Lisa Anderson, a supply chain expert and president of California-based LMA Consulting Group, says that the Chips Act “has spurred on certainly quite a bit of investment” in the US electric car sector. And Mexico is also booming through ‘friend shoring’.

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Read the full article at the BBC website. 

The post BBC: Why firms are bringing their manufacturing back home 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

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Manufacturing Matters – Safety & Security

Manufacturing promotes safety and security and mitigates risk. Controlling your supply chain and mitigating geopolitical risk can become paramount overnight as geopolitical events occur, natural disasters emerge, and supply chain challenges arise (strikes, disruptions, shortages). These types of issues have been increasingly concerning with recent events.

For example, the war in the Middle East has caused disruptions in the Suez Canal. Container ships are being diverted and traveling around the southern tip of Africa, adding 10,000 miles and 7-10 days. This situation delays critical supplies and causes further inflation with increased costs. Additionally, the reason China has been threatening Taiwan is partially to gain control over 90% of the world’s advanced computer chips that go into everything from medical devices to critical infrastructure.

During the pandemic, the U.S. discovered it was dependent on China for critical supplies and everyday necessities. Not only can a worldwide pandemic cause disruptions of these supplies, but country specific policies can dictate whether your supply will be cut off. For example, China rolled out zero COVID policies, directly impacting production and shipping to the U.S. China could prioritize who received limited supplies.

China also wants to control the Red Sea and could decide to cut off supplies produced in other Asian countries in the region. Clearly China thinks manufacturing is essential to national security. For example, their shipbuilding capabilities are over 200 times greater than the U.S. According to the Maritime Executive, China produces more than half of all new tonnage in the world. These types of statistics are gravely concerning and the proactive will build capabilities.

Manufacturing Will Thrive in the Next Decade

As companies realize they must gain control over their supply chain to better support customers, reshoring and regional expansion of manufacturing capabilities will soar. Additionally, the cost has come into alignment for non-commodity products if you evaluate the total cost to produce, ship, store, protect, etc., China won’t have the advantage. Piles of inventory tying up cash unnecessarily are no longer acceptable, especially as customer needs change rapidly, increasing the risk of obsolescence. As interest rates soar, this situation is untenable.

Customers are not willing to accept prolonged periods of delays and stock outs. Thus, they are taking control of their supply chain and focusing on manufacturing capabilities. In addition, companies must prioritize customers and address proactively with strategic pricing and capacity decisions. Thus, smart companies are utilizing a SIOP (Sales Inventory Operations Planning) process to proactively navigate these changing circumstances to maintain high levels of customer service, profitability, and working capital results. SIOP will bring visibility to customer and product profitability, sourcing decisions, make vs buy alternatives, capacity bottlenecks and more.

The proactive will thrive and have more opportunities than ever expected. In fact, they will be in the catbird seat. The rest will continually struggle and weaken. With the significant skills gap (refer to our recent article on where the talent has gone), the proactive executives are hoarding the “best of the best” (employees, trusted advisors, suppliers, etc.). Are you prepared to thrive?

If you are interested in reading more on this topic:
SIOP/ S&OP: Proactive Approach to Maximizing Production Output and Capacity

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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.

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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.

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Lisa Anderson was quoted in a SelectHub article when she warned that, in the area of attracting and retaining workforce talent, competitors will always try to steal your best employees.

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Manufacturing Trends 2024: Maintaining A Competitive Edge

What are the most essential manufacturing trends of 2024? I hate to burst your bubble, but this industry doesn’t just focus on AI, IoT, data mining or advanced manufacturing software.

We’re talking about the big-picture patterns that are shaping the future of manufacturing as we speak. This guide will tell you how to retain labor, keep a carbon-neutral work environment, maintain a positive reputation and more.

Key Takeaways

• Some ideal technologies for manufacturing include IoT, IIoT, AI and data mining.
• When adopting smart factories, there should be a harmonious balance between machines and humans.
• Top manufacturing process types include repetitive, discrete, process, continuous, job shop, 3D printing and more.
• Ideal ways to attract and retain manufacturing employees are giving them satisfactory work environments, liveable pay and benefits, training opportunities. and more.
• Because of the digital twin market’s resourcefulness across the manufacturing and PLM sectors, this market could hit $155.84 billion in value by 2030.

Top Trends for 2024

1. Attracting and Retaining Workforce Talent

Lisa Anderson, founder and president of LMA Consulting Group Inc., warned that competitors always try to steal the best employees.

