Improvising manufacturing with focus on performance

• Factors that impact manufacturing performance and ROCE and ways to improve it.

• Investing in leadership development programs that focus on the use of predictive strategy models and implementing tools and systems to easily access and analyze relevant data can help companies improve manufacturing performance and increase profitability by enabling leaders to make informed, data-driven decisions.

• AI to support leadership

Manufacturing performance, or MP, is a measure of the efficiency and effectiveness of a company's manufacturing processes. It is an important metric for businesses to track, as improvements in MP can lead to increased profitability and competitiveness. There are many different factors that can impact MP, including:

• Productivity: The higher the productivity, the more output a company can achieve in a given period of time.

• Cost per unit: The lower the cost per unit, the more profitable a company's operations will be.

• On-time delivery accuracy: The better the deliver accuracy, the more satisfied customers will be and the less likely they are to switch to a competitor.

• Inventory levels: The lower the inventory, the less capital is tied up in unsold goods and the more nimble a company can be in responding to changes in demand.

• Scrap and rework: The lower the scrap and rework, the less waste a company produces and the more efficient its operations will be.

• Overall equipment effectiveness (OEE): The higher the OEE, the more efficiently a company's equipment is being utilized.

-1% OEE

Improving OEE by just 1% can lead to a 2-3% increase in profits.

One key performance indicator (KPI) that is often used to measure MP is return on capital employed (ROCE). ROCE measures the profitability of a company's operations, taking into account the amount of capital invested in the business. It is a useful metric for comparing the profitability of different companies or business units, as it adjusts for differences in the amount of capital invested.

Improving ROCE and MP requires a holistic approach that involves all departments and functions within a company. Poor communication or misaligned goals between different departments can lead to issues that negatively impact MP. For example:

• Customer design: If the customer design department does not have knowledge of the manufacturing processes, they may make design choices that are difficult or expensive to manufacture, leading to higher costs and lower productivity.

• Suppliers: The quality, price, delivery accuracy, and packaging of materials can all impact MP. If suppliers are not meeting the required standards, it can lead to issues with production efficiency and quality.

• Purchasing: If the primary KPI for the purchasing department is cost per unit, there may be less focus on quality and delivery accuracy, which can lead to issues downstream.

• HR: If the primary focus for the HR department is wage or salary cost, there may be less emphasis on finding skilled workers who can contribute to continuous improvement efforts. This can lead to a less efficient and effective workforce.

• Finance: If the finance department is primarily concerned with productivity and cost per unit, there may be less focus on customer service and quality. This can lead to a focus on volume over customer satisfaction, which can have negative consequences in the long run.

• Sales: Promising extremely short delivery times to customers may result in issues with production planning, overtime, extra costs, and air freight. This can lead to higher costs and potentially lower quality, which can negatively impact ROCE.

To improve ROCE and MP in a sustainable way, a company must have a clear long-term vision, establish KPIs that support this vision, and foster a culture of continuous improvement. A few key prerequisites for improving ROCE and MP include:

• Define long-term targets.

• Identify key areas for improvement.

• Prioritize a few key areas to focus on.

• Implement improvements in a specific "Practice Ground" within the company to identify any issues and allow for easier correction.

• Roll out successful improvements to other areas of the company.

To get the best results, it's important not to try to tackle too many areas of the company at once. Instead, focus on making improvements in one area at a time and gradually expanding from there. This approach will allow for a more sustainable improvement in ROCE and MP.

Manufacturing performance, or MP, is a measure of the efficiency and effectiveness of a company's manufacturing processes. It is an important metric for businesses to track, as improvements in MP can lead to increased profitability and competitiveness. There are many different factors that can impact MP, including productivity, cost per unit, delivery accuracy, inventory levels, scrap and rework, and overall equipment effectiveness. One key performance indicator (KPI) that is often used to measure MP is return on capital employed (ROCE). ROCE measures the profitability of a company's operations, taking into account the amount of capital invested in the business.

To make quick, informed decisions, leaders need to have access to reliable data and predictive models that can help them understand the potential outcomes of different actions. However, finding qualified and high-performing leadership that is proficient in using such models can be a challenge. Many leaders may not have the necessary training or experience in using predictive strategy models, or they may not fully understand how to apply them to their specific industry or business.

As a result, companies may struggle to make timely, data-driven decisions that can help them improve MP and increase profitability. Without the ability to quickly assess and respond to changing market conditions, they may be left behind by more agile competitors.

To overcome this challenge, it is essential for companies to invest in leadership development programs that focus on the use of predictive strategy models. By providing their leaders with the necessary skills and knowledge, companies can better equip them to make informed, data-driven decisions that can drive improvements in MP and overall performance. In addition, companies should consider implementing tools and systems that can help them quickly and easily access and analyze relevant data, making it easier for leaders to make timely, informed decisions.

By addressing the challenge of qualified and high-performing leadership, companies can better position themselves to succeed in the manufacturing market of the future. By making data-driven decisions supported by predictive strategy models, they can improve MP, increase profitability, and remain competitive in an increasingly fast-paced business environment.

Under 2023, the use of artificial intelligence (AI) in business decision-making will continue to grow in popularity. One key performance indicator (KPI) that is often used to measure manufacturing performance (MP) is return on capital employed (ROCE). ROCE measures the profitability of a company's operations, taking into account the amount of capital invested in the business. It is a useful metric for comparing the profitability of different companies or business units, as it adjusts for differences in the amount of capital invested.

One way that AI can be used to support leadership in improving ROCE and MP is through the development of predictive models. Predictive models use data from the past to make predictions about future outcomes, and they can be particularly useful in industries where there are many variables and it is difficult to determine the most likely outcome. By using predictive models that are powered by AI, leaders can better understand the potential consequences of different actions on ROCE and make more informed decisions about how to improve MP.

Another way that AI can support leadership in decision-making is by providing real-time data and insights. By using AI to continuously monitor and analyze data, leaders can stay up-to-date on the latest trends and developments within their industry and make more timely decisions. This can be particularly valuable in fast-paced industries where quick action is often required. For example, if a manufacturing company is experiencing a sudden surge in demand for a particular product, they may need to rapidly increase production to meet the demand. By using AI to continuously monitor sales data and identify patterns, leadership can quickly identify changes in demand and take action to adjust production accordingly, improving MP and potentially increasing ROCE.

The use of AI in combination with predictive models and real-time data analysis can be a powerful tool for leadership in decision-making. By leveraging these technologies, companies can improve their MP and increase ROCE by making more informed, data-driven decisions. However, it is important to note that the adoption of AI in decision-making is not without its challenges. One of the main concerns is the potential for bias in AI algorithms, which can lead to decisions that are unfair or discriminatory. To mitigate this risk, it is important for companies to carefully consider the data that is used to train AI algorithms and ensure that it is representative and free from bias. In addition, companies should establish robust processes for monitoring and testing the performance of AI algorithms to ensure that they are making accurate and unbiased decisions.

Another potential challenge in using AI to support decision-making is the need for qualified and high performance leadership. While AI can provide valuable insights and analysis, it is ultimately up to leadership to interpret this information and make the final business decisions. To be effective, leadership must have a strong understanding of both the technology and the business context in which it is being used. This requires a combination of technical expertise and strategic thinking, as well as the ability to communicate effectively with both technical and non-technical team members.

Overall, the use of AI in decision-making has the potential to greatly improve manufacturing performance and increase profitability. By investing in the development of predictive models and real-time data analysis tools, and by ensuring that leadership has the necessary skills and expertise, companies can better equip themselves to make informed, data-driven decisions that drive business success.