted to walk out on the shop floor to show them an assembly line and none of the six were running. So, one of the managers came out and said well, “Why don’t we sort of take a break, we’ll go into a little conference room and tell you other things about our company.” So, 45 minutes later, we came back, and I’m sure you could guess, none of the lines were running. So, we then decided to go for lunch. It’s now about noontime. We went for an hour lunch and came back, hoping to see a line running at one in the afternoon, and none of the lines were running. So we left the facility with none of our executives having seen a line running and we were there over three hours, so it just caused me to ask myself the question, “How common is it that lines don’t have good uptime?”

    Phil Zarrow: So how strong an effect does productivity have on profits? 

    Ron Lasky: As you’re probably aware I’ve developed some cost estimating software called ProfitPro™, and I use this to show that, say on an assembly line, one that’s pretty productive, it’s producing about, say 32 million dollars of product a year, let’s say we improve the productivity just one percent. So, if the line is producing X number of circuit boards a year, we make it so we improve the productivity so it goes to X plus one percent. So, most people would think right off the bat well, that’s going to improve profit about one percent, because I’ve got one percent more to sell. But it actually improves profits by about three percent, because we have the rent for the facility, we have the pay for the workers, and the power coming into the company, all of those are constants, so we’re producing more product with constant costs and actually makes the profit go up, not one percent but three percent.

    Phil Zarrow: In light of this, how should assemblers work with their materials and equipment suppliers, Ron?

    Ron Lasky: One of the things you should ask your materials and equipment supplier, since both of these can affect productivity, is, “If I buy your product, how will it affect my productivity?”

    Phil Zarrow: Where can engineers find additional information on productivity?

    Ron Lasky: Well, as you’re aware, I have a blog at Indium Corporation that they can look at where I often discuss these topics. But also, if they have a particular question, they can just send me an email at

    Phil Zarrow: Excellent. Ron, thank you very, very much.