We believe manufacturing will remain an important sector in the economy, even though employment in the manufacturing sector will continue to shrink because of ongoing productivity improvements. We consider manufacturing to be an important pillar within a healthy society for two main reasons: first, many services are directly linked to manufactured products (e.g. sales, customisation, logistics, maintenance contractors and field services) and, second, manufactured goods can be traded internationally much more easily than most service products.
International competition is fierce, and it is tough to survive as a manufacturer particularly in high-wage countries with rapidly increasing ESG (Environment, Social and Government) expectations and legislation. Manufacturers must move faster, but many of them are still implementing methodologies from the first half of the last century such as Lean (1940s) and Six Sigma (1950s) – now combined into Lean Six Sigma (LSS).
LSS is important, but it is only one part of the equation – quality of management is the other part and the key. Manufacturing excellence requires process excellence, which requires managerial excellence, and the two management levels that matter most are the leaders at the top and the first-line supervisors.
Developing managerial excellence requires:
getting the manufacturing strategy aligned with the business strategy
getting the structure of the basic business processes right
cascading the strategy down to the shop floor
installing a powerful performance management system for understanding and acting on quality and productivity drivers
a compelling vision on how the plant should look and run – a vision that is co-owned by all
quick wins to establish momentum
In all sectors, companies are dealing with an increased frequency and magnitude of disruptions. Businesses must quickly scale down and then ramp up their operations once demand returns. They have to switch product portfolios depending on the availability of components. Some of the events that have caused havock in the past decade include the Fukushima earthquake and tsunami in Japan, Suez Canal blockage, lockdowns related to Covid19 and variants, semiconductor shortages(link resides outside Axisto), staff shortages, war in Ukraine, exploding energy costs(link resides outside Axisto), high inflation.
Understandably, most of these disruptions took leadership teams by surprise. The worst of these disruptions have taken a toll on business output, revenue and profitability. Recovery can take months or even years.
Process mining provides the much-needed overview of the end-to-end supply chain and provides better insight and information for better, proactive collaboration internally and in the overall supply chain. Process mining also provides proposals for decisions with their consequences for real-time optimisation of flows.
(*) click here for introduction to process mining.
PROCESS MINING – WHAT IT IS AND WHAT IT CAN DO
It provides all insights for targeted performance & efficiency improvements: fast, end-to-end and fact-based.
DISCOVER AND IMPROVE YOUR REAL PROCESSES
APPLICATIONS OF PROCESS MINING
Instead of working with the designed process flow or the process flow that is depicted in the ERP system, process mining monitors the actual process at whatever granularity you want: end-2-end process, procure-2-pay, manufacturing, inventory management, accounts payable, for a specific type of product, supplier, customer, individual order, individual SKU. Process mining monitors compliance, conformance, cooperation between departments or between client, own departments and suppliers, etc.
OVERVIEW OF THE ENTIRE SUPPLY CHAIN
Dashboards are created to suit your requirements. These are flexible and can be easily altered whenever your needs change and/or bottlenecks shift. They create real-time insights into the process flow. At any time, you know, how much revenue is at stake because of inventory issues, what root-causes are and which decisions you can take and what their effects and trade-offs will be.
If supplier reliability is not at the target level at the highest reporting level, you can easily drill down in real-time to a specific supplier and a particular SKU to discover what is causing the problem in real-time. Suppliers could also be held to the best-practice service level of competitive suppliers.
MAKING INFORMED DECISIONS AND TAKING THE RIGHT ACTIONS
The interactive reports highlight gaps between actual and target values and give details of the discrepancies, figure A. By clicking on one of the highlighted issues, you can assign an appropriate action to a specific person, figure B. Or it can even be done automatically when a discrepancy is detected.
And direct communication with respect to the action is facilitated in real-time, figure C.
A process manufacturer with a network of assets spread across Europe needed to respond more flexibly to changes in customer demand while maintaining high asset utilisation, low working capital and low transport costs.
