Accenture Achieving High Performance Through Manufacturing Mastery

8/2/2019 Accenture Achieving High Performance Through Manufacturing Mastery

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High Performance through Manufacturing

Accenture Research and Insights intoManufacturing Mastery

Consulting Technology Outsourcing


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Contents

Introduction

A Global Study on Manufacturing Practices

Manufacturing Masters:Learning from the Best

Insights and Recommendations

On the Journey to High Performance

03

05

07

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Introduction

Globalization has had a dramatic

impact on every large companyover the past decade. But its impact

on manufacturers and their supply

chains has been especially profound.

For these companies, achieving high

performance is more importantand

more difficultthan ever.

Some of globalizations biggest

challenges involve managing the

complexity of supply chains that

extend around the world. The rise of

economies in Asia Pacific, Eastern

Europe and other emerging regions

creates new customers whose needs

are often quite different from those

of a manufacturers long-standing

customers. Matching supplies (steel,

rubber, parts and other components

of final products) that are sourced

from every region with demand that

is harder to predict and much more

variable by customer segment and

geography has made it far moredifficult to run effective and efficient

supply chains. Couple this with the

increasing market volatility and

the geopolitical situations, and the

complexity of global supply chainsincreases exponentially.

In turn, all this forces companies

to shift production from one plant

to another to load-balance their

manufacturing network, which can be

contrary to lean principles that call

for focused, repeatable manufacturing

processes. Shifting supply around the

world also increases the complexity

of dealing with fluctuating exchange

rates, unfamiliar tax and customsregulations, and special localized

environmental laws. Determining

the optimal places to manufacture

although never straightforward has

become infinitely more complex.

Complicating the picture even more

is the specter of global capacity

constraints. Internal manufacturing

capacity may not always be available

to meet demand, especially when a

companys factories are specialized

or its suppliers capacities are

located far away from the finished

product factories. As a result, many

manufacturers total landed costs

have spiked, squeezing profitabilityand eroding competitiveness. These

companies now need unprecedented

flexibility in their manufacturing

strategies and operationsespecially

in how they source material, a

key cost component.

The case of a consumer-durables

producer illustrates the pressures on

manufacturers. In 2008, its cost of

direct materials had risen dramatically

due to the global proliferation ofraw materials and parts. To reduce

its cost structure, the company

brought together representatives

of its engineering, procurement,

manufacturing and marketing

functions with its various suppliers to

agree on material and part standards

that would reduce complexity and

costs as well as to seek other initiatives

they could jointly pursue to generate

supply efficiencies.

Over the past 20 years, the rising

cost of producing goods for a global

market has forced manufacturers of


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automobiles, computers, consumer

electronics, telecommunications

equipment, machine tools, furniture

and many other products to shift

much of their production overseas

and to other low-cost manufacturing

hubs. But more recently, a number

of the macroeconomic drivers of theoffshoring movement have changed

substantially. In 2008, the US dollar

plunged against major Asian currencies

to its lowest value in five years, but

has recently strengthened again.

Crude oil prices skyrocketed and then

came tumbling down. Labor costs in

developing countries have increased

steadily (in most cases, at a higher

rate than the corresponding developed

economies), eroding some of their

manufacturing cost advantage.

These and other factors have begun

tipping the scales the other way.

While offshore manufacturing remains

attractive, many companies now are

rethinking their production strategies.

In fact, a number of US-based

manufacturers are shifting production

from offshore production facilities back

to domestic or near-shore plants. For

example, Tesla Motorsa producer of azero-emissions, electric-powered sports

carhas moved the assembly of battery

packs from Thailand to San Carlos,

California, next to its headquarters.

Thailand's low labor costs no longer

offset the high costs of shipping

thousand-pound battery packs across

the Pacific. Similarly, a number of

manufacturers headquartered outside

the United Statesincluding Suntech, a

Chinese manufacturer of solar

panels and related equipmentare building American plants to reduce

the high cost of shipping and be

more cost competitive in the

North American market.

