The manufacturing sector has emerged from the recent economic crisis stronger in many ways, consulting firm Accenture contends in a report on the strategies of successful companies. But it is by no means exempt from challenges.
Russ Rasmus, managing director for the firm’s manufacturing practice, warned that in an era of “permanent volatility,” manufacturers cannot let themselves get stuck in old patterns of inflexibility and slow response to customer demands.
In a survey of executives from 81 large U.S. manufacturers with global operations, Accenture found that developing a dynamic manufacturing strategy is the top priority at successful firms. Researchers identified a group of companies it dubbed “recovery leaders” based on their superior performance, and found that their strategies are driven by four primary factors:
- “Insight to action,” employing analytics to give decision-makers greater intelligence and operational insight;
- “Adaptable structures,” allowing flexible operating models that can quickly adjust to changing market conditions;
- “Flexible innovation,” focusing on growth through new business models and better differentiation;
- “Agile execution,” developing organizational capabilities to respond faster and more effectively to customer expectations.
At the best-performing manufacturing firms, executives are learning how to establish better alignment between manufacturing operations and the decision-makers responsible for business performance, according to advisory firm LNS Research.
Mark Davidson, principal analyst at LNS and a former executive in the controls manufacturing industry, told IMT that the primary driver has to be delivering value to the customer. “The top strategic manufacturing objectives are agility, responsiveness to customers’ order-demands and ensuring constant quality of products,” he said.
“Company leadership needs to make sure they have good insight as to what the marketplace is asking for,” Davidson said. For example, customer-order demand is a key metric — that is, the number of units a customer requires within a given time period, he said. “How do I stack up against my competition? Can my competition make to order faster than I can? You need to have a good handle and understand what the customer needs and is willing to pay for,” he said.
The same is true of quality, Davidson said. “People don’t like surprises — If you have bad news, tell me early. Be more forthcoming with your customer,” he said. “Instill that in your managers, and also in your people on the shop floor, that they need to be more forthcoming with management.”
Empowering the worker on the shop floor can go a long way toward maintaining quality, as in lean manufacturing, where people have the authority to stop the line when a problem comes up, Davidson said.
North American manufacturers have an important advantage in the realm of employee relations, he said. “The concept of empowerment and employee engagement is much stronger here than in emerging economies,” he said. “In our society, employees want to understand when they go to work each day what contribution they are making to the overall company. They want to feel that the company values their opinions and their ideas for how to improve things.
“Culturally, I think we have an edge that way. If you have a management team that is willing to be more transparent and have that translate down to the manufacturing managers as well as the maintenance, quality and production people — that’s the kind of best-practice trend I see now, really working to align those goals and give better visibility for those goals, so everybody has constant awareness of how things are going. Instead of hiding things, make sure it’s all out in the open.”
LNS researchers have been taking a close look recently at the role of metrics in manufacturing strategy. “In discussions with decision-makers in manufacturing,” Davidson said, the researchers found that “they still struggle with educating executives in the importance of manufacturing metrics. They tend to treat manufacturing like a black box — ‘that’s the factory, my plant manager takes care of that.’ But improvements in manufacturing metrics can have a huge impact on the bottom line.”
In the most effective companies, “people are bridging that gap” by aligning executives with manufacturing operations, Davidson said. “At the end of the day, you’re one team, and you have to make the translation down to what’s happening on the manufacturing floor and create a more seamless understanding.”
Putting metrics to work in manufacturing strategy means establishing strategic objectives and performance goals. “Map those goals into measures of success,” advised Davidson. “Determine your KPIs [key performance indicators] and make sure everyone is calculating and measuring them in the same way. Make sure people understand those KPIs and that they’ve got to match their behaviors to them. You’ve got to specify that when you see this one going up or that one going down, that’s not good, and here’s what to do about it. You need management trained in this up and down the line.”