According to a study by Deloitte and The Manufacturing Institute, 2 million jobs could go unfilled in the sector by 2030. The cost in 2030 alone could potentially total $1 Trillion. Worse yet, the manufacturers surveyed said it is 36% harder to find the right talent than it was in 2018, and 77% of manufacturers expect to have ongoing difficulties attracting and retaining manufacturing employees.

As technology, automation, and artificial intelligence (AI) continues to gain steam, lower skilled jobs are automated, but higher-skilled jobs become critical. The gap is significant. Additionally, as reshoring gains momentum and manufacturing expansion becomes a priority with the rise of geopolitical risk and the rollout of government funded programs such as the CHIPS act, manufacturing will increase, and the skills gap will widen. Finally, by 2030, the youngest of the largest generation in history will be older than 65, further decreasing the workforce.   

Simply hiring a recruiting firm will no longer be sufficient. There simply are not enough manufacturing resources to fulfill the needs. Proactive executives will put an increased emphasis on training and development. For example, an aerospace manufacturer needed far more machine operators than they could find, and so the company set up a training facility and hired trainers to put new hires through a comprehensive training and development program. They went from constantly struggling to creating a pipeline of qualified candidates. Another client sent employees to a technical training center in the region to gain manufacturing skills.

Relying on your planners, buyers, and analysts’ college education and prior work history is no longer sufficient. At least 80% of clients are struggling to hire resources with the appropriate education and training. For example, two power systems and electrical equipment manufacturers serving different industries went live with an upgraded ERP system. Although they brought on significant support, both struggled due to lack of production planning and inventory concept education and training for their resources. Proactive clients are arranging ERP and MRP (material requirements planning) education for their employees. For example, a significant beverage manufacturer has been coordinating with a local supply chain education partner to provide practical education.

Turn traditional thinking on its head. Supplement your employees with consultants to upgrade processes and improve efficiencies (refer to our guide for hiring consultants), hire temporary employees to fill gaps, and partner with specialist resources such as engineering firms to make quicker progress. Appreciate different pools of talent such as veterans and retired workers and reexamine your qualifications. For example, a building products manufacturer eliminated its requirement for a college degree and replaced it with practical experience and/or approved skills training. Not only did they find additional candidates, but the candidates were a better fit for the role.

Leadership and culture will be vital to closing the skills gap. People do not follow companies; people follow leaders. The best employees expect leaders to have high expectations, to address poor performers, to face reality with tough topics, and to appreciate and recognize progress. For example, an industrial equipment manufacturer was able to find and retain employees in a small town with limited resources and a key competitor because employees knew that the leader would expect high levels of performance, push for excellence, and cared.

Attracting and retaining talent will be key to success in the manufacturing industry in the next decade (refer to our article for strategies). Proactive executives are developing creative alternatives to traditional hiring, retention, training, and development strategies. The best remain committed to leadership and culture to retain top talent and attract scarce talent.  

Originally published in Brushware, March – April 2024

If you are interested in reading more on this topic:
Where the Talent Has Gone & Strategies for Success

The post Skills Gap Challenge for Manufacturing Success appeared first on LMA-Consulting Group, a supply chain consulting firm.

Companies should seize opportunities to increase packaging efficiencies, improving profitability and sustainability

Since packaging is typically 10-40% of the retail price of products, there is no doubt it adds up to a relevant factor in product cost and waste. Packaging encompasses product design, prototypes and trials, materials, production, labor, shipping, and recycling and/or disposal. The most proactive companies pay close attention to opportunities to increase packaging efficiencies throughout the end-to-end supply chain to improve their profitability and sustainability.

Product Design Collaboration

Product design is at the heart of improving packaging efficiency. Our best clients take a collaborative approach to R&D and packaging design encompassing the end-to-end supply chain. For example, in a healthcare products manufacturer, the packaging engineer worked with R&D, manufacturing technicians, procurement resources, and logistics resources with a specialty in warehousing and transportation. In addition, customers, packaging materials suppliers, equipment specialists, and other resources took part in the collaborative design.

By involving these cross-functional resources, the full life cycle could be incorporated into the product design. In this case, they wanted to ensure the design encompassed the optimal packaging design to meet the customer’s visual, strength, and storage specifications while minimizing the materials, labor, and logistics costs. For example, the objective was to minimize the packaging materials while meeting product specifications. However, the team had to review potentially conflicting factors. For example, doubling the number of units of product per package would make the way the package fit in the box less efficient, the box might not be best designed to optimize the pallet, the pallets might not be optimized to fit on the truck, or the customer might not like the visual design or be able to fit the product in the storage area.

In addition, the product’s performance had to remain intact. Reducing the quantity of materials must not negatively impact the way the product worked for the customer. Compressing the product into the package must not negatively impact the absorbency of the product. Using redesigned materials in the manufacturing process must not impact product quality. This healthcare manufacturer successfully redesigned the product and reduced the total cost by more than 20% inclusive of materials, packaging, warehousing, and transportation costs.

Packaging Efficiencies in Bottling

There are vast opportunities to improve packaging efficiencies in the bottling industry. For example, Niagara has accomplished several key objectives in eliminating waste through packaging and innovation. They designed new packaging that eliminates the need for a cardboard tray in their cases and reduced the amount of plastic in their bottles by 60%. Thus, this packaging requires less materials and uses up less pallet space, allowing the company to reduce carbon emissions and ship more water per order.

