The Future of Manufacturing

This article discusses the current problems and cultural issues facing manufacturing and a recipe for resolving the issues raised, as well as the influences of recent philosophies such as Lean Manufacturing and Agile Manufacturing, Lean & Agile Supply Chains and information technology such as e-commerce, and ERP.

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Crystal Ball

A discussion with most executives will echo with three letter acronyms of the latest techniques they have implemented. A quick glance at the balance sheets of the major manufacturing companies does not reveal leanness. A quick glance at any computer sales brochure will reveal that everyone claims to have sold software to everyone and has produced enormous benefits. A glance at the measures of performance displayed on notice boards do not reveal improvements in agility or innovation.

The above initiatives have attempted to optimise the situation in a focused way with varying degrees of success. It is helpful to consider the importance of a particular technique in the context of the strategic objectives of the business, ("Beyond competitive advantage: a competitive relevance approach"; H. Maylor, 31st International Matador Conference Apl. 1995), verses the impact of the constraints within it, and the ease of overcoming them. This avoids the scourge of modern manufacturing, which is the winning of the medal for "implementing" the latest technique. This is a very serious current problem, where management can be justifiably criticised by shareholders, employees and customers alike for insincerity, because this approach often does not yield the expected benefits. To label techniques is helpful in identifying them and in creating initiatives but unhelpful when the label becomes the objective instead of the benefit.

Secondly there is a prevailing need for short-term effects, where a manager is viewed as successful or not on the basis of only short term objectives. This creates an environment where the company lurches from one short-term initiative to another, often without finishing the first, which leads to rapid deterioration of the initiative and ultimate failure. This often gives rise to cynicism.

We are not short of techniques. We are short of:

The motivation of managers to recognise the need for change without leaving it to a crisis to act as a catalyst
The ability to be selective about their use and the benefits of doing it
The ability to select an appropriate technique which is competitively relevant
A commitment to the philosophy and underlying principles implied in that technique, such that a real zealot with the authority exists within the organisation to champion the implementation
The ability to implement the technique properly and keep it simple
The patience to see the implementation through and not do too many things at once. It took Toyota 20 years to fully implement leanness (See Lean Manufacturing), (and they had a zealot with the authority to make it happen)! But interestingly, like most large companies, they seem for the moment to have lost their way a little.

Customer choice is a powerful driver towards increased variety, perfect quality, instant off the shelf availability, and small cost (and cost of ownership). Manufacturing has to respond to this desire by the use of "agile" techniques, (see Agile Manufacturing).

The Internet will eventually have a profound effect but only when communications are integrated with the design, manufacturing planning and control systems of both customer and suppliers. Electronic demand communication (EDI) has been around for 20 years but is still largely being used as a substitute for faxes. There are very few fully integrated customer-purchasing to supplier-sales links. This problem is now beginning to be addressed by researchers and software suppliers, under the banner e-commerce (see E-commerce E-nabling your Business), but the problem is not simply an IT problem. It is deeply routed in a trusting relationship between the partners, where sourcing rules are transparent, as is supplier replenishment demand implied by revealing the customer's sales and the customer's customer's sales. Perhaps the time has come to start thinking small, (which will be the subject of a future article).

The smooth flow of real demand (See Demand Management) down the supply chain without the intervention of inventory planners feeding the "Forrester effect" ("Industrial Dynamics" J.Forrester) is also a current difficulty. This requires a return to gross requirements planning (a simple explosion of bills of material uncorrupted by batch sizes, safety stocks, lead times, stock records etc.) for indicative long term demands and pull systems for short term demands. In this environment "Takt" time has meaning. If this is combined with the need to process single piece flow rather than batches it is hard to define a role for MRP2 systems. However there is a need to pass this uncorrupted demand data down the supply chain via exploded bills of material in a timely way. This certainly overcomes the deterministic (dictated by the bill of material) demand communication problem but does not resolve the problem of forecasting probabilistic requirements from the end consumer. However Agile Manufacturing has the potential to alleviate this problem by reducing the horizon needed for forecasting because lead-times will be shorter.

There are obvious difficulties here:

Inventory planners and manufacturing managers who prefer a quiet life by holding stock and Work in Process just in case. This is based on a real concern of course that problems do arise, stock needs to be built to cover local disruptions in the supply chain such unsynchronised holidays and there is still uncertainty in the supply chain.
The vested interests of the computer software suppliers who are selling functionality (or complexity) whichever is your point of view.
Although some standards exist for electronic data communication the lack of standards for inter-organisation and inter-ERP (see Implementing ERP Systems) software are still issues, even though software is becoming available. Standards remain a stubborn problem in the IT industry!

This aspiration also requires:

Prototype knowledge based Master Production Scheduling systems (see Participative Sales and Operations Management (S&OP)) have been produced by universities, and commercial knowledge based product configuration systems are now appearing. There is also scope for more use of knowledge bases in purchasing, particularly in supplier selection.

Whilst all of these aspects jointly create significant opportunities and challenges they are a trend which will certainly continue and will govern future developments. "Short-termism" mentioned earlier is structural and in the nature of annual accounting. Power bargaining in customer supplier relationships is endemic to a degree that the end consumer can become disadvantaged. This will make zealots hard to find. A catalyst is needed to ensure these things do not remain on the drawing board or in the Guru's textbooks. Critical Success Factors (KPI's) derivation, measurement and control (See Focused Improvement Systems) may provide the motivation and benchmarking (see Introduction to Benchmarking) the solution. The alternative may be the increasing trend to export manufacturing jobs to the developing world. Just in Time does not apply to shipments from the Far East, which take several weeks by boat! On the other hand, Lean Manufacturing, Agile Manufacturing and Postponement and Mass Customisation techniques have the power to put retailing back into the high street, (or into the home if the configuration process is simple), via Internet connected intelligent customisation and ordering linked to the manufacturer. They could then immediately customise the product and ship them directly without stock.

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Whilst great care has been taken to provide relevant, accurate, practical, advice based on our considerable process design and development experience, this will almost certainly require interpretation into the context of your unique business. Please be careful in doing so and if in doubt seek expert advice. We would welcome your feedback!

SM Thacker & Associates

Independent Best Practice Training & Consultancy

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The Future of Manufacturing

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