Bob Parker and I recently took part in the Next Generation Manufacturing conference hosted in Austin, TX, The theme of the conference centered on managing complexity. If this sounds familiar it's because we participated in a similar program earlier in the year in Spain. Once again, we made a distinction early in the proceedings between "complication" -- essentially waste which should be eliminated, and "complexity" -- a fact of life in modern manufacturing given the advanced
Improving New Product Introduction Performance
This group advocated for making sure new products were fully vetted before handing over to operations. This review would include an honest assessment of the market opportunity and how well the company was meeting the need through differentiation or value. Beyond the revenue forecast accuracy, best practices were identified around several "design for x" considerations; "x" being things like supply chain, manufacturing, quality, and sustainability. The conclusion of the group was that process discipline around introduction was straightforward but performance wouldn't be substantially enhanced until the "design for x" factors were mastered. Based on the fact that our discussion in Spain was heavily centered on process discipline, it's probably worth noting that although process design may be theoretically straightforward, following through on the process is another story.
Balancing Global Best Practices and Flexibility in Supply Network Design
Similar to our conversations with European manufacturers, U.S. manufacturers are also examining the classic tradeoffs in the supply chain between service levels/availability and network cost/inventory, where decisions should be influenced by the factors that are most relevant to the business models. (See Simon Ellis' blog on this topic – What Do I Stand For?) Critical considerations include:
- Lead times
- Inventory constraints
- Landed costs
- Proximity to inputs or customers
- Regulatory framework (government or customer mandates, import/export constraints)
- Business continuity
- Market Growth
- Ability to adjust
Final recommendations came down to the fact that the goal of supply network design should be a resilient and responsive economic model, with global best practices that support the ability to change and enable flexibility when necessary.
Strategic Sourcing – Empowering Sourcing Teams
The group discussed the many elements that create complexity in sourcing today - quality/consistency, talent, risk management, global footprints, and cultural awareness. (Discussions in Spain focused on accurate landed costs, linking procurement to customer demands, and understanding regulatory implications – all of which are also creating complexity in sourcing). In line with the objective of the discussion, the team came up with a prioritized roadmap:
- Understand and magnify core competencies, augment where necessary.
- Encourage higher levels of supplier collaboration.
- Build a supplier management approach that centers on accountability.
- Build and share supplier dashboards.
- Assure you have well developed make versus buy decision capability.
- One size does not fit all - make sure the expectations align with the supply tier.
Looking ahead, we believe manufacturers have the opportunity to improve sourcing performance through applying the traditional fundamentals (commodity management, etc.) and incorporating new, rich information sources to empower sourcing teams.
A Vision for the Factory of the Future
This topic was so popular that there were two groups that took it on. One group enumerated the critical success factors:
- Factories will be embedded with (not just supported by) lean manufacturing principles.
- Personnel will have real time problem solving capabilities
- Change will be flexible and fast.
- People development will be crucial. (One of the groups approached this factor from the point that in the plant, equipment will increase and people decrease, resulting in a need for those people to have an even greater range of skill sets).
- Advanced technology (and lower cost of that technology) will raise productivity.
- The factories will be networked to other factories (both the company's own and those of suppliers) to support collaboration.
- Sustainability will be embedded.
These led to three recommended best practices when articulating a vision of the future factory:
- Design goal is to provide a global competitive advantage
- Integrated supply chain forward and backward (inbound materials, outbound finished goods)
- Managed simply so that change is easily managed, with tools that make it easier to understand and interpret information visually
Quality – Creating A Successful Approach
We were pleased to see this topic get some attention, since it continues to figure highly in our field research, and the topic wasn't discussed in our Spain conference. This group of conference delegates in Austin went straight to its recommended practices:
- Define and measure quality success in terms of meeting customer requirements.
- Integrate and align with a leadership team but provide latitude to global/regional/local quality teams.
- Ensure safety goes hand in hand with quality.
Creating Workforce Strategies
The response we witness when manufacturers are discussing workforce management Is universal; hiring, developing, and retaining a qualified workforce is no easy task. Manufacturers in Austin also discussed the use of internships, cross skills training, incentives tied to performance and skills development, and mentoring, including a mix of "reverse mentoring" that allows younger employees to teach your experienced team about those markets (and perhaps other things like using technology) while they are gaining valuable process expertise. Other recommendations included:
- Expand responsibility (empowerment)
- Expose young talent to work in other geographies
- Appeal to and encourage the development of a more diverse workforce (including women and minorities) in all regions.
- Develop cooperative arrangements with local educational institutions.
- Upgrade labor (skills and capabilities).
- Plug into the military pipeline of talent.
The workshops did an excellent job of connecting to the themes of complication and complexity. In addressing complication, we saw that Lean Sigma approaches are still critical. Presentations on the program successes at Pentair, Kraft, Lenovo, and Boise Cascade reinforced this notion, but also illustrated that the approaches can be very different and should be tailored to the individual need. For example, Pentair attacked material flow while Boise Cascade took a "constraint busting" approach relative to critical operating assets.
On the complexity side, we heard from a manufacturing company that is doing as good a job mastering and capitalizing on complexity as anyone, Caterpillar. The Cat presentation really set the tone for understanding the challenges of global competitiveness and how people, process, and technology must come together to achieve strategic objectives. The people topic was a thread through all of the workshops to the point where we noticed the phrase "war for talent" was used more than once or twice. Process transformation was discussed in the opening keynote panel by both J&J and P&G - two companies that are considered leaders in mastering complexity. On the technology side, technology firms like AT&T and Cisco discussed how collaboration and mobility are improving operational performance.
Finally, we'd like to refer back to the three major conclusions we presented earlier in October:
- There is a direct connection between managing complexity for competitive advantage and the use of collaboration for better decision making
- Manufacturers need new models for leadership and learning, as well as finding and developing talent (influential versus hierarchical leadership, how to foster collaboration among those not in reporting line).
- Manufacturers are placing a renewed emphasis on the customer and customer service and understanding what the customer wants as key to economic growth and manufacturing growth.
You'll also find some of these issues and themes woven into our Predictions for Manufacturers in 2012. (To listen to the replay of our Predictions webcast, you can register here.)
Let us know how you're approaching these issues. Please share your thoughts with us at our IDC Insights Community.