Pearson on Excellence: Strategies for aligning manufacturing with business and supply chain goals
February 01, 2012
Most companies’ manufacturing strategies involve decisions relating to landed cost per unit, cost/quality balance, and various SKUs’ compatibility with supply chain parameters—transportability, packaging, serviceability. However, one thing is often missing: insights for connecting manufacturing operations with business results. Few companies excel at understanding and optimizing the business value of their manufacturing decisions.
This is not to say that all manufacturing companies have similar goals or priorities. However, ensuring that smart manufacturing choices are also smart business choices should be a largely universal theme. And for most companies, using technology to generate, clarify, and disseminate manufacturing information is the best way to raise the business value of manufacturing operations.
Consider how technology acumen can benefit the business missions common to many manufacturers:
Improve customer centricity. Every year, manufacturing customers want more customization, higher quality and greater value. Manufacturers can respond by using technology to integrate customer feedback into manufacturing and design processes; cost-effectively increase customization; reduce product and process complexity; and help designers, suppliers, and contractors work more interactively.
Become more globally and more local. More and more manufacturers must combine global operations with a regional (locally knowledgeable, market-customized) presence. Technology can help support this dichotomy by enhancing network visibility, data security, product tracking, and total landed cost management at the global, national, regional, and local levels.
- Maximize agility. Everything about business is moving more quickly. Advanced information technology can help manufacturers do a faster (and better) job of identifying profitable customers, right-pricing products, determining the drivers of financial success, and shifting capabilities during reorganizations, M&A situations, and outsourcing engagements. Every company that manufactures products also manufactures information.
And more often than not, companies that do the best job of leveraging their manufactured information will derive the greatest business value from their manufacturing operations. Here are three technologies that can help make manufacturing more strategic and businesses more profitable:
1. Analytics. Manufacturers have an immense opportunity to improve manufacturing—and overall business—effectiveness by better interpreting information that originates on the shop floor. The linchpin is analytics, which can be woven into work processes in several ways:
Automated decision applications. These applications sense online conditions or data, apply logic or codified knowledge, and make decisions with minimal human intervention. The best conditions for this kind of decision-making are when experts can readily codify decision rules, surrounding processes are highly automated, and high-quality data exists in electronic form.
Applications for operational and tactical decision-making. Recommendation and planning applications can incorporate near-real-time information and multiple models to make manufacturing decisions that balance conflicting goals such as profitability and customer satisfaction.
- Strategic decision-making. As shown in Figure 1, analytics can be applied with increasing sophistication based on the needs and abilities of the organization—moving from what-if based questions to forecasting and business optimization.
2. Lean Six Sigma (LSS). Lean Six Sigma’s roots are mainly in cost reduction—eliminating or reducing process inefficiencies, excess inventory and motion, and unnecessary downtime. However, LSS also can help produce higher-level advantages focused on margin enhancement and profitability.
Companies often begin their LSS experience by establishing a set of disciplined processes based on industry standards, such as IT Infrastructure Library (ITIL), the eSourcing Capability Model for Service Providers (eSCM-SP), the Capability Maturity Model Integration (CMMI), ISO 9000 or AS9100 for aerospace and defense companies.
Using this underlying framework, manufacturers can then aim higher—driving micro-process adjustments and tracking the value impact of those changes across manufacturing operations and across the company. This continuous improvement of the production environment can raise agility significantly.
3. Enterprise performance management. Enterprise performance management (EPM) technology can help ensure that accurate, well-formatted information from manufacturing (and other locations) is available for use across multiple business functions, such as new product development, financial planning, and supply chain management. Savvy use of EPM often means:
Better decision making: The result of providing managers with meaningful and actionable information to formulate budgets and plans, develop targeted reports, and analyze performance.
Improved collaboration: Superior, reliable metrics, and a common language.
- Increased productivity: Achieved by reducing rework and manual fixes.
It isn’t rocket science: Manufacturers that excel at generating, clarifying, and disseminating manufacturing information are well positioned to turn production operations into strategic assets. Key to making that happen are technology enablers such as analytics, Lean Six Sigma, and enterprise performance management.
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