Manufacturers rely on metrics for the clearest and most accurate performance picture of their organizations’ processes, production, and profitability. Yet, although they have come a long way in updating their technology, many aren’t certain how to leverage the mounds of information being generated. Data crunching, which refers to importing facts and figures and processing them in a way that makes it useful for arriving at better decisions, is key—especially when doing so helps to answer five simple questions that enable manufacturers to make better choices when it comes to their operations.
Question 1: How well do you turn your data into action?
Data may be in good supply for many manufacturers, but it’s futile unless the data offers what’s needed to make decisions that have discernible influence. In truth, the majority of manufacturing executives in charge of big data don’t know how to make sense of its worth. Even for those who understand the big picture, turning the data into actionable steps in a timely manner proves tricky. But to be a factory of the future, the job of consolidating, sorting, and analyzing this data has to occur quickly and efficiently. Companies with the upper hand in turning this data into business intelligence—with enough time to implement change quickly at a lower cost— will come out ahead.
Question 2: How can manufacturers get the most from their data?
Numbers can be a manufacturer’s best friend. Not surprisingly, the metrics they provide are getting the attention of manufacturing budgets everywhere. These metrics are impressive in that they can offer a real shot at gaining a competitive advantage. Some of the strategies that help manufacturers get more from their data include:
- Set a baseline. From the start, measure manufacturing systems and process performance in order to establish a baseline from which everything will be measured.
- Customer-centric metrics. Which of the company’s manufacturing processes impact customer interactions the most? Once identified, devise metrics to measure this performance from the customer’s point-of-view. Think in terms of metrics that connect performance on the floor to financial results by way of the customer.
- Make results visible. With customer-centric metrics, it’s impressive to see the changes that can occur across a company. Collaboration toward solutions seems to happen more seamlessly and willingly once the entire company can see the analytics of customer performance.
Question 3: How do manufacturers accurately identify total operational costs?
Moving beyond the raw materials and labor, there are indirect costs that are just as essential to the operation, even though they’re not physically part of the manufacturing process. These costs fall under manufacturing overhead, and they must be properly accounted for, as required by generally accepted accounting principles. Factory expenses that are indirectly related to the manufacturing process include quality control staff, factory clerical workers, and equipment maintenance and repair personnel. Although these represent indirect manufacturing labor costs, they still include benefits and payroll taxes, not just salaries. Other costs that fall under manufacturing overhead include property taxes, factory supplies, utilities, and equipment/building depreciation.
Question 4: How flexible is your manufacturing execution system (MES)?
In the past, manufacturers used manufacturing resource planning (MRP) and enterprise resource planning (ERP) applications to manage data. MESs have brought about positive change to the industry by offering a far more simplified process, which is much more likely to produce a competitive advantage. The primary goal of a manufacturing execution system is to arrive at a level of high performance and maintain it. And, since MES software can be customized, it allows a manufacturer to choose the areas in which it wants to improve performance. Be it inventory, a specific process or a dysfunctional machine, an MES can offer sufficient insight to get to the root cause of problems.
Question 5: How does your business align with the global marketplace?
Repeatedly, research supports the notion that aligning with the global marketplace is a process that is driven by strategy, not tactics. Going global requires a long-term action plan—not just any action plan, but one that aligns corporate vision and mission, as well as identifies opportunities in preferred markets.
Going global presents an awkward situation for many executives charged with its execution. Those who know the tactical side of business naturally lean toward this type of work and associate accomplishment with getting an operation ready to roll…tactically. However, setting out to introduce a product or service to a new or foreign market requires a keen sense of the local culture, right down to consumer buying habits. Also, how does the company plan to distinguish itself in this new market? Nothing can be presupposed based on its past performance. Instead, newcomers need to find the product or service’s unique market position so they know what will move inventory more quickly than any competitor.
Getting answers from the numbers
One apparent trend in the manufacturing industry is its ongoing volatility, which translates into uncertainty—a condition from which all supply chains suffer. As a matter of principle, manufacturers must rely on the data their operations accumulate, which is why they use metrics. The process of effectively measuring, analyzing, and improving manufacturing metrics isn’t as easy as it may seem. Often there are combinations of metric indicators necessary to ensure that a larger business objective is being met. Developing a strategy, coupled with comprehensive answers to the five questions outlined, help a company understand the interrelationships between high-level goals and objectives. Also, being clear about strategy provides a sharper understanding as to how to better collect, manage, and act on a company’s business metrics. In the end, visibility into the process is made clearer and decisions can be made with resolve.
This article was a Target Online Original Story posted on June 14, 2016. The authors of this post are Michael Mantzke, CEO and Robert Jonas, COO of Global Data Sciences. To learn more about this post, Mr. Mantzke and Mr. Jonas can be reached through their website at www.globaldatasciences.com or contact the LEAN Accountants of McKonly & Asbury.