By DIETER REZBACH & ANTOINE FABRI

Automation is moving forward, robots are becoming much more common, and collaborative robots are allowing humans and robots to work together in the same workspace. This change is most often described as an evolution, a gradual change. However, the change is now accelerating.

If companies fail to modernise and fall behind, the distance to the leaders will become insurmountable. With each investment we need to check whether it is compatible with ‘Industry 4.0’, which is all about integration of machines and the Internet.

Seamless integration works very well when there are established protocols. The suppliers of equipment and software are working on it; but sometimes it is not in their strategy to “mix and match” products from different companies. In the meantime, we must deal with what is available.

In our opinion, companies need to evaluate their status quo and create an overall plan on how to transform the company. It is unlikely that any company can “sit out” this transformation.

This is not a fashion trend which we could ignore and wait until this trend passes and life returns to normal. The same way your business today would be less viable, or even impossible, without CNC machines.

Just look around and recognise what changes are happening in India. The change towards technology integration is not only in the manufacturing industry, but also in commerce, healthcare, entertainment and home – it is already in all aspects of our lives.

Many categories

When assessing a company, we at Lignum Consulting GmbH like to look at seven categories. Based on the answers on those categories, a roadmap for ‘Industry 4.0’ can be developed. In the big picture all categories need to be aligned.

Medium-term and long-term, none of the categories can be neglected or be underdeveloped. The company’s strength will be determined by its weakest link.

In my opinion, the most important step is to put ‘Industry 4.0’ on your agenda. ‘Operational Excellence’ means the company must be good or better overall to become excellent. But operations do not stand alone. It is imbedded in the overall company performance and is a part of corporate excellence. The corporation’s performance becomes excellent when all the elements are performing well and in alignment.

Sales, marketing and distribution includes product development, branding, corporate identity, market intelligence, sales organization, distribution and marketing.

Finance includes, in addition to the classic elements, product costing and pricing. Financial planning and financial controls will interact with all areas of the company. Whole libraries are filled with books on this very subject.

•        Procurement and supply chain management: With 40% of sales typically being spent by purchasing, it makes them the biggest money spender in the company. Placing purchase orders with suppliers, receiving and managing the inventory are just the basics.

High competency starts when there is a system of reliable, long-term supply partners integrated and aligned with the corporate goals. Balancing the price/ cost pressure with strategic make versus buying decisions demonstrates the required interaction between finance and operations.

•        Human Resources: A lot of companies claim their people are the most important resource. For many this is just lip service. If you mean it, you need a focused approach on this subject. HR is much more than just managing payroll and administering employees.

•        Manufacturing model: How is your production organised, scheduled and controlled? Are you producing into FG-stock according to a forecast, or do you produce individual customer orders separately?

          Selecting the right/ wrong model for you impacts your capital requirement, manufacturing lead-time, space requirement, inventory (WIP, FG, RM), productivity and flexibility.

•        Value Stream: This refers to the material and information flow from the first to the last customer contact. All steps that are of value to the customer are accumulated. It includes the factory layout with the alignment of machines, the material handling and the material buyers within the flow.

          Optimizing the value stream will impact material flow and handling, space utilisation, manufacturing lead-time, machine utilisation, manpower productivity (direct, indirect), and inventory levels.

• Product Engineering: The ability to provide the design flexibility as required by sales and marketing and optimising the manufacturability in the existing or the near future plant. Standardisation of components, design details and material type will simplify the operation.

          Optimising the product impacts set-up time reduction or elimination, capital requirements, raw material variety, inventory reduction, productivity increase, data complexity decrease, and process time reduction.

Balance and technology

Technology includes all equipment and processes required for operating the production. This major section is the core of manufacturing. It includes all the machines and tooling, but also includes jigs, fixtures and devices.

We need to drive for balance within technology. For example, if you have leading edge technology in the parts machining, but all your assembly is manual, your next investments should focus in the assembly area.

It does not mean that you need to have the best of the best all the time. Being good starts when you are balanced.

The selection impacts capital requirement, labour productivity, quality, flexibility, capacity and complexity.

Process support systems include the various software programs required to operate the company. This is your enterprise resource planning (ERP) system, your material requirement planning, material management tools and your manufacturing execution program (MES).

It is not only the program you buy it is also the other systems that you implement: quality assurance programs, lean manufacturing and continuous improvement programs and equipment maintenance.

Your key performance indicators (KPI) are also a part of the support system. Such optimisation impacts lead time, ease of doing business, indirect labour cost, flexibility, inventory levels, and speed to market.

The organisation, development and management of the operational work force is tied to the corporate plan, but it is also an important operational factor. Operator training and employee motivation are more relevant than ever before.

Alignment is key

All the above elements have an impact on the overall performance. The overall performance depends on how good we are in the individual elements – however, most importantly, how well the performance is aligned and coordinated with all the others.

The result will be according to the lowest performing element. What is the weakest link? We admit that an excellent element may compensate for a lower performing element.

For example, a company can still do well with a low performing operation, but have top performing sales and marketing and/or procurement. We believe we all know companies which are good in so many sectors, but the lack of the “good” on one element reduces the overall performance to that level.

A factory, for example, equipped with state-of-the-art equipment will not run smoothly if other elements such as human capital and/or product are not in line. If the company is relatively good in the individual disciplines, but all elements are out of alignment, the problem can be fatal to the corporation.

If a factory is trimmed for a narrow, highly standardised product line, but sales and marketing is pushing highly customised products, the impact is obvious. Each incremental misalignment is a disadvantage compared to a competitor who got it right. Being good in one discipline is not good enough: you need to be aligned!

As operations people, we too often tend to scrutinize the details. We dissect them into individual and minute components. This is still the correct approach. However, we need to also be conscious that not all details need to be optimised, it is the overall optimization.

To compare it with sports: Yes, you need good players, but it is the team that needs to win!

This is why strategy is so important. A good solution or an improvement is only good when it is aligned with the overall strategy. And only then it will lead to operational excellence.

IMAGE:Feature-Lignum Dieter-Rezbach: – Dieter Rezbach is the Founder of Lignum Consulting. He studied wood technology at the University of Applied Sciences in Rosenheim, then joined a consulting company in 1987 and gained extensive project experience both domestically and abroad. He completed his post-graduate studies in export economics at the University of Applied Sciences in Pforzheim and an MBA at the University of Central England in Birmingham.

IMAGE:Feature-Lignum Antoine-Fabri:– Antoine Fabri is Senior Manager with Lignum Consulting. He has studied wood technology at the University of Applied Sciences in Rosenheim. For more information, write to info@lignum-consulting.de

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