Since 2009, Niagara improved its carbon footprint by 59% through innovations in design, lightweighting, and packaging. It has also increased its recycled content usage, which reduced greenhouse gas impact by bottle by 12%. Gaining these results requires a full lifecycle view of supply chain from product design through recycling.

Packaging Efficiencies at Amazon

According to Amazon, it continually works to reinvent and simplify packaging options. The company combines lab testing, machine learning, materials science, and manufacturing partnerships to accomplish this goal. Amazon notes that it avoided more than 2 million tons of packaging materials and reduced per-shipment packaging weight by 41% since 2015. The bottom line is that a significant reduction in packaging will reduce costs and improve sustainability.

Improving packaging efficiency can produce dramatic results. The healthcare products manufacturer, Niagara, and Amazon prove that by focusing on packaging design and innovation, tremendous savings in materials, labor, and freight will flow to the bottom line. In addition, carbon emissions are reduced and sustainability objectives are achieved.

Originally posted in Adhesives & Sealants, March 2024

The post Strategies for Gaining Packaging Efficiencies in Your Supply Chain appeared first on LMA-Consulting Group, a supply chain consulting firm.

Status of the Medical / Healthcare Supply Chain

The supply chain has calmed down since the height of the pandemic; however, smart manufacturers are thinking ahead to changing conditions. Geopolitical risks are at an all-time high. The Russia-Ukraine war rages on and Israel and Hamas are at war which has spilled over to the Iran-backed Houthis rebels attacking container ships in the Suez Canal, disrupting a major shipping lane.

Additionally, China continues to threaten Taiwan which produces 90% of the advanced computer chips for the world and an important component in medical devices. China is also being very aggressive in the region which could impact shipping lanes through the South China Seas, manufacturing in China and manufacturing in countries in the region. Since China dominates the medical device supply chain, this is concerning. Thus, proactive manufacturers are moving towards regional manufacturing. This trend started following the pandemic (refer to our quote in a MPO Medical Products Outsourcing article) and has been picking up steam.

Reshoring & Expanding Manufacturing Capabilities

According to Xometry’s Medical Industry Survey, medical device manufacturers are rapidly reshoring operations to strengthen their domestic supply chains. In fact, 67% of medical device manufacturers are in the process of reshoring operations within the next 12 months. There is a focused effort in rethinking supply chain strategies.

Although many companies are reshoring, executives remain concerned about the cost impact of expanding production in the USA. The good news is that labor costs have decreased as a percentage of total cost dramatically since the offshoring craze while other costs have increased, making reshoring more attractive. For example, transportation costs were heightened during the pandemic and have been impacted by the Panama Canal drought, the diversions of the Suez Canal, and other supply chain disruptions. The cost of capital has increased significantly with the increase in interest rates which has made the cost of carrying inventory much higher. And there are many other costs to consider in the total cost to produce. In fact, the total cost of product can be equivalent or even less in the USA in some non-commodity situations.

Many advancements have been made in manufacturing and technology. Companies are automating and digitizing their manufacturing and supply chain. For example, they are using 3D printing/ additive manufacturing, robotics, artificial intelligence with IoT, and other advanced technologies to improve efficiencies and enhance visibility. As manufacturers expand their manufacturing footprint, source new regional suppliers and reshore production, these advanced technologies maximize operational performance and minimize cost while maintaining and improving customer service levels with lower inventory levels. Thus, margin concerns are mitigated depending on the upgrades and improvements to the manufacturing process.

In the medical device industry, companies are starting to expand regional manufacturing in the USA. For example, Ascential Medical & Life Sciences is reshoring to Minnesota. Their new state-of-the-art facility has highly innovative automation solutions, making reshoring financially viable. Certainly, they are not alone. Companies are expanding operations in the USA.

Manufacturers are also nearshoring to the region. Mexico has expertise in medical devices and the ability to scale. Since customer requirements are significant in North America, the ability to scale in the US and Mexico is a relevant factor. The availability of advanced manufacturing and technical skills is also an important factor. Medical grade material supply can be sourced nearby, and the USA is ramping up computer chip manufacturing capabilities. For high labor component products, Mexico provides an excellent option because their labor rates are lower than China, and they benefit from the USMCA agreement between the two countries.

Although the USA and Mexico are great options with scale, there are additional medical device manufacturing hubs in other nearby countries. For example, Costa Rica has advanced skills, computer chip manufacturing, and therefore a thriving medical device manufacturing concentration. The Dominican Republic has medical device manufacturing, and Puerto Rico is known for pharmaceutical manufacturing.

Manufacturing Resurgence

There is no doubt that the successful companies will mitigate risk and manufacture regionally. Thus, the USA, Mexico and business friendly countries will experience a resurgence in manufacturing in the next decade. It will require investments in manufacturing, tooling, and other resources although there are opportunities to keep costs intact or even reduce total product cost.

The most successful companies will upgrade their processes, ERP systems, utilize advanced technologies, maximize customer and product profitability and proactively manage these opportunities with a SIOP (Sales Inventory Operations Planning) process. Assess your supply chain to learn how you stack up. Take our complimentary supply chain assessment. Upgrade, innovative, get ahead of the competition, and thrive.

If you are interested in reading more on this topic:
Why Manufacturing Matters and Will Thrive in the Next Decade

The post Regional Manufacturing in the Medical Supply Chain appeared first on LMA-Consulting Group, a supply chain consulting firm.

