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The COVID-era supply chain disruptions are slowly but surely easing up for manufacturers around the globe. While the worldwide market is not yet fully recovered, signs point to a strong resurgence in 2023, with a return to normalcy by 2024. Even though good news is on the horizon for manufacturers, there are still a number of challenges to be aware of that will impact day-to-day operations. Here’s an overview of a few of the top manufacturing challenges for 2023, and how to handle them.
Challenge: Legacy technologies
Many manufacturers operate with legacy technologies — outdated hardware or software systems. These outdated systems can cause disruption for an organization in a few key areas.
The first problem: Legacy technologies can cause efficiency issues. Since these systems can be years (and sometimes decades) old, they simply don’t have the same features and capabilities of newer software on the market. Additionally, these legacy systems can pose a security risk. Older technology doesn’t have the same safeguards as newer systems, and cybercriminals have a much easier time infiltrating outdated software than one that is up-to-date.
Despite these problems, manufacturers can be hesitant to change systems due to familiarity, not wanting to enact a full system overhaul, or a mix of the two.
Strategy: Invest in new technologies and smart warehouses
Investing in emerging technologies should be a priority for manufacturers heading into the new year.
It’s a wise strategy, not only to become more efficient and protect systems from infiltration, but newer technologies can increase safety in the workplace and free up employees to handle more productive tasks. A recent survey from Deloitte found that 85% of manufacturing executives think that some form of robotics on the production line could increase employee safety, and 78% agree that updated technology can minimize repetitive work, empowering employees to focus on more productive and impactful tasks.
Starting in mid-2022, inflation across all essential goods prompted public backlash, not to mention squeezing the wallets of consumers and businesses alike. Bearing the brunt of the blame was the global supply chain, and the bottlenecks and scarcity it caused in markets across the world. Although those pressures are easing headed into the new year, inflation will still be a factor in 2023.
Strategy: Re-evaluate costs during design
For manufacturers, inflation means more careful planning to ensure operations remain lean, mean and profitable.
One way of doing this is by implementing Design to Cost — a method in which a manufacturer combines cost management with decision-making during the design stage of a product. Rather than the normal method of thinking about costs after a rough design of a product is made, the unit and material costs are fully integrated during planning to ensure products are profitable.
This type of thinking seems to be the reality for manufacturers in 2023, as a recent Forbes survey found that 87% of manufacturing CEOs plan to increase prices in the new year. Therefore, it’s important for all manufactures to think ahead, and integrate material costs into their design process as soon as possible.
Challenge: Inventory uncertainty
Inventory uncertainty remains one of the manufacturing challenges in 2023. Despite the healing global supply chain, manufacturers still need to strike a proper balance between stockpiling inventory and buying just-in-time. Striking that balance can be tricky. Not getting it right can cause businesses to become over- or under-leveraged at a moment’s notice — affecting the bottom line in the process.
Sales, Inventory & Operations Planning, SIOP, takes the normal sales and operations planning process and makes inventory just as important of a variable and a strategic tool. Following this methodology helps manufacturers eliminate waste, increase efficiencies and achieve an optimal level between not enough and too much.
We recommend that the SIOP horizon be a minimum rolling 14-month period that gets updated monthly. The aim is to look ahead multiple quarters to make sure inventory is available exactly when you need it. Involving a wide range of departments such as sales, marketing, engineering and finance, SIOP is a system that involves the entire organization to ensure yearly goals and objectives are met.
If you would like to learn more about SIOP, download our (free) eBook, “Sales, Inventory & Operations Planning: It’s About Time.”
Keep moving forward
There will be manufacturing challenges in 2023 and beyond. By addressing your legacy technologies, adjusting to inflation fluxes, and taking the uncertainty out of your inventory management, you will be able to fine-tune your operations for optimal performance.
If your business could use some horsepower to power up your team on improvement initiatives, contact USC Consulting Group and we will put our over 50 years of experience to work for you.
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Supply chain disruption. Layoffs. The Great Resignation. Hiring wars. The past few years have not been smooth sailing for the manufacturing industry. Dealing with ongoing challenges can take more time out of your day than simply getting the job done.
So, how do manufacturers survive in this tumultuous business climate? Our subject matter experts here at USC Consulting Group have identified and examined six challenges as the most common issues bedeviling manufacturing right now, along with the strategies we offer to our clients to tackle them.