Globalization not only forces

manufacturers to rethink their supply

chains; it requires them to pursue

new markets and compete against

new competitors. To grow, many

manufacturers have expanded into

emerging economies such as China

and India. While presenting vast new

opportunities, these new markets

come with the tall challenges of

understanding the needs of a whole

new set of customers and customer

segments. Additionally, these emerging

markets often present new competitorsto global manufacturerscompanies

that have been operating in these

countries for years and, thus, are

intimately familiar with market needs.

They typically also operate with

much lower cost structures, which

enable them to manufacture in new,

streamlined ways. Take Tata Motors,

an automaker in India, or Chinese

telecommunications equipment

supplier Huawei Technologies. Both

companies represent a new breed of

flexible, nimble manufacturers. They

are creating severe pricing pressures

for Western manufacturers and

providing attractive alternatives for

customers in developing markets. They

also present the threat of diversifying

into developed markets.

Finally, one of the greatest challenges

to global manufacturing companies

is the competition for supply chaintalent. While attracting and retaining

skilled people is difficult at all levels

from hourly laborers to executive

management the biggest shortage

is in middle management: supply

chain planners, production supervisors,

warehouse and transportation

managers and the like. These people

are in high demand in such countries

as Mexico, China and India.

Many of the most talented middlemanagers in these countries lack

global experiencewhich is critical

as companies in emerging markets

look to expand outside their domestic

borders. This is especially true given

that most companies lack standard

ways of conducting supply chain

operations across their organizations.

Without such standard operating

models, companies are at the mercy

of localized, idiosyncratic ways of

planning transportation routes,

operating warehouses, sequencing

on the assembly line, scheduling

the workforce and conducting other

supply chain activities. That puts these

manufacturers at the mercy of the few

individuals who understand how to

run these activities. Operations thatdepend on individual heroics

are extremely fragile. They invite

expensive bidding wars for their

services and consternation when they

retire or leave.


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The aforementioned challenges

are substantial, and they no doubt

have made the working lives ofmanufacturing executives more

difficult. Thus, its not surprising that

many companies around the world

have struggled to achieve superior

performance in their manufacturing

operations. As part of Accentures

ongoing research on the characteristics

of high-performance businesses, we

conducted an extensive survey of more

than 600 major companies around the

world. We wanted to better understand

the state of their manufacturing

operationshow they were performing

on key production metrics, and the

extent to which they had adopted

advanced manufacturing practices,

capabilities and technologies.

(See Figure 1)

Figure 1. Survey participant demographics.

By Geography

A Global Study on Manufacturing Practices

31%

33% 36%

Europe

Americas

Asia Pacific

By 2007 Revenue

29% 36%

17%18%

6%

Up to $500 million

$500 million to $1 billion

$1 billion to $5 billion

$5 billion to $10 billion

>$10 billion

By Industry

36%

3%

18%

6%6%

9%12%

4%6%

Communications

Electronics & High Tech

Retail

Food & Consumer Goods

Automotive & Industrial Equipment

Travel & Transportation

Biotech & MedDevices

Natural Resources

Utilities

Overall, we found most companies

struggling to produce much better-

than-average performance on keymanufacturing metrics. We also found

that lackluster performance largely was

a function of immature manufacturing

practices and capabilities in key areas.

We gauged manufacturers

performance on several commonly

accepted core measures. For the

survey respondents as a whole, high

performance on any one metric was

rare (see Figure 2). For example, we

found the median percent of overallthroughput was just 80 percent. Their

asset utilization and overall equipment

effectiveness were no better, and

uptime versus scheduled was worse, at

75 percent. Manufacturing lead time

clocked in at 10 days.ys.