Clients typically set goals; however, goals without an understanding of where you stand is non-value added. Although it is common to set goals and expect employees to achieve them, it is far less common for clients to understand how they will get from the current state to the desired future state. You must start by understanding where you stand in your supply chain. Unfortunately, although this sounds obvious (and Executives would agree), in reality, it is uncommon common sense!

How comfortable are you that you understand where you stand when it comes to your supply chain? We thought it would be of value to create a quick (2 minute) supply chain assessment quiz so that you can self-assess your supply chain. Learn more about the quiz here.

Client Example: Supply Chain Assessment for Service Turnaround

Our first step of any project is to perform a rapid supply chain assessment. For LMA to help a client, we must know the current situation. We do a review of people, processes, systems (ERP and peripheral systems such as CRM, CPQ, etc.), data, alignment with strategy, etc. Since we are focused on bottom line results, we must determine how to get from “here” to “there” on the quickest and smartest path while ensuring quick wins and value along the way.

For example, an aerospace manufacturer wanted to improve delivery performance to support key customer programs (Boeing, Gulfstream, etc.). In essence, they wanted to dramatically increase OTIF (on-time-in-full) from the mid 60%’s rapidly and reduce lead times to a more acceptable and attractive level for customers while maintaining or improving costs and working capital levels. The executives brought us in as supply chain consultants to upgrade their systems, processes, and talent to achieve these goals.

Our first priority was to perform a supply chain assessment. We reviewed their end-to-end order flow process, use of ERP, data, and skills/ talent. This provided us with a good understanding of their strengths, weaknesses, opportunities, and risks of execution so that we could put together a roadmap for success.

We stuck around and partnered with our client to roll out demand planning, master scheduling, capacity planning, and SIOP (Sales Inventory Operations Planning), also known as S&OP programs. Based on the assessment, we knew we could better utilize their ERP system and upgrade processes by entering forecasts, analyzing capacity plans and establishing supplier contracts with attractive pricing and stability. Additionally, we identified training and education opportunities and risks of execution so that we could mitigate potential bottlenecks. We brought service levels into the 90%’s, gained key customer confidence with improved scorecard performance, and improved margins by several points by rolling out materials forecasts, supplier contracts, and by gaining long-term visibility into operational capacity to minimize costs.

Client Example: Supply Chain Assessment to Turnaround an ERP Debacle

In an electrical equipment manufacturer, customers were upset due to lagging service levels and key employees were overwhelmed with an insurmountable workload following the launch of a new ERP system. After jumping into the details to work with their North American planners to unbury the schedule and to develop directional capacity information, we performed a supply chain assessment with an eye to use of ERP. There was no way to find a grain of sand in the ocean of details without assessing their supply chain and use of ERP.

Although we have a combined 99+ years of experience, 112+ successful client engagements with bottom line business results, 42+ ERP projects, and specialized manufacturing experience, jumping into the process and working with the key resources to turn around the execution didn’t provide enough information to put together a long-term path forward that would achieve the radical improvement required with the ERP system. Thus, an assessment was required with the full scope of ERP as it relates to supply chain and order creation and fulfillment.

We spent five weeks in an around-the-clock focused effort as the situation was urgent to gain a thorough perspective of the business processes, use of ERP and associated skills. After all, our team had to absorb what the ERP implementation team took a year to develop and roll out while understanding the impacts on the supply chain teams (demand planning, production planning, materials planning, capacity planning, etc.) and the correlation to the business bottlenecks. We reviewed business requirements, ERP functionality, offline spreadsheet processes, the status of data integrity, data availability, the status of training and development, availability of key resources, etc. Although it was a hair-raising process, we were successful in putting together an assessment, resource recommendations, quick wins and long-term solution to rectify the use of the ERP system to drive the business results.

The Bottom Line

Take a step back and assess what is needed to achieve your objectives. Don’t “stay in your lane” if you require a broader scope to ensure results even if you must have uncomfortable conversations and take risks in pushing back on standard assumptions. On the other hand, don’t fall into analysis paralysis. When you have a directional view that is assured to get you moving in the “right” direction (even if not 100% optimal), start moving. Avoid circular discussions and pivot back to the key points.

Also consider the people, the process, the system, the data, metrics and strategy in conjunction with each other. Focusing on technical without the process and people will not work, but focusing on the people without a good understanding of the technical and process aspects will not work either. In fact, you will come to inaccurate conclusions in your assessment that will make the situation worse, not better. Instead, use uncommon common sense, and you success rate will skyrocket.

If you are interested in reading more on this topic:
Why Planning is Impacted as Disruptions Abound

The post How Do You Rate in Supply Chain? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Enterprise resource planning systems, CRMs and other tech such as RFID, barcoding, customer and supplier portals, blockchain, IoT, and GPS tracking all support this goal.

Modern ERP systems are no longer just about transactional processes and standard business processes. They are now pivotal in meeting customer requirements, supporting automation, and integrating other essential technologies like AI, IoT, CRM and e-commerce.

Companies must stand out from the crowd with a superior customer experience to sustain profitable growth during these turbulent times; however, service alone will no longer suffice. Companies must contain cost and mitigate risk. ERP and related technologies are key to achieving these objectives.

During these turbulent times of supply chain disruptions, geopolitical risk, and stubborn inflation, companies must take bold action to mitigate risk, stabilize the supply chain, provide a customer service edge, and contain costs. As wars rage across the world, geopolitical risk has skyrocketed. If there is a disruption at one node in the end-to-end supply chain, the disruption can ripple throughout the entire chain. Executives realize that the risk is simply too high to count on the supply chain remaining stable without securing and gaining visibility to their full supply chain.