The situation was complex. The assets were different and had their own characteristics. The outflow from the installations could not simply be stopped between production runs, and a change of material resulted in a massive production loss – although a product type change without a change of material was doable.
The producer had 25 production lines and served 1,000 customers with a total of 2,500 products. In short, the perfect complex planning issue for which our More Optimal platform was designed.
The planners had been working with a combination of SAP and Excel spreadsheets. They were handling a huge number of variables and attempting to incorporate increasingly shorter delivery times. The planners understood their trade, but the complexity of the puzzle was too great for the resources available. There was much to gain.
Our generic More Optimal platform makes it possible to create a customer-specific application in a short time, with all relevant planning rules built in. The platform is set up in close consultation with the user. First, the relevant Key Performance Indicators (KPIs) were defined. These included (1) demand fulfilment, (2) asset pull / productivity, (3) inventory, (4) transport costs and (5) planning effort.
In a number of joint work sessions, we established the planning process and drew up the rules for allocating products to the various production lines. In addition, the transport options relating to production locations and the rules for product changes were built in. By working closely with the planners at every step, we gradually developed the More Optimal platform, and this now shows in real-time the consequences of the decisions made by the planners and gives advice on how to improve the planning process.
The application is also used to evaluate what-if scenarios and their impact on the KPIs. The manufacturer uses this functionality as part of the annual planning and budgeting process and relies on it for concrete operational issues on a more regular basis.
Companies that pack fresh products face massive complexity and unpredictability. They process many different products, all of which have specific requirements in terms of quality, class and size. They deal with a multitude of packaging requirements and variability in price agreements for each customer. And they handle huge swings in supply and demand. But the time frame in which packers must match supply and demand is short.
How do you balance customer requirements with product and process complexity to achieve high customer satisfaction and high ‘valorisation’? And how do you deal with last minute changes in supply and demand – for example, if a batch is rejected because it does not meet the quality requirements?
The packer had been using Excel spreadsheets to allocate products on packaging lines and carry out detailed line planning. This had caused misunderstandings and mistakes – and a higher workload than necessary for the planners. They were losing time creating iterative plans, and there was uncertainty about which version of the plan was most up-to-date and about which numbers were correct.
We knew that the More Optimal platform would resolve these problems and explained the benefits to our client. The need was so great and the benefits so obvious that the packer did not even want a ‘proof of value’, but immediately decided to develop and implement a dedicated application based on the More Optimal platform.
The goals were (1) to arrive at a workable schedule faster, (2) more efficiency in the operation, (3) shorter lead times relating to product freshness, (4) better demand fulfilment and (5) increased flexibility.
The More Optimal platform makes it possible to build a customer-specific application in a short time with all relevant planning rules built in. The application is set up in close consultation with the user. First, the relevant Key Performance Indicators (KPIs) are defined to quantitatively determine the quality of the allocation plan. Two of these KPIs were demand fulfilment and lead time (related to product freshness).
In a number of joint work sessions, we drew up the allocation rules for products and determined how products from suppliers should be allocated to customers. By working intensively with the packer, we developed a dedicated application that shows the consequences of the decisions made by the planners and gives advice for better planning. This application was further expanded with support from the planners in order to optimise the detailed planning per packaging line to minimise changeover times on the lines and to increase the throughput capacity (OEE) of the lines. The application measures the operational performance based on the agreed KPIs.
Recession on the horizon? Based on our own research and research by Bain & Company, Harvard Business Review, Deloitte, Gartner and McKinsey, we formulate 7 actions to accelerate your profitability during and straight after a recession. Figure 1 shows how big the difference is between winners and losers. This does not only apply to EBIT, after a recession, winning companies are also able to make significant strides in market share.
THE 7 MOST IMPORTANT ACTIONS TO BE AMONGST THE WINNERS
The key to success is preparation. Although, preparation is actually a wrong choice of words. Winners are winners, because they structurally sail close to the wind and have a clear vision. They are proactive, fast and decisive. They are financially prudent to absorb setbacks and seize opportunities as they arise. The seven actions below clearly indicate what that means in concrete terms.
