Category Archives: Manufacturing

Overcoming Worker Resistance in Process Improvements

Sometimes, despite your best efforts, certain members of your organization will resist change tooth and nail. That’s why a recent Industry Week article on “How to Bring About Process Improvement When Workers Resist” caught my eye. The article, about Dover Corps. efforts to reconcile processes and operations between a plant in Tulsa, Oklahoma (Norris) and in Edmonton, Alberta (Alberta Oil and Tool), overviewed a good approach that might help you convince two competing divisions, or even two businesses within the same conglomerate, to play nice.

The article started off by noting early that processes are only as good as the people who implement them, and if John doesn’t like Bill and Bill thinks John is an idiot, no change initiatives can succeed and that systems are held together by purpose, relationships, and information. This is important because, at the very least, you will need a team that is willing to work together if you are to have any hope that your efforts to integrate disparate processes will work.

Dover Corps. began its process by putting all types of employees — union factory workers, maintenance personnel, front-line supervisors, engineers, and scheduling personnel — through three programs: on-line assessments, a relationship workshop, and individual sessions with an executive coach. The goals were to demonstrate:

  • the behavioral style of each individual to them, and how their style affects their communication with people throughout the organization
  • the best way to communicate with people of different behavioral styles
  • that many communication problems can be solved by adapting your style to better understand what another is trying to say
  • the ability for everyone to learn new ways of doing things

The process was very effective for Dover Corps. Results included:

  • recognition, and improved focus, on the strategic constraint for both companies
  • increased profits, despite the fact that 33% of constraint capacity at one location had to be taken temporarily out of service for repairs and upgrades
  • 87.5% reduction in setup time at one location
  • 80% improvement in rework

Finally, the article shared some key lessons learned, which contain some useful advice:

  • Work on relationships before you work on an issue.
  • Folks are folks (are folks). Whether you’re in the executive suite or on the shop floor, relationship building should work.
  • People need to be engaged in a proactive manner before they are pushed into a new process.

Downstream Supplier Performance Management

As per a recent Industry Week article, collaboration in the 21st century must be a tightly coupled relationship, not only between retailer and manufacturer, but also between manufacturers and all downstream suppliers and stake holders; including logistics, raw material, sub-contractors, packaging and quality / validation services, and, yes, even legal and finance. Otherwise, the chances of the right product hitting the right place at the right time are not very good, and neither are the chances of the final costs being on target. To this end, if you are to manage downstream supplier performance effectively, you need to be aware of the issues and trends. According to the author of the Industry Week article, Phil Friedman of QAD, there are four key issues and trends that consumer product manufacturers and retailers need to be aware of if they are to effectively manage downstream supplier relationships. They are:

  • Your raw material suppliers need visibility into your current demand plan.
    A root cause of missed delivery dates is a raw material supplier’s lack of visibility into a manufacturer’s current demand plan, which is often a constantly changing target in a demand-driven supply network. If a raw-material supplier believes a slowdown is coming, when in fact an upswing is just starting, delivery dates will likely be missed. Similarly, packaging suppliers need to align production, delivery, and, sometimes, design and art to support a manufacturer with tight schedules.
  • You need in-transit visibility since being in transit doesn’t guarantee you’ll get your shipment on time.
    You need to be aware of where the item is and whether there are any variances with respect to the original schedule. Otherwise, you won’t know that an item is going to be late until its late. However, if you know that your shipment sat on the dock three days longer than expected, and that it is going to be three days late, two weeks before the expected delivery date, you can adjust production schedules accordingly.
  • You need to know that supplier material meets quality standards before it is incorporated into your product.
    As recent years have demonstrated, poor quality materials can lead to massive recalls and significant hits to your brand and your bank account. Your suppliers should be able to prove to you that their materials meet specifications before they ship them to you, possibly through independent third party testing and validation.
  • You need to get all of your regulatory and business requirement ducks in a row well before you need the first shipment.
    As the article points out, orders are often missed not because the product is not ready, but because letters of credit are in error, quality assurance liability bonds have not been signed off by legal, and one delay after another causes raw material or contract manufactured products to sit and wait.

So if you make sure you are working in concert with your suppliers, distributors, partners, and internal counterparts, you can be sure that you’ll be a lot less likely to miss your delivery dates.

Design Cost Out with Akoya

Last year, I gave you a formal introduction to Akoya (acquired by I-Cubed) in my post Ahoya, Akoya and their unique solution for reducing direct material spend, which was described by their co-founder and president Brett Holland in his posts on “Getting Ahead of the Product Cost Management Curve” and “Taking Control of Cost Management for Engineered Direct Materials” over on Spend Matters. (With additional information to be found in their short paper on why “analytically derived should-cost information is critical for improving product margins”.)

