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Transform manufacturing operations
26 July 2013
LNS Research’s Mike Roberts discusses how discrete manufacturers can enable long-term growth and move towards their operational goals
For obvious reasons, most companies have a central focus on growth. The more sales closed, in combination with improvements to operating margins, the better. Manufacturers have control over a variety of the operational aspects of this strategy and can employ process improvements, technology, and metrics to help deliver these results.
However, with pressures to grow from top-level management and external stakeholders, it’s common and, in many respects, easier in the short-term for manufacturers to focus on cost-cutting methods rather than taking a holistic, long-term approach to improving products and processes for sustained growth.
Understanding the drivers behind strategic decisions
LNS Research’s 2012-2013 Quality Management Survey puts these concepts into focus. When we look at the top financial and operational objectives noted by over 500 industry executives in comparison to only those executives in US discrete manufacturing industries, we see two main points stand out.
Financially, a majority of companies in all industries, and US discrete manufacturing industries specifically, are putting efforts into growing revenue, with only a fraction of that focus on growing and improving operating margins. As it pertains to financial objectives, the numbers seem to taper off with less respondents reporting objectives around expanding into global markets and ensuring compliance.
Operationally, most companies across all industries are focused on improving manufacturing efficiency, and that number is even greater when we account for just US discrete manufacturers. Other operational areas such as improving supply chain responsiveness, managing compliance, and introducing and delivering new products seem to take a backseat to manufacturing efficiency. Therefore, the need to improve manufacturing processes for efficiency is being seen as a key to supporting sustained growth objectives. A manufacturing organisation that is more efficient can truly do more with less and rapidly react and respond to growth challenges.
Bridging the gap between financial and operational objectives
In contrast to focusing primarily on cutting costs to realise growth, there are a number of strategies that market leading discrete manufacturers are leveraging to actually enable long-term growth and movement toward operational goals. Specifically, LNS has identified two key areas:
A manufacturing organisation that is more efficient can truly do more with less and rapidly react and respond to growth challenges
LNS Research Establishing metrics and focusing on how they connect across the entire value chain: to realise strategic and recurring growth, it’s important to focus on metrics that provide an accurate and comparative measure of the efforts of people, processes, and technology over functional areas.
When used correctly, these metrics can show a global view of performance, which can be inspected and acted upon at a very granular level and then further analysed to identify areas for improvement. Metrics to include in this list are:
- Successful new product introductions
- Supplier defects
- Overall equipment effectiveness
- On-time deliveries
- Customer complaints.
Focusing on how plant operations can drive growth with end-to-end business processes: There needs to be the correct mixture of people, processes and technology to support growth when using these manufacturing KPIs. To facilitate this, many leading manufacturers have a robust and seamless IT structure to that connects data sources and processes across the value chain, and then organises them into actionable information and repeatable workflows.
Companies should be putting efforts into creating a more collaborative and streamlined supply chain, improving the new product introduction process, standardising manufacturing production processes and metrics across lines and plants, and establishing closed loop quality management processes to help identify non-conformances closer to product design rather than the customer.
Realising end-to-end visibility with the right IT architecture
A major roadblock for driving growth through end-to-end, business, and manufacturing processes can be found in many manufacturing facilities’ fragmented, database-centric IT architectures. It’s common for there to be hundreds of manufacturing software applications and solutions that aim to solve a series of point issues and don’t effectively communicate with one another.
This lapse in manufacturing operations communication is expected to slowly become an issue of the past, as manufacturers work to consolidate and simplify solutions portfolios. LNS Research has recently been discussing this topic, and the market space’s movement toward a comprehensive manufacturing operations platform approach.
Having the capability to manage operations using these types of modern platforms and ‘apps’ will create a range of strategic growth opportunities that span far beyond cost cutting. Manufacturers will have the ability to better manage end-to-end, business and manufacturing processes, which will deliver compounding impacts to profitability, reputation, the quality of products, and overall business performance
Mike Roberts is research associate at LNS Research