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We also probed a number of aspects

of manufacturing operations andmanagement. Here, too, we found an

inconsistent level of sophistication

in practices and capabilities. In fact,

most companies have only basic

capabilities in key manufacturing areas

such as determining where to locate

production, streamlining manufacturing

processes and creating highly flexible

operations that can be altered quickly

and cost efficiently when the market

changes. These three capabilitiesare core to creating manufacturing

operations that support companies

pursuit of high performance. Our survey

respondents overall weakness in these

areas goes far to explain the rather

mediocre aggregate performance.

Specifically, we found most

manufacturers struggling to determine

where to locate manufacturing to

make certain productsthat is, how

to assess costs and benefitslargelybecause they dont use modeling

techniques and are unable to conduct

what-if scenarios. Such scenario

Percent overall throughput: 80 percent

Customer promise kept percentage: 95 percent

Overall equipment effectiveness: 80 percent

Asset utilization: 80 percent

Material efficiency: 95 percent

Manufacturing lead time: 10 days

Percent production to plan: 90 percent

Delivery to schedule: 90 percent

Capital project index: 53 percent

Uptime versus scheduled 75 percent

Downtime versus scheduled run time 10 percent

Workforce satisfaction (% satisfied) 80 percent

planning methods help manufacturers

gain more insight on how to meetcustomer demand: where to locate

the supply base and manufacturing

plants, and which products to produce

in which manufacturing facilities. We

also found only narrow adoption of

proven manufacturing improvement

techniques such as Lean and Six Sigma,

which have helped dramatically to

reduce costs, cycle times and defects

at many manufacturers.

Our arguments are not meant toundermine the progress and major

strides that many companies have

made in linking manufacturing to other

core enterprise functions. However,

on average, the companies in our

survey did not have superior levels of

integration and/or collaboration across

their supply chain. Similarly, highly

modular manufacturing processes were

not common across companies in our

sample. Such processes are criticalto flexible productionto create

operations that can be changed rapidly

and cost-effectively when customer

needs change, to incorporate new

technologies and to reduce costs. Thebiggest barriers to such flexibility

typically are twofold: visibility, or the

understanding of how well production

is performing at the companys, its

contractors, and its suppliers plants;

and the ability to conduct what-if

scenario planning, which we discussed

briefly above. In general, our survey

participants did not report having a

high degree of visibility in key areas of

their manufacturing operations.

Figure 2. Performance across key manufacturing metrics by the overall survey

sample is not high.

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Despite the fact that globalization

has raised the bar of performancefor manufacturers around the world,

our research and client work have

revealed that a number of companies

have overcome the key obstacles we

mentioned earlier. In the process,

their manufacturing operations

have become a major competitive

differentiator and a key factor in their

superior financial performance.

We refer to this group of companies

as manufacturing masters. Themasters finished in the top 10 percent

in our survey on three core aspects of

manufacturing: cost effectiveness, as

measured by several metrics including

actual versus budgeted manufacturing

costs, line conversion costs and s

crap rates; customer service, as

measured by customer lead times and

the percentage of customer promises

kept; and operational efficiency,

as measured by asset utilization,overall equipment effectiveness and

throughput, and several other standard

production metrics.

Manufacturing Masters:

Learning from the Best

We also identified a group of

companies on the opposite end of thespectrum: the survey respondents we

deemed the laggards those that

finished in the bottom 10 percent in

the three core areas. Laggards differ

demonstrably from masters not only in

their performance on the manufacturing

metrics covered in our survey, but also

in terms of the level of maturity of

important manufacturing capabilities

and practices. Understanding

these differences provides numerousinsights into the keys to superior

manufacturing performance.

Before exploring the differences

between the masters and laggards

in manufacturing capabilities and

practices, it is revealing to see just

how much better the masters are than

the laggards in terms of operational

performance. As Figure 3 illustrates,

masters held a substantial edge over

laggards across the metrics thatAccenture has found to be strong

indicators of manufacturing operations

performance. The gap between masters

and laggards was especially noticeable

when comparing the lead times amongcontinuous and discrete manufacturers

(see Figure 4).


