Sep 27, 2022 | Change, Operations
The world of manufacturing is in a state of perpetual change. The rate of which is accelerating at a scary pace, and Australia is falling further behind.
Manufacturing moved from being powered by steam to powered by electricity, a process that took over a hundred years from the early 1800’s to the 1920’s, but we did not notice it due to the time. It took 50 years for the internal combustion engine to go from early iterations to general use in affordable cars, and the telephone took even longer before it was standard in most homes. The dominant business model was based on Industry ‘verticals’ that usually included controlled supply chains.
By contrast, we moved into the age of digital in the early 90’s, and everything changed in a generation.
Suddenly we are seeing ‘ecosystems’ of manufacturers who compete in some things, and collaborate on others, people who do not have one employer only, industry boundaries are not just blurred, they are becoming seamless.
Amazon is a great example. It is a retailer, wholesaler, provider of systems and technology, newspaper publisher, technology investor, space explorer. Not an industry vertical in sight, rather a web of interconnected interests and cash generators.
The architecture upon which our manufacturing has been built for 100 years has broken down, and we seem unsure of what has replaced it.
If we are truly now in a ‘knowledge economy,’ it follows logically that we should be competing on the rate of learning we can achieve. Sadly, this is inconsistent with the way most Australian organisations are structured and run. The application of digital technology is evolving daily at a rate at which we must learn or be left behind. Algorithms that learn are increasingly intruding, while reflecting and building on patterns of behaviour, without us recognising it is happening.
Manufacturing is a physical process, increasingly being driven by digital, and that rate is accelerating, making it necessary to be competent in both the physical and digital, or fail competitively.
Manufacturing is becoming a hybrid beast.
It seems to me that future survival increasingly depends on our strategic priorities moving from the trends in our physical and competitive environment, to those in our relationships and learning environments.
These are much harder to measure and anticipate, so it is easier to ignore them until too late. Don’t be caught with a blindfold.
Sep 21, 2022 | Innovation, Operations
Yesterday, Tuesday Sept 19, 2022, I went along to the Modern Manufacturing Expo at the Sydney showground.
Expectations were high that I would be able to see the emerging technologies, techniques, product, and service innovations that might support the re-emergence of manufacturing in this country. Specifically, I was also looking for ideas for my clients.
Perhaps I was too focussed, and saw just what I wanted to see when I registered some time ago.
It took a bit to find the expo, as there was no signage at all. Instead, there was signage for the ‘Workplace Health and Safety show’. Confused, I wandered in to ask directions to the manufacturing show to find they were the one and the same.
So, I went into the pavilion hoping to find some of the inspiration and conversation I was looking for.
The manufacturing part of the show was in the back corner. A discarded program I found indicated the manufacturing part had 25% of the floorspace, but it seemed more like 15%, and then, there was not much to see.
My question, hopefully not too frivolous is, do we not need a vibrant and successful manufacturing sector in order to support the plethora of OH&S products, services, and associations? Where are their revenues going to come from if the manufacturing sector remains as constrained as it is currently? Judging from the exhibitors yesterday, OH&S has become the end, rather than a vital means to the end, which should be a vibrant, innovative, globally oriented manufacturing sector.
This is not to throw rocks at those who turned up, made the investment, and were there to generate awareness and leads from those in attendance, in addition to the obvious networking opportunities. It is simply a commentary on the lack of support from across the broad base of manufacturers and their suppliers, education, government, and service providers.
Perhaps it was just a lousy marketing effort by the organisers, the costs were too high (although the OH&S crowd fronted), or maybe it was just one too many expos?
At least my effort was rewarded by running into someone with whom I had a useful conversation about a topic that had nothing to do with manufacturing, and as he lives two streets away, I tend to see him around a bit anyway.
To my mind, the old question of which needed to come first was clearly answered yesterday, and sadly, we seem to have it the wrong way round.