1. CLEAR VISION AND ORGANISATIONAL ALIGNMENT
What will your business look like in three to five years? And in one year? What are the ‘vital few’ strategic initiatives and what is the path from strategy to concrete actions? Not only your leadership team needs to be committed and aligned, this applies to your entire organisation. Strategy Deployment is a powerful tool to maintain alignment and focus, monitor progress against plan and make rapid and appropriate adjustments in case of changing conditions.
2. UNDERSTAND YOUR STRATEGIC AND FINANCIAL POSITION
Mapping out your plans depends on your strategic and financial position (see figure 2).
3. FREE UP FINANCIAL RESOURCES
The focus is on aligning your spending with your vision and strategic initiatives; not blunt cost cutting. Zero-based Alignment is a good way to select and make lean those activities that are fully aligned. Non-aligned activities are stopped. The financial resources you free up can strengthen your balance sheet and/or support your investment agenda.
Currently we face high inflation. Supply chain problems and capacity bottlenecks are responsible for some of it, but their effect will dampen. Another cause is the sharp rise in energy costs as a result of the conflict in Ukraine and the resulting economic sanctions. In time, part of the costs will bounce back, but no longer to the old level. Costs will remain structurally higher due to urgency of the climate-change-driven energy transition. Furthermore, too much money is in circulation and its effect on inflation will also last longer.
The current high inflation can turn margins negative very quickly. Speed and flexibility are called for and selling prices have to go up. Raising prices in one go is difficult. It is better to do this in regular small steps. Possibilities depend on the strength of your brand and the market your company operates in. Make sure you retain the right customers in the process
4. RETAIN YOUR CUSTOMERS
Retaining customers is much cheaper than acquiring new ones. The margin impact is significant. Explore ways to help your customers through the economic downturn and particularly in the early upturn when the opportunities start to arise. Winners have already created the “currency” to invest. Just make sure you target the right customers.
5. PLAN FOR VARIOUS SCENARIOS
No one knows when and how a downturn will fully unfold and when the economy will start growing again. The winners have developed different scenarios, and they know how they should act in each scenario. This allows them to act quickly and decisively.
6. ACT QUICKLY AND DECISIVELY
Winning companies act quickly and decisively, in the downturn and particularly in the early upswing when the opportunities begin to emerge. They have already unlocked the financial resources to invest.
7. EMBRACE TECHNOLOGY
Not all companies have been equally aggressive in adopting new technologies. There are many opportunities here for improving efficiency or generating more value and thereby gaining a competitive advantage.
To emphasise the importance of technology even more.
Figure 3 shows the development of the total shareholder return before and after the recession of 2009/2010. It is clear to see how winners break away from the rest.
Harvard Business Review found that 70% of companies failed to regain their pre-recession growth rate in the 3 years following the recession. Only 5% of companies manage to develop a growth rate that is consistently above that of their competitors (quarter-over-quarter simultaneous growth of sales and profit margin).
Digital leaders are 3x more likely to achieve revenue and margin growth that exceeds industry!
Maintenance is a value creator rather than a cost generator. For asset-intensive industries, high uptime and reliability are critical to ensure return on assets; for asset-lighter industries, high uptime and reliability are critical in a just-in-time supply chain.
Current digital possibilities provide ample opportunities for Maintenance to play that all-important value-creator role. However, more often than not we see that the basics are just not in place: cooperation between Maintenance and Production is unproductive, mean time between repairs is too short, there is too much corrective maintenance versus preventive maintenance, maintenance backlog is growing, drawings are out of date as are maintenance plans, data is lacking and contractors are underperforming. The effects are too much downtime, unreliable production, low efficiency, high costs, too much working capital and dissatisfied employees.
