Operations Innovation & Transformation – the 4 Types a Series

Over the last couple of years Stan   DeVries and I have looked a 100s of projects by leading companies across many industries, analyzing industry trends. Much of what I discussed in this blog over the last year has come from these investigations. But Stan and I thought it was time to talk through these "Operational Innovations" and Stan has put a series of 5 blogs on the topics that I will post over the next 2 weeks. Building on the ideas and concepts.

 High Level Review of the 4 Types Operational Innovation:

There has been much marketing on the innovations in supply chain and customer relationship management during the last 7+ years.  During this time, manufacturing and industrial operations has begun a less publicized transformation on their own.  This transformation goes beyond lean and total quality management principles.  In the 1980’s, we saw the impact of Japanese quality strategies; in the 1990’s, the consumer globalization fundamentally changed where facilities are built, how frequently new products are introduced, and in the 21^stcentury, industrial operations focus on how they create value for their customers, often focused on reliability.  These strategies might seem to be dreams without understanding the innovations that make these sustainable and the new risks can be practically managed.

These innovations are focused on unlocking the value of groups of physical and human assets:

1.       Physical Assets: the move to unifying the industrial enterprise over multiple sites (in groups or as a whole), with a more holistic view in terms of operating strategy and performance management.

2.       Human Assets: the shift to operational teams that spread across the multiple sites (in groups or as a whole), central, and Subject Matter Experts (SME’s) to make a rapid and dynamic decision support system in a dynamic operational world.

The following table published by ARC describes a spectrum of coordination or collaboration across assets, both physical and human:

The innovations are essential and prominent in the Integrated and Optimized portions of the above table.  So physical or human assets become 2 parts of one of the dimensions:

So far, no innovation is immediately apparent.  The other attribute of creating value of these groups is improving consistency or efficiency, either by seeking and maintaining a constant “sweet spot” or by enabling profitable agility.

One way that value can be unlocked from a group of people or physical assets is by improving the consistency of the group’s output.  This is very different from the hope of “the best worker on their best day, every day” or the physical asset’s equivalent.  Instead, the innovation achieves a “new normal” which understands and manages to a repeatable performance or “the new average worker on their average day, every day”.  This focuses on reducing the range of performance in output, whether measured as sales value of production, yield, efficiency, throughput etc.

Another way that value can be unlocked from a group of people or physical assets is by improving the effectiveness of the group’s output – the “synergy”.  This focus might seem to be a cliche, but it has produced significant and sustainable improvements.

So consistency and effectiveness become 2 parts of the second dimension, and now we have 4 quadrants:

Now we have some hints of innovation – how is it possible and practical to achieve significant and sustainable improvement from a group of physical and human assets instead of the “sweat the assets” focus which has been in place for 100 years?  The changes come from using physical and human assets differently when they are required to perform to a group objective.  The 4 quadrants are summarized as follows:

In the lower left quadrant, a group of similar industrial operations (2 or more) adapt their performance objectives, business processes and accompanying hiring and information strategies to optimize the “fleet”.  This innovation can be limited by the distribution flexibility among the locations, but several corporations have achieved success with this.  One example is keeping most of the locations operating at a constant or “base” portion of the combined market demand, and using the more agile locations to deliver the “swing” or variable portion of the demand.  Other examples and methods are described in a following article which focuses on this quadrant.

In the upper left quadrant, a group of complementary industrial operations (2 or more) adapt their performance objectives, business processes and accompanying hiring and information strategies to optimize the “chain”.  This innovation can be limited by the dynamic and range flexibility of some of the operations, but several corporations have also achieved success with this.  One example is seasonal competitiveness, where the “chain” collaborates to achieve maximum throughput during the high demand season and maximum efficiency during the low demand season (efficiency and throughput interact differently across different groups of industries).  Other examples and methods are described in a following article which focuses on this quadrant.

In the lower right quadrant, teams of specialists are grouped to provide value improvement to a group of physical assets, and the group of physical assets can be used as a “fleet” or as a “chain”.  This is much more than a passive “help desk”.  One example is where specialists use real-time bench-marking and other tools, working with new business processes with the physical assets and the dedicated workers, to unlock value of themselves and the physical assets.  Other examples and methods are described in a following article which focuses on this quadrant.