Pay alone will not suffice. In our experience, the most important priority to retaining top talent is company culture and leadership. People do not follow companies. They follow leaders. Clients with leaders who appreciate talent, offer training and advancement opportunities, and are willing to address poor performers and tough topics are respected and successful. On the other hand, clients with volatile leaders are losing talent at a quick pace.”

To read the full article, click here.

The post Manufacturing Trends: Maintaining A Competitive Edge – SelectHub 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

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Clients are struggling to keep up with customer’s changing requests. Order backlogs remain relatively high (depending on the industry), but customers are pushing orders out at the last minute, pulling orders in without notice, adding future potential orders, and changing requirements on the fly. Production is scrambling to keep up.

80%+ of manufacturers simply do not have enough skilled production and support resources to keep up with the volumes, let alone with the volatility of the order backlog and changing forecasts. Not surprisingly, executives do not want to hire more resources than absolutely necessary as they are concerned about rising input costs and the uncertainty of their order backlog. To add fuel to the fire, the supply chain has been volatile as well with global unrest, strikes, and other disruptions as well as supply chains on the move. Read our recent article on how supply chains are changing. The production resources cannot keep up with changing conditions, and triage must occur.

Our best consulting clients are engaging in proactive business processes to get ahead of changing customer conditions and sales forecasts and the impact on capacity, production and replenishment plans as well as the reallocation of critical resources. SIOP (Sales Inventory Operations Planning) is a key process and toolset for successfully navigating this volatility while maximizing output and production capacity to support revenue growth.

An Industrial Manufacturer Case Study

An industrial manufacturer struggled to meet customer requirements. Order deliveries were lagging, capacity wasn’t allocated evenly across its ten production facilities and production at a critical site had almost 1000 hours of change overs per month for nine months in a row to try to keep up with urgent customer requirements. Several large customer jobs pushed out and others pulled in, keeping Operations scrambling.

We rolled out a SIOP process, starting by getting a handle on the sales orders and potential sales orders. A weekly meeting with Sales and Project Management helped to solidify the priorities of the demand plan (sales forecast). Although customers continued to request push outs and pull-in’s, when the requests were proactively worked with the team and the ERP system was maintained, better clarity emerged.

The demand was run through a capacity model, showing available capacity vs. operational requirements by production facility. The operational requirements were bucketed in categories of firmed sales orders, sales orders waiting on Engineering release, sales quotes that were better defined, and sales quotes. By evaluating near-term capacity, priorities could be established with Engineering, short-term capacity actions could be taken (overtime, supplementing production at additional sites, etc.), and proactive customer communications could take place.

More importantly, by evaluating medium and long-term capacity, the appropriate strategic decisions came to light. For example, the critical site showed as overloaded months in advance so that Operations could reallocate customer orders among production facilities within the same region to mitigate impacts on freight cost. The model could be evaluated with multiple what if scenarios so that Sales and Operations could address the bottlenecks proactively. Guidelines were set to reprioritize and set pricing for key customers, capacity could be reallocated, additional capacity could be planned, and capacity offload options explored.

The key is the connection between Sales, Project Management, and Operations and Engineering. As customer requirements change, capacity scenarios need to be reevaluated and impacts reviewed. Proactive communication and collaboration is a critical piece of SIOP to keep demand and supply aligned and optimized.

SIOP Maximized Production Output & Capacity

By seeing the demand and capacity picture in advance with SIOP, the executive team could maximize production output and capacity. They could do this by proactively addressing bottlenecks to level load the plants so that the scheduling teams could optimize the production schedules to increase efficiencies and reduce waste. By running like items, sizes, and material types together, changeovers are minimized. And by seeing the final assembly schedule requirements, labor and resource plans could be optimized.

Also by reviewing the full capacity requirements across all North America sites, capacity could be reallocated to maximize output, thereby minimizing the need for offload capacity. Each plant’s strength could be maximized and planned in advance while minimizing transfers between plants, freight to customers, and material price differences.

By addressing these supply plans proactively, materials contracts could be addressed in advance ensuring material availability which positively impacts manufacturing planning and output. It also typically provides opportunities for more favorable contracts and pricing. In addition to maximizing production and capacity output, SIOP improved the customer delivery performance, resulting in happier customers and additional revenue possibilities.

