The consultant documented how many employees were needed at a given time based on incoming materials. He found that employees were working five eight-hour shifts when they would be better utilized working three 12-hour shifts. The changes to scheduling increased the employee utilization rate from roughly 50% to as high as 90%.
Making the Most of Utilization
Utilization refers to the rate of an employee’s productivity, measured in hours. This rate is particularly important for any firm that bills a client for time spent on a project. Utilization is calculated by dividing the number of billable hours (eg, 30) by the total number of hours in a particular time period (eg, 40), and 30/40 = 75% utilization rate. It is possible to exceed 100% utilization if more than 40 billable hours are worked in a given week (eg, 50/40 = 125% utilization).
Issues with calculating utilization across multinational companies can arise when taking into consideration that not all countries embrace a 40-hour work week. In fact, New Economics Foundation, a British think tank, has proposed a 20-hour work week to deal with issues of unemployment, child neglect due to overwork parents, and carbon emissions from commuting. (Cross your fingers that proposal gets passed.)
In general, companies aim for an 85% utilization rate for technical personnel, with a 65% utilization rate for staff overall in order to be profitable. Of course, the higher the utilization rate for billable employees, the greater the profit margin.
OE to a Certain Degree
Employee utilization is part of the bigger picture of Operational Excellence (OE), which is a management and improvement philosophy credited with saving millions of dollars in pharmaceutical manufacturing. According to a white paper on management excellence by Oracle, the leading performance indicator is the asset utilization rate, which is the extent that available resources can be used in an efficient manner. The paper presents several management methodologies but admits that these techniques are difficult to assess and must be aligned to a company’s goals and overall management style.
The Consultant Takes Center Stage
As shown with the tech transfer project, a consultant versed in OE elements like utilization in particular and knowledgeable of the pharmaceutical and biotech industry in general can lead to a sharp increase in profit potential. And, establishing tools to analyze resource utilization can also provide the means to proactively evaluate any future changes to production. How would your organization have handled this situation?
Published by Enterey Marketing & Communciations Team
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