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:
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 21st
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.
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