Supply Chain Performance

It’s Time to Recharge Your Supply Chain

As we head into the new calendar year, now is a great time to take stock and look at reframing, re-evaluating, and recharging your business. There are a bunch of different ways to do that. But if you’re in manufacturing, whether you’ve been in business five years or 100 years, there’s a good possibility you’re in a rut. Industrial companies, for a lot of good reasons, tend to be pretty traditional businesses. But the downside to that is the risk of falling behind on what new innovations have to offer. Here’s the thing–it’s not your grandpa’s manufacturing world anymore.

The good news is that my discussions have shown me that over 80% of businesses are looking to technology to reinvigorate themselves. So at least people realize they might have a problem.

The bad news is that for a lot of them, they don’t exactly know what to do about it.

So let me help.

We’ve all heard about the supply chain woes, and most of us are experiencing them. There are difficulties all over: with raw material supplies, offshore manufacturers, ship transportation, rail transportation, and truck transportation.

You may have heard about the 4th Industrial Revolution and digital transformation. It’s a fair bet that a lot of us are so tied up with the current crises that making any progress on Industry 4.0 seems like a bridge too far. But what if I told you that the supply chain crisis and the digital revolution together represent exactly the opportunity that we’re referring to when we challenge you to recharge your supply chain?

Many of the disruptions we’re seeing in the supply chain world could have been avoided with Industry 4.0 solutions. That entails implementing a technology solution alongside a change management program with support and involvement from the top-down.

You might be thinking, “How could robots have prevented the current delivery problems or the long-term pain points?” But that’s where so much of the current digital revolution thinking is wrong (or at the very least, too limited). It’s not necessarily about robots or production process automation. It’s about automating your run-of-the-mill pain points, wherever they are.

For some people, the answer is robots or some other type of process automation. But for others, the biggest opportunities lie elsewhere. 

Most companies that could automate their production processes already have automated their production processes. (In fact, basic automation isn’t even Industry 4.0–it’s Industry 3.0. Yep, you’re aging yourself.) Oh, there will always be further opportunities to do more automation, because the technologies for that keep getting better and better. (Advanced automation and connectivity are part of Industry 4.0–feel better now?) And labor keeps getting more expensive, and harder to get, so the economics keep changing in favor of further manufacturing process automation.

But for most people, the real opportunities are in business process automation. If you challenge your team members to take time to call out what they do in their jobs that are time-consuming and dreadful and boring and costly, I bet a whole bunch of it turns out to be administrative work.

Some of us have spent years or even decades wringing out efficiencies on the manufacturing floor. And yet that’s where so many of us just keep focusing on more improvement. There’s not necessarily anything wrong with that, because it’s a pretty good bet none of us have reached perfection out there in our production areas.

Still, after spending years on that improvement, your potential returns may get smaller and smaller, right?

What about looking at the other areas of your business where people are spending their costly labor hours? Have you focused any energy on improvements in those areas lately?

Let me guess. You’re thinking, “Oh, we launched an ERP years ago. That’s all taken care of!”

Is it, though?

Think back to that ERP launch. Chances are, it didn’t go so well. It was a difficult rollout with all kinds of problems and business disruptions, and your people had to build their own workarounds just to keep things going. This adds to the original problem, and most companies are caught in a web of customization, led by a handful of people that could leave the company in a state of emergency if they leave. Which has and continued to cultivate the fear of not making an additional investment to truly solve the problem we started with.

It’s a good possibility that your business has had some changes over the years. Maybe your entire strategy has changed, or maybe you’ve just added digital sales where they didn’t exist when you first automated things. Either way, your ERP probably hasn’t kept up.

The good news is that technology has marched on, big time, and there is a great opportunity to streamline and alleviate your pain.

But if you’re planning on automating manual business processes, just as installing new capital equipment to improve process efficiencies or provide capacity for business growth, you have to make the business case and justify the ROI for proposing a technology change. Job #1 is building their confidence in the details you’re using to build and protect your financials. Then it’s designing an implementation program that fits your company’s culture and appetite for change.

When it comes to confidence in your financials, you can build an initial business case from the data at hand. Have you identified areas for cost savings or cost improvement? But since far too many systems have data that are unreliable, you should also plan to do some hands-on work to validate that data. Manual data collection from the operating floor, with the analysis done with good statistical methods, will help build a compelling case. If the improvement you’ve identified involves working with your suppliers or customers, make sure to include them in the data collection and business case.

For new technology solutions, there are business cases and white papers available that will show the savings that other organizations have realized. In addition to your own analysis showing what you think your company’s savings can be with your proposed solution, these external studies can help show real-world savings that other companies have gained to give your work more credibility.

There are the obvious labor cost improvements from eliminating all that repetitive labor–we’ve seen time efficiency gains of 25%. But how about 35% improvement with on-time deliveries? Or increasing your inventory turns by half? In today’s environment, where too many businesses just can’t make enough to meet demand, business process improvements that help avoid missed sales can generate enormous savings and protect your current book of business. In a world where customers have tons of shopping options, maintaining brand loyalty and brand recognition is top of mind for leaders across the manufacturing verticals.

Don’t forget the added benefits of better morale among your staff. With retention being a big concern these days, given the absolute nightmare that recruiting has become, keeping your good current team members happy and challenged, and continuing to work for you and not somebody else, is worth more now than ever before.

There are the knock-on effects of freeing your people to do higher-level work, where they can focus on other pain points that might be less mundane, but could represent even further improvements. Think of having your talented teams focused more fully on strategic sourcing, or on mitigating supply chain risks. If you challenge your people as you head into the new year about what they’d like to spend their time on if they didn’t have to spend so much on manual drudgery, you might be surprised by what they come up with. Many of the crises that so many companies are dealing with in their supply chains today could have been averted if people could have thought beyond the busy work of the day and focused instead on the weak points and how to shore them up.

Challenge your suppliers to look at their processes. It’s likely they suffer from a lot of the same inefficiencies, and can benefit from the same kinds of improvements to their administrative processes.

You invested a lot in your ERP. For all the headaches it may have caused, it’s still a tremendously valuable tool, and it represents a huge advance over the processes it improved or replaced. It can be an even better tool still, if you look closely at the manual work it’s left in place, and look to easily integrated digital solutions that will eliminate that wasteful work.

Encourage your team members to help you identify those opportunities for improvement.