In the upper right hand quadrant, managers and supervisors use consistent measures and business processes to adjust targets for specialists and other workers, using the industrial automation concept of a “control loop”.  One example is where managers negotiate the next day’s production targets each day using the same business process for all specialists and industrial locations.  Other examples and methods are described in a following article which focuses on this quadrant.

The results have been spectacular, including double-digit improvements in efficiency, first-quarterly industry performance, and more.

Personality, Patterns, and Principles are key Pillars to User Interface and User Experience

I was watching a Microsoft session on user interface, and they spelled out the concept of the “3 Ps” in their design. I thought it would be effective to pass it on with commentary:

Personality: the visual interactive design

Patterns: Common interface patterns

Principles: the guidelines by which you set out UIs e.g. colors, fonts etc.

The three Ps we overlook in defining the report, the dashboard or user interface in the industrial world, the three Ps are not new, many of applying them without realizing.

Personality: This is a way in which the user interface interacts with the role and user, which requires the designer to define the targeted user, and make sure they understand the experience effective experience, knowledge and activities the role has. If you take the “activities" approach again understand the expect interaction, to create efficient decisions and actions, so that the system is intuitive. This means in different cultures based on regions the personality may change, certainly the personality between a dashboard for a maintenance engineer vs. production management is very different relative interaction. In 2014, the explosion of mobile applications for different "activities" /"roles" will occur instead of generic applications for the industrial market. This does not mean generic is wrong, but I firmly believe that if there is a choice between a specific application for an activity vs. a generic the specific will chosen as it will have the personality to suite the effective execution of that "activity".

Patterns: The user interface patterns are also key, to make the experience intuitive and familiar the layout, arrangement patterns need to be set out. Even though the actions maybe different the navigation, experience of where and how to find or execute something should not take learning when swap pining between different activities. These patterns should go across roles and “activities".

Principles: This again is key for familiar and consistent experience. Guidelines for use of color, fonts, backgrounds etc. are, and important comfort factor as the user enters and works with the system.

With so many different user experiences the knowledge worker interacts with today from reports, dashboards to interactive screens across desktops, pads, to mobile to notifications and video. All designed by different content developers and made available to knowledge worker community of the company. Increasingly the content developer will not know the content consumer other than by “activity" and role, as the host for the content will be user interface hosting frameworks (example the portal) that host, layout and enable navigation of content that is created elsewhere. So a piece of content for activity could be hosted in a desktop, then a PDA, then a web applicant all the same time, with the user traversing between "at will". To achieve a smooth, effective transition the 3 Ps in user experience for content design are key, far more important than in the last 20 years. Combine this with the dynamic nature of the workforce community initiative, familiar experiences will a pillar for competitive advantage. It is important that these standards can be managed, and evolved, we are investing alot in tools to make this managed easier and effective.

Collaborative Manufacturing is Becoming a Reality

The concept of Collaborative Manufacturing has been attempted in the past and successfully with Toyota and others but the time has come for a change that will enable an ecosystem of small agile manufacturers to form a “product value chain”. So lets start with what is Collaborative Manufacturing:

In Collaborative Manufacturing, designated individuals and organizations – both internal to a manufacturing enterprise and extended to its suppliers, customers, and partners – work together for mutual gain. The objectives of Collaborative Manufacturing are to streamline end-to-end business and supply chain processes and provide a more comprehensive and

accurate information base from which to make decisions.

Collaborative Manufacturing allows multiple groups to act together as they set plans and policy, agree to actions, and execute operations. Collaborative Manufacturing can boost responsiveness, agility, and customer-centricity. It also fosters the most cost-effective methods to design, source, make, deliver, and service standard, mass-customized or to-order products.

An effective Collaborative Manufacturing strategy requires business processes to include more inputs and interactions than most traditional processes. To support Collaborative Manufacturing, information systems must integrate and aggregate information from across the manufacturing business and from its suppliers, trading partners, and customers. It must also provide the means to intelligently distribute that information across various business entities.

So why now what is different?

Key to me is that fact that small enterprises can now leverage “Managed service” in the cloud that deliver the rich operational business capability of inventory management, operational process and manufacturing, and specification management which was only available to much larger companies. Now an end to end product chain can be developed with aligned a process and enable a product manufacturer to divided up over multiple operations, each operation executed by a small manufacturing entity.

