By Mark Davidson, LNS Research
Largely due to the misalignment of goals and objectives, a considerable number of organizations struggle to realize the full business value that manufacturing can generate. From discussions with executives in a wide variety of manufacturing industries, this challenge seems to in one way or another impact the effectiveness of a majority of their organizations. Goal alignment is an issue that even market leaders struggle with and sometimes fail to successfully address.
Although the manufacturing staff wants to do the right thing to support the organization’s goals, and are sometimes incentivized to do so, they typically have to work within a specified envelope of control and adjustments that they can directly impact. They make decisions based on what they are familiar with and what they are allowed to do. Depending on how well the organization has aligned its goals, these confines may not be optimal to the overall profitability of their company.
Best Practices for Achieving Manufacturing Business Goal Alignment
Transcending across industries and positioning within the supply chain, there are several steps all organizations that utilize manufacturing can take to properly and optimally align goals.
1. Understand and Articulate Strategy
Companies must have a clearly articulated and universally understood manufacturing strategy that is in support of a corporate business strategy. Examples of manufacturing strategy may include being a low-cost provider, a high-value niche offering provider, the highest quality or purity provider, the most responsive or fastest delivery supplier, or some mix of these or other strategies. Disparate goals tend to surface when the strategic nature and intent of a manufacturing organization is not universally understood across a business.
It could be, for instance, that the manufacturing capabilities simply have to be “good enough,” and not necessarily a source of strategic advantage. In this scenario, advantage may come from some other business activity such as marketing and distribution, which is often the case in consumer products. Or, advantage may come from the speed of new product introductions in industries like pharmaceuticals. In all cases, a company has to clearly define and articulate to the entire organization how its manufacturing fits within the broader business strategies and goals.
2. Translate Strategy into Specific Goals
After the role manufacturing will play within an organization has been established, it is important that strategies are translated into specific goals for the different business groups and associated supply chains, as well as the individual plants, and each plant unit and production line within each plant. Lack of an organized approach to the translation across all of these levels tends to be the main source of disconnects and conflicting goals. An example of misalignment would be a plant that consistently drives towards a high overall equipment effectiveness (OEE), even when demand for the product does not exist. In this case, the plant hits its OEE targets but overproduces.
3. Map Goals and Specific Measures for Success
From top to bottom, companies should map the goals of each translation with full visibility and transparency across the organization. This process is most effective when carried out by a cross-functional team composed of not only business and manufacturing executives, but also staff down at the plant and shop floor levels. After establishing the more granular aspects of these goals and measures, tests and improvements should be made based on how well they align to the strategy using an iterative process. The goal and measurement maps should be reviewed and updated annually.
4. Determine Key Performance Indicators (KPIs)
In order to have effective alignment and the ability to make measurable progress toward goals, KPIs need to be standardized across the company relative to exactly how these will be measured, calculated, and compared. In many cases, this process uncovers weaknesses that exist in support systems for these activities. When possible and appropriate, technologies that automatically generate KPIs, including a combination of Enterprise and manufacturing operations software , should be leveraged. The less labor-intensive and timely the KPIs, the more likely they are to be accurate and utilized.
5. Establish Communication Procedures for KPIs
Actionable information on current performance relative to goals needs to be provided to the right individuals in a timely manner. It is important to understand that requirements around time domains and information vary by the roles of individuals across the manufacturing enterprise. For instance, people working in plants typically need the fastest measurement responses, while executives may operate on daily, weekly, and monthly information time domains.
6. Set Processes for How to Act on KPI Information
Equally critical to establishing a communication procedure, the different manufacturing roles from top to bottom need to be properly trained on what to do with KPI information. For example, plant operators need to not only understand the alignment of business goals, measures, and trade-offs, but they must also know their envelope of empowerment when it comes to making adjustments versus when they need to escalate issues. In some instances, automation can help with this, but the human element is vital for day-to-day handling of unusual cases and exceptions.
7. Match Performance Incentives to Aligned Goals
It is imperative that performance measures are accounted for in the goal alignment process. In this regard, both individual and team rewards need to be linked to desired behaviors and the actual performance attained. Incentivizing progress toward manufacturing KPIs can help to reinforce the effectiveness of the overall business and manufacturing strategy.
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