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Figure 3. Masters outperformed laggards on core manufacturing metrics.

Masters Laggards

Percent overall throughput 85 percent 50percent

Customer promise kept percentage 98 percent 86 percent

Overall equipment effectiveness 92 percent 60 percent

Asset utilization 90 percent 50 percent

Material efficiency 98 percent 80 percent

Scrap rate 1 percent 10 percent

Manufacturing lead time 3 days 35 days

Percent production to plan 97 percent 83 percentDelivery to schedule 98 percent 83 percent

Capital project index 90 percent 30 percent

Downtime versus scheduled run time 6.5 percent 19 percent

Workforce satisfaction ( percent satisfied) 80 percent 80 percent

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Figure 4. Manufacturing lead times among discrete and continuous manufacturers.

Discrete Continuous

Average Masters 9.2 7.6

Laggards 29 63

Median Masters 5 4.5

Laggards 30 40

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However, while these figures clearly

show the masters significantlyoutperformed the laggards in

manufacturing, they do not explain

why masters were that much better.

To shed light on this difference, we

compared the manufacturing practices

and capabilities of these groups.

While comparing how masters and

laggards manage their manufacturing

operations, we found a number of

significant differencesones that

correlate strongly with superiormanufacturing performance. Masters

are far more likely than laggards to

excel in six areas: manufacturing

strategy, manufacturing excellence

(process improvement), operational

flexibility, workforce engagement

and productivity, health, safety

and environment, and information

technology. In other words, as Figure 5

shows, we found that sophistication or

maturity of practices and capabilities

in the preceding areas are stronglycorrelated with superior planning

performance. We explore each area in

the pages that follow.

ManufacturingCapability Maturity

ManufacturingPerformance

Low

High

Low

High

Figure 5. Maturity of practices and capabilities in key areas are strongly correlated

to superior planning performance.


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Two of the most consequential

decisions for heads of manufacturingare whether to make or buy and

where to locate plants. Masters

appear to be far better at determining

whether to insource or outsource

and where to set up production (see

Figure 6). More than half the masters

develop comprehensive business cases

for make versus buy decisions, which

was the case with only about one-third

of the laggards. Masters are twice as

likely to analyze past facility location

decisions when make new decisions.

In addition, one-third of the masters

use modeling techniques in location

decisions, while only 12 percent of

the laggards did so. And masters

are about eight times more likely to

use sophisticated modeling tools to

determine whether to make or buy.

In making their sourcing and facilitylocation decisions, masters are farmore likely to rely on a range of factors,both quantitative and qualitative. Asshown in Figure 7, masters weremore likely than laggards to factorin capital cost, government or local

Manufacturing Strategy

Figure 6. Masters have a more sophisticated approach to make versus buy and

facility location decision making.

Comprehensivebusiness case for makevs buy decisions

Analyze past decisionswhen making Locationdecisions

Sophistication ofmodeling tools used

Use modelingtechniques to make

location decisions

tax incentives, labor availability,

transportation infrastructure andproximity to customers.

A multibillion-dollar oil-field services

company shows the value of making

shrewd make versus buy decisions.

The company operates more than a

dozen plants around the world, which

provide more than 100 products for

the extraction of oil from the ground

and seas. Soaring global demand for

oil and gas forced the firm to rethink

its manufacturing footprint that is,where and how to increase capacity.

The company developed a five-year

manufacturing strategy to meet

future expected demand. Considering

its markets, countries in which to

manufacture, supplier locations and

other criteria, the company developed a

whole new plan. It built four new plants

in 2007, and by 2009 had doubled its

manufacturing capacity. The strategy

is expected to boost earnings by morethan $1 billion over 10 years.

55%

32%

43%

21%

33%

4%

33%

12%

Masters

Laggards

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Figure 7. Masters are more likely to consider a range of factors when developing

their manufacturing strategy.