Manufacturing challenges include:
- The ongoing hiring wars
- The skills gap
- Creating a better frontline worker experience
- Digital transformation
- Supply chain disruption and inventory management
- Change management
Dive deeper into each one of these issues and learn the solutions to overcome them in our free white paper “The Consultant’s Guide to Overcoming Today’s Manufacturing Challenges.”
1. The Ongoing Hiring Wars
Like most other industries these days, manufacturing is grappling with the most challenging hiring market in decades. IndustryWeek reports that 54% of U.S. manufacturers are finding it difficult to attract skilled workers to get the job done. That’s up from 38% before the pandemic.
2. The Skills Gap
The hiring wars and the skills gap are giving manufacturing a one-two punch. Not only is it incredibly challenging to fill open positions, but filling them with people who have the skills and experience to get the job done right is proving to be nearly impossible. Hence, the skills gap.
3. A Better Frontline Worker Experience
Just 36% of U.S. employees are engaged at work, and 74% are actively looking for new jobs, according to a Gallup survey. With all of the hiring challenges and shortages of skilled workers, it’s more important than ever to focus on your frontline workforce.
4. Digital Transformation
Digital transformation has been an industry term for several years now. What it means, at its core, is utilizing digital technology to make processes faster, easier, safer and more efficient. The pandemic kicked digital transformation up a notch for manufacturers.
5. Supply Chain Disruption and Inventory Management
Supply chain and inventory management issues have long been a challenge for manufacturers, made worse by the pandemic. These are separate issues, but two sides of the same coin.
6. Change Management
All of these challenges represent and require some degree of organizational change. The term “change management” may seem like the jargon of the moment, but really, it’s about laying the groundwork for change to be successful in your organization.
Learn about each of these challenges in more detail and how to overcome each issue by downloading our white paper:
The Consultant’s Guide to Overcoming Today’s Manufacturing Challenges
If you’re grappling with any of these manufacturing challenges, USC Consulting Group is here to help. We are a global operations management consulting firm that has been helping organizations through more than 50 years of challenges. It’s our specialty. Give us a call today to talk about how we can help you.
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Remember the familiar line from an old TV cop show: “There are 8 million stories in the Naked City”? As USC Consulting Group’s Vice President and Senior Operations Manager Paul Harker likes to point out, the same could be said about your inventory.
Like most dramas, the story of your inventory management can take unexpected turns. It’s very easy to get lost in the din of safety stock levels vs. Lean principles, order quantities, reorder triggers and the lead time to replenish the stock. Supply chain disruptions and shortages haven’t helped matters over the past few years. The plot unravels when these stories don’t add up to a single coherent tale.
Major characters in this inventory management drama:
Operations, which sees inventory as a buffer against fluctuating demand. But how much is too much? They don’t want an excess of stock, which would fly in the face of the popular “just in time” or Lean operating method, which, admittedly took a bit of a hit during the pandemic when people panicked about shortages and bolstered their safety stock.
Sales wants product at the ready at a moment’s notice, not “just in time,” but “all the time.” They’re not overly concerned with storage space, inventory investment or production efficiency.
Finance looks at inventory as a double-edged sword. They want to reduce inventory in order to free up cash and minimize carrying costs. But inventory is also collateral. High levels of production, whether the goods are sold or not, can absorb overhead and drive better month-end results, which are Finance’s Holy Grail.
Executives are focused on achieving quarterly corporate objectives and view inventory in terms of dollars.
At a fundamental level, all of these decision-makers speak different languages, have different perspectives and conflicting messages. Of course, everyone has the same goals: efficiency and profitability. But they may be at cross purposes getting there.
The Hero: SIOP
You might be thinking: “Is that a typo? Don’t they mean S&OP?” Yes and no. No, it’s not a typo. And yes, S&OP, the business management process that involves sales forecast reports, planning for demand and supply, and other factors, is the foundation of all of this. We just think S&OP is missing something: Inventory.
When you’re focusing on inventory, it elevates the entire planning process up a notch. When your inventory is optimized, things tend to fall into place. But it is not an easy mark to hit in these days of supply chain disruption and the sometimes conflicting goals of key decision-makers. With SIOP, you can circumvent these challenges and make your inventory work for you.