Similarly, as the world struggles with limited resources, high inflation and interest rates, there is an intense focus on cash flow and cost containment. Only those companies that automate, digitize, and utilize advanced technologies across their supply chains will be able to support customer requirements while maintaining and increasing profitability, productivity, and working capital. This will become even more critical as those companies that do not invest in their future will not be able to meet customers’ needs, leaving a vast opportunity for those ready to scale and meet customer requests.

Not enough to use your old ERP in new ways

Better utilizing an old ERP system will no longer suffice. To stand out from the crowd, you must go beyond these fundamentals and offer a differentiated or personalized customer experience.

For example, your ERP system must allow for progressive e-commerce capabilities that support not only B2C consumer expectations but also provides advantages for B2B customer ordering and status visibility with ease and effectiveness. Your ERP system should support customer personalization as well as product and service customization.

Similarly, a customer relationship management (CRM) system should be robust in tracking your pipeline, building relationships, and providing relevant insights and statistics of where to focus. Our most successful clients focus on analyzing CRM data, forecasting future customer needs, and utilizing these insights to build customer relationships.

The best clients combine CRM with a powerful business intelligence system to create predictive analytics and assess what if scenarios. The best companies connect directly with their customers’ data and provide proactive insights and differentiated value to their customers.

In addition to gaining sales, companies should utilize ERPs to take customer service to the next level with collaborative customer ordering programs and vendor managed inventory programs. By utilizing demand planning and sales forecasting including the use of AI and predictive analytics as well as replenishment planning and advanced planning functionality, clients can solidify their preferred partner status.

For example, a health care products manufacturer grew the business by outperforming their key customer’s resources in determining what to stock where. Not only did they increase their customer’s fill rate and shorten lead times, but they also reduced their customer’s inventory levels. The customer responded by expanding business and suggesting additional opportunities. In addition, the manufacturer reduced inventory levels and improved their production, warehousing, and transportation efficiencies. Profitability and cash flow increased.

Manufacturer technology that supports supply chain visibility

End-to-end supply chain visibility is essential to responding quickly to changing conditions and in providing Amazon-like status updates to your customers. Several technologies support this type of visibility, including RFID, barcoding, customer and supplier portals, blockchain, IoT, GPS tracking, and more. Smart companies are collaborating with supply chain partners to gain access to status information and to connect, plan, and optimize efficiencies across their supply chain.

For example, if you know the status of key materials, you can better plan production to minimize costs while meeting customer expectations. If you know the status of incoming goods, you can optimize truckloads and modes of transportation to mitigate costs while improving delivery performance.

The metaverse can bring together what customers ask for with what customers need. In essence it can accelerate your SIOP (Sales Inventory Operations Planning) process. In a metaverse collaborative room, any set of customers, consumers, and suppliers can meet virtually to review sales forecasts, projected production plans, and possible supplier/capacity limitations that could affect manufacturing volume. They also can visualize an immersive supply chain network map, see where inventory is, identify issues, and model possible solutions. These types of proactive solutions will upgrade your ability to secure your supply chain, enhance margins, and provide end-to-end visibility.

The ever-increasing importance of automation

In addition to automating repetitive tasks, ERP systems and related technologies can keep facilities running at night without people. Since most clients have consciously prioritized which customers to serve due to limited resources, taking advantage of lights out capabilities is quite appealing.

For example, an aerospace manufacturer had a bottleneck in a critical area of the shop that required high-skilled resources to function which created significant past due and unhappy customers. This client purchased a robot and invested in high-skilled talent to modify the robot to work for their needs and connect it to their systems. They were able to program the robot during the day and run lights out on second and third shift, quickly resurrecting their customer service and supporting future growth.

As companies expand and upgrade the use of ERP and related technologies, they can create unique value for customers and in their supply chain. Taking it a step further, to thrive during these turbulent and inflationary times, it is important to automate, digitize, reduce repetitive labor requirements, increase efficiencies, and standardize so that more can be achieved with fewer resources. The best companies engage their people and connect with customers and suppliers to upgrade the end-to-end customer experience.

Originally published on Smartindustry.com on November 17, 2023.

The post Leveraging ERP and related technologies for a diverse customer experience appeared first on LMA-Consulting Group, a supply chain consulting firm.

The Economy: Big Picture

In the last month, we’ve participated in at least six economic forecast presentations or discussions with experts (economic, banking, investment, manufacturing). Although they each had nuances, common themes emerged. Adding our expertise into the mix, we see volatility on the horizon. 

The bottom line is that inflation is likely to continue, interest rates are unlikely to decline near-term without creating additional down-the-line inflation, unemployment will have fits and starts and trend up slightly yet the labor participation rate will remain lower than pre-pandemic. From a jobs standpoint, low skilled jobs are being automated, yet high-skilled jobs are experiencing a severe skills gap. Overall, the economy will be slower than it has been. Last but not least, geopolitical risks are concerning every expert, leaving volatility the name of the game in the foreseeable future.

