Most manufacturers today are unable to find and share information as a consequence of siloed systems that isolate data, hinder collaboration and restrict visibility. With multifaceted operations spanning the globe, they’re susceptible to the chaos caused by scattered, unorganized data and mundane processes.
As manufacturers cope with heightened pressures for highly customized orders and sudden changes in demand, they experience a mismatch between their planning and procurement teams. Call it the “execution gap.” It drives up inventory carrying costs and leads to stockouts, late deliveries and unsatisfied customers. Together these challenges can quickly erode bottom-line profitability.
To make matters worse, external forces are creating additional hurdles. Supply chain shortages, labor constraints and the constant need to “do more with less” are forcing manufacturers to rethink how they manage their operations. One area that’s often overlooked is the difficulty of getting planning, procurement and production to collaborate.
Teams working in parallel should have access to the same information so that they can achieve shared long-term goals. If, for example, planners manage orders and forecast demand with daily or weekly production through one system, and procurement uses a separate system to buy the materials, components and other goods needed to execute the original plan, there’s no way to effectively hand off information from one department to the other. As a result, data becomes useless before it’s received.
To bridge the execution gap, many companies have historically shared information across departments by exporting data from an enterprise resource planning system into spreadsheets. The problem is that spreadsheets require entirely too much manual effort to keep up to date, and are error-prone. After copious amounts of time spent analyzing the data, organizing the report and sharing the information, it’s already too late to take actions that would improve supplier performance, reduce inventory levels and eliminate shortages.
The current siloed, spreadsheet approach that many manufacturers are using is no longer working. Cycle times and the sheer velocity of doing business are speeding up, to the point where by the time data gets into an Excel spreadsheet, it’s already obsolete.
A Radical Departure
Today’s customers want more personalized products, and discrete manufacturers that already produce distinct goods are well-positioned to meet these demands. Manufacturers that once generated a predictable product configuration with few if any changes are now being asked to deliver highly-personalized products without impacting speed of delivery, quality levels, or even cost.
Aircraft manufacturers are fielding demands for personalization as they accommodate customer requests for certain types of seatbacks, electronics and other cabin features. Just 10-15 years ago a manufacturer’s core focus was on making an aircraft that would fly safely and efficiently. Today, the same company has to be able to offer a wide range of configuration options for its customers.
The same level of differentiation can be seen right on the floor of the average home improvement store, where a common household amenity may have hundreds of features that vary from one retailer to the next.
Manufacturers are also outsourcing more of their work to other vendors, adding complexity to the process of assembling a finished product. At a macro level, the producers and their outsourced providers are dealing with external forces like the higher cost of doing business, inflation and the ongoing labor shortage. Masking these problems by simply adding more inventory or asking employees to work more overtime isn’t sustainable or even viable for most companies.
The personalization factor is crushing manufacturers that are dealing with variability. The question becomes: How can you adjust for all the different customizations that a customer might want, then factor that into your planning, procurement and production?
Closing the Loop
The solution to closing the execution gap lies in technology that helps manufacturers connect the dots across their production, planning, procurement and supply chain operations.
With everyone working from the same playbook and not constrained by spreadsheet-based information, manufacturers are free to operate more effectively and profitably. Planners have clear visibility into their operation’s production readiness and know when to give the “clear-to-build” signal to production departments. And procurement can rest easy, knowing that production has everything it needs to move forward with their jobs.
In adopting the right technology, companies should avoid the need to rip and replace existing software applications. Instead, they should seek an effective control layer for key business planning and customer fulfillment needs. It’s important to have a lightweight connection to the company’s planning applications to ensure that buyers are procuring the right materials.
Enlightenment Drives Action
As companies across industry sectors digitize their operations, many are ending up with a hodgepodge of disconnected systems. For discrete manufacturers, there simply aren’t enough hours in the day, or hands on deck, to find coherence among these disjointed applications. Somewhere between their legacy ERP systems and supply chain applications lies a procurement department that’s forced to operate in an increasingly fragmented digital ecosystem.
As global supply chains continue to expand, these fragmented digital ecosystems can become true liabilities for discrete manufacturers that are also dealing with customer demands for more personalization, a labor shortage and ongoing supply chain disruptions — the next of which is probably lurking right around the next corner.
With recession looming, it becomes even more important to be smart about investing in technology that will drive a return on investment. "Lean thinking" is going to be needed even deeper across the supply chain.
The first step toward closing your company’s execution gap starts with a simple assessment of where your operation stands today, what it’s doing right and what it can be doing better. Look for any disconnects between planning and procurement, factor in your current supply chain challenges, and assess your existing data-sharing, inventory management and reporting processes. Does your operation have all of the intelligence it needs to be able to make good, proactive, customer-focused decisions on the spot? If the answer is no, then it’s time for a change.
Richard Lebovitz is chief executive officer of LeanDNA.
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