Manufacturing as a Competitive Advantage

Continuous Improvement programs are evolutionary but manufacturers need more to stay competitive. This article discusses how a temporary influx of effort, focused on high-priority improvement opportunities, can create step-change improvements.

Achieving Breakthrough Performance

Why Continuous Improvement Is Not the Total Solution

Manufacturing operations exist in an environment of constant change and challenge. Rising raw material costs, energy prices, demands of regulators and competitive threats from offshore manufacturers are just some of the challenges that drive the need to seek operational improvements. For many, this pursuit has led them on the path toward the creation of continuous improvement cultures and organizations. These companies have embraced and leveraged programs over the past three decades - from Duran’s quality circles, Deming’s TQM, and Toyota’s TPM through the Lean and Six Sigma tools and philosophies that are in vogue with today’s generation of managers and leaders.

Continuous Improvement (CI) remains a fundamental requirement for survival in today’s manufacturing world. That said, it must be recognized that rarely, very rarely, does any CI program provide a source of competitive advantage. This is because 99% of organization’s already have CI programs and, rather than creating step change or breakthrough performance CI is a requirement to keep up with inflation and not lose ground on the competition.

Relying solely on Continuous Improvement efforts in order to maintain manufacturing competitiveness poses a number of challenges:

Situations where a traditional CI approach may not be optimal:

To successfully meet the challenges presented by such events, an organization requires a process-based approach that helps to identify and bridge performance gaps in a way that ensures performance will be sustained within a time scale that meets the needs of the business.

KT STEP CHANGE

Kepner-Tregoe (KT) has developed both a philosophy and practical project model to enable organizations to address these situations that integrate with, and add another dimension to traditional CI models.

KT Step Change is a robust three phase model (Diagnose — Implement — Sustain) which guides an organization through the processes of accurately assessing the potential for improvement and selecting the optimal project mix and schedule that must be implemented to achieve improvement. Beyond implementation, making the changes required to operational practices, processes, procedures and performance expectations will allow for sustained improvement.

Diagnose

Rather than instinctively initiate action in response to events, it is essential the organization first gather relevant information with which to make decisions regarding how best to respond. A thorough, yet expeditious gathering of information (with issue focused data collection) is crucial to guiding the decisions about alternative responses. While there is often information already available regarding where the problems or opportunities are, it is also likely that some of these issues have already been addressed. The intent of a best-in-class diagnostic is three-fold: prove what is already suspected, disprove what is already suspected, and uncover new information (or look at old information differently). Organizations that approach their responses with this in mind generally make smarter choices on the path they take.

One of the outputs of movements such as Six Sigma is that they have created a very strong capability in most organizations to gather volumes of data and “slice and dice” it to death. However, numerical performance data only tells a portion of the story. Often, causes of issues within an organization are just as strongly associated with how people behave in the business environment, as the business processes that surround them. Successfully understanding the reasons why performance is not providing a competitive advantage requires that influencers of the “people” performance (qualitative) side of the equation be explored just as robustly as the data (quantitative) side.

Focus on capitalizing on strategic value

First, it is important to understand where improving operations processes, practices, and performance fit within the strategic objectives of the manufacturing organization, vis-a-vie other advantage drivers. Is it more appropriate to focus on equipment and capital improvements? Is improving the safety of all workers a higher imperative? Are quality and compliance issues threatening to constrain the ability to operate? Is there simply a need to improve human capabilities broadly across the organization? Understanding where to focus attention at the strategic level is the first question that needs to be answered.

When focusing on operational processes, it is tempting to simply gather the “low-hanging fruit” or rely on technological solutions and capital investments to achieve organizational goals. However, Step Change is much more comprehensive than just handling the “easy” or “quick” fixes. It clearly outlines crucial factors, including the organization’s value system, and external market factors influencing the creation of projects that will either never be implemented, add zero-value, or create internal conflict and distraction. The diagnosis is structured to uncover the opportunities that will most contribute to successful resolution of the organizations’ specific issues.

Evaluate all of the improvement efforts against the strategic objectives before launching initiatives

Once a clear understanding of all the opportunities has been gained, successful manufacturing organizations consider all potential alternative solutions (or combinations of solutions) that they might undertake and how, once implemented, each would contribute to their improvement objectives. While some of the instinctive reactions may have been the most appropriate response, it becomes important to evaluate the existing situation in a more measured manner, determine the objectives that need to be achieved, and ensure that all potential courses of action are considered. This is key to making sure that all actions being considered are what’s best for the organization.

In order to ensure an intelligent use of limited resources, successful organizations engage in a diagnostic process that is tailored to specifically uncover those opportunities most relevant to the desired improvements. KT’s diagnostic approach relies heavily on our proven rational thinking processes for setting priorities, identifying problems and their root causes, making rational decisions, and understanding human performance. The diagnostic methodology is designed to quickly assess where opportunities reside, prioritize what’s most important, and formulate a diagnostic approach.