The Economy & The Data

A summary of findings from recent research on the state of the economy includes the following:

• Stimulus (COVID money flooded the economy): Inflation would need to rise by 30% to absorb the stimulus. So far, inflation has gone up around 20%. Thus, there is around 10% left to absorb to get supply and demand in alignment. If interest rates stay put, the COVID funds will run out in about a year. Otherwise, we will have spurts & starts.
• Government spending: Government spending has continued at historic levels. For example, in 2023, nominal GDP was up $1.5 trillion yet federal debt increased $2.5 trillion, leaving a gap. Debt is increasing at what some see as an alarming rate.
• Inflation rate: It has gone up by 20%, but to absorb the stimulus, there is still 10% to go. It is likely interest rates will remain flat to work through the COVID money. If not, there will be bursts of inflation and recession (volatility). Inflation is likely to stay higher than the goal around 3-3.5%.
• Unemployment rates & labor participation rates: Layoffs surged 136% in January to the second-highest level on record with financial companies, the technology sector, food production companies, and retail with the highest levels (in order of sequence). On the other hand, these findings led the experts to think employers would show the latest hiring at 180,000 workers yet the number came in double that amount (353,000). The unemployment rate stayed about the same at 3.7% with the labor force participation rate at 62.5% (which close to 1% lower than pre-pandemic, 63.4%). There is 1.3 jobs for every person looking for a job. From a client point-of-view, they simply do not have the high-skilled resources required although they are automating low-skilled jobs, and depending on the industry, they have put a pause on hiring.
• Wages: Workers’ wages are improving but they still have not caught up with inflation. In the last three years, real average hourly earnings are still down 2.4%. Thus, people are not feeling better.
• GDP (gross domestic product): Real gross domestic product has largely recovered. It increased 3.3% in the 4th quarter and consumer spending has remained relatively strong. It shifted from goods to services, but has held up overall even with the interest rate hikes thus far.
• Banking: There is concern about the regional banks. They hold most of the commercial real estate loans that will need to be refinanced at higher rates over the next few years. Also, bank’s liquidity requirements are driving concerns with the changing of bonds prices with the quick increase in interest rates.
• Geopolitical risk: Every expert mentioned concern around geopolitical risk. It will lead to inflationary pressures with reshoring, increased prices (for example, the Red Sea rates, diversion costs, and/or expedite costs), impact on energy prices, etc.

The bottom line can be summed up in with the misalignment of demand and supply, the shrinking workforce (with Baby Boomer retirements – by 2030, the youngest of the largest generation in history will be older than 65) combined with the divergent needs for high-skills vs low skills, and the emergence of high geopolitical risk. Thus, volatility and uncertainty will remain.

What Should We Take Away

Smart executives will take bold actions to ensure they can supply their key / ideal customers while pruning low margin/ non-value added customers. They are adding customer/ product profitability, pricing, and costing trends into their SIOP (Sales Inventory Operations Planning) processes to evaluate options, set strategy and make decisions.

They will invest in the best high-skilled resources, supplement with additional options (refer to our article, Where the Talent Has Gone, and create a high-performance culture. Strong leaders will be pivotal to ensuring success. People follow leaders; not companies.

Proactive clients are upgrading ERP systems to ensure the basic processes (blocking and tackling) are in place. Additionally, they are rolling out advanced technologies including artificial intelligence (AI) to automate, digitize and thrive. To read more about these strategies, refer to our article, Automate, Digitize and Thrive in Supply Chain. It will be cornerstone to success in the next decade.

Additionally, smart clients are upgrading business processes, cleaning up their data to better utilize their ERP and peripheral systems, and building flexibility and scalability into their future thinking. The core processes include demand planning, production planning, engineering (for engineer-to-order ETO and configure-to-order CTO companies), production and inventory control, and replenishment/ distribution planning processes. From a data perspective, it is important to review bills of materials, routings, work centers, item masters, customer and supplier masters, and MRP parameters. Proactive clients are ensuring the basics are intact and they are focusing on the roadmap to stay at least a few steps ahead of changing conditions.

If you are interested in reading more on this topic:
Supply Chain Volatility, Risk & Capacity Remain Critical Priorities

The post The Economy, Outlook & Strategies for Success appeared first on LMA-Consulting Group, a supply chain consulting firm.

Where Has the Talent Gone?

The labor participation rate is still under the pre-pandemic rate. According to the Bureau of Labor Statistics, the rate is still running almost 1% below the pre-pandemic rate. This is no surprise to clients as they simply do not have the talent needed for key positions in Manufacturing, Planning, Purchasing, Customer Service, and more. Read more about the Skills Gap in our article.

We believe there are several key reasons for this continuing trend:

• Baby boomer retirements: 44% of the Baby Boomer generation are at retirement age. By 2030, the youngest of the largest generation in history will be older than 65.
• Pandemic career changes: The pandemic made people realize that they wanted to find what would fulfill them, and several have changed careers. Also, Families changed their view on how to raise children. In some situations, one parent changed and/or reduced focus on his/ her career (unless flexible) while his partner stayed focused on her career.
• Current Leadership: The generation following Baby Boomers (Generation X) is not as large. Across clients, whoever is remaining in a leadership role (typically a Baby Boomer, Generation X or Millennial employee) is completely overwhelmed and running around like a chicken with his head cut off.
• Newer employees: Generally, they are gaining experience, but do not have the knowledge to “figure out complex issues”.
• The advancement of technology: Technology continues to advance as companies realize they must embrace ERP systems, automation and robotics, artificial intelligence, predictive analytics and more. This has reduced the need for low skilled resources, but it has increased the need for high-skilled resources.

Lack of training & mentoring: For many years, companies could hire talent from the competition. Although this is still possible, there are fewer and fewer resources with the practical experience, systems and data knowledge, and process expertise to fill the roles.

Client Examples

We wish it was an exception, but clients are scrambling (and frequently in chaos). This situation is no longer the exception. It has become the norm. As key people leave the organization or critical changes occur, the resources simply do not exist to successfully navigate these situations as smoothly as they did previously. Thus, clients are scrambling on a day-to-day basis.