Jun 20, 2022 | Change, Operations
Over time, as changes in the world trading environment evolved, corporations of all sizes matched that evolution through their supply chains by seeking efficiency.
China began to open its economy in the 1980’s, bringing a massive previously untapped labour pool onto world markets. The accountants in developed countries did what they do and took advantage of this cheaper labour by shifting manufacturing operations. This hit the labour market in developed countries hard, and drove change towards automation. The change also brought huge increases in the standards of living of millions of Chinese that increased total demand dramatically.
A key part of the automation processes was the deployment of operational improvement practises, lean, six sigma, JIT, and others. The driving force in these deployments was efficiency.
Over time as manufacturing focussed on efficiency, we did not recognise the downside sufficiently, and sacrificed the resilience in our supply chains against any sort of disruption. We engineered redundancy out, as it did not deliver efficiency.
This is all very useful in the relatively benign environment we had, barring a few hiccups like the 2008 financial meltdown. However, it becomes toxic when the brown stuff really hits the fan, as it did with Covid, and now the Russians. Having practised in Georgia in 2008, and the Crimea in 2014, they have gone after the bigger prize of Ukraine.
Suddenly the patterns of demand for all sorts of products from microchips to grains and consumer products have radically changed, and we discover the downside of engineering out resilience in favour of efficiency.
As one product becomes disrupted by the chaos, it creates waves of second and third level effects, many of which nobody has thought about. Suddenly, and belatedly, we recognise the interconnections and dependencies that compound the disruptions.
The huge challenge for manufacturing leaders is to devise new models that continue to build efficiency, while not sacrificing resilience.
May 4, 2022 | Leadership, Operations
Any company that has grown bigger than about twenty or so employees has developed functional silos as a necessity. The bigger the company, the more focussed and powerful drivers of behaviour of functional employees those functional silos become.
At some point, they risk becoming self-preserving organisms, which seek survival and growth in an internal environment that competes for scarce resources to be allocated.
This is always a huge problem when seeking to generate change.
Water runs downhill, it finds the easiest way down, it builds momentum, continuously making minor adjustments, carving out a modified route as necessary.
Individuals in an organisation have a choice. Metaphorically, they can just ‘go with the flow’, or they can create friction and try and redirect the water. Few attempt to redirect the flow, and fewer still have the power to mandate it.
At some point, someone comes in and says we want some water back at the top of the hill, so someone gets some buckets, fills them, and starts back up the hill.
Almost always the journey is too tough, and they give up.
The momentum of the water still flowing down the known tracks beats them.
The task of leadership is to make that journey easier, to enable the individual to redirect their piece of the water flow, not to where it is easiest, which is the way it went last time, but to a new way, forging minor changes that cumulatively create the new best route to the end point.
Customers do not care about your internal structures, rules, and priorities. They want their product as ordered, at the agreed price, on time, no defects. This is inherently cross functional.
We have organised businesses for our own convenience, when in fact they should be organised for the convenience of customers.
Header photo credit: Lunayuna via flikr.
Mar 23, 2022 | Analytics, Operations
6 sigma is a statistical toolbox designed to assist process improvement. It was originally developed by Motorola in the 80’s as they struggled with quality problems in their booming but now extinct mobile phone business. The tools seek to identify and remove the causes of variability and resulting defects in manufacturing processes. It uses statistics to identify problems, formulate remedial action, then track the impact of improvements as they are implemented.
In simple terms, 6 sigma compliance means there is less than 3.5 defects in a million opportunities for that defect to occur. This can apply to a specific machine or action, or whole production line. Clearly the latter creates many more opportunities for error, and therefore harder to stay ahead of the 3.5 defects/million opportunities benchmark.
Improvement projects are run to a proven statistical ‘recipe’ going by the acronym of DMAIC.
Define. Using statistics, define the problem, and the deliverables of the project.
Measure. By collecting data, you measure the ‘current state’ of the process or activity. This is the starting point from which the improvements will be measured.