“A key to SIOP is to emphasize inventory as a strategic tool to help offset variation in either demand or production issues,” explains David Shouldice, Senior Vice President and Managing Director at USC Consulting Group. “One lever of control in the SIOP process is to make inventory harder working as a strategic tool.”
As Shouldice notes, it’s about having the right conversations about the right topics at the right time.
This isn’t a one-and-done process. The SIOP planning horizon should be at least a rolling 14-month period. We recommend that our clients update their plans monthly. Some do it more often than that. The point is covering a sufficient span of time to make sure the necessary resources will be available when you need them. The plans take into account projections made by the sales and marketing departments and the resources available from manufacturing, engineering, purchasing and finance. All of that together works toward hitting the company’s goals and objectives.
Using SIOP for inventory management
Sales, Inventory and Operations Planning helps your company get departments in sync, ensures that everyone is on the same page and realistic about the process, helps you manage and roll with changes, and measures performance.
One powerful component of SIOP is that the process involves all of the key players in your inventory drama.
Here’s who we typically see take part in the SIOP process:
- Vice President, Sales and Marketing
- Vice President, Operations
- Director of Logistics
- Vice President, Engineering
- Vice President, Finance
- Vice President, Information Systems
- Vice President, Human Resources
Different languages? You bet. But getting them all working together cuts down on the noise of those different languages. One reason SIOP is such a critical management tool is that key players from many departments are working from the same plan, and able to compare actual results to plan, evaluate their performance, and prepare updated plans going forward. SIOP: The universal translator, or C-3PO, for your business.
It is a powerful tool to help you wrangle your inventory management, achieve the optimal balance between not enough and too much, and settle back into Lean (or just in time) manufacturing principles that can eliminate waste and help ramp up your efficiency.
If you’d like to learn more about SIOP, download our (free) eBook, “Sales, Inventory & Operations Planning: It’s About Time.”
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Operations management consulting is a discipline designed to improve your company’s internal operations and processes, making them more efficient, streamlined and ultimately, profitable. It’s what we have been doing at USC Consulting Group for more than 50 years now. During that time, we’ve run across some misconceptions about operations management consulting. In this article, we’ll give you a short rundown of what operations consulting is, and highlight (and debunk) some of the more common myths that are floating around out there.
Operations Management Consulting 101
Operations consultants are outside experts (like us) who can look at your operations with a fresh set of eyes. If your business has a problem or obstacle you can’t solve — a slowdown in throughput, trouble on the line, machinery problems, supply chain issues, demand outweighing supply and more — it’s time to bring in an operations consultant. Operations consultants will first look at your current operations model, systems and day-to-day processes of getting the job done. They talk with front-line workers, executives and everyone in between. Listening is a big part of the job. They employ methodologies like Lean Six Sigma, SIOP, the Five Ms and other tactics to uncover what’s bedeviling your operation and create ways to solve those problems.
Some operations consultants are advisory consultants, or “boardroom consultants” who perform a two- to three-week study and provide a book of recommendations to help you out, and then hand it to you and go on their way. Implementing consultants, like USC, roll up their sleeves and work with a company’s internal teams for as little as 12 weeks to upwards of around 40 weeks depending on the scope of the project to help affect change, and ensure those changes will stick.
For a deeper look at operations consulting, read our blog: “What Is Operations Consulting and Can It Help My Business?” Now, here are three common myths about operations consulting, debunked.
Operations Consulting Myths
Myth: Operations consulting is all about math
At USC, we like to say we’re 80% people and processes, 20% numbers. Yes, some data crunching is involved. But we’re more about getting into your operations, talking to people from the front-line workers to the boardroom, and listening to the pros on the line who do the job day-in and day-out. We use common-sense methodologies to find opportunities for efficiency that you might have missed. We’re not a bunch of pencil-pushing statisticians. Anything but.
Myth: Operations consulting is only for the manufacturing sector
We work with a wide range of industries, including chemical processing, forestry products, food & beverage, life sciences, mining & metals, oil & gas, transportation & logistics, private equity, and yes, manufacturing. We also work with a wide range of disciplines and departments within these industries, including organizational operations, supply chain, sourcing & procurement, maintenance, finance, business process management, shutdowns & outages, research & development and outsourcing.
Myth: Operations consulting has no strategic importance
We’ve got to admit it, this one stings. People somehow got the notion that operations consulting looks only at the day-to-day aspects of getting the job done, and not the big picture, so there’s no strategic importance in what we do. That couldn’t be further from the truth.