Capital cost Government

or local taxincentives

Labor

availability

Transportation

infrastructure

Proximity to

customers

58%

67%

71%

21%

42%

50%

54%

67% 67%

62%

Masters

Laggards

1111


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Manufacturing processes that arent

measured, evaluated and improvedsubject a manufacturer to considerable

riskof defective products, inefficient

production (and eroding margins)

and customer defection. The past

decade provides numerous examples

of manufacturers across industries

that took their eyes off their assembly

lines and other plant operations and

rapidly lost market share. The masters

we studied were much more likely to

use proven techniques for continuous

manufacturing process improvement

such as Lean, Six Sigma or other

techniques. Two-thirds of masters

compared with only one-fourth of

laggards routinely use kaizen events

(that is, a short-term project for

improving a process).

Masters are more than twice as

likely to use analytics monitoring.

(Analytics monitoring, also known

as manufacturing performancemanagement, is an approach to

improving manufacturing operations

through metrics and data. In aligning

operational objectives with strategic

goals, it enables managers to makedata-driven decisions and push

operational performance metrics and

accountability to the people who can

improve those operations.) About

three-quarters of masters compared

with 59 percent of laggards said their

entire company has a clear mandate

to implement continuous improvement

strategies. And more than three times

as many masters than laggards track,

audit and report the results of theseimprovement strategies (see Figure8).

Figure 8. Masters implement continuous improvement programs to align with

business and product strategies and monitor their effectiveness to ensure

sustainable improvements.

Manufacturing Excellence

Use of proven continuousimprovement techniques

Entire organization hasclear mandate

Prioritize improvementopportunities based onbusiness, product strategies

Use analytics monitoring tosustain improvements

Focus on processimprovement, but

pursue innovation whenopportunities arise

90%

50%

76%

59%

71%

50%

71%

31%

57%

39%

Masters

Laggards

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Many manufacturing masters indicated

they apply their relentless focus oncontinuous improvement to their

supply chain partners. One-third of the

masters compared with one-fourth of

the laggards routinely use Lean and

Six Sigma principles to improve the

operations of third-party and contract

manufacturers. Furthermore, internal

initiatives are more likely to produce

results for masters than for laggards

in large part because masters are more

likely to track, audit and report the

results of these initiatives (see Figure

9). Three-quarters of the masters,

versus about half of the laggards, said

their continuous improvement efforts

improved company performance.

And masters were much more likely

to be satisfied with the results of

these initiatives.

Take the case of a global maritime

propulsion system manufacturer in

Europe. It built a new plant that shiftedthe company away from traditional

cell-based production set-ups to line

manufacturing principles. However,

the switch over caused problems in

in-bound material supply and logistics.The company performed root-cause

analysis to understand the barriers

to production by using the kaizen

technique. A cross-functional team

used continuous improvement methods,

set key performance metrics and

instituted changes. Manufacturing

production rebounded, with lead

times in material inspection falling 75

percent, and relations between shop-

floor supervisors and plant workers

improving significantly.

Take the case of a global maritime

propulsion system manufacturer in

Europe. It built a new plant that shifted

the company away from traditional

cell-based production set-ups to line

manufacturing principles. However,

the switch over caused problems in

in-bound material supply and logistics.

The company performed root-cause

analysis to understand the barriersto production by using the kaizen

technique. A cross-functional team

used continuous improvement methods,

Figure 9. Masters monitor and get better return on their continuous

improvement efforts.

Positive impact oncompany performance

Satisfied with results

Results tracked, auditedand reported

set key performance metrics and

instituted changes. Manufacturingproduction rebounded, with lead

times in material inspection falling 75

percent, and relations between shop-

floor supervisors and plant workers

improving significantly.

