Operations Innovation & Transformation – the 4 Types a Series

Over the last couple of years Stan   DeVries and I have looked a 100s of projects by leading companies across many industries, analyzing industry trends. Much of what I discussed in this blog over the last year has come from these investigations. But Stan and I thought it was time to talk through these "Operational Innovations" and Stan has put a series of 5 blogs on the topics that I will post over the next 2 weeks. Building on the ideas and concepts.

 High Level Review of the 4 Types Operational Innovation:

There has been much marketing on the innovations in supply chain and customer relationship management during the last 7+ years.  During this time, manufacturing and industrial operations has begun a less publicized transformation on their own.  This transformation goes beyond lean and total quality management principles.  In the 1980’s, we saw the impact of Japanese quality strategies; in the 1990’s, the consumer globalization fundamentally changed where facilities are built, how frequently new products are introduced, and in the 21^st century, industrial operations focus on how they create value for their customers, often focused on reliability.  These strategies might seem to be dreams without understanding the innovations that make these sustainable and the new risks can be practically managed.

These innovations are focused on unlocking the value of groups of physical and human assets:

1.       Physical Assets: the move to unifying the industrial enterprise over multiple sites (in groups or as a whole), with a more holistic view in terms of operating strategy and performance management.

2.       Human Assets: the shift to operational teams that spread across the multiple sites (in groups or as a whole), central, and Subject Matter Experts (SME’s) to make a rapid and dynamic decision support system in a dynamic operational world.

The following table published by ARC describes a spectrum of coordination or collaboration across assets, both physical and human:

The innovations are essential and prominent in the Integrated and Optimized portions of the above table.  So physical or human assets become 2 parts of one of the dimensions:

So far, no innovation is immediately apparent.  The other attribute of creating value of these groups is improving consistency or efficiency, either by seeking and maintaining a constant “sweet spot” or by enabling profitable agility.

One way that value can be unlocked from a group of people or physical assets is by improving the consistency of the group’s output.  This is very different from the hope of “the best worker on their best day, every day” or the physical asset’s equivalent.  Instead, the innovation achieves a “new normal” which understands and manages to a repeatable performance or “the new average worker on their average day, every day”.  This focuses on reducing the range of performance in output, whether measured as sales value of production, yield, efficiency, throughput etc.

Another way that value can be unlocked from a group of people or physical assets is by improving the effectiveness of the group’s output – the “synergy”.  This focus might seem to be a cliche, but it has produced significant and sustainable improvements.

So consistency and effectiveness become 2 parts of the second dimension, and now we have 4 quadrants:

Now we have some hints of innovation – how is it possible and practical to achieve significant and sustainable improvement from a group of physical and human assets instead of the “sweat the assets” focus which has been in place for 100 years?  The changes come from using physical and human assets differently when they are required to perform to a group objective.  The 4 quadrants are summarized as follows:

In the lower left quadrant, a group of similar industrial operations (2 or more) adapt their performance objectives, business processes and accompanying hiring and information strategies to optimize the “fleet”.  This innovation can be limited by the distribution flexibility among the locations, but several corporations have achieved success with this.  One example is keeping most of the locations operating at a constant or “base” portion of the combined market demand, and using the more agile locations to deliver the “swing” or variable portion of the demand.  Other examples and methods are described in a following article which focuses on this quadrant.

In the upper left quadrant, a group of complementary industrial operations (2 or more) adapt their performance objectives, business processes and accompanying hiring and information strategies to optimize the “chain”.  This innovation can be limited by the dynamic and range flexibility of some of the operations, but several corporations have also achieved success with this.  One example is seasonal competitiveness, where the “chain” collaborates to achieve maximum throughput during the high demand season and maximum efficiency during the low demand season (efficiency and throughput interact differently across different groups of industries).  Other examples and methods are described in a following article which focuses on this quadrant.

In the lower right quadrant, teams of specialists are grouped to provide value improvement to a group of physical assets, and the group of physical assets can be used as a “fleet” or as a “chain”.  This is much more than a passive “help desk”.  One example is where specialists use real-time bench-marking and other tools, working with new business processes with the physical assets and the dedicated workers, to unlock value of themselves and the physical assets.  Other examples and methods are described in a following article which focuses on this quadrant.

