The coming months will come with many unknown variables, and now is therefore the perfect time to seize the opportunity to strengthen the resilience in your operations now, so that you will be able to overcome any future challenges.
Operational resilience is fundamentally about two things: creating flexibility to be able to handle any challenges in your supply and demand as well as eliminating waste and bottlenecks hurting your efficiency. Flexibility in your supply chain could e.g. mean having more than one supplier or having alternative scenarios at hand to enable you to respond quickly in an unexpected crisis. But buffers of this kind cost money, which is why it has never been more important than now to eliminate any waste and bottlenecks draining the company’s capacity, and which may have received less focus until now. Having strategic and tactical buffers is not equivalent to having fat in the wrong places in the organisation which merely drive costs without offering resilience.
YOU CANNOT AFFORD OTHERWISE
Perhaps you have already made operational efficiency improvements several years ago and work with continuous improvements. Perhaps there is no waste in your production processes and no bottlenecks in your system. Then all is well.
But if you suspect that there may be room for improvement in your operations, now is the time to do something about it. If you have scaled down operations within the last six months due to a decrease in demand, lock-down, etc., I would recommend that you open up gradually and continuously focus on potential for optimisation and on identifying any critical points in your supply chain. You will miss out on major opportunities for operational efficiency improvements if you simply start up on the same level and relative resource intensity as before.
YOU WILL NEED A GAME PLAN
Review your entire production system and identify the optimisation initiatives that it makes sense to launch and when as you scale up your production. Where are your bottlenecks and critical points where your resources are not used efficiently? It is easier to work systematically with these areas in your scale-up phase than when the entire company is up and running at 100%.
Your first step should be to map out your entire operational system and identify opportunities. These opportunities can then be realised step by step in a game plan that should enable a continuous overview as the capacity requirements intensify and you meet shortages on equipment and staff.
Your game plan should address three core needs of your operational system:
- Eliminate bottlenecks to enable larger throughput
- Address efficiency in hotspots to reduce overconsumption of resources
- Sustain a robust operational leadership system
ELIMINATE BOTTLENECKS ONCE AND FOR ALL
Understand your entire value chain, from product development to customer service. Find out where your limitations are with respect to utilising opportunities on the market. Value stream mapping (VSM) is neither sexy nor new, but it works. This conventional approach will offer you an overview of limitations and opportunities in all phases of your value chain.
And use data to gain insight into where your bottlenecks occur when you ramp up production. You also need to review your OEE (Overall Equipment Efficiency) to understand how much you are utilising your capacity in your bottlenecks and remember that bottlenecks can relate to both machinery and human resources. You may have a high number of breakdowns or changes that shortens the value-adding time compared to your waste time. You may need to use machine learning on sales data in order to understand where future demand will come from, and what it will look like.
Our experience is that bottlenecks just as often are caused by the production system as by the work processes. To give an example, a major manufacturing company managed to increase their flow through their factories via targeted OEE optimisation in their bottlenecks, enabling them to double their production. And this is just one example of many.
ADDRESS EFFICIENCY IN YOUR HOTSPOTS
The next step in your value stream mapping should be to identify where your resource consumption is and to conduct a sensitivity analysis that will allow you to understand how sensitive your resource consumption is to escalating volumes. Different types of activities have varying degrees of sensitivity to fluctuations in volume, and you need insight in these degrees of sensitivity.
It is also necessary to gain an overview of the current utilisation rate of your resources. And this requires a standard benchmark, which surprisingly many companies do not have. Standardisation of work tasks is basically about breaking down tasks and defining their content at a granular level after which the standard time for carrying out the task is documented.
It is a time-consuming task to break down work tasks into standard work, but it carries its own reward. A rule of thumb is that if your company has not previously worked with standardisation and efficiency improvements of work tasks, you will have a potential of 15-25% in productivity improvements, and not just in production.
SUSTAIN A ROBUST OPERATIONAL LEADERSHIP SYSTEM
It is time for the executive team to step up. It is the executive team’s job to make sure that the changes happen and that the conditions for success are optimal. You need to have your leaders take ownership for creating an overview of the as-is situation, launching optimisation activities in the right order and following up on results to enable ongoing adjustments. And it is also your job to ensure that a process is set up that will enable the seamless escalation of identified challenges, both top-down and bottom-up.
You need to lead the value chain proactively by launching optimisation initiatives in prioritised order aligned with market developments. The overarching purpose of these initiatives should be to ensure scalability. Focus on customer value and reduction of process variance through cross-functional improvement work throughout the value chain and make it a priority to have consistent process focus, process targets and process ownership.
The main job of the executive team is to take responsibility for realising results and for following up on results to ensure sustained progress. It is your job to set the direction and ensure prioritisation of leadership power and resources.
YOU ARE NOT A VICTIM
It is natural to feel that your company is a victim of external fluctuations in demand and supply, especially in these times where we are feeling powerless in many ways. But my experience tells me that 70-90% of variance in the production system is internal – also in a ramp-up scenario. In a ramp-up, variance in the production system is not driven by external forces but is simply caused by a lack of optimisation in the value chain. And this form of variance causes waste and poor ability to deliver, two things that no company will be able to afford in the future.
This is why you need to create a culture of continuous improvements in which you work systematically on variance reduction. Identify activities that create a better flow through your value chain and ensure that each individual in your organisation takes responsibility for improving processes in their own area. As leader, you should both demand results and make continuous improvements a priority on all management levels.
And the reward for all of this work will be that you will be able to afford to create resilience, a buffer against the blows your supply chain is certain to receive in the months to come.