73%

54%

60%

42%

53%

17%

Masters

Laggards

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Masters are much more likely to

anticipate issues on both ends of

the supply chain that could affect

production: with suppliers (for example,sourcing problems) and customers

(including distributors). And they are

much better able to ratchet production

up or down to deal with dynamic

market conditions and mitigate the

risk of market fluctuations (see Figure

10). For example, nearly twice as many

masters as laggards use dynamic

production scheduling tools. As well,

masters are far more likely than

laggards to model tradeoffs between

redundant costs and risk. Masters

will routinely use modeling tools to

conduct what-if scenario analysis

and develop contingency plans based

on this analysis. They also use these

tools to quickly evaluate alternative

production strategies to meet changing

customer demand or react to changing

transportation, labor or other volatile

supply chain costs.

But masters realize that such flexibilityhas a cost. As a result, most (57

percent) create modular products

and services to reduce costs and

enable rapid changes in products and

distribution services to meet fast-

changing customer needs. In contrast,

only the minority of laggards (39

percent) modularize their products and

services. Masters are also much better

at gathering and evaluating the supply

chain data that is critical to providing

upstream and downstream visibility. Forexample, nearly three times as many

masters (76 percent versus 26 percent

of the laggards) have historical data

on factory machine utilization, setup

and performance. This visibility allows

masters to understand the risks and

trade-offs of moving production from

one facility to another to account for

changing market conditions.

More masters (48 percent) use real-

time information on the status of

production machines than do laggards

(30 percent). Masters also are more

likely than laggards to monitor a wide

range of vital manufacturing indicators

(see Figure 11), most notably raw

material inventory, production time

and queue time of critical processsteps, work-in-process inventory and

supplier/vendor quality performance.

Monitoring such indicators provides

visibility to decision makers, who can

use these indicators to predict supply

chain performance issues and react to

potential problems before they become

noticed in the supply chain.

Finally, the majority of masters but

the minority of laggards have full

visibility and predictive capabilities fortheir own operations. And masters are

more likely to have such visibility into

their partners operationsas well as

a formal process for escalating supply

chain problems quickly (see Figure 12).

Japanese juggernaut Honda

demonstrates the power of flexible

manufacturing. In 2001, the company

was able to introduce a new car model

without making a huge investment in

new tools and factories. Honda made

its assembly plants flexible enough to

build a greater variety of vehicles. This

required installing common machinery

such as robots in each plant, as well as

common assembly techniques.

Honda predicted the change would

save nearly $1 billion a year in

manufacturing costs. 1

Operational Flexibility

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Use of dynamicscheduling tools

Ability to modeltradeoffs betweenredundancy risk

Figure 10. Masters are better prepared to respond to market changes and risk.

Figure 11. Masters are more likely to monitor a wide range of key manufacturing

performance indicators

Figure 12. Masters have greater visibility into their own and partners operations.

Full visibilityand predictivecapabilities (ownoperations)

Formal model forquickly escalatingproblems

Full visibilityand predictivecapabilities (partneroperations)

67%

35%

58%

23%

Raw material

inventory(stock leveland accuracy

Work-in-

processinventory(stock level andaccuracy)

Finished goods

inventory(stock leveland accuracy)

Production

time and queuetime of criticalindividualprocess steps

Supplier/

vendorqualityperformance

Set-up time

50%

90%

65%

86%

54%

81%

39%

67%

55%

71%72%

81%

67%

42%

71%

50%

43%

30%

Masters

Laggards

Masters

Laggards

Masters

Laggards


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Masters appear to be far more

focused than laggards on makingtheir manufacturing workforce more

productive and satisfied with their

work (see Figure 13). How do we

know? First, while the majority of

masters and laggards measure worker

productivity, masters are still more

likely than laggards to measure this key

aspect of the manufacturing workforce.

Furthermore, the majority of masters

monitor employee engagement, while

only a minority of laggards do so.