In the upper right hand quadrant, managers and supervisors use consistent measures and business processes to adjust targets for specialists and other workers, using the industrial automation concept of a “control loop”.  One example is where managers negotiate the next day’s production targets each day using the same business process for all specialists and industrial locations.  Other examples and methods are described in a following article which focuses on this quadrant.

The results have been spectacular, including double-digit improvements in efficiency, first-quarterly industry performance, and more.

Personality, Patterns, and Principles are key Pillars to User Interface and User Experience

I was watching a Microsoft session on user interface, and they spelled out the concept of the “3 Ps” in their design. I thought it would be effective to pass it on with commentary:

Personality: the visual interactive design

Patterns: Common interface patterns

Principles: the guidelines by which you set out UIs e.g. colors, fonts etc.

The three Ps we overlook in defining the report, the dashboard or user interface in the industrial world, the three Ps are not new, many of applying them without realizing.

Personality: This is a way in which the user interface interacts with the role and user, which requires the designer to define the targeted user, and make sure they understand the experience effective experience, knowledge and activities the role has. If you take the “activities" approach again understand the expect interaction, to create efficient decisions and actions, so that the system is intuitive. This means in different cultures based on regions the personality may change, certainly the personality between a dashboard for a maintenance engineer vs. production management is very different relative interaction. In 2014, the explosion of mobile applications for different "activities" /"roles" will occur instead of generic applications for the industrial market. This does not mean generic is wrong, but I firmly believe that if there is a choice between a specific application for an activity vs. a generic the specific will chosen as it will have the personality to suite the effective execution of that "activity".

Patterns: The user interface patterns are also key, to make the experience intuitive and familiar the layout, arrangement patterns need to be set out. Even though the actions maybe different the navigation, experience of where and how to find or execute something should not take learning when swap pining between different activities. These patterns should go across roles and “activities".

Principles: This again is key for familiar and consistent experience. Guidelines for use of color, fonts, backgrounds etc. are, and important comfort factor as the user enters and works with the system.

With so many different user experiences the knowledge worker interacts with today from reports, dashboards to interactive screens across desktops, pads, to mobile to notifications and video. All designed by different content developers and made available to knowledge worker community of the company. Increasingly the content developer will not know the content consumer other than by “activity" and role, as the host for the content will be user interface hosting frameworks (example the portal) that host, layout and enable navigation of content that is created elsewhere. So a piece of content for activity could be hosted in a desktop, then a PDA, then a web applicant all the same time, with the user traversing between "at will". To achieve a smooth, effective transition the 3 Ps in user experience for content design are key, far more important than in the last 20 years. Combine this with the dynamic nature of the workforce community initiative, familiar experiences will a pillar for competitive advantage. It is important that these standards can be managed, and evolved, we are investing alot in tools to make this managed easier and effective.

Collaborative Manufacturing is Becoming a Reality

The concept of Collaborative Manufacturing has been attempted in the past and successfully with Toyota and others but the time has come for a change that will enable an ecosystem of small agile manufacturers to form a “product value chain”. So lets start with what is Collaborative Manufacturing:

In Collaborative Manufacturing, designated individuals and organizations – both internal to a manufacturing enterprise and extended to its suppliers, customers, and partners – work together for mutual gain. The objectives of Collaborative Manufacturing are to streamline end-to-end business and supply chain processes and provide a more comprehensive and

accurate information base from which to make decisions.

Collaborative Manufacturing allows multiple groups to act together as they set plans and policy, agree to actions, and execute operations. Collaborative Manufacturing can boost responsiveness, agility, and customer-centricity. It also fosters the most cost-effective methods to design, source, make, deliver, and service standard, mass-customized or to-order products.

An effective Collaborative Manufacturing strategy requires business processes to include more inputs and interactions than most traditional processes. To support Collaborative Manufacturing, information systems must integrate and aggregate information from across the manufacturing business and from its suppliers, trading partners, and customers. It must also provide the means to intelligently distribute that information across various business entities.

So why now what is different?

Key to me is that fact that small enterprises can now leverage “Managed service” in the cloud that deliver the rich operational business capability of inventory management, operational process and manufacturing, and specification management which was only available to much larger companies. Now an end to end product chain can be developed with aligned a process and enable a product manufacturer to divided up over multiple operations, each operation executed by a small manufacturing entity.