Considering the opportunity landscape, a variety of diagnostic approaches are employed to uncover where improvement efforts are best focused. Often, this may include one or more of the following:

An agreed upon approach would combine the use of appropriate operational analysis tools and techniques with structured thinking processes to uncover hidden opportunities and quantitatively prove or disprove where those opportunities are suspected to exist. Used in a targeted way, these methodologies will identify the magnitude and location of the opportunities.

If you examine a manufacturing organization long enough, it is difficult not to find dozens if not hundreds of improvement opportunities and devise ways in which to address them. Obviously, leveraging all of the opportunities discovered is the ideal. However the truth of the matter is that not many organizations have the resources to tackle such monumental tasks, even with outside assistance.

IMPLEMENT

Kepner-Tregoe, relying heavily upon its Decision Analysis (DA) process and experience in managing large portfolios of potential projects, works with organizations to define alternative initiatives to address opportunities and, perhaps more importantly, facilitate a rational process for selecting the right initiatives needed to achieve the desired improvement objectives.

Our approach to evaluating initiatives within the context of all other “project” work occurring within an organization is one of our core competencies. DA is a powerful tool that helps make sure that the work undertaken is the “right” work, is resourced appropriately with the right mix of people, and is evaluated against the overall ability of the organization to fund and resource. Grand visions of Step Change leaps in performance often go unrealized because organizations fail to consider that their people have “day jobs” and are often working on other “hidden” initiatives to which management may not have visibility. Our approach to creating an Optimal Project Portfolio, against which any proposed improvement initiatives are objectively evaluated, helps avoid the pitfall of resource drain.

Once an ideal set of initiatives has been selected, Kepner-Tregoe employs its robust, PMI-certified Project Portfolio Management processes to define, plan, and ultimately manage to completion the work necessary to realize the desired results. It works hand-in-hand with appropriate stakeholders and project team members to ensure that the improvements are implemented effectively. Before launching any work, we make sure that the organization understands its commitment (and ours), the results that can be expected, as well as how long the work will take so that intelligent and informed decisions can be made.

Ensure that key organizational resources are used effectively and ongoing operations are not negatively impacted during implementation

Rapid implementation of dramatic changes usually comes at a cost. There is no greater cost in most organizational improvement efforts than the human one. Assessing where opportunities lie, objectively prioritizing which are most important to capture, structuring a logical approach to making high-priority improvements, managing the design and implementation of those improvements… all take time and effort. Successful manufacturing organizations recognize that not all activity needs to be conducted by their own resources, especially if committing those key resources jeopardizes the day to-day operations. Those organizations most successful at maintaining their competitive advantage leverage interim expertise, when possible, in order to reduce the strain on their organization’s most precious resource… its people.

Rely on proven methodologies and best practices when possible rather than reinventing the wheel

While every organization is unique, the fact remains that issues and opportunities have striking similarities across geographies and industries. While not providing turnkey solutions, proven methods and approaches can be applied to specific issues thereby saving much time, money, and frustration during implementation. Successful manufacturing organizations understand that others may have discovered effective means of resolving similar issues and sought out those best practices and methodologies, then adapted them to meet their needs. Engaging resources who have experienced a wide variety of issues adds value, perspective, and expertise to the implementation effort and allows for improvements to yield results much more rapidly than reinventing the wheel.

Initiatives that are launched as a result of the diagnostic process typically balance physical, process-based changes with activities designed to ensure that the human side of change is accommodated as well. They ensure employee on-the-job coaching with timely feedback. The processes and tools used to support the changes are based, when applicable, on proven best practices, incorporating both practical experience and sound, logical designs. Given the kind of issues we have seen in organizations faced with the need for dramatic rapid improvement, KT brings to the table a number of frameworks for dealing with some of the more typical needs. These include:

These processes are designed to work within their environment and owned by the client. An appropriate amount of time and resources are devoted to developing the skills and capabilities necessary to successfully execute the change process and utilize new tools and job aids.

SUSTAIN

Finally, and perhaps most importantly, successful manufacturing organizations focus on doing what is necessary to ensure that changes made are institutionalized. Sustainability, at its core, is making sure an organization keeps people “interested” and does not punish people for doing the right thing. Experience has shown that the work required to guarantee ongoing success is often the most overlooked. KT has developed structured approaches to sustainability, including:

CONCLUSION

There is no argument that Continuous Improvement programs are vital to a manufacturing organization’s ability to stay competitive on a day-to-day basis. But they are often limited in their ability to quickly and effectively respond to extraordinary events and challenges that organizations often face. In these situations, a more appropriate response is an event-based approach that provides a temporary influx of effort, focuses on high-priority opportunities that directly respond to what is happening, yet ensures that improvements that are achieved are not temporary and remain in place moving forward.


07 December 2010 KL744 Copyright © 2010 Kepner-Tregoe, Inc. All Rights Reserved. 700-47-P420910

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