Before deploying the various digital aids that are on the market nowadays, you must get the basics right. Key elements are:
getting the maintenance strategy aligned with the business strategy
getting the structure of the basic maintenance processes right
fostering a deep and productive cooperation between Maintenance and Production
fostering a productive partnership with contractors
a powerful performance management system for understanding and acting on quality and productivity drivers
knowing what the critical equipment is
registering data on equipment behaviour, logging maintenance history and ensuring integrity of data
ensuring technical condition of equipment is at the sufficient level
ensuring quality execution of corrective maintenance: root cause elimination
ensuring timely and quality execution of preventive maintenance routines
using condition monitoring of equipment
getting the skills and behaviours right
If you already have all this is in place, the equipment performance will already be high and costs significantly lower. Gradually, in line with the growing maturity of the organisation, you can integrate digital aids to achieve the next levels of equipment performance, efficiency and even lower costs: IIoT (Industrial Internet of Things), smart equipment, mobile devices, wearables, digital twin, advanced analytics, predictive maintenance, seamless engineering, etc.
Developing new products and introducing the industrial production processes to support them is highly complex, especially when you’re at the limits of manufacturing technology. Increasing market demand only raises the pressure further, since each and every product manufactured can be sold. Also, demand for new product types was growing very fast. It appeared a toxic combination.
We had already worked with this business unit to solve its manufacturing problems and enable it to become a more reliable supplier, now the management team asked us back in to help them improve their innovation reliability and reduce their time-to-market for new products.
The situation in the innovation-to-market department was complex. There was strong demand for additional product types and the market was shifting from B2B to B2C, which meant a shift in product requirements. On top of that, additional resources were required to address problems in production, and the department was constantly hiring additional new product development resources. Competition was growing, so speed was of the utmost importance, and the improvement targets were extremely high.
Our analysis, which we conducted in close cooperation with the client, revealed three main problem areas:
1. Portfolio management
The innovation portfolio was too big, its content was inconsistent and the priorities were regularly changing. This situation had developed because of poor business and operations planning and, as a consequence, poor technology and product roadmap planning.
2. Resource management
a. The organisation had created a self-inflicted resource bottleneck. The problem was caused by trying to manage too many portfolio projects at the same time and by allocating too many projects to limited resources. The result was plummeting productivity.
b. The constant inflow of new hires was creating a skills issue. There was no time to train them, and knowledge was not readily accessible for the new hires because very little had been documented.
3. Project management of innovation projects
A project management process had been defined for only 2 out of 5 project categories. And because of time pressures, people were cutting corners in projects and tollgate discipline was poor. This behaviour was creating rework and thus project delays. Project quality was suffering, and this in turn was causing production problems and an increase in customer complaints.
We worked with the client to set clear goals to increase innovation output by reducing time-to-market and improving project reliability. The time-to-market target was a reduction from an average of 23 months to just 9 months. We set an aggressive 6-month timetable for achieving these goals and formed joint teams to drive the changes. Because the three main problem areas were very much interdependent and the lead time was short, we ran four workstreams in parallel: (1) single project management, (2) portfolio management, (3) business planning and roadmapping, and (4) knowledge capture and design rules. We selected six pilot projects to introduce the new ways of working and deliver actual results.
We set up a project governance structure, including a review team, a project team and several workstream teams, and established milestone deliverables. We used a combination of “waterfall” and “agile” approaches to get things done.
Performance improvement programmes must carefully balance human and technical aspects if they are to deliver significant, sustainable results. A critical aspect for sustainability is the development of a deep local ownership of the solutions to the problems. Therefore, we approached the challenge by ensuring the solutions were found by a process of co-creation right from the start.
The developers just didn’t have any time to spare, but speed was essential, so we started by slashing the volume of projects in the portfolio. Next, we set priorities and reduced the number of projects allocated to the developers. This was a tough process as there were many invested interests. However, this reconfirmed the analysis finding that the business had to get its strategic and operational planning right.
During the project we identified five different project categories, ranging from large, complex innovation projects down to factory support (crash actions). For each category, we designed and implemented project process maps, which included the project management methodology with team meetings, tollgate reviews, tollgate criteria, along with tools relevant at each stage in the project.