The transparency of the product manufacturer across the sites all using “managed services “ in the cloud for ERP/ Order fulfillment, and MES operations / quality etc., provides the visibility to enable this agility. Effectively one Product Manufacturing chain (route) is been executed updated on a particular site as the product moves through, transport, assemble are also managed in this higher MES.

Yes, it will require a new thinking and alliance of small businesses but the value on agility and cost and the ability to scale provides a real opportunity for a new manufacturer and deliver model to take on the larger companies.  

To maintain a competitive edge, manufacturers must make a major shift in strategy to effectively synchronize activities among functionally and geographically dispersed groups. Those with whom they need to collaborate include:

• customers and, in some cases, their customer’s customers;

• distributors and channel partners;

• materials and sub-product suppliers;

• outsourced or contract manufacturers;

• logistics partners for distribution, warehousing, and transportation;

• providers of services such as legal and regulatory advice;

• multiple departments and divisions within their own company and with any of those entities described above.

A Collaborative Manufacturing strategy can help a company maximizes the effectiveness of its value chain in order to better control profits and address changing market demands.

Is this real, my answer is yes, I was on a plane last week, and two fellow travelers talked about the alliance and the seeking out others to make this ecosystem, combined with the agility of 3D printing, and then assemble these two expected to grow and had a good pipeline due to satisfy the “pay on delivery, with small order sizes” also the ability to have local final assembly close to distribution centers and significant retailers make them more desirable to occupy the “shelf space”. Both agree the reality is only now that the tracking and management are common across the plants in a hosted “managed service”.

Food for thought! 

Manufacturing Trends towards 2050

Well it is a new year and in many of us we look ahead, last year I looked at 2020 from an operational landscape, this year let us take a little bit further look out for looking at manufacturing. These are long term trends that will evolve and impact architectures, and I believe the whole landscape of operational systems. It relates to the discussion I brought up late last year on the trend from globalization to continentalision, due to speed of demand, and cost relative to energy etc.

Some interesting charts that show another set of trends I found in reading from ARC:

The top chart shows an interesting but fully expected trend towards more local, often small businesses, this aligns with continentalision, where time and agility to deliver is key, combined with another trend which is the move to customization of the end product. (note this is the opposite to what we see in the industrial software/ commercial software market where customization is giving way to “good enough” applications.) People will shift from brand to local product that aligns with the way they live , environment etc, this means more than language it means the culture of the consuming product. To achieve this combined with optimization even multi national companies will shift to local manufacturing sites for final productisation.  Example is in tobacco manufacturing where primary manufacturing is trending to centralize, and the packaging is local, enabling supply chain optimization, while agility to serve local markets.

But the bigger trend this move to “local/ smaller manufacturing facilities” suggests is the shift to “collaborative manufacturing” across an ecosystem of smaller more agile manufacturing facilities often run and owned locally. The opportunity for this comes through shift in technology to the “cloud” and “managed services” which enable a multi site manufacturing chain to managed in a series manufacturing facilities across the “product value chain” even if they are not the same company, but now a “collaborative manufacturing value chain” for that product. Managed services also provide the ability for these smaller companies to adopt mature operational/ MES applications as “managed services” providing them with operational control and alignment which has not been affordable before.

The chart below also supports the big trends by functions:

The key trends of shifting to renewable s, the impact of energy costs as the end of the “second industry revolution (oil based) “ declines, the “bottom of the pyramid” which refers to lowest 4 Billion income earners how we raise their standard of living. This is much more holistic view of the world than the 20^th century, except for the mass customization demand of my local product.

My feelings that this time to deliver, and satisfy the market the old “shelf space” will rule, with immediate satisfaction and freshness driving buying habits, combined with costs as transport and logistic costs and risk rise.

The final chart to reflect on shows the growing factors that effect manufacturing and operational decisions and therefore systems. 

This diagram does not look into the future but shows how in the last 20 years the major factors that influence manufacturing have expanded significantly, and they continue to grow. I would add the big one which is the shortage of skilled people, or operational empowerment in a dynamic workforce. Where now we have plants coming on line faster, or being acquired either into a global supply chain, or being added into a “collaborative manufacturing value chain” relative to a product. Combine this with the dynamic workforce that will be rotating roles, locations at less than 2 years in a role, while the ability to deliver more customized products drives the complexity of the production process, and value chain.

All good food for thought, as we look at significant operational transformation.