For example, multiple clients pop to mind with a key planning, supply chain or operations resource who is completely overloaded. This team member is “juggling multiple balls in the air while doing jumping jacks”. In essence, they are running around filling gaps, resolving issues, and bringing up topics proactively. However, internally, the resource is seen as the issue because she is always racing to keep up with Sales changes, rescheduling due to production ramp up challenges, uncovering system issues, and bringing up potential problems. There was a ‘brain drain’ of expertise and this resource continues to absorb additional tasks to try to keep the balls in the air.

The process is dependent on the system, and the system is dependent on the resources (design, setup, training), the data and transaction disciplines. In our examples, there are completely different situations (challenges, leadership styles, geographies, ERP system maturity, etc.). Yet the result is the same. If the process is dependent on a person, the process will not succeed. On the other hand, the process, system and resources need to be upgraded (including training and education) in conjunction with one another. Our consulting role is to partner with the client to assess the situation, design an upgraded path forward, and partner with the client to roll out and achieve sustainable results.

What it used to take to deliver bottom line results for clients absorbs around 20-30% more effort on average than it did pre-pandemic due to this skills gap (even with our greater experience and internal process upgrades). In some cases, it requires 50-100%! If this situation was an outlier, we wouldn’t be concerned, but it is no longer an outlier. Thus, we are pivoting and will be aggressively highlighting the key issues, warning signs and plans of attack earlier in the process. It will be less comfortable for clients to absorb this news earlier (with less time to absorb the facts), but we are experienced in seeing the signs and knowing the best route to “right the ship”, and so we will force these uncomfortable corrections early on. Fasten your seat belts!

Strategies for Success

There are a few key recommendations to start to “right the ship”.

• Leadership & Culture: There are fewer resources to bring on board to jump in, figure out a situation and “right the ship”. People follow people; not companies. Thus, you must have exceptional leaders. The only way you will have exceptional leaders is to have an excellent company culture. Of course, company culture goes back to leadership. There are no magical solutions. It take a LOT of hard work, excellent people, the willingness to take risks and invest when no one else is investing, and establish a performance management process that weeds out the poor performers and recognizes the star performers. Read more about this topic is our article How to Attract People to Your Company.
• Training, education & mentoring: These are NOT the same topic. You can no longer rely on hiring key resources away from the competition. Instead, you must develop them. Provide training (step-by-step processes), education (the why behind what you are doing and how it fits into the big picture), and mentoring (follow me and watch my example as I’ve been there and done that).
• Supplement resources: Clients are supplementing with consultants, contractors, interim temporary resources etc. Although we are jumping in as consultants to assist clients with critical priorities, we are jointly prioritizing bringing them up-to-speed so that they can sustain the process upgrades on their own.
• Appreciate different pools of talent: Retired workers might be exactly what you need to help you over the hump and/or bring folks up-to-speed. There are other groups such as veterans to pursue as well.
• Revisit your job requirements: What do your most successful employees do differently? It might be that they need fundamental skills training but not a college degree. It might be that they need certain characteristics for certain roles but not specific experience. It might be practical ERP knowledge instead of the specific ERP system experience.
• Meaning, Flexibility & Opportunities for Advancement/ Learning: The name of the game to attract, engage and sustain employees is to ensure meaning, flexibility and opportunities for advancement and/or learning.

Talent is such a critical topic that we will keep our eyes and ears out for unique strategies and fresh ideas for success. Please keep us in the loop with your ideas and success stories as well. It will be a key differentiator in the next decade.

If you are interested in reading more on this topic:
Where is Your Supply Chain Talent?

The post Where the Talent Has Gone & Strategies for Success appeared first on LMA-Consulting Group, a supply chain consulting firm.

According to Polaris Market Research, the market size of artificial intelligence (AI) in manufacturing is predicted to grow more than 41% during the next decade. Although the latest Sikich Industry Pulse found that less than 20% manufacturers have started to implement AI, the ones that want to thrive in the next decade are pursuing AI strategies that make sense to support their business objectives. AI can help manufacturers target where to focus and automate mundane tasks.

There are many uses for AI in manufacturing. A classic example is predictive maintenance. Instead of preventative maintenance, target where to maintain with predictive maintenance to maximize your efforts. Collaborative robots (cobots) work alongside people and often can perform tasks such as those requiring heavy lifting. Digital twins are virtual models of physical objects or layouts, and they can receive information about the object through sensors to get information about maintenance needs etc. On the software side, manufacturers are using robotic process automation (RPA) to handle high-volume, repetitive tasks that can be automated. 

For example, in working with a water tank manufacturer, we wanted to upgrade the use of ERP and start using MRP (material requirements planning) recommendations for purchasing. Before turning MRP on, we had to perform a cleanup of data and add routing data steps in the system. The team was lean, and it was estimated to take a few months to prepare for go-live. The executive team did not want to wait to improve service and increase efficiencies, and so a technical expert on the team used RPA to write a code to automate the setups. We completed the preparation in three days instead of three months and started gaining results.

Another application for AI in manufacturing is a lights-out factory which runs with robots. Although full lights-out factories are rare, this application is gaining momentum across the globe especially as workforce participation rates remain low, manufacturers realize they need to gain control of their success and are reshoring, and margins remain tight with high material and labor costs. Robots can operate around-the-clock without lunches, breaks, and workers compensation claims.