When I was back in the mostly windy city recently, I had a chance to catch up with Akoya and discuss their new product offering, currently in beta with a few select customers, which is designed to complement their existing product offering and help organizations save even more on their manufactured part purchases.

Their current product offering, Category Workbench, allows a company to identify which parts it is likely paying too much for using a technique Akoya calls “competitive banding”. By extracting identifying features and product composition information from part designs, Akoya’s Category Workbench can automatically group parts into categories by common design elements and raw material composition and extrapolate average prices. Using this information and market costs, it can also statistically extrapolate expected prices for each part in a category and identify those parts that are currently being sourced at below market price, at market price, and above market price. This allows the company to identify those parts that present savings opportunities through re-sourcing, re-negotiation, or re-design. With this information in hand, a company not only knows where its sourcing teams should direct their sourcing efforts, but where it’s engineering teams should direct their redesign efforts. Considering that re-design and re-costing of even a simple part through a system like MTI Systems’ Costimator or Apriori’s Virtual Product Environment* can take a design engineer the better part of a day at the low-end, and a few days at the high end, and that their time is very expensive, this is very important as a company that sources thousands of direct parts can only attack a few hundred parts in a given year, and the wrong choice (based simply on a spend analysis by volume, supplier, or cost) can cost a company more money than the redesign effort will save.

Akoya’s next product, Designer Workbench, is going to allow a company to dive into those parts where the Category Workbench indicates a potential savings opportunity in a way that’s going to allow the company to determine the potential extent of the savings opportunity in minutes instead of hours, or even days. In addition to a number of new search, costing, and CAD data support features, which I plan to dive into at a later date after the product is generally available, one of the significant new features that this product is going to include is a new “What If” Analysis Tool. Using market pricing and price data from other products in the competitive band, this tool is going to allow an engineer to quickly create virtual variants with different features, treatments, processes, and raw materials and calculate estimated costs in real-time. In a matter of (less than 15) minutes (on average), a design engineer is able to iterate through a number of options and identify not only a lower cost alternative, but the high level design features that the lower cost alternative needs to have. In beta tests with an existing client, the estimated costs produced by the solution have been found to be accurate within 95% or more (when compared with detailed Costimator analyses which take an average of 6 hours for the customer in question). Needless to say, these are some amazing results, and I suspect that a forward thinking company that properly utilized this solution in conjunction with complementary solutions would see incredible returns. But that’s also a subject for a later post.

* Although re-design and re-costing through Apriori’s Virtual Product Environment can be done in a matter of minutes once the environment is configured and appropriate cost information entered, setting up one of these environments usually takes days, and often requires the assistance of Apriori personnel. 

Junket Junking with James Jin

While I was visiting MFG headquarters in Atlanta yesterday, I had the pleasure of sitting down for a few minutes with James Jin, who runs MFG’s Shanghai office (which covers all of Asia at the moment). James, who hosted last year’s webinar on Surviving China’s Rapidly Changing Sourcing Tides is a rare character who not only deeply understands both the North American business world and the Chinese business world, but who also sees what’s needed to bridge them into a more seamless global marketplace, which is something he does on a daily basis through MFG. It was a pleasure to discuss both what he thought were the most critical areas of focus for MFG, and other companies doing business in China, as well as what his biggest challenges were, because it not only highlighted the differences in doing business with China, but also the similarities – which I don’t think enough people spend enough time on.

From James’ perspective, the three most critical aspects that MFG (and other businesses entering or doing business in the Chinese marketplace) needs to focus on are:

  • Any international business can’t afford to miss the China market
    Low cost country sourcing might be going away, or changing in nature, but China is here to stay as not only a huge supply base, but an economic development opportunity.
  • There is a huge buy-side demand, growing larger by the day.
    Not only does China have one of the largest emerging middle-classes in the developing world, but they already have one of the largest middle-classes in the world. (Think about it, they have over 1.3 Billion people!) China is not just a large supply-side opportunity, but they are a large sell-side opportunity for any company that can offer the right products at the right prices.
  • The key to success is to think globally, but act locally.
    Doing business in China requires a balance and an understanding of local culture and geography.