One example of how operations consulting is all about strategic importance: SIOP. What is it? It’s our enhanced methodology on Sales and Operations Planning (S&OP). S&OP is a business management process that involves sales forecast reports, planning for demand and supply, and other factors. The goal is to help companies get a better, clearer look at their operations and create better-informed strategic decisions, allowing them to deliver what clients need in the most profitable way. It’s a useful process, but we’ve found it’s missing a critical area: Inventory. Hence, the addition of the “I” in the acronym.
Adding inventory into the mix is just one additional step, but we find it can be the key to the whole thing. When you’re focusing on inventory, it requires a more careful strategy and elevates the entire planning process up a notch. When your inventory is optimized, which is not an easy mark to hit in these days of supply chain disruption, things tend to fall into place. With SIOP, you can make your inventory work for you.
Sales, Inventory and Operations Planning is a holistic process that integrates customer-focused demand plans with production, sourcing and inventory plans, resulting in improved tactical and long-term decision-making.
So, you see, it’s ALL about strategic importance. Three common myths, debunked!
Want to see more myths busted? Catch the second installment Debunking Myths about Operations Management Consulting: Part 2 here.
If you have questions about operations consulting and what it can do for your business, give us a call or email us at firstname.lastname@example.org. We have the answers you’re searching for.
To read more about SIOP, download our free eBook, “Sales, Inventory & Operations Planning: It’s About Time.”
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The only thing that’s constant is change. It’s a phrase famously attributed to a Greek philosopher in 500 B.C., but it also sums up the past year and a half in manufacturing and, frankly, just about any industry out there. It seems like change is coming at us faster than ever before. Apps now run our personal lives, and in the workplace, we’ve all had to adapt instantly to everything from customers going away to how the shop floor is configured for employee safety.
The ability to react to sudden events in the marketplace, whether it’s a shift in the economy or a supply chain disruption, requires manufacturers to be agile enough to pivot on a dime. But, it’s not just a matter of being able to roll with the punches. It’s about being able to react quickly to opportunities, too. It’s about growth and the ability to sustain that growth for the long term, come what may.
When thinking about change management, it’s natural to think of change coming from outside forces. Economy shifts. Supply chain disruptions. Even sudden changes in demand for what you produce. But some change comes internally, as well. Longtime leaders get their gold watches and retire. Companies restructure. Mergers and acquisitions happen. Company culture suddenly takes a nosedive and nobody knows why.
Having a mindset of change management already in place helps companies react quickly and effectively when change inevitably happens.
For manufacturers, the bottom line is always very thin. At USC Consulting Group, we specialize in those tight margins, helping our clients find hidden opportunities to realize and profit from efficiencies they may not even know were there.
Some key factors in creating a change management mindset include:
Acceptance of change. When we uncover efficiencies for our clients, sometimes we ruffle feathers because of a mindset that is built around “it’s the way we’ve always done it.” The idea that it’s OK to let go of some traditional methods, try something new and change processes that just aren’t working anymore is key. This may sound basic, but it is difficult to produce a culture shift like this if your company has been doing the job the same way for years.
C-suite support. The ability to pivot and react has to come from the top.
Employee buy-in. We find that this is crucial to successfully implementing any change, even positive ones. The people doing the job on the shop floor need to embrace it.
Planning. If you fail to plan, as the saying goes, you plan to fail. It may sound a little counterintuitive, planning for change, but we find that if our clients have a solid planning process in place, it can act as a rudder in choppy waters. We recommend a process called Sales, Inventory and Operations Planning that integrates customer-focused demand plans with production, sourcing and inventory plans, resulting in improved tactical and long-term decision-making.
We like to tell our clients that the purpose of SIOP is making sure you’re having the right conversations about the right things at the right time. And getting what you need when you need it.
“Key to the SIOP is to emphasize inventory as a strategic tool to help offset variation in either demand or production issues,” explains David Shouldice, senior vice president and managing director of USC Consulting Group’s global mining and metals practice. “One lever of control in the SIOP process is to make inventory harder working as a strategic tool.”