For example, an industrial manufacturing client struggled to find the talent to run its manufacturing operations. They couldn’t keep up with demand, employees were frustrated, and customers were unhappy. They purchased a robot to perform production in a key bottleneck area of the facility; however, the robots couldn’t produce around-the-clock because there was nowhere to store finished product on second and third shift without material handlers. Thus, the engineering team developed an automated way for the product to be moved from the point-of-production. Past due deliveries plummeted as the system came online.

AI is also prevalent in supply chain applications that support manufacturing success. For example, sales forecasting and demand planning is supported with AI algorithms to better predict demand. Even in the most industrial of manufacturers, demand patterns have been difficult to predict, creating a need for AI to get in front of demand. AI is also used in inventory management and to prevent bottlenecks and predict what’s needed.

AI requires proactive design so that you can limit expense and minimize the high-skilled resources required to go live. Start with a rapid assessment of your business requirements, process and technical infrastructure and resources. Select a pilot to test your plans and results will follow.

Originally published in Brushware Magazine, January / February 2024.

The post Integrate AI in Manufacturing to Raise the Bar appeared first on LMA-Consulting Group, a supply chain consulting firm.

99% of the companies that bring us on board for consulting projects can accelerate bottom line business results by better utilizing their ERP system. The typical 80/20 equation holds true – at least 80% of companies underutilize their ERP system by a significant amount. Even the 20% that utilize their ERP system to a better degree than most have opportunities.

In almost 20 years of consulting, we have found only 1 client that couldn’t utilize their ERP system to a greater degree as their manual work around processes would fall apart. They required an ERP upgrade before they could utilize their system to a greater degree. Every other client could make progress (improve customer service levels such as OTIF on-time-in-full, reduce lead times, increase efficiencies, reduce waste, automate manual functions, reduce inventory, etc.) by better utilizing their ERP system. It didn’t matter if they had a tier 1 ERP system such as SAP or Oracle, or a tier 2 or 3 system such as Epicor, SAP Business One, Microsoft Business Central, Sage 100 etc. It didn’t matter the industry – aerospace, building products, life sciences/ healthcare products, or food and beverage. These statistics apply across the board. To learn more about how to better utilize ERP, read our article, The MacGyver Approach: Leveraging Your Underutilized Asset.

Building Products Manufacturer Case Study

A building products manufacturer struggled to get the “right” inventory to the “right” distribution center at the “right” time to service customers successfully. There were four production facilities supplying around 12 distribution centers across North America. Each production facility also functioned as a distribution center for their region. This consulting client used SAP, and although they were on an older version of the software, the system could support a complex distribution network. However, they were underutilizing the ERP system.

There were various levels of expertise at the production facilities, different processes at different facilities, and different use of the ERP system and different data integrity at different sites. This is not uncommon. In 80% of clients, the employees using the ERP system are NOT resistant to change once they understand how it works, how it will help, and how what they do fits into the big picture. Until they understand how to perform their daily tasks to successfully serve customers and accomplish their goals, they will do whatever it takes to do what’s needed including developing manual processes, updating spreadsheets, etc. That is exactly the situation as we entered this client.

We started by understanding the current business processes and use of the ERP system. By documenting the high-level processes, we could identify gaps and opportunities. We quickly addressed quick wins. There are typically a few quick wins at every client; however, to make sustainable progress, the key is to review how the business processes connect with and interface with each other. Once a full view of the business processes and interfaces emerges, the current use of ERP will also become apparent. Finally, the use of data, integrity of the data, and reliability of the data for decision-making will also emerge during the process review.

In this client situation, we started by sharing best practices among production facilities. One production site had a more advanced use of planning functionality, and so we worked with the second priority site to set up the appropriate system settings, update data, and roll out upgraded planning processes. This use of SAP in conjunction with upgraded planning processes and coordination with Sales and Operations propelled service levels to jump from low 60%’s into the 80%’s within a few months. Next, there was additional SAP functionality that could upgrade the planning process across both sites, and so we worked with SAP experts to test and roll out additional SAP functionality to further automate what made sense. This resulted in a solid production plan.

From a replenishment standpoint, it started with a solid production plan. Beyond a solid production plan, the replenishment process to supply the distribution centers with the appropriate product to satisfy customers required a directionally correct forecast. The forecast was the trigger to supply the distribution centers. Thus, we worked to better utilize the advanced planning module of SAP to whatever degree feasible on an accelerated timeline in addition to upgrading the business process for reviewing the demand plan with the Sales Team. This step was incorporated into the monthly SIOP (Sales Inventory Operations Planning) process to gain executive alignment and to ensure the forecasts passed the smell test.

In addition, we reviewed the current replenishment process including the MRP and replenishment or transfer order settings. We performed inventory analysis to determine optimal settings for safety stock, minimum orders, etc., and rolled out process improvements in conjunction with SAP functionality. These process and ERP utilization improvements allowed us to improve our service levels greatly and rectify relationships with customers. As the process smoothed out, we started to look at ways to optimize inventory levels while maintaining higher levels of service.

Results with Better Utilization of ERP

Results followed the rollout of improved utilization of SAP in combination with process upgrades and associated education. Most importantly, service levels improved from around 40% to the 90%’s. Lead times were also shortened in a critical site that produced a core product line. This made a dramatic impact on customers’ perception and and turned unhappy customers into customers looking for opportunities to expand business with our client.

In addition, the critical site increased output and capacity as manufacturing got in front of what was needed to support customer requirements. Manufacturing efficiencies improved as the production schedule transitioned from reactive to proactive.

