The manufacturing press is always buzzing about the latest and greatest Industry 4.0 and the connected enterprise are getting lot of attention for good reason. The performance data that manufacturers can gather through the cloud computing and big data analytics is truly invaluable. And the idea of connecting data, technology, process rigor and people across the enterprise with industry 4.0 to streamline and improve operational effectiveness is exciting.
But the truth is that data in and of itself can only add limited business value. In high-performance organizations, most consequential performance improvements are driven by leaders who have a strong ongoing commitment to streamlining process rigor, project management and daily execution, whether or not they are thinking about IoT or the connected enterprise. With the speed of business today, operations managers and leaders need a better and faster way to focus on strategic priorities and uncover opportunities for growth as well as areas in need of improvement. This blog post explains why technology integration and process management is critical to realizing strategic objectives, sustaining improvements and carving out a competitive advantage.
Are you and your employees really focusing on the right details?
While most manufacturers understand the importance of annual goals and strategic objectives, many also regularly fall well short of meeting them, as illustrated in this data from a client survey*:
- 50% of respondents said that they only could achieve half or fewer of their strategic objectives each year
- More than 50% recognized that middle managers and line associates don’t have a clear understanding of business objectives
- 30% of respondents had no way to identify or track if they were winning on a daily, weekly, monthly or yearly basis
Since virtually every manufacturer can collect and analyze many different types of data on some level today, the challenges above often have little to do with data availability. The problem is typically more process related; companies manage operations based on past experience or what’s happening directly in front of them rather than relying data and a process framework that can tell the right people, at the right time, how they are performing against goals and strategic objectives. And that has huge implications. After all, when people can’t clearly track things like variability in processes, they also can’t come up with solutions for improving performance.
Move from firefighting to fire prevention
Overall, a lack of effective process management and rigor can lead to frequent firefighting. For example, early in my career I worked for a manufacturer who was continually running behind on customer shipments, and we quickly got into a pattern of relying on more planes than trucks for shipping which contributed to an increase in cost to serve. A mentor told me that we were in a sticky wicket and perhaps we did have to firefight, but if we didn’t start figuring out how to permanently put out fires as we went along we would certainly perish. That’s a narrow and dramatic example, but the point is that the costs of continually dealing with the same missteps can add up fast—especially across multiple departments. And in today’s hyper-competitive markets, the implications on profitability and competitiveness are often significant.
Ultimately, the process rigor needed to drive ongoing process and performance improvements needs to be built on three pillars (Figure 1). Let’s take a quick look at each of them.
Tiered accountability or structure
First and foremost, it’s essential to align every level of the organization, from executives to managers to front-line associates, with strategic direction. We call this “tiered accountability”. Only once strategy flows down and is clearly communicated to everyone can people really begin to address the ongoing issues that are most relevant to achieving business goals.
But getting people aligned isn’t a one-off effort at the beginning of the year. Approach alignment, communication and incentives carefully and ensure that information can flow both ways in the communication chain. It’s also essential to have a help chain, (a way to summon resources and support) available when one team or department identifies an issue that needs to be addressed. Take a very simple example where at the same company the shipping manager is hearing “ship everything you can,” the quality manager is hearing “don’t let anything bad get out or else,” and the maintenance manager is hearing “spend as little as possible.” Poor strategic alignment is a common problem in manufacturing organizations. And the resulting poor communication and cooperation between departments can be a major contributor to missed goals and strategic progress.
Create a focus around key performance indicators
While it’s a given you need to measure things to effectively manage performance, it’s not always obvious what needs to be measured and why. So how can you ensure that people at all levels of the organization are paying attention to the right key performance indicators at the right time? At a high level, it comes down to five key manufacturing KPI considerations we discussed in a recent post:
- Carefully align the desired results with the right KPIs
- Choose and set the right metrics for the right level
- Ensure that KPIs are visual and clearly visible at each organizational level
- Quickly take corrective actions based on the data
- Set stretch goals
Develop your managers instead of drowning them
Companies usually promote people into management and supervisor roles based on outstanding performance in a current position. But although success at the next level is never a given, many companies don’t provide much in the way of education, training and mentoring to help ensure success. When it comes to effective performance management, however, this “sink or swim” mentality can end up sinking the performance of the entire company. After all, every day that people don’t clearly understand the issues that need to be addressed along with how to spot them is another day the company falls behind on its goals and objectives. That’s why it’s essential to establish an approach to building and updating management capabilities.
Technology’s role in disciplined execution
While process rigor is built on the three pillars above, it’s virtually impossible to achieve optimal performance without the help of some sort of integrated management system that is designed to keep teams (including cross-functional teams) and managers working toward common goals and objectives. After all, timely course corrections are essential to meeting ambitious quarterly or yearly goals. And teams need frequent measurements of improvement initiatives to identify issues or opportunities that they should be addressing.
Pulling it all together pays
It is important for organizations to learn how to live and breathe process rigor and accelerate performance by combining best practices with technology in pursuit of strategic goals and objectives. For example, reference our global pharmaceutical manufacturer case study where we were able to reduce operating costs as a percent of revenue by one third over a four-year period. Additionally, our train and railway systems company case study which explains how we used a pit-stop like maintenance approach to double maintenance productivity and increase train availability and annual revenue.
If your organization is struggling with how to meet annual goals and objectives or is looking for ways to continuously improve performance let’s talk.
*TBM Webinar Survey – August 2014
VICE PRESIDENT, NORTH AMERICAN BUSINESS DEVELOPMENT
TBM CONSULTING GROUP
A skilled business leader with experience in both process and discrete manufacturing, David is recognized for his ability to deliver results and for his 25+ years’ experience driving lean transformations, facilitating culture change and developing lean leaders.