Article

Factory turnaround

Published

November 2018

Author

João Castro

The concept of factory turnaround is something very close to our heart in Operations Strategy. It aims at supporting companies in developing a tangible long-term plan on what needs to happen within the next 24 months – this helps narrow the gap between their daily operations (next month) and the strategy of their business (5+ years). Even though the main typical drivers of these projects are often similar – cost reduction and service-level improvement – it’s the approach and focus in these projects that ultimately ensures that the impact results in both behaviour and financials.

With comprehensive subject matter expertise within manufacturing, Implement Consulting Group has developed an approach that allows you to structure, scope and co-ordinate the transformation of your manufacturing. This approach covers decisions at the three levels of planning (operational, tactical and strategical) in a sequence that ensures a well-grounded transition plan.

Across these three levels, the focus is shifted across six main areas that are familiar to all production environments: performance and governance, product scope, organisation, layout and equipment, material handling and planning.

We are pleased to share the four main tools and methodologies that we have been using successfully with clients.

Operating system for manufacturing

The operating system for manufacturing is all about formalising and structuring the informalities in our management procedures, processes and touchpoints that we all have in our factories today. The overall objective is creating ONE common structure for managing, ONE set of numbers for performance, ONE set of processes for working and ONE way of improving on all of the above. It is simply put a pre-requisite to succeed in obtaining operational excellence!

We built the operating system by establishing five central elements: performance management, process standardisation, flow management, capability and improvement management. All of these elements contain an element of visual management, which must be central to everything we evaluate, do and plan for the future. The approach to implementation follows a specific sequence to cater for dependencies between the elements and also requires leadership training along the way to secure awareness, desire and knowledge.

Based on our experience, a fully implemented operating system doesn’t only enable you to move forward based on a very stable foundation, it also provides sustainability and structure for improving beyond your own expectations. Putting improvements, changes or new initiatives to work in an established standardised environment is naturally much easier than having to do so 50 times ad hoc.

Warehouse and distribution strategy

Seven out of ten companies have a warehouse and distribution strategy that does not match customer requirements or operates on a cost level that is too high. When did you evaluate the warehouse and distribution strategy in regard to what a simple, scalable and Lean warehouse and distribution strategy looks like in terms of reducing the cost, catering for growth and maintaining or improving the service level for customers?

To set the strategic direction for the warehouse and distribution footprint we must:

  1. Map and understand the current end-to-end supply chain
  2. Identify the future market trends and customer needs
  3. Use these insights to define the guiding principles for the strategic options
  4. Develop, model and evaluate scenarios and options
  5. Decide and implement a new warehouse and distribution strategy.

In recent years, we have seen a clear trend where the warehouse and distribution strategy has become an integrated key element in the design of the future value proposition to customers. We have moved the agenda from a classic supply chain cost optimisation approach to a much more balanced approach between the supply chain value proposition to different customer segments versus the cost of operation.

We have worked intensively with a wide range of both domestic, regional and global organisations to improve their warehouse and distribution strategy. We have managed to create an overview and transparency to improve responsiveness to customers and reduce operations costs – and even both.

Asset strategy and planning

Capacity decisions are central to the role of factory manager of manufacturing organisations. Often, when faced with increased demand and a perceived high capacity utilisation, the factory manager’s first response is to invest capex in new machinery. However, our experience shows that factories often operate with outdated planning methods that provide sub-optimal output and therefore do not utilise the true capacity of the system.

Our approach begins by posing the question: Can we increase capacity by improving our planning? The first step is to understand the true capacity as well as the underlying constraints that limit the factory from utilising the full capacity. Once we have understood the system and its constraints, we can challenge the planning methodology – the principle of how the production plan is created and the underlying assumptions made while creating the plan. We have learned that most factories and their production plans are rooted in old assumptions and methodologies that often no longer hold true.

Impact: We have systematically helped organisations improve their throughput through better planning, increasing throughput on average by 10%. The approach suggested highlights the true capacity utilisation and the underlying constraints. Our strong belief is that by re-thinking the planning methodology we can, in 9/10 cases, improve the capacity of the factory without significant investments.

Industry 4.0

A lot of companies struggle to distinguish hype from actual value within Industry 4.0. One reason underlying this has to do with a lot of confusion that arises from a conversation that is focussed mostly on technology, IT requirements and enablers. How often is a company’s Industry 4.0 strategy and operations strategy aligned? How can the shop floor best support this innovation and pursuit of new solutions?

At Implement, we have a long track record of working on manufacturing projects and believe in addressing Industry 4.0 as an evolution to Lean management, enhanced with some new technology enablers. However, even though technologies open the door for new possibilities and ways of re-designing processes, they must still be firmly supported by business cases and operational performance. These should be the point of departure. Furthermore, we support a sprint methodology that quickly allows for prototyping and testing for impact, without disrupting day-to-day operations commitments.

Implement’s approach has helped organisations address their uncertainties around Industry 4.0. By helping them first to understand their needs and performance objectives, we are able to avoid a lot of time and investment spent on the wrong things from early on. Additionally, considering the novelty of this area, we have also succeeded in the development of capabilities that allow the organisation to be fit to manage changes in the environment in an independent way.

In a recent case, a leading company within jewellery asked support to reduce lead times, improve productivity and reduce quality issues in a high product mix context with little to no visibility of ongoing operations. Implement supported the company on the journey to include continuous data capture within production, using it for real-time scheduling and rebalancing of production lines. Furthermore, displays with KPIs and SOPs helped the operators to become more efficient while reducing quality mistakes. In sum, the average lead time was reduced by over 50% and quality issues were also reduced by 50% which resulted in a total productivity increase of 15%.

Conclusion

In sum, our approach to factory turnaround enables you to focus on the most impactful levers (processes, layout, planning and/or technology) that transform your manufacturing. This re-design creates some impactful efficiency gains by having a wider view of the production system. Furthermore, Implement’s experience with business cases in manufacturing and roll-out change plans creates commitment from all in the organisation, whatever the current maturity stage of your operations environment. Finally, combining all these elements with an agile co-creation approach to testing and prototyping solutions helps us ensure change with impact and making the best ideas a reality.