We designed and implemented a portfolio management process and system with clear roles and responsibilities, set up review teams for various project categories, established criteria to allow / refuse projects into the portfolio and encouraged an attitude of “killing” projects as early as possible to eliminate waste and maintain a manageable portfolio. We also designed a process for allocating resources.
In parallel, we implemented five different business planning and roadmap processes, including a technology roadmap, a product roadmap and an application roadmap. To support the development of knowledge and skills, we established a process to capture and document learnings from all projects, regardless of whether they had been successful, unsuccessful or ditched.
The results were impressive. Time-to-market dropped from 23 weeks to 11 weeks within 6 months, with plans in place to meet the target level of 9 weeks. Equally important, the results were sustainable because the root causes had been identified and eliminated, and the solutions locked into the Performance Management Systems (PMSs) developed during the project. The PMSs also included key performance indicators to give managers and employees ready access to the quantifiable information needed to make fact-based decisions, both as teams and individually, and to take pro-active and predictive action.
Throughout the implementation, a balanced combination of human and technical aspects drove the successes, and solutions were added to the PMS to support sustainability. By creating and communicating the right culture from the very start, we helped the client establish and communicate roles and responsibilities for employees at all levels. As the project progressed, employees began to see the value of their own contributions and to understand how their own performance influenced that of others, both within their discipline and beyond. As this understanding grew, a culture of accountability and collaboration evolved. Clear goals were communicated in a common language that everyone could understand, and employees embraced the new systems, processes and ways of working as their own.
Attaining world-class supply chain management and collaboration means developing and managing supply chains and partnerships so that your company is flexible and resilient, with response times and delivery performance that will beat the competition.
Future supply chains need to cope with the long-term trends of mass customisation, ever shorter life cycles and the more recent volatile conditions that are here to stay. In these market conditions, many companies will benefit from a “smart” supply chain, which combines the drive to eliminate waste (i.e. anything that doesn’t add value) with agility and responsiveness (i.e. the ability to handle unpredictability with speed and flexibility).
A smart supply chain enables fast, flexible supply of tailor-made products at competitive cost levels. It excels in having few product and process quality issues, reduced operational costs, increased flexibility, and high internal process speeds. It integrates customers and business partners to create value in both the primary and support processes.
Building a smart supply chain requires a holistic approach that integrates product and process design, organisation design, and digital solutions:
an unambiguous supply chain strategy
product configuration for late postponement
processes that are aligned with strategy and designed for minimal order cycle times
a flat organisation with multidisciplinary teams and no silos
integration with partners throughout the supply chain
an aligned performance management system with real-time information from the end-to-end process
supply chain visibility with the ability for stakeholders throughout the supply chain to access real-time data related to the order process, planning, inventory, delivery and potential supply chain disruptions
Faced with rapidly ever tougher global competition, customer demands and cost pressures, the management team of this manufacturing and technology licensing company needed to increase both the effectiveness and efficiency of its innovation/R&D process in order to secure future market opportunities. The challenge was to increase the success rate of innovation projects and to cut the time from product concept to market introduction by half.
The company had a central R&D department, but there were also people working on innovation in the various plants across Europe. The people in the plants were closest to the customer and were working mainly on applications, whereas those in the central R&D department were doing ‘blue-sky’ development.
We began by working together with the client’s European business team, the R&D hub and a representation of process engineers from the various plants throughout Europe to analyse the “as is” situation. Three main issues were identified:
The customer release process was problematic because samples did not meet customer requirements, and this had created the perception of the company being an unreliable supplier for its customers.
The increased number of additives being used was creating in-house manufacturability issues and additional complexity both in the plants and in the supply chain.
Instability in the innovation/R&D portfolio contributed to an increasing time-to-market.
However, the definition and management of product platforms was strong, as was the skills level
throughout the innovation/R&D organisation. Therefore, there were some solid elements we could build on.
We worked as a joint team with the European business team, the R&D hub and process engineers from the plants to identify the root causes of problems, establish key levers to turn the situation around, and set clear and challenging targets. We set up a project governance structure, including a review team, a project team and various workstream teams, and established milestone deliverables. We used a combination of “waterfall” and “agile” project approaches to get things done. We selected nine pilot projects to introduce the new ways of working and deliver actual results.