SIOP: A Look Forward

In our book, “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth“, we discuss how SIOP can support these types of improved results. As companies navigate the exaggerated volatility of the global environment and try to keep up with changing customer needs, SIOP becomes an essential tool in the toolkit to survive, let alone thrive. Our best clients are utilizing SIOP as a way to take control of their future and manage their options instead of letting their situation manage them. In fact, they are taking SIOP to the next level with advanced technologies and by connecting SIOP to their customers and suppliers to gain an end-to-end supply chain view.

Did you like this article?  Continue reading on this topic:
Optimizing Business Decision Tradeoffs with SIOP

The post SIOP / S&OP: Proactive Approach to Maximizing Production Output & Capacity appeared first on LMA-Consulting Group, a supply chain consulting firm.

As the labor market tightens with changing demographics, companies will need to leverage technology and digitize their supply chains.

The world has never experienced a labor shortage quite like the one we are experiencing. According to the Bureau of Labor Statistics, employment growth will average .3 over the next decade; however, labor participation will drop from 62.2% to 60.4%. In essence, we have entered a secular labor shortage. Similarly, according to the German Chamber of Commerce and Industry, half of German companies are struggling to fill vacancies due to labor shortages. Thus, the only companies that will thrive in the next decade will leverage technology and digitize the supply chain.

The use of technology and automation will be of paramount importance to not just supplement the labor force, but also to meet ever increasing customer requirements and provide visibility across the end-to-end supply chain. Companies must be faster, focused, and perform with lights-out manufacturing and logistics to succeed. Thus, a modern ERP system will be an assumption, not a differentiator. In addition, companies must pursue advanced technologies such as business intelligence and predictive analytics to forecast the future and determine where to focus, artificial intelligence, and IoT solutions to support items such as predictive maintenance, and digital twins to optimize process and product performance.

Pertinent Examples

An electrical power solutions manufacturer struggled with an ERP system upgrade, and it impacted every aspect of the business, requiring additional resources to support customer requirements. A base ERP system is no longer acceptable. Instead, a modern ERP system that supports customer expectations such as configure-to-order (CTO), customer relationship management (CRM), and customer-related functionality — including customer portals, order fulfillment visibility and backlog management — is essential.

Since the ERP team didn’t have the time required to fully prepare, the executives quickly supplemented with additional consulting and temporary resources, developed interim solutions for tracking backlog, and ordered ahead to support the transition. Even with one of the best management teams in the industry, until modern ERP functionality was available, they had to implement several stop-gap measures to avoid significant customer impact.

An industrial manufacturer struggled to forecast revenue accurately one month ahead, causing frustration with their board of directors. An assessment of their business processes and use of technology showed that their sales and order entry systems did not talk with their production and inventory control systems. Although Sales could estimate revenue, Operations had no idea which products would be required to support that revenue until Engineering completed design. Thus, although performing above expectations, the two rarely met.

To turn this situation around, we had to build a bridge between the two systems with a data model. However, that alone wouldn’t resolve the issue, as the product details were not known soon enough to ensure seamless delivery and revenue predictability. Thus, in addition, the team created a digital-twin-type capability to predict the product grouping and model information with a SIOP (sales inventory operations planning) process so that materials could be purchased and capacity planned. Once this information was built into automated dashboards, Production was able to transition from reactive to proactive, thereby creating predictability in shipping plans and taking it a step further with proactive margin enhancement strategies.

An aerospace manufacturer continually struggled with on-time delivery, and customers were losing patience. The issue was a bottlenecked area of the manufacturing process that simply could not keep up. They could not find enough high-skilled resources to run the machinery on second and third shifts, and overtime was maxed out. The team pursued an alternate strategy to employ a technological solution to run lights out around the clock.

They purchased a robot and focused their most advanced resources on modifying the robot to work in their manufacturing environment. With the upgraded robot, their high-skilled resources refocused attention on setting up the machinery during day shift, which allowed the robot to perform the repetitive tasks on second and third shift. Order delivery performance improved rapidly, and customer complaints disappeared as the bottleneck was removed. Later, they focused on upgrading their distribution processes with lights-out capabilities as well to further differentiate performance.

Forward-thinking companies will pursue smart technology upgrades while their competition focuses on containing cost. The companies that figure out how to do more with less and digitize their supply chain will thrive while the rest struggle. Resources will no longer be plentiful, and so pivoting with technology will be the only route to executing successfully while meeting ever increasing customer expectations.

Originally published in Adhesives & Sealants Industry.

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