Australian Manufacturing is in decline
Manufacturing as a share of the economy has been declining for many years, and even the recent weakening of the exchange rate has not had much of an effect yet. Productivity is not improving, despite the tremendous effort. Managers and employees are tired and suspicious of improvement efforts that often end up in cutting employee numbers.
Anecdotal evidence suggests that it is becoming ever more challenging to obtain the required skills at an acceptable cost. In Australia, employee engagement is seemingly falling off a cliff, from 24% of employees highly engaged in 2013 to only 14% in 2017.
Most global markets are in oversupply, so competing for the customers’ attention is getting harder.
Creating a thriving enterprise
Consultants and managers have tried for decades to improve profitability by improving customer satisfaction while simultaneously reducing waste in the organisation. This has not worked, not because the ideas are wrong, but because the way we approach these initiatives cause countervailing forces to arise in the organisation. We are in desperate need of innovation, but not the kind that involves technology and products. Based on 20 years of experience in running manufacturing companies and consulting to the industry, we believe innovation in manufacturing management is the missing success ingredient.
Manufacturing differently: A new management paradigm
At Stratflow, we have developed the Productivity Platform, based on principles of Theory of Constraints (TOC) to make this possible.
The increased clarity of purpose, advance warning of problems, alignment and trust, enables production flow to increase by 20-30%, using the same resources. This enables employees and managers to not only decrease lead time and increase capacity but also to ensure that the right product is available at the right time. Management is now in a position to make offers to the market at higher margin or to increase volume. The Productivity Platform reduces the levers to control to the absolute minimum and unshackles employees to do what needs to be done for the good of the whole. In this manner, the information overload that impedes many management teams is substantially reduced.
Here is a list of some of our successes:
Modek Polycarbonate Roof Sheeting- Sales grew in the face of entry by an aggressive international competitor. Before the intervention sales had fallen to 30% of that achieved for the corresponding period the previous year. After the intervention sales recovered within two months and increased by 20% for the year. The TOC for Operations intervention enabled much better reliability (MTO) and availability (MTA) of product. With these production changes Availability (Make to availability) and Reliability ( Make to order) could be promised to the market.
Modek Polyester Roof Sheeting- This business unit was a year away from closure. It had lost 20% of its sales every year for five years in a row. Given the strategic value of the business the MD allowed one last effort at turnaround.
The Manufacturing Differently intervention was used and the unit turned around within six months. It continued growing at 20% sales a year for three years after.
The TOC supply chain intervention has proven to be very effective.
Our Beliefs and Methodology
- If customers had their way, they would want their goods to be Free, Perfect and to have it Now.
In most cases it is not the sales person’s fault when a client is lost. The problem needs to be found in the production and/or logistics department and solved there.
- The Supply Chain/Operations intervention starts with determining the customer’s significant need and then makes sure that production and supply chain delivers exactly that.
- The TOC for Operations intervention helps with getting the cost down and quality up while the supply chain solution enables customers to have their goods now, with a minimum of stock and no stock-outs. Since the items that sell best tend to stock out sales are also improved by having these items available.
- By satisfying the customer, the sales department can be taken out of firefighting mode and are enabled to focus on selling and finding new markets.
- It is important to prevent sales from selling more than 80% of what production can deliver at any moment, protective capacity must be maintained.
- For a successful intervention, we assume that the technical and manufacturing capability of the target company is on par with that of its direct competitors. See “Drawing a new Map” for cases where this is not true.
- Apart from focusing departments on doing the right things employee engagement improves as a result of this intervention.
- The facilitator’s role is to attend the Flow meetings for two to three days per week to ensure the dialogue process works well. This needs to happen for the first three months.