Insights from the recent Deloitte global manufacturing benchmarking initiative, entitled "Mastering Complexity in Global Manufacturing: Powering Profits and Growth through Value Chain Synchronization" reveal:
- The vast majority of manufacturers are falling short financially:
In the last year, one out of three manufacturers failed to achieve their goals for return on capital/assets.
– 38 percent of respondents have operating margins of less thanfive percent or are losing money.
– 36 percent missed their goals for return to shareholders.
– 35 percent fell short of their profitability targets and 40 percent did not achieve their revenue goals.
- Supply chains are increasingly becoming more global:
– 80 percent of manufacturers have marketing and sales operations outside their home regions.
– More than half have moved some production and manufacturing to lower-cost regions, such as Mexico, China and Central and Eastern Europe.
- Approximately three out of five outsource segments of engineering and manufacturing.
- Product innovation and new product introduction is a key revenue driver:
– 35 percent of manufacturers’ revenues will come from new products introduced in the three preceding years – up from 21 percent in 1998.
– Average product development time today – 16 months from concept to launch – is 12 percent less than in 2000; by 2006, it is expected to be another 18 percent shorter.
A new perspective is required
Lean techniques have been applied extensively in production operations for well over a decade. Yet, many companies have failed to recognise the broad productivity and performance improvements promised by lean proponents. In practice, companies have focused the vast majority of lean efforts on classic manufacturing problems and have been slow to apply lean techniques to other critical business activities such as logistics and supply chain management. Furthermore, lean is frequently deployed as a tactical, single-dimensional tool that enables localised improvements, but rarely generates significant impacts to the balance sheet and the profit & loss statement.
In response, Deloitte has developed a unique capability to deploy lean as a strategic business improvement tool. This capability applies lean and other techniques such as Six Sigma, to optimise work and information flow across value streams (e.g., order-to-ship). By simultaneously optimising work across value streams, the Deloitte approach provides much greater leverage over cost and performance than traditional lean improvement approaches. In short, it allows lean to take a seat in the boardroom as well as the on the shop floor.
The Deloitte approach has been successfully applied to a wide range of operational challenges including production system performance improvement, asset productivity enhancement, supply chain operations, logistics/distribution, and overhead cost reduction. By taking a systems engineering perspective on operations, the Deloitte approach enables clients to develop comprehensive and optimal solutions for their business problems.
A rigorous, but focused value stream analysis approach first "reveals" actual process performance characteristics and penalties, then serves as the basis for developing new, reconfigured work designs that dramatically improve operational and financial performance. Lean reconfiguration always begins with the development of a reconfiguration architecture or plan that defines the top–level, structural changes necessary to achieve desired performance improvements in cost, profitability, and cycle time.
This architecture is supported by the specific work configuration details necessary to implement and sustain the change. In this manner, the Deloitte approach provides a complete audit trail between top–level design requirements and the most tactical elements of the new work design. Ultimately, lean work configurations enable the target value stream – whether a production operation, support function, or a Processing Centre – to be conducted in manner that minimises distance, friction, space, and time.
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