No sooner has the Covid dust settled than the threat of recession now looms, forcing manufacturers throughout the supply chain to realize that a precarious, post-pandemic market requires a radically different mindset.
Before Covid, manufacturers were finally beginning to face the demand for changes brought about by regulation and customer demands. Typically, this was seen in areas such as sustainability, inventory availability and speed of delivery, or increased visibility throughout production. When it came to the production efficiency behind these capabilities, what was once dipping toes into the waters of digital transformation, became a full on diving contest.
In the face of these different headwinds, savvy manufacturers are realizing there are two key elements to a successful strategy:
1) The considered alignment of separate business units, rationalized for efficiency, then integrated with a common backbone
2) Ensuring that this new, integrated organization is fully customer-centric
One of the earliest lessons has been that both of these aspects demand a substantial amount of data, but also create an opportunity for huge improvements in efficiency, both within and beyond the production environment.
Rationalized and integrated business units lead quickly to economies of scale that arise from smarter procurement and manufacturing. This is often misunderstood. Savings are not only made by removing duplicated effort across multiple business units, but also in solving multiple instances of the same issues. Common constraints typically include manual processes that taken together, can create a strong appetite for the adoption of new technology.
The balancing act here is to implement consistent technology both across and within the business units or brands, whilst maintaining individual identity and the best results that arise from the autonomy of those operations. Cultural issues such as the ‘identity’ of the business can become a significant obstacle to integration and derail efficiency programs if not handled sensitively.
However, it is the second perspective – using customer data to align output to demand and creating a customer-centric organization – that has the final say.
As recessionary fears continue to take hold, sustainability has evolved rapidly from an exercise in greenwashing, to a key focus on operational efficiency in every department. For production, concerns around energy use and raw material consumption are no longer about saving the earth or the right thing to do – they are about saving costs and ensuring business survival.
The zenith of this idea is that as a business, nothing is produced (or indeed, no activity is undertaken) that is not then part of a tangible, specific demand. No goods are produced that are not already sold. No travel is undertaken that does not tie into clear benefit such as a new or increased order. Buffer inventory is eliminated. Staff are focused on the highest value tasks as defined by the business.
There have been attempts at this kind of thinking before: lean manufacturing, zero waste projects and so forth. What makes the current situation different is the presence of technology that can not only track the necessary variables throughout the business, from energy use to production output, but also the connection to customer data.
Roadmap to delivery
Two main questions then arise: firstly how a manufacturer can undertake a project that pulls together so many different business disciplines into a cohesive whole and secondly, just how far can it take these projects to yield improvements?
Implementing a customer-centric strategy that includes production efficiency (and indeed, efficiencies throughout other areas of the business) is no small feat.
The first phase is discovery – assessing the current state of play and getting a clear picture of the status quo. This typically involves a lot of stake holder interviews, data gathering where possible, and then looking for the most pronounced pain points.
From this, a set of recommendations follow to address these issues, that then feeds into a strategy that can outline business models and architecture. From this the roadmap can be developed, that will oversee investments to be made.
Mandate for change
In terms of an order of priorities, this will of course differ from company to company, but any decent discovery process will quickly reveal the most pressing concerns.
Our own assessment then takes into account two factors – the effort demanded to make necessary changes and the impact that those changes will have. Of course, low effort / high impact changes will look attractive, but typically it will be those changes that are less effort but less impactful that will see the most agreement.
Production efficiency improvements (and some associated areas such as logistics) usually do demand a little more effort but they also do have a much more pronounced impact – so it is important at this stage to secure full buy in from senior figures to ensure changes will be implemented and supported.
Which then brings business leadership to the second question – how far can these changes go? Or rather, how far should these changes extend?
The immediate boundary is that of commercial relevance and benefit. If any changes to improve production efficiency – or any other aspect of a manufacturer – does not yield tangible improvement, then it should not be pursued.
But even here, there are degrees.
The cost of a change program, in terms of money, time, human resources and host of other factors can – and arguably should – put the brakes on. This is especially true of programs in departments that might not be directly customer-facing.
But in those departments that do interact with customers, it can often pay to be a little more flexible, in the search for the next series of data points that can feed into the business to make it more efficient from the customer-centric perspective.
Beyond this, there really is no limit to the efficiencies and changes that manufacturers can explore, even within solely the production environment – although such an approach would of course limit the return made on the investment. Production efficiency demands change and change is an organization-wide mandate to any manufacturer looking to emerge victorious in the current climate.
Matt Fearon is Senior Consultant at BML Digital, a consultancy that demystifies technology and digital transformation. It delivers focused, powerful, pragmatic, and effective change to some of the biggest names in business. Its unparalleled insight and expertise leads to tangible transformation that creates actual results.