Pearson on Excellence: Leading manufacturers thrive in a world of ongoing volatility and uncertainty

Volatile markets. Unstable currencies. Vacillating demand. Unpredictable commodity costs. Manufacturers, like most companies, have plenty to worry about.

However, there is a small segment of manufacturers that consistently increases profits and maintains growth—in spite of all of the challenges mentioned above. According to a recent Accenture survey, this group comprises about 9 percent of our survey respondents. On average, they have increased production levels, profitability, and labor efficiency by more than 10 percent since 2011, and anticipate similarly strong results in the near future. The primary goal of the survey was to discover what these leading manufacturers are doing better than everyone else. Several areas surfaced: technology investment, strong service culture, and enlightened leadership.

Yet, one factor was particularly prominent: The ability to flexibly and dynamically alter production to match demand. In other words, the operating models of these high profit, high growth companies accommodate a near constant shifting of resources and activities to different locations across their supply chain and manufacturing networks—and even within specific facilities.

Compared to the other 91 percent, the leading manufacturing’s are twice as likely to have relocated manufacturing operations since 2011; to have started new operations during that time; and to be considering relocating manufacturing operations in the near future. They are also more prone to:

• Rely on modular business processes that allow them to quickly reallocate manufacturing capacity.

• Have extensive visibility across the supply chain, thus helping them make informed, flexible decisions about how to handle demand.

• Excel at sensing market changes and opportunities.

• Employ diverse workforces that include full- and part-time employees, contractors, and consultants.

• Build programs focused on extending the life and contribution of existing assets, particularly through total productive maintenance (TPM) and analytics.

From this group of leading practices, Accenture has identified four “flexibility enablers,” or exceptionally desirable capabilities for manufacturers seeking higher profits and stronger growth:

Control towers. Control towers offer manufacturers “integrated visibility” into demand; capacity (suppliers, manufacturers, distributors); inventory; orders and shipments in transit; and the activities of supply chain partners. Control towers can also help companies use the data they collect to respond more quickly and decisively to changes. For example, by leveraging predictive analytics, manufacturers can set alerts to flag potential issues and run simulations to model the potential outcome of various decisions.

Contract manufacturing strategies. Our survey revealed that many manufacturers plan to use more contract manufacturing in the coming year. However, the predominant reason is to relieve temporary (short-term) capacity constraints, which is not a particularly strategic, productive, or flexible way to leverage contract manufacturers. Utilizing contract manufacturing more strategically begins with careful consideration of what the company should be outsourcing and what it should keep in house. Next, they need to understand how to outsource—something that is not as self-explanatory as it seems.

Manufacturing leaders, for example, appear to put a lot of thought into what kind of contract manufacturing relationship is right for them. They also make fact based decisions about what tools and capabilities are needed to effectively monitor and manage the relationship .

Production systems. Think of a production system as an integrated governance tool designed to help manufacturers operate globally repeatable and consistent manufacturing processes, efficiently re-allocate manufacturing capacity, ensure continuous improvement, and eliminate waste. Production systems are increasingly important to achieving the highest concurrent levels of flexibility and consistency. To be effective, a production system must be tightly linked to a company’s overall business strategy. It should also be based on lean principles that emphasize customer focus, process standardization, and waste elimination across the enterprise.

Enlightened asset management. Highly effective manufacturers consider asset reliability a shared responsibility between production and maintenance. They also excel at using predictive analytics to create models that highlight the likelihood of various events and the impact those events could have on an asset’s performance. Most importantly, successful manufacturers don’t neglect maintenance during times of austerity.