From a replenishment standpoint, as upgraded replenishment planning was rolled out, service levels improved. And, as MRP settings were updated with optimized variables, inventory levels were reduced without impacting service levels negatively.

Finally, as the process and system upgrades were rolled out, the team was educated and gained confidence with their core tasks. Additionally, as processes were automated, the team could spend more time on exceptions and less time performing mundane tasks. This freed up time for additional improvements to grow revenue and profitability.

The Bottom Line

Pay attention to your business processes in conjunction with your use of ERP. The better you utilize ERP in a smart way to accomplish your goals, the more focus will go to exceptions, bottlenecks, and additional process and technological upgrades. If you are interested in talking about how to better utilize your ERP system to drive superior customer service, customer growth, profitability and cash flow, contact us.

Did you like this article?  Continue reading on this topic:
Better Utilize Your ERP System

The post Better Utilizing ERP for Sustainable Results appeared first on LMA-Consulting Group, a supply chain consulting firm.

Although production and materials planning can be overlooked in its importance in most companies if going smoothly, it is cornerstone to success. Unfortunately, when not going smoothly, it can bring a company to its knees. For example, production might not know what to run, changeovers can be out of control, customers become unhappy, materials shortages persist, resources are scrambling to catch up with changing conditions, and chaos ensues. Read more about this topic in our article, The Million Dollar Planner.

An Industrial Equipment Manufacturer Case Study

An industrial equipment manufacturer struggled to keep up with month end sales goals when receiving last minute notice from Engineering of final design of the engineer-to-order item (bills of materials) before the item was scheduled to ship to meet customer requested dates. There were multiple stages to the manufacturing process (fabrication, weld, paint, final assembly), and parts had to be shipped offsite for process steps and married up along the way at the “right” time to make the orders come together.

The bottleneck and pacing item was the machine shop, yet visibility was limited to seeing which parts had to complete production at the same time, and the production schedule was completely manual based upon paperwork on hand since there was a lack of visibility in the system. The production supervisor would go through the work order packets, pick out manufacturing differentiators (size, material type, etc.) and group the packets in piles by the optimal run sequencing. For example, you run different sizes on different machines, and you would sequence by material type to be most efficient with changeovers.

Although the machine shop pulled out the stops on a regular basis to meet sales goals, it required constant expediting and coordination of process steps, was sub-optimal based upon the work order packets available at the time, and the process was completely dependent on a person (who also turned into a single point-of-failure). Since there was a lack of visibility, sales order availability frequently moved from month-to-month, creating concerns with predictability. And the machine shop ran less efficiently than it would have if there was visibility to the full scope of work order packets.

As we provided consulting support to this client, we learned about the optimal sequencing triggers (size, material type, etc.) and looked for ways to identify these triggers sooner in the process. Of course, it is never as easy as it appears. Thus, we had to work upfront in the sales quoting process to get a better picture of the demand plan by adding configuration strings (high-level identification of the item) into the process and system early in the process. By adding this information into sales orders, the team had better visibility to what was coming down the pike prior to Engineering’s final design so that we could gain visibility to plan capacity and materials (master scheduling) instead of reacting to sales orders late in their life cycle. We integrated this visibility into a SIOP (Sales Inventory Operations Planning) process to build a monthly cadence and review of critical sales and operational forecasts.

To address the machine shop scheduling, additional triggers had to be identified and incorporated into the data. Sales order statuses were also key to the process as sales orders went through engineering, production engineering, customer approval, material availability, and work order creation before the items were available to be scheduled. We built these statuses into a planning report along with key triggers and dates (incorporated from a production status review process). Once this report was built, a dashboard was developed for improved visibility and ease of use. This powered the production scheduling process and replaced the packets process so that the system automated the 80/20 and focused attention on what was meaningful to optimize the production schedule and ensure the parts married up at the right time.

Master Scheduling & Production Planning Results

As the client gained visibility to required capacity and materials, they were able to start making directionally correct decisions early in the process with the master scheduling process. As capacity bottlenecks arose, they were able to address proactively before “running into a wall”. For example, we gained visibility that paint was a future bottleneck, and so the head of Operations was able to put together the appropriate capital requests, gain approval, and order an additional paint system to support sales growth goals. Additionally, offload capacity was needed to supplement the weld area, and so leadership was able to pursue additional options prior to negatively impacting customers.

From a materials standpoint, Purchasing was able to look into the future and secure materials ordered from the Russia-Ukraine region while they were still available. While every client struggled to maintain service levels during COVID, our client was able to keep one step ahead and sustain higher levels of service for customers.

As the production scheduling process was upgraded, our client gained visibility to the machine shop and could optimize efficiencies and gain capacity. The head of Operations said he was able to double capacity to support sales growth. The production schedule was no longer dependent on a person; it became part of a process. Thus, this key resource could focus attention on further optimizing machine shop performance.

The Bottom Line

Pay attention to your planning processes as they will drive bottom line business results. Changing from reactive to proactive sounds far easier than it is when you get down to the details, but rolling out the appropriate process, data, and ERP system upgrades will propel progress. If you are interested in talking about implementing a master planning and production scheduling process upgrade to improve visibility and results, contact us.

Did you like this article?  Continue reading on this topic:
Production Planning Best Practices to Recover Capacity

The post Master Scheduling & Production Planning Case Study: Gaining Visibility for Results appeared first on LMA-Consulting Group, a supply chain consulting firm.