How manufacturing companies can become ready for the “New Normal”?
The Coronavirus pandemic & the resultant Lockdown is a global crisis that has hit almost every country in the world, hard. Undoubtedly these are devastating times, tough times, trying times! But, when you cannot control, what is happening, you have to challenge yourself to control the way you respond. That’s where your Power Is! Manufacturing companies whose productions are stalled are gearing up to adopt new technologies & digitalization and craft strategies to survive the crisis and spring back to the “New Normal” as soon as the crisis is over.
In the midst of every crisis lies a great opportunity! – Albert Einstein
Here are some strategies and points to implement while tracing your journey back to the “New Normal”
Digital – The “New Normal”
It is quite amazing how a lot of companies have abided by the rules of “Social Distancing” and quickly adopted digital technologies to “Work from Home” and leveraged “Web Conferencing, Online Training” to make sure good communication & collaboration among teams as the “Show Must Go On”. This Digital Trend will continue to the “New Normal” even when the crisis is over.
1. Why Gear up to Leverage Technology?
Adopting digital transformation is practically inevitable now, for manufacturing companies to stay relevant & competitive. To survive this crisis & stay afloat, companies will have to focus on areas of cost reduction and become lean.
To do this, companies must start identifying & eliminating problem areas, blockages, and wastes across processes. Companies will have to focus on optimizing the processes across all functions such as manufacturing, production planning, inventory management, procurement, supply chain, logistics to bring speed to business.
Businesses must adopt new and emerging technologies into processes and organization strategies to survive fierce competition, now more than ever. Digital technologies are here to stay.
2. Implement Business Discipline
To achieve consistent results, identify & eliminate problem areas, make optimum utilization of resources, improve efficiency & profitability of the company Implement Business discipline. Define clear guidelines, processes, and standards for Production, Inventory, Sales, Procurement, Finance, Quality.
Examples of how manufacturing companies can implement business discipline with ERP:
- Inventory: Implement inventory control methods, define warehouse management rules, reorder limits. This helps ensure optimum inventory.
- Procurement: Maintaining purchase lead, time, PO Cycle time, Reducing Purchase Order Cost, Avoiding emergency purchase, Ensure a minimum number of suppliers.
- Maintenance: Define maintenance schedule, set reminders to ensure preventive maintenance.
- Production: Prepare a detailed production plan, schedule and adhere to it.
- Finances: Define rules for income receivables & payments due to monitor them closely and ensure timely payments
- Sales: Define Credit control policy, Pricing & Discount metrics, Define & monitor Sales plan
- Budget Implementation: Define stringent budgets for each unit/department and carry out analysis for the variance.
- Quality Inspection: Define every stage of inspection, ensure proper quality control
- Gate Control: Link all inward outward vehicle movements with some documentation such as Gate Pass, Sales Invoice, Good received, Rejection Note, etc.
Business Discipline implementation should be coupled with implementing Financial Discipline.
3. Implement Financial Discipline
Financial Discipline involves clearly defining a set of rules, policies or procedures that everyone within the organization must adhere to and become disciplined in terms of how every organization manages every financial aspect of the organization.
Companies must clearly classify where they will spend their finances and allocate stringent budgets for each function, and department. This will help control the spending, as well as spend the amounts only for the budgets and heads allocated.
By Implementing Financial Discipline manufacturing companies will be able to
- Implement stringent budgets & control on spending
- Avoid unnecessary or unplanned expenses
- Ensure positive cash flow
- Achieve optimum inventory
- Ensure Healthy working capital
When you have implemented discipline it is also important to measure your organization is performing in its core functions, hence it is important to measure the manufacturing KPIs.
4. Measure Your Manufacturing KPIs
Manufacturing as a core business process uses raw materials, consumables, components, parts, plant & machinery, manpower, money, to produce finished goods. Thus manufacturing is a crucial process that impacts the quality of the product, price of the product, and therefore the image and reputation of the company. By defining appropriate KPIs for monitoring, measurement, you can ensure optimum utilization of the resources as well as consistent quality to customers.
- Plant & machinery KPIs: Plant & Machinery are at the heart of a manufacturing organization. You must ensure their optimum performance and efficiency for the smooth functioning of production and timely delivery.
- Inventory KPIs: Inventory is extremely important to ensure materials are available at the right time to the right production process. You must avoid situations of overstocking or stock-outs to ensure smooth production.
- Purchase KPIs: Purchasing involves procurement of raw materials, consumables, capital items as well as suppliers & costs. Keeping a track of purchase costs & cycles is critical for a business to succeed.
- Customer KPIs: Customers constantly expect high-quality products so carry out customer surveys for continuous product improvement.
- Quality KPIs: Quality is a make or break factor of a product. It is the most important metric to track
- Employee KPIs: When employees perform well, adhere to quality standards, the manufacturing processes will run smoothly and the end product will be of great quality.
Measure your manufacturing KPIs consists of compiled a list of various manufacturing KPIs which are important to measure and control for a manufacturing organization. Read
Now, that you have implemented discipline & KPIs, it is time to become a data-driven organization to make informed decisions
5. Become a Data-Driven Organization
Data-Driven Organizations gather digital data across all areas of the business and can use a combination of data, analysis, and insights to make informed decisions. They use data to understand what happened, analyze why it happened and determine the next steps. These companies make strategic decisions based on data, across all levels of the organization.
Steps to become a data-driven organization
Becoming a data-driven organization involves gathering relevant data across all business areas. The process includes creating awareness about the importance of data, developing a mindset to use this data to identify patterns and trends across important areas of the business, then creating a culture of making data-backed, fact-based decisions, at all levels across the organization, from top management to the junior-most employee of the organization.
- Gather data across all crucial business functions in digital formats.
- Create a single source of accurate data with real-time updates.
- Most updated consistent information is available across the organization
- Store data in a central location to be accessible anytime from anywhere
- Create user roles & hierarchy & to provide only requisite data to concerned people
- Create simple interfaces, user-friendly, reports, graphs, to easily understand data
- Provide facility to slice and dice data to carry out multidimensional analysis
- Train employees how to continuously monitor and analyze data against KPIs
- Use a common vocabulary across the organization to understand & interpret data
To prepare thoroughly to function in the “New Normal” post the “Coronavirus Era” it is time, to build on your strengths and focus on your areas of improvement. Adopt new technologies, innovation, digitalization to improve systems, processes, and functions.
It is imperative for companies that have not yet adopted digitalization or only implemented basic digitalization to consider Implementing ERP software as a change driver in the organization. ERP software provides the technology edge and an opportunity to digitize, automate, improve, speed up business processes, and increase productivity & efficiency.
- It creates a single source of accurate data and a digital backbone.
- Enables you to standardized processes and implement business discipline across the organization.
- Facilitates better Planning, Productivity & Optimum Utilization of Resources.
- Improves collaboration & empowers employees to make decisions.
- Measures performance & process KPI Metrics and improves customer service.
- Creates a cultural change in terms of making timely, data-backed and informed decisions.
- Becomes an effective mechanism to roll out and implement business discipline in an organization.
This will help companies to imbibe a culture of making informed decisions based on data insights & reports. This will help organizations to reduce costs & stay competitive when you resume activities in the “New Normal”