Performance improvement programmes must carefully balance human and technical aspects if they are to deliver significant, sustainable results. A critical aspect for sustainability is the development of a deep local ownership of the solutions to the problems. Therefore, we approached the challenge by ensuring the solutions were developed by a process of co-creation right from the start.
We worked on three workstreams in parallel:
Integrated strategic and operational planning
We started to break down organisational silos by bringing people together from the business team, the R&D hub and the plants in a series of workshops to craft an integrated strategic and operational planning process and to create a management and reporting structure. This meant that when technology and product roadmaps were generated they were better aligned with the market requirements and timelines. This prevented the development of applications and platforms becoming intertwined.
Transparent portfolio management
We achieved greater transparency and alignment through broadening the employees’ skill base and developing the use of existing IT tools. This meant that employees were better able to deal with uncertainty and to understand investment alternatives when “go–no go” decisions were being taken at stage gates along the innovation process. The development of effective behaviours in the project teams and around these tollgates was paramount throughout the implementation.
design rules and complexity
The principle of product platforms/product families was well understood and adhered to; however, new applications were not being managed well. A variety of additives was being used to achieve the same properties, and this was creating more and more complexity both in manufacturing and in the supply chain. In addition, rules such as design for manufacture were not tightly managed. In one case the company’s client was deeply impressed by the time-to-market of the new product they required, and the properties were spot on. However, the problem was that manufacturing the new product caused the production output to drop by 30%.
We ensured that the design rules were more explicitly defined, documented and accessible for everyone. We also introduced clear accountabilities and responsibilities to tighten the process for releasing additives and managing their variety.
The “as is” situation at the start of our joint project provided a good basis to build on. Many of the elements of world-class innovation management were already in place. The performance improvement was due mainly to an improved organisational alignment (and integration), more effective behaviours and, in particular, a more disciplined use of tools and methods.
Of course, there are a range of useful multi-project-management IT tools that can enhance visibility and enable more effective project portfolio management; however, the challenge here is to foster the behavioural change and teamwork that is required to build on the IT capability and not to rely solely on the IT tool to change the way people work.
Innovation, in contrast to health, safety and environmental management, demands risk-taking. DuPont’s Robert A Cooper sums up the requirement neatly: “Don’t manage the risk of failure. Manage the cost of failure.” Achieving this goal does not mean avoiding failure; it means failing clearly and early. To facilitate this behaviour, we developed a clearly defined and staged project management process with tollgates and explicit tollgate criteria. In fact, processes were designed for various project categories. “Go–no go” decisions could now be made based on facts. The development of effective behaviours in the innovation project teams and around these tollgates was paramount throughout the implementation.
A container terminal reached the limits of its capacity due to a further increase in the number of units to be processed. The terminal also had to become more attractive for ships to dock by faster loading and unloading for shorter waiting times. Furthermore, container ships are getting bigger, increasing complexity and time pressure at the terminal.
The assignment was to increase efficiency to make more inbound and outbound truck movements possible and to shorten ship waiting times.
Based on data from the ERP system regarding plan and actual over a representative period, the current working method of the terminal was reconstructed in our Planning Platform. The actual operation was visualised and animated, allowing the movements of each individual container to be tracked from position to position. The reconstruction was validated and further fine-tuned in a highly interactive process with the client.
Subsequently, with our Planning Platform, the current operational performance of the terminal was determined based on jointly identified Key Performance Indicators (KPIs), such as the mooring time per barge, the number of crane movements in/out and the number of truck movements in/out. Subsequently, a simulation of an optimised operation was performed using the exact same dataset and boundary conditions. The comparison of the KPIs of the current and optimised operations immediately gave a clear picture of the improvement potential.
In close collaboration with the client, the plan for a number of containers was then optimised step-by-step until the total was finally optimised. After each step, the improvement was measured against the identified KPIs.