The transparency of the product manufacturer across the sites all using “managed services “ in the cloud for ERP/ Order fulfillment, and MES operations / quality etc., provides the visibility to enable this agility. Effectively one Product Manufacturing chain (route) is been executed updated on a particular site as the product moves through, transport, assemble are also managed in this higher MES.

Yes, it will require a new thinking and alliance of small businesses but the value on agility and cost and the ability to scale provides a real opportunity for a new manufacturer and deliver model to take on the larger companies.  

To maintain a competitive edge, manufacturers must make a major shift in strategy to effectively synchronize activities among functionally and geographically dispersed groups. Those with whom they need to collaborate include:

• customers and, in some cases, their customer’s customers;

• distributors and channel partners;

• materials and sub-product suppliers;

• outsourced or contract manufacturers;

• logistics partners for distribution, warehousing, and transportation;

• providers of services such as legal and regulatory advice;

• multiple departments and divisions within their own company and with any of those entities described above.

A Collaborative Manufacturing strategy can help a company maximizes the effectiveness of its value chain in order to better control profits and address changing market demands.

Is this real, my answer is yes, I was on a plane last week, and two fellow travelers talked about the alliance and the seeking out others to make this ecosystem, combined with the agility of 3D printing, and then assemble these two expected to grow and had a good pipeline due to satisfy the “pay on delivery, with small order sizes” also the ability to have local final assembly close to distribution centers and significant retailers make them more desirable to occupy the “shelf space”. Both agree the reality is only now that the tracking and management are common across the plants in a hosted “managed service”.

Food for thought! 

Manufacturing Trends towards 2050

Well it is a new year and in many of us we look ahead, last year I looked at 2020 from an operational landscape, this year let us take a little bit further look out for looking at manufacturing. These are long term trends that will evolve and impact architectures, and I believe the whole landscape of operational systems. It relates to the discussion I brought up late last year on the trend from globalization to continentalision, due to speed of demand, and cost relative to energy etc.

Some interesting charts that show another set of trends I found in reading from ARC:

The top chart shows an interesting but fully expected trend towards more local, often small businesses, this aligns with continentalision, where time and agility to deliver is key, combined with another trend which is the move to customization of the end product. (note this is the opposite to what we see in the industrial software/ commercial software market where customization is giving way to “good enough” applications.) People will shift from brand to local product that aligns with the way they live , environment etc, this means more than language it means the culture of the consuming product. To achieve this combined with optimization even multi national companies will shift to local manufacturing sites for final productisation.  Example is in tobacco manufacturing where primary manufacturing is trending to centralize, and the packaging is local, enabling supply chain optimization, while agility to serve local markets.

But the bigger trend this move to “local/ smaller manufacturing facilities” suggests is the shift to “collaborative manufacturing” across an ecosystem of smaller more agile manufacturing facilities often run and owned locally. The opportunity for this comes through shift in technology to the “cloud” and “managed services” which enable a multi site manufacturing chain to managed in a series manufacturing facilities across the “product value chain” even if they are not the same company, but now a “collaborative manufacturing value chain” for that product. Managed services also provide the ability for these smaller companies to adopt mature operational/ MES applications as “managed services” providing them with operational control and alignment which has not been affordable before.

The chart below also supports the big trends by functions:

The key trends of shifting to renewable s, the impact of energy costs as the end of the “second industry revolution (oil based) “ declines, the “bottom of the pyramid” which refers to lowest 4 Billion income earners how we raise their standard of living. This is much more holistic view of the world than the 20^th century, except for the mass customization demand of my local product.

My feelings that this time to deliver, and satisfy the market the old “shelf space” will rule, with immediate satisfaction and freshness driving buying habits, combined with costs as transport and logistic costs and risk rise.

The final chart to reflect on shows the growing factors that effect manufacturing and operational decisions and therefore systems. 

This diagram does not look into the future but shows how in the last 20 years the major factors that influence manufacturing have expanded significantly, and they continue to grow. I would add the big one which is the shortage of skilled people, or operational empowerment in a dynamic workforce. Where now we have plants coming on line faster, or being acquired either into a global supply chain, or being added into a “collaborative manufacturing value chain” relative to a product. Combine this with the dynamic workforce that will be rotating roles, locations at less than 2 years in a role, while the ability to deliver more customized products drives the complexity of the production process, and value chain.

