Profit is the Goal—Part 2: Staying Focused on the Money
In my last post, I drew attention to the historic failure of plant
measurement projects to deliver hard and sustainable
benefits.
In a recent (Summer 2007), study of 100 food and beverage and CPG
companies, AMR Research found no measurable difference between the
abilities of MES users and non-MES users to leverage metrics to
respond to business challenges. Not a pretty picture for
those investing in costly MES systems.
The study revealed, in many cases, that the implementation of MES
and a downtime or OEE dashboard had become goals in
themselves. I surmise food and beverage manufacturers assumed
the mere appearance of a new measure would cause performance to
improve, and with it, profitability. This assumption is
flawed, as it takes for granted the most important aspect of
the task at hand – taking action; doing something with the
new information; changing the behavior of people on each and every
shift. A project that does not begin with a plan
of exactly how to do this from the outset will fail to deliver any
true ROI. It used to be OK to pursue such
pointless exercises in the past, and the executive suite turned a
blind eye to these failures, but it will not be acceptable in the
future, nor should it. Profit improvement comes from taking
action, not from measurement alone.
In today’s recessionary world, we will experience an era of
capital preservation and margin improvement action-taking.
Manufacturing executives must deliver hard benefits – not
assumptive measurement projects.
I have heard it said many times that financial benefits of plant
monitoring cannot be estimated until after the investment is made,
as the data gathered is what identifies the opportunity; (the
classic “chicken and egg” argument). This is
nonsense and results in an unfocused data-gathering and
dashboard-design jamboree rather than meaningful business
activity.
An experienced practitioner knows exactly where to look, can assess
the gap between current and future potential operating performance
and where the hard savings can be made. This can, and should,
be done before anyone spends a dime on software. This should
take less than a week unless your advisor is “learning on the
job,” which is not recommended. A subsequent project
should take a fraction of the time you anticipate (think
six weeks for an entire plant location, not
six months), as you are now focused on a specific
operating goal. This can be prescriptive and does not need
you to measure everything that moves before you get started.
For plants that stay focused on the money and start with that goal
from the very beginning, margin improvements
follow.
By focusing on the “money” and not the systems, plant
executives, corporate SVP’s and hourly paid workers are all
unified and have a “bankable” objective the same year
they start. They will not end up as a sorry statistic that
failed to make a difference.
The next blog entry will address the practicalities of the role of
the SVP and the “change management” aspects of a
successful plant/multi-pant margin increase mission.
Paul Boris commented:
Great insights ! I would suggest that the focus on the
metric/deployment as THE goal could be worse than doing nothing at
all. Once everyone has been dragged through the process, having no
measurable impact will actually make it harder to do it right in
the future – “we tried that before and it never worked
here.” I also agree completely that folks should be thinking
in terms of 6 weeks to begin to see results, as opposed to 6
months. With all the volatility in the market, I would speculate
that most managers would be hesitant to offer predictions as to
where anyone will be in 6 months. The 6 month horizon places a big
hurdle in the path of getting started – “maybe we
should wait to see what happens first.” CP and Life Sciences
(process related operations) typically have nuances allowing them
to deploy and see results in very short windows. The manufacturing
managers (local and senior) better be looking for ways to wring
cost out of the operation NOW, but do it in a way that will give
them a real framework for sustaining these gains when things turn
around, i.e., investing in their people AS WELL AS technology.
Finally, I have always felt that if it were as simple as putting up
a dashboard or calculating a couple metrics, the plant folks would
have done it already. The notion that we will come in and simply
document all the rules, configure the MES and drop it in would
indicate the plants knew all the things they needed to do –
begging the question “why aren’t they doing it
now?” Our best customer successes have come when we have been
prescriptive, leveraged the existing systems and processes, started
fast, created new capability that was unavailable before and
directly and positively impacted the life of the front-line
operators in a very short window (weeks).
Paul Boris commented:
Great insights ! I would suggest that the focus on the
metric/deployment as THE goal could be worse than doing nothing at
all. Once everyone has been dragged through the process, having no
measurable impact will actually make it harder to do it right in
the future – “we tried that before and it never worked
here.” I also agree completely that folks should be thinking
in terms of 6 weeks to begin to see results, as opposed to 6
months. With all the volatility in the market, I would speculate
that most managers would be hesitant to offer predictions as to
where anyone will be in 6 months. The 6 month horizon places a big
hurdle in the path of getting started – “maybe we
should wait to see what happens first.” CP and Life Sciences
(process related operations) typically have nuances allowing them
to deploy and see results in very short windows. The manufacturing
managers (local and senior) better be looking for ways to wring
cost out of the operation NOW, but do it in a way that will give
them a real framework for sustaining these gains when things turn
around, i.e., investing in their people AS WELL AS technology.
Finally, I have always felt that if it were as simple as putting up
a dashboard or calculating a couple metrics, the plant folks would
have done it already. The notion that we will come in and simply
document all the rules, configure the MES and drop it in would
indicate the plants knew all the things they needed to do –
begging the question “why aren’t they doing it
now?” Our best customer successes have come when we have been
prescriptive, leveraged the existing systems and processes, started
fast, created new capability that was unavailable before and
directly and positively impacted the life of the front-line
operators in a very short window (weeks).
Tom C commented:
I could not agree more. Metrics are not results. They are data.
Data must be used to form usable information. The goal is not the
plan. Having a plan is essential to taking actions to achieve the
goal. If the plan contains who, what, when, where, and why, and the
tools and resources are in place to perform the tasks, the chances
of reaching the goal are very good. This assumes those doing the
tasks understand the rationale (the money) and have the ability to
execute the plan. These fundamentals are equally applicable to
strategic sourcing or supplier initiatives. All too often, the
metrics focus on reducing line item prices of the parts in the box
that ultimately get used for MRO purposes. Overlooked is the total
cost of ownership to apply those products to production equipment.
Strategic sourcing decisions made by purchasing entities without
collaborating with the plant floor users and the applications based
intelligence of the suppliers is a recipe for failure. The
sweetness of low price is long gone after the agony of a bad job.
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