Analyse. By analysing the data from each point of input, usually by experimentation, you isolate the cause-and-effect chains in the activity. This identifies the root causes of the variation being investigated.
Improve. Removal of the causes of variation will result in improved performance. The improvements require that changes be made and that the improved processes become the Standard Operating Procedures (SOP).
Control. Control is the continuing monitoring of the improved process to ensure that there is no ‘back-sliding’.
When engaged in a 6 sigma type project, I like to combine it with the SMART methodology in each component of the improvement process. This enables pro-active project management of the components of the process.
6 sigma is often confused or conflated with ‘Lean’ methodology. They use a similar toolset while coming at problems from different perspectives. In my view, and some disagree, they are highly complementary.
Feb 25, 2022 | Analytics, Operations
To improve performance, the key challenge is to identify the drivers of outcomes in real time, and enable the changes to be made that will improve the performance.
The ‘Box score’ is a term that has been hijacked from the recording of individual sporting performances in team sports by a few accountants seeking to capture real time operational data. The term originated with Baseball, but all team sports have a system that in some way records individual performances which when taken together are the source of team performance.
In a commercial operational context, the collection of metrics plays the same role, capturing the real performance of a part of a process, adding through to the totals for the whole ‘team’. It is a more accurate and responsive way of tracking the costs incurred in an operational situation, specifically a manufacturing process, than the favoured standard costing system.
Typically, standard cost systems while better than nothing, fail to reflect the actual costs incurred by a process. They are ‘lazy’, displaying the averages of past calculations, and as we know, averages hide all sorts of misdemeanours, errors, and potentially valuable outliers.
Sometimes these systems also have a component added to the cost of each unit of production that is noted as: ‘overhead absorption’. This just makes the inaccuracy and inflexibility of the standard costing system even more inaccurate and misleading, resulting in poor data upon which to make decisions.
Accounting has only two functions: the first is reporting to outside stakeholders. That has become a formulaic process with a template and rules about how things will be treated, this is to ensure that you are always able to compare apples with apples across industries.
The second function is to provide the information necessary to improve the quality of management decisions. The two are not connected except at the base level, the originating data.
This is where the ‘box score’ approach adds huge value: it captures the actual cost of a process.
A well thought out standard cost of goods sold (COGS) calculation typically includes calculations for the cost of packaging, materials used in manufacturing, and the labour cost consumed by the process. The calculation assumes standards for all three, and then throws out variances from the standard to be investigated. Standards would typically be updated regularly to accommodate variances that appear intractable. Changes such as labour rates, machine throughput, and price changes in materials, should be included in updated standards, but often they are not, and when they are, it is after the fact, and as averages.
A ‘box score’ by contrast captures the actual cost in real time, or close to it, so that more informed management decisions can be made.
30 years ago, I did an experiment in a factory I was running, the objective of which was to identify the exact cost of the products running through a line. To collect the data, a host of people needed to stand around with clipboards, stopwatches, and calculators. At the time it was called Activity Based Costing, ABC. The result was good, but the improvements resulting from the information gathered did not generate a return on the investment necessary.
These days with the digital tools available to collect data, there is little excuse not to invest the small amount required to measure the real throughput and resources allocated to get the better information for informed decisions. The options to collect real time data are numerous and cheap, and in modern machinery, just part of the control mechanisms. These devices can collect data and dump it into anything from Excel to advanced SCADA systems, which enable the data to be analysed, investigated and the outcomes recorded and leveraged for improvement.
Managing operations using the actual costs captured and reflected in a ‘Box Score’ manner enables more accurate and immediate decisions to be taken at the point of causation. It is no different to a cricket captain taking a bowler off because the batsman is belting him out of the park. When you can see what is happening in real time, you can do something about it.
Header: courtesy Wikipedia. The scorecard in the header is the scorecard of day 1 of the 1994 ashes test in Brisbane. It progressively captures the days play as it happened: a ‘Box score’