This isn’t a one-and-done process. We recommend that our clients update their plans monthly. Some do it more often than that. The point is covering a sufficient span of time to make sure the necessary resources will be available when you need them. The plans take into account projections made by the sales and marketing departments and the resources available from manufacturing, engineering, purchasing and finance. All of that together works toward hitting the company’s goals and objectives.
Sales, Inventory and Operations Planning is done on an aggregate level. The big picture, in other words. Those big-picture plans then drive the individual departmental plans. Each month, you meet again to determine whether the overall company plan is on course, and to adjust for changes in the marketplace and changes or problems within the company.
A foundational tenet to a robust SIOP process requires that the right conversations occur about the right topics at the right time. Core components of a successful SIOP process include:
- Sales forecasting and accuracy measures
- Strategic inventory considerations
- Consistent operational capability analysis (capacity and efficiency)
- Cohesive plan with stakeholder collaboration
- Ability to execute the plan or pivot
- Report and review plan versus actual
- Analyze and implement corrective actions
With the right plan in place, your company is positioned well for whatever changes come down the pike. To learn more, contact us and we’ll be happy to talk about how a great plan can help you realize even greater efficiency.
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The planning and forecasting process has always been a vital part of manufacturing, but now, after a roller coaster of a year, it’s becoming clear to many in the industry that this process needs to be bulletproof — and in many cases, it isn’t. The good news? A little tweaking and refining can shore up your planning process and help protect your operation against any kind of uncertainty, or disruption, that may come down the pike in years to come.
Problems in planning
You already know that accurate planning and forecasting is designed to anticipate demand and determine how much to produce to meet that demand, including shoring up adequate, but not too much, supply. We find that for a number of our clients, that works out to a “tons per hour” measurement of what they can realistically produce on any given day.
But, snags that manufacturers encounter in their planning process tend to come from the “it’s the way we’ve always done it” files. Here are just a few that we’ve seen lately:
Data is old by the time the plan actually goes into effect. Does this sound familiar? You start planning at the beginning of the month. By the end of the month, you’ve got a plan to hold yourself accountable. Great! But, the problem is, you’re using month-old data to start their planning process, so at the time the plan goes into effect, you’re using two-month-old data.
Data is not uniform. If manufacturers have multiple locations, odds are that they’re not all walking in lockstep when it comes to planning and forecasting. You may have plants doing their own thing, how they’ve always done it in regard to efficiencies, so there is no single source of truth on efficiencies and capabilities companywide.
Vetting time. If manufacturers are taking too much time to vet the plan, it delays the accuracy and immediacy of their data.
Unforeseen circumstances. We all know now, all too well, how unforeseen circumstances can throw a wrench into operations.
Refinements that can solve those problems
We’ve found that for many of our clients, some tweaks and refinements to their planning process can make all the difference. Here are a few problem-solvers that our clients are implementing.
A rolling calendar structure. We recommend instituting a 24-month rolling calendar, so when one month drops off, another is added on the back end. Here’s how it looks in practice:
- The first third of the month. Look back and assess how you performed vs. the plan in the previous month. If you fell short, how can you get better?
- Middle third: Continuous improvement. Develop action items to make the planning more smooth.
- Final third: Actually do the planning. Instead of having two-month-old data, you’ll be working with at most 10- to 15-day-old data.
Compromise on perfection in favor of immediacy. Don’t write those 24 months in stone. The plan might change multiple times between the start of the plan and 24 months down the line because of unforeseen circumstances. Being OK with this might require a huge shift in mindset for some people.
Flexibility. The forecasting and planning process has to be flexible enough in manufacturing to roll with the tides that might shift at any given moment in time.
SIOP. We focus on Sales, Inventory and Operations Planning, a holistic process that integrates customer-focused demand plans with production, sourcing and inventory plans, resulting in improved tactical and long-term business decision-making capability. The purpose of SIOP is making sure the business is having the right conversations about the right things at the right time. Steps in the plan include:
- Sales forecast
- Inventory considerations
- Executing the plan
- Reporting and reviewing
- Analyzing and improving
Uniform efficiencies across all plants. If you have multiple locations, get everyone on the same page in terms of planning.
Bottom line, more accurate planning and forecasting is going to make your manufacturing operations more efficient and ultimately more profitable. At USC Consulting Group, we’re dedicated to helping our clients get there.
For an inside look into how we helped a national construction materials supply company refine their planning process, read “Building Materials Supplier Lays Groundwork with SIOP.”
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