The age old adage of what gets

measured, gets performed is

certainly true in this case. Half of the

masters, compared with one-fourth

of laggards, said productivity is rising

in all areas of their workforce (see

Figure 14). We believe one reason for

rising productivity among masters

is they measure this more diligently

and have programs that boost

employee productivity. For example,

nearly half the masters, but only 12percent of laggards, had complete

training programs for boosting worker

productivity. Such training programs

are more likely to be formal in nature

among masters, which also are more

likely than laggards to have formal

employee coaching.

Finally, masters are also more likely

than laggards to formally seek process

improvement ideas from shop-floor

workers, and are more apt to have a

regular way for shop-floor workers

to report problems and submit

improvement ideas.

Figure 13. Masters are more likely to measure employee

engagement as well as employee productivity.

Figure 14. Masters are more likely to say productivity is

risinga fact that seems to correlate with more prevalent

employee training.

Formally measureemployeeengagement

Productivity isrising in all areas

Formally measureemployeeproductivity

Complete programto provide trainingto improveproductivity

67% 50%

24%

12%

46%

95%

78%

48%

Masters

Laggards

Masters

Laggards

Workforce Engagement and Productivity

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While some manufacturers may view

this issue as a nice to have whentimes are good, our survey data

suggest companies that take greater

responsibility for workers health and

safety on the job, as well as for their

plants larger environmental impacts,

outperform those that dont (see Figure

15). Nearly twice as many masters had

a formal health, safety and environment

(HSE) program across all departments.

Furthermore, tracking HSE indicators

is one thing; sharing that data is

another. Here again the masters stood

out. Nearly twice the percentage of

masters documented and distributed

information on HSE issues and how

they were resolving them. In addition,

masters are more than four times as

likely as laggards to measure and report

their manufacturing safety statistics

weekly, and are much more likely to

review and update HSE information

quarterly or monthly and hold monthlytraining to improve HSE. Thus, it is no

surprise that masters also are more

likely to reward their employees for

identifying and helping the company

solve HSE issues.

Health, Safety and Environment

Figure 15. Masters are more likely to have leading practices in health, safety and

environment

Externally publishedHSE vision

Formal HSE visionprogram across alldepartments

Measure and reportweekly

Issues and resolutionsare documented /widely available

Monthly / quaterlyupdates and training

Rewards foridentifying andresolving HSE issues

63%

53%

80%

46%

45%

10%

81%

44%

71%

40%

52%

32%

Masters

Laggards

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Simply put, manufacturing masters are

better at exploiting IT (see Figure 16).They are more likely to embrace IT to

improve production processes, integrate

systems and data, and track the impact

of technology than are laggards.

Workers and managers in masters

manufacturers also are much more

likely to adopt manufacturing

technology71 percent versus

50 percent in the laggards. Such

technological prowess is not due to

spending much more on IT but, rather,to the fact that masters take a more

rigorous approach to managing their

return on that spend. Our research

found masters are nearly four times as

likely as laggards to require a detailed

business case with quantified return

on investment projections (40 percent

versus 11 percent). And the majority

of masters (65 percent) track their

spending on manufacturing IT, while

only 40 percent of the laggards do so.

Information Technology

Figure 16. Masters do a better job capitalizing on

manufacturing technology.

Integration ofinformation sources

and systems

IT support approach

Level of useracceptance

Programs to increase

user acceptance

52%

44%

76%

46%

71%

50%

46%

53%

Masters

Laggards


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Insights and Recommendations

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The findings of our research are

consistent with what we have learned

through our extensive work with

global manufacturers around the

world: that sophisticated

manufacturing practices and

capabilities can mean the difference

between average and market-leadingperformance. Specifically:

Developing a dynamic global

manufacturing strategy by modeling

and achieving the right trade-offs

across various key factors can lead to

a revenue uplift of 20 percent to 30

percent in three to five years.

Adopting and internalizing bottom-

line-driven and proven manufacturing

excellence principles can lead to areduction in operational cost by 5

percent to 15 percent.