All good food for thought, as we look at significant operational transformation.

Focusing on Operational Activities and new Roles provides a Path to the Future Operational Workspace.

As we enter the new year, the challenge of how and where we start designing the new operational solutions for 2020 and beyond will come up.
I have expanded on a blog I did in November with a white paper, on the facets especially around the Operational Workspace.
I hope this provides some food for thought as we enter the new year.

Companies have invested and executed on the traditional alignment in a plant across process systems, and business systems (such as SAP), leveraging such guidelines such as ISA-95. With the drive towards more and more agility and rapid deployment of products to markets, the alignment of multiple plants,and their operational/automation systems with the business strategy/ applications is a key area. The other key area of critical concern is the operational workplace. With rapid agility,comes the requirement for more alignment, and more complexity, combined with key / rapid decisions to be made in real-time, and as a result the new operational team collaboration, and operational workspace will be critical. Combine this with the facts that over 10,000 experienced baby boomers are retiring each week, (this rate is expected to continue for seventeen years), and that by 2020, 42%+ of the workforce is expected to made up of Gen Y.

So where do you start when planning to design an industrial operational system today?

Some people throw technologies around like Cloud, wireless, and mobile, and begin looking for how to apply them, instead of stepping back and looking at “how they will be Operating, based upon the business, market and both capital and human assets”. This requires developing a plan and landscape to satisfy this future operational state, and then apply the best technologies available to achieve the result in the most timely, cost effective and operationally effective manner.

The future “operational state” of the business needs to take into account:

• The production and delivery requirements of products and services, and how to satisfy the consumer demand, this will probably lead to an “enterprise Industrial/ Manufacturing Landscape” with a holistic view and operational execution across multiple plants strategically located for satisfying delivery.
• The “operational workspace” of the future and how the workforce, including all roles at corporate, in the plants, delivery and supply will execute their required activities in the most effective manner.
• The overall supply chain of raw materials, to delivery, the cost, the environmental impact, and how to minimize energy costs.

It is important to note that, in most cases the automation layer is mature and well established and that their business side is also mature on the second generation business system.

So the question of where do I start designing a system for 2020 a beyond, leads to all three of the above aspects of requirements, but of the three aspects of consideration above, the “operational state” is the one that least understood and probably the biggest impact. The opportunity of significant improvement and gain is in the “Operational Workspace” at the operational layer across multiple facilities. Based around the “activities” a role executes decisions in real-time with consistent actions across a range of workers in that role in different plants.

In defining the future “Operational Workspace” of an industrial landscape there are two key activities that need to defined:

• Define the “Operational Activities”: across the value supply chain, looking at each step of manufacturing and delivery. As these activities are captured look to determine a common set of “activities” that can be applied across the sites. It is important to have a defined set of work/ operational processes from which people execute, and then look to embed these processes in a sustainable manner so that they can evolve over time. The diagrams below show the importance of a framework for operational process and how these contribute to the site operational activities, based on what Toyota has applied.

Embedding these operational procedures is important so that consistency across sites, teams, and the dynamic workforce is achieved and sustained. The diagram below from ARC shows the impact of companies building standards and the difference in the long term if they are not embedded to become part of “Operational Workspace”.

• Define the roles in the new operational workspace: how they will work. These roles could be on site or off site, through the concept of the “flexible operational team”. Define the role, the day in the life of that role taking into account location, what “activities” that role is responsible for, and who and what he/she will interact with through the day. Yes, switch into a “Facebook” thinking of friends, but friends maybe people, (other experts) Assets, Processes, even products. Once this map of “activities” and responsibilities during the day is defined, this drives what information, systems and people this role must interact with in a day. By understanding how a role will work in his/her day e.g. if he/she will be located at a plant or roaming, the way that the role will engage with the operational workspace will become clear as well as the role of such technologies of mobile, cellular networks vs. wireless infrastructure, etc. For a particular activity, the role may be notified using one device, but actually executing the role may need to go to a different device based on the requirement for the activity’s execution. When looking at the role, also understand the expected experience in executing the activity, or the site awareness, potential age (e.g. Gen Y- are they experts providing support), etc. as this effects the design of the most effective operational environment.

This role map is key as now you have a starting point, as to driving consistency in a dynamically changing workforce. These role maps are then combined, composed of “operational activities” associated with the role, where the activity has the required notification, information, actions, community of expertise etc. and architectural landscape so these “operational activities” can complement existing systems.

The architectural landscape should define the layers on top of existing systems, in a neutral way, where these operational activities (model driven approach) will reside, these could be local or remote hosting but will require clear governance and require models to defined in an environment that enables constant evolution of the practices but process experts locally and centrally as a “crowd development”, with governance control.

Initially focusing on a role or set of key roles allows the company to gain an approach on how the operational plant will run in 2020 and the key decisions / activities that required, and start applying these now in an architecture that lives with the current systems, but starts to drive consistency and faster decisions across that same role over multiple plants.

Notice that the discussion is independent of technologies; my assumption on mobile and Cloud that the architecture is set up so that these activities will be able to execute independently of the device, so that the adoption of what devices are used on a plant are relative to the plant and the support that they get. The key is the devices, no matter if desktop or mobile or web, should be suited to efficiency of the role execution.

This approach defines the “Operational Workspace” with roles and activities in a defined framework applied across the industrial landscape of the required value chain for delivering products in a timely manner to desired markets. Optimizing these processes and procedures lowers the cost of materials, wastage, and energy, and maximize the utilization of available capacity.

Happy New Year, A year of Promise for Operational Transformation

As I sit and look out over the surf in south Australia, with the end of year here, we have time to reflect.
Firstly happy new year to all of you.
2014 has a real opportunity to be a transformation year in the Operational Management space, with many of the seedlings of trends and direction becoming increasingly adopted as we accelerate into new requirement of agility.
In this brief blog the areas for watching:

• The increased use of the "internet" as a natural part of the operational / automation architecture
• The increased adoption of the cloud combined with the expect rapid expansion "managed industrial services" (offerings) available from vendors and specialist suppliers
• The increased transition from central to distributed, in all aspects of architecture and operational approach to plants.
• The increased role of energy and environment as one of the big factors in operational/ automation design.
• The change in operational Experience to accommodate the transition of workforce to Gen Y and to a more operational team
• The shift to the "internet of things" where smart strategies will increase the distributed landscape of operations, and control.

So many of these strategies are well under way, but 2014 there is the potential for surge in adoption to increase  as confidence and acceptance of the approaches takes place.

Enjoy the start of 2014.

Confusion Over Standards: Limits or Basis for Innovation?

One of the nice things of this time of year the meeting workload drops, providing the opportunity to do some much needed catch up of reading. An article that sparked some interesting thoughts and is related to a lot of the principles of work and activities. It is worth a read on Toyota’s approach to management of standards around the fundamentals of operational procedures.

http://m.industryweek.com/blog/confusion-over-standards-limits-or-basis-innovation

As discussed at length this year there are a couple of key approaches that will effect industrial operational design:

·         That design needs to move away from interfaces to actually design around activities/ Work; these can be executed through any interface hosted on any device.

·         The other trend is to move to manage / planned work, a knowledge worker moves from a “fire fighting” mode to a 70+ % planned work in a day, which increases safety, and consistent process execution through operational process stands combined with significant cost reductions due reductions in the planned time.

These two trends or approaches will grow in adoption in 2014/ 15 as it is the only practical way to deal with the changing dynamic nature of the workplace and rotating workforce.

The structure outlined below by Jim Laker used at Toyota is a good basis for the how to lay out standards in procedures vs the actual operation instruction. But another key cornerstone of this is knowledge management, with 10000 baby boomers retiring a week in the US, and this rate is expected to sustain for the next 17 years, the requirement for skill vs the talent pool will be offset. So the operational systems must incorporate shared knowledge, crowd sourced and managed to maintain the value. Many of the operational procedures and best practices must be captured over the next 5 years, companies must put a maintainable knowledge management  system, and culture in place, and as you can see in this diagram that standard procedures, operational safety and environment procedures, and practices form the basis for the transition to planned work, and activity based systems.

When you think of standards you think of “handcuffs” on design and therefore innovation, but this is not a logical thought process. How do you enable operational innovation which is based on operational best practices, provides the foundational platform on consistent execution to enable innovation and movement forward. The need to capture operational innovation by taking the best operