The four fundamental ways in which value is created for customers in manufacturing are cost, quality, lead time and flexibility (i.e., changes in product mix and volume). It is a mix of those four things that the customer wants. Which of those qualify you to be in the decision band of the customer and once you have qualified to participate in that market, which of them will win you the order? Attaining acceptable delivery performance is the most significant manufacturing challenge faced by many organizations today, which means constantly evolving and improving every aspect of your global organization.
The challenge is that many manufacturing facilities are a mix of jobbing, assembly and continuous processes. Yet many a manager will come up with one set of measures, one mode of team and one set of management tasks across all process types. If you are a beverage manufacturer, you can learn only a limited amount directly by visiting a car manufacturer in Japan (there’s much to learn, but you need to be able to adapt it to your industry type before applying it blindly). As a result, it is not uncommon for managers in continuous processing industries, for example, to take ideas out of a textbook or from visits to assembly-based facilities and plug them straight into their operations with limited or no success.
For manufacturing operations to win at the margins, every day and every shift must balance the need to reduce costs while staying agile enough to respond to new customer demands. There are key success factors (KSFs) specific to your process type that need to be achieved to satisfy the generic mix of likely order qualifying criteria (OQC) and order winning criteria (OWC) of your market.
Performance is measured by these key success factors. For example, objectives to be measured in a continuous processing environment include availability, plant utilization, material yield, and overall equipment effectiveness (OEE). These are key cost drivers in any manufacturing concern yet in many companies, for instance, the OEE metric is often not even known. And if you don’t get these cost drivers right, you’re most likely going to fail in your promise to the customer.
For manufacturing operations to win at the margins, every day and every shift must balance the need to reduce costs while staying agile enough to respond to new customer demands.
If, for example, you have assets worth half a billion dollars, then it is critical that they perform when they’re expected to perform and that they perform reliably. Engagement of the people running the machine with the health of that machine is critical. About 70% of equipment problems are created not by how equipment is maintained, but how it is used. Operators need to develop ownership of their equipment, and become full partners with Maintenance so that they can perform as a tight-knit team to create maximum equipment effectiveness. There are two components to this attack on waste — asset care and autonomous maintenance. These components denote the close collaboration between those who operate the machine and those who maintain the machine, both of which drive up availability while driving down costs.
What is our material yield through the process? How do you attack that? Firstly, by having a highly engaged team that measures and defines the right things in collaboration with management. They are focused on the material yield and — through problem-solving training, facilitation by the team leader and the availability of problem-solving tools — can actually make material usage a highly controllable item. Material yield and plant availability, and utilization are critical components for hitting the sweet spot in manufacturing. The other truth is that the organizations that mobilize the entire workforce around problem-solving, are the same organizations that not only reap the rewards of many small improvements, they are also the organizations that find and discover the significant improvements. So through a continuous evolutionary approach they achieve both incremental improvement and the step change.
Practices that drive performance
It is equally important to determine what practices drive performance in these key success factors. These practices can be divided into two groups: foundation practices that should be applied by all manufacturing organizations on the path to world class and functional practices, which vary according to an organization’s KSFs. Foundation practices include managing change, teamwork, 5S, visual management, and focused improvement.
Performance is measured either by a balanced scorecard approach or KSFs. It is an essential step, but unfortunately that is where it often stops. Managers measure performance and then rely on people’s innate ability to understand what drives performance in the blind hope that they’ll “do that stuff”. That has been a void in the manufacturing world for a long time. You need to measure these practices and find out what you need to do to improve them. Best practices have a direct strategic link.
Measuring your best practice maturity puts you in a position to manage the way forward logically, working on the drivers of improvement, rather than on the effects (the resulting performance outcomes). Set target maturity levels for each selected best practice with a view to achieving balance across them. It is advisable to reach a minimum level of maturity across all practices and then develop all practices to the next level of maturity.
Initially, focus on achieving that balance across all practices and then look at advancing practices across the board.
Beyond knowing the customer’s basic product requirements, one needs to think about both their order qualifying and order winning criteria. Firstly, what qualifies your business to be an option in the buying decision of that customer? Do you have a ticket to participate? Once you have taken the necessary steps to ensure that you qualify to participate, you should examine the criteria that will win you the order.
The transformation from a functionally managed organization to one that is process-based and designed with the ability to always meet (and even shape) demand, is a complex task made up of organizational development, frontline execution and systems improvement work, which all need to happen simultaneously. Increasingly, organizations are realizing that a comprehensive management system is required to define the work to be done clearly — and to manage the competencies, procedures, processes and people which ultimately influence a performance-driven culture that delivers to promise.
Organizations that wish to be competitive in the global market know that their manufacturing or production processes are, in fact, part of a greater value chain that begins at the sourcing of raw materials, and ends with a satisfied customer. In between all of these are an array of people, processes and functions. The TRACC Value Chain Improvement Solution not only handles the manufacturing function, but all of the management and administrative functions as well — integrating them into one system that delivers.
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.