Integrating manufacturing

with product design, planning and

scheduling, S&OP, and service

can reduce time to market by up

to 20 percent.

Building operational flexibility by

using modeling techniques and creating

visibility into leading indicators that

help anticipate and address supply

chain issues before they occur can help

substantially reduce fixed cost through

better asset utilization.

Achieving a high degree of employee

engagement among manufacturing

personnel can boost employee

productivity by 5 percent to 10 percent.

Tightly integrating manufacturing IT

systems can lead to better

return on those IT investments while

helping to ensure the

ability to meet compliance and

regulatory requirements.

In addition to the preceding benefits,

achieving manufacturing mastery

can lead to as much as 13 percent

higher throughputs, 15 percent better

equipment effectiveness, 30 percent

more uptime and 75 percent reduction

in lead times.

21


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22

The twin vectors of increased global

sourcing of products and materialsand the increasing global demand

for goods and services require

manufacturing models to be

changed fundamentally, not tweaked

incrementally. Consider how Tata

Motors reinvented the way an

automobile is designed and assembled

to produce a $2,500 car (the Nano).

Tata started from scratchnot simply

taking existing automobiles and

removing expensive features from them.

In a similar way, manufacturers of every

product must conceive of radically new

ways to produce and distribute

their products.

Manufacturers could consider using a

model such as the one popularized by

Sun Microsystems, in which functions

and operations traditionally performed

in-house are outsourced to partners

given great visibility into the companys

business processes and capacities. Or itmight be a completely different, near-

sourcing strategy driven by rising

energy and labor costs.

Whichever model a manufacturer

chooses, achieving high performancewill be difficult simply by conducting

business as usual. Increasingly,

maintaining the status quo is a bigger

risk in a world where new customer

demands, challenges and competitors

lurk around every corner.

On the Journey to High Performance

22


23/24

Emilio Mostoles

Notes Contacts

Amit Gupta1Quality, flexibility give Honda

edge, Joe Miller, The Detroit News,January 7, 2001.

Special acknowledgement and

thanks are due to followingpeople for the effort and timethey invested in the preparationof this report: Jonathan Wright,Rup Banerjee, John Calder, BrooksBentz, Mike Engoian, Fred Hajjar,Ruchir Gupta, Varadaraj Shanbhag,Derek Jones, Scott Egler.Zeljko Nikolic

Chicago, United [email protected]

Madrid, Spain

[email protected]

Sydney, Australia

[email protected]

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Copyright 2009 Accenture

All rights reserved.

Accenture, its logo, and

High Performance Delivered

are trademarks of Accenture.

About Accenture Supply Chain ManagementAbout Accenture

The Accenture Supply Chain

Management service line works

with clients across a broad range of

industries to develop and execute

operational strategies that enable

profitable growth in new and existingmarkets. Committed to helping clients

achieve high performance through

supply chain mastery, we combine

global industry expertise and skills in

supply chain strategy, sourcing and

procurement, supply chain planning,

manufacturing and design, fulfillment,

and service management to help

organizations transform their supply

chain capabilities.

Accenture is a global management

consulting, technology services

and outsourcing company.

Combining unparalleled experience,

comprehensive capabilities across

all industries and business functions,and extensive research on the worlds

most successful companies, Accenture

collaborates with clients to help them

become high-performance businesses

and governments. With more than

181,000 people serving clients in over

120 countries, the company generated

net revenues of US$23.39 billion for

the fiscal year ended Aug. 31, 2008.

Its home page is www.accenture.com.

We collaborate with clients to

implement innovative consulting

and outsourcing solutions that align

operating models to support business

strategies, optimize global operations,

enable profitable product launches,and enhance the skills and capabilities

of the supply chain workforce.

For more information, visit

www.accenture.com/supplychain.

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Accenture Achieving High Performance Through Manufacturing Mastery

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