However, James’ answer to my inquiry on the three biggest challenges to doing business in China was even more revealing on what it takes to do business successfully in China than the three most important areas on which you need to focus. In short, the three biggest challenges are:

  • People
  • People
  • People

Despite the cultural and language differences, the reality is that doing business in China is just like doing business with most developed countries. They’re very mature about their approach to business (they understand that business ebbs and flows in a repeated cycle, and that just because they’re getting a lot of business today, that doesn’t mean they’ll be getting a lot tomorrow and that they’re going to have to work to get and keep new business), they have new plants with industry leading technology (in fact, some suppliers have the most modern plants in the world for what they produce due to recent investments to keep up with Western demand), the leaders understand that it’s all about the people (as almost everything but the human equation can be automated these days), but, even with 1.3+ Billion people, it’s a constant struggle to find the right people with the right education and the right skills for the job. Especially when they have to play in a global marketplace.

As for what’s going on with the rest of MFG, you’ll be hearing a lot more from them next quarter, and I’ll have more to discuss at a future time as well, but for now, I need to hit the road again and wonder just what Willie was thinking. (Obviously, he didn’t drive his own tour bus!!!)

Equipment Breakdown Risk Management

At risk of sounding like a broken record (or a scratched CD, for you young twitterers), your supply chain is fraught with risk! However, the more risks you’re aware of, the more risks you can mitigate, especially if someone gives you some tips on how to identify and mitigate those risks. That’s why I enjoyed a recent article in Industry Week by Anthony J. Trivella of The Hartford Steam Boiler Inspection and Insurance Company on “Mitigating Equipment Breakdown Risks”.

In his article, Anthony notes that the most vulnerable part of many businesses is the equipment that keeps them up and running — and if the equipment, or the underlying infrastructure that supports it, breaks down, commerce usually comes to a stop and profits vanish as customers go elsewhere for their products and services. Furthermore, risks are being exacerbated as four trends are converging to drive risk to higher levels than ever before: infrastructure is aging; demand for equipment is increasing globally; energy demands, and costs, are rising rapidly; and technology is proliferating faster than Fibonacci’s rabbits.

The Aging Infrastructure and the Data Explosion

The U.S. infrastructure, and the power grid in particular, is being strained by the proliferation of power-hungry technology. (Data centers are now sucking up close to 20% of all energy produced in the US! [IT: The Biggest Threat to Our Energy Future]) Much of the current system was developed over half-a-century ago, and was not designed for today’s energy needs. In addition, many equipment owners neglect to install adequate surge protection, and place their business activities at increased, unnecessary, risk.

The Global Battleground for New Equipment

As the GDP of developing nations that we have been outsourcing to for most of the decade continues to grow, so do their middle class – who now want what Americans want. China and India account for 40% of the global population, and by some estimates, their middle class is now larger than the US population. However, worldwide production hasn’t increased at the same pace, so in addition to a fight for easily made DVD players, there’s also a fight for the modern equipment needed to build skyscrapers, road, bridges, and power grids.

Rising Energy Demands and Costs

Peak demand for electricity in the US is expected to increase by 18% in the next 10 years while committed power generation is projected to rise a mere 8.4%. Considering the total annual energy demand of the US, that’s a huge differential. Can you say “rolling blackouts”? I hope so, because that’s looking more and more likely every year! (So, start greening your roofs, using geothermal to cool your buildings, installing those solar panels and wind mills, and watching that fuel cell technology … because, if uninterrupted power is critical to your business, generating your own power is the only way you’re going to insure you have power when you need it.)

Technology Proliferation

Just look at your average worker who needs a utility belt to hold all of his iPhones, iPods, iFaxes, iBooks, etc. etc. etc. and you can see that we have become slaves to technology. (It’s a damn good thing we’re still not close to achieving artificial intelligence!) How many computer systems do you have? Really? Better count again … between desktops, laptops, servers, backup-servers, backup machines, machines in repair, etc. – I bet you have three times as many machines as you think you have. (And yes, that’s one of the reasons your energy bill is going through the roof!) Then there are all of the different enterprise software systems that you use to manage your business. And your mobile devices. Point of Sale devices. etc. etc. etc.

This widespread use of electrical and electronic equipment, which is highly vulnerable to power surges and other disturbances, is creating equipment and business risks for commercial operations whose owners may not understand their exposures. Moreover, technology is advancing so rapidly that much of it becomes obsolete quickly, making it difficult to repair or find replacement parts. In many cases, if key components are unavailable, it must be completely replaced.

Unprecedented Risks Require Unprecedented Mitigations

Equipment owners need to assess their risk exposure, improve maintenance and operation procedures accordingly, develop contingency plans, and insure they have appropriate insurance protection. Some specific things that can be done include:

  • the life-span of large transformers can be maximized via dissolved gas analysis and other tests that can identify defects and necessary repairs before the transformer breaks down
  • key data systems and servers can be backed up by redundant surge-protected uninterruptable power supplies
  • on-site power generation systems can be installed to not only provide emergency backup, but reduce the amount of power the business needs to draw from the grid at peak times