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back to index backAMERItalk March,  2017


How Manufacturers Can Get Faster, More Flexible, and Cheaper

Meeting customers’ expectations for personalization and customization requires flexibility. And such flexibility can provide a distinct competitive advantage — as long as costs aren’t spiraling out of control. In a study of nearly 250 manufacturers over a 10-year period (2005–2015), we found that 78% of firms had improved their ability to fill their total actual market demand but had lost control over costs. Apparently, chasing the often elusive customer came at a cost that many boards and shareholders had somehow overlooked (or had discreetly discounted). We also found that 11% of the companies studied had suffered both a decrease in their demand fulfillment percentage and an increase in their conversion costs, the labor and overhead costs incurred when converting raw materials into finished goods. Hardly a desirable position.

All kinds of companies had failed at operational flexibility. There were companies in a wide range of industries, from automotive and industrial equipment manufacturers to oil and gas majors. There were companies with revenues over $100 billion and with revenues under $5 billion. There were Japanese manufacturers and Chinese manufacturers. There were companies that had more than doubled production levels during the 10-year period, and even those that had reduced production levels by 10% or more. In other words, we found no flexibility correlation with respect to industry, geography, size, or growth rate.

But here’s the interesting part. In our study 11% of the manufacturers were able to both increase their demand fulfillment and lower their costs. What were the secrets of these masters of manufacturing? We found three common traits.

More products but fewer parts. The first is SKU proliferation, or a greater number of product variants, which was a natural response to the need for greater customer personalization. Over 80% of the master manufacturers believe that producing more (not fewer) SKUs per line has been a key success factor for them. In fact, more than half of those masters stated that they wanted to further increase their number of SKUs per line over the next decade.

To keep conversion costs in check, however, the SKU proliferation must involve fewer components. Toyota’s New Global Architecture (TNGA) is a case in point. The TNGA approach gives more choice to the customer, but on a simplified platform and with fewer components, all with the aim of cutting conversion costs.

Toyota’s goal is to make the transition from having 100 different platform variants to just five standardized platforms across all its models. These five vehicle platforms will cascade into a manageable selection of accompanying components and unique interior choices, helping retain design distinctions. Toyota expects TNGA to help cut factory investments by 40% and manpower by about 20%. In addition, design improvements to the standardized platforms are likely to improve the customers’ driving experience and increase vehicle fuel efficiency.

Faster, cheaper, and more flexible through digitization. The second common trait of many masters is digitization. The use of digital designs and 3D printing enables rapid prototyping, which more than 80% of the masters said was imperative for improved flexibility, and allows companies to experiment more with alternative designs.

Consider a European automotive company, which has been successfully deploying rapid prototyping across its various businesses, using an effective combination of digitized designs and 3D printing. Such technologies have, for instance, enabled the company to slash the development time for a critical component from 20 weeks to only two weeks, with a cost savings of 92%. And the company is now deploying 3D printing not just for part prototypes but also for actual manufacturing tools. In the company’s truck division, 3D printing has helped reduce the tool manufacturing time from 36 days to two. Moreover, tools printed using a material called thermoplastic have helped slash the tooling costs by 99%. So far, the division has printed more than 30 different production tools, all with 100% accuracy.

Optimization through cross-training. The third trait that many masters share is the use of flexible plant designs and multiskilled, or cross-trained, machine operators. A great example of that is Honda’s Assembly Revolution Cell (ARC) line, which was built from scratch, in 2015, for the company’s new Prachinburi plant, in Thailand.

At the facility, each ARC unit consists of one rectangular platform sandwiched lengthwise between two circular platforms. The units are mounted on wheels, and each carries one vehicle body at the center as well as four operators, with a complete set of parts to be installed at the four sides of the vehicle. The entire production line consists of 50 such moving ARC units, one after another, with each capable of assembling a car from start to finish. Adding or removing the ARC units is relatively easy because there are no overhead conveyors and the units are not fixed to the plant floor. This allows flexibility to increase or decrease volume and SKUs at short notice without any major cost penalties. Equally important, the ARC operators learn to solve a broad range of production challenges, another boost to flexibility and efficiency.

There are a number of incremental efficiencies built into the design of the line. The curved shape of the circular platforms, for instance, allows full boxes of parts to be supplied and empty boxes to be retrieved from the same position in a single trip. Also, operators are not required to walk back and forth between the moving line and the parts shelves, saving precious time.

In our study, more than 90% of the manufacturing masters said that cross-trained operators were instrumental to achieving flexibility. What’s more, those companies that failed to achieve master status tended to place less emphasis on employing such workers, with only 79% saying they were an important asset.

Reducing changeover times is not the only issue here. Cross-trained operators are better suited to optimize time and effort across multiple tasks while the line is operational. The strategy has helped Honda improve work efficiency by 10%, compared with a conventional line, and because each operator is responsible for a wider range of tasks, their feedback to the design and development teams has turned out to be more insightful.

Flexibility is not an end state. It is only relative, tied to how important a company’s need for it might be at any given time. But when executed effectively, it can earn measurable financial returns even through times of uncertainty and upheaval. As companies continue grappling with the adoption and implementation of digital technologies, they may easily lose sight of flexibility. But the masters of manufacturing recognize flexibility as fundamental to their business. Like efficiency and productivity, it is becoming an increasingly important barometer for future success.

Source: Harvard Business Review - GAI





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AMERItalk

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