How Manufacturing Operations are Matching Cost Pressures with Current Business Challenges


Manufacturers are finding themselves in a challenging environment with producers being pressured by changes in consumer habits – demanding more transparency in production and supply chains – which is decreasing their profit margins.

Thus, manufacturers must adapt to these new waves of disruption by adopting a more customer-centric mindset while seizing the potential of digital tools and reinventing their supply chains.

As inflation puts pressure on energy and raw material prices, and geopolitical uncertainty and the pandemic disrupts the supply chains, topics such as digitalization and sustainability become critical. Organizations must operate with vision, innovation, and adaptability, looking for ways to reduce costs and improve margins.

To face these challenges, manufacturers need to find the right balance between productivity and flow in their operations. They need to create a one-piece flow while maximizing equipment efficiency and resource productivity.

Also, an important paradigm should be shifted: from push and batch production to pull production and one-piece flow. And to reduce the impact of inflation on materials and energy prices, manufacturers will have to develop sustainable and energy-efficient operations while implementing a material yield improvement plan.

A set of impactful initiatives to face these challenges and boost manufacturing operations are described below.

1. Boost operational efficiency

Efficiency is at the heart of most capital-intensive manufacturers as it contributes to both creating flow in production and boosting productivity.

Some challenges to improve include:

  • Equipment availability issues related to breakdowns, micro-stoppages, cleaning or changeovers.
  • Recurring quality issues in labeling, packaging, or product specification compliance.
  • Lack of full optimization of production parameters to reduce human intervention.
  • Everyday maintenance tasks are only concentrated in specialized maintenance teams.

To solve equipment failures, manufacturers should implement Kobetsu KAIZEN™, and, to reduce total loss time due to changeovers and optimize setups sequencing, they should use SMED.

Maintenace efficiency

In terms of maintenance, to improve planned maintenance activities, they should understand the shutdown critical path, manage spare parts in real time, implement predictive maintenance, and standardize maintenance tasks. Autonomous maintenance should also be adopted by operators who are focused on standards for cleaning, basic maintenance, and detection of operating deviations.

2. Implement a material yield improvement plan

As acknowledged, manufacturers have been facing increasing input costs – especially related to raw materials – and the majority are not optimizing their usage. Most of the material yield losses are hidden in the process, and there is high variability in material or component consumption as well as a lack of material reuse in the process.

Initiatives to improve material yield can have a significant impact on margins, reducing materials costs by up to 11%. These are:

  • Improve process control by using Lean Six Sigma to reduce consumption variability and standardize manufacturing tasks.
  • Eliminate machine inefficiency and/or replace outdated machinery.
  • Implement product reengineering to remove non-value-added materials or technically improve the process to reduce the consumption of certain materials.
  • Reintroduce by-products in the manufacturing process or use them to generate electricity.

3. Adopt a flow improvement model

In manufacturing operations, around 70% of production time is non-added value. This is a result of batch production with long Lead Times, production lines with unbalanced operations, dysfunctional and non-ergonomic warehouse and production layouts, or team leaders that are firefighting and focused on operational tasks instead of on improving their teams’ performance.

To maximize the added value of activities and improve productivity and service levels, a flow improvement model should be adopted based on the following actions:

  • Implement a one-piece flow from raw materials to finished products by implementing line design and standard work.
  • Achieve scale customization through the flexibility required to produce small batches.
  • Implement an information flow that follows the material at all stages.
  • Synchronise logistics loops between production and logistics.
  • Improve warehouse design to increase picking productivity.
  • Develop a training plan to ensure standard compliance and the transmission of best practices.

4. Shift from push to pull production

The high seasonality of raw material availability and the increasing number of finished product references create difficult challenges for supply chain planning. Typically, the number of slow movers’ stock is high, as well as finished products with many variations in packaging and labeling for different markets.

Moreover, purchase orders are based on non-accurate sales forecasts, and production is focused on maximizing equipment occupancy and efficiency instead of customer service levels.

These paradigms must be shifted to decrease stock levels while increasing service levels. It can be accomplished through a redefinition of the stock management policy to achieve the right balance between coverage levels and stockouts. Also, it is crucial to link production to logistics by implementing a planning algorithm based on historical data, replenishment Lead Times, stock strategy for each reference, and consumption data.

Ultimately, manufacturers must reduce supplier dependence to decrease sourcing variability.

Production strategy matrix

5. Develop sustainable operations

Today, sustainability is a major priority of customers, and only 20% of manufacturing companies are on track to meet their sustainability goals, consuming high amounts of water and energy in all stages of the production process. Sustainability is also part of current consumer expectations, transparency and ethical material sourcing.

To be capable of responding to consumer needs, and reducing energy and water consumption at low cost, manufacturers should leverage data analytics and expert insights to develop an actionable zero-carbon roadmap.

They should also focus on real-time measurement of energy consumption, execute a cost/benefit analysis to identify critical equipment whose energy performance should be improved, and strive for circularity in energy and water consumption.

6. Harness the power of data

Most manufacturing companies do not make use of data in a meaningful way to facilitate process improvement. Usually, workforces are under-skilled and not trained to deal with the digital tools, hindering their access to information. Thus, in such cases, the efforts that organizations make to incorporate digitalization in operations have a reduced return, as they are not tied to a broader operations strategy nor to the training of manufacturers.

To improve this adaptation process and to maximize efficiency, organizations should develop digital competencies by implementing a program of workforce training and getting information more accessible to them, allowing effective and flexible use of real-time data and data analytics for decision-making and process improvement. Additionally, manufacturing companies should implement advanced analytics to improve planning and forecasting, as well as embed new technologies such as artificial intelligence or machine learning in their operations.

7. Reorganise teams to reinforce the KAIZEN™ culture

Typically, production teams are organized in silos which leads to low levels of flexibility and polyvalence within teams. Additionally, when deploying new processes, methods are not standardized, and teams do not have adequate training nor enough support from superiors to adopt them.

Therefore, to support a deep organizational transformation, it is key to establish a strong improvement culture within the organization – not only to increase teams’ flexibility and polyvalence but to sustain improvements over time.

The adoption of such a culture implies the organization of production lines in value streams to improve flexibility and increase resource productivity and the deployment of new standards or processes using a structured training plan to develop team members. A team development program should be applied by first training the team leaders, and then assigning them the responsibility of training the team members.

Still have some questions about transforming manufacturing operations?

What is SMED?

SMED (Single-Minute Exchange of Die) is a Lean tool used to minimize changeover or set-up time in a process so that it can be performed in less than 10 minutes. It consists of classifying elements as internal or external to a machine’s operating time, and then converting the internal ones so they can be completed externally while the machine continues to operate. Besides improving process cycle time, it can help reduce costs and increase flexibility.

What is one-piece-flow?

One-piece flow is an approach to Lean manufacturing that refers to the way products flow from one step in the process to the next, moving efficiently with little or no waiting time, based on a workflow that focuses on the product’s needs instead of the organization or equipment.

What is predictive maintenance?

Predictive maintenance is a technique that uses data analysis tools to identify anomalies in the condition of equipment and in operating processes, helping to predict the future need for assets to be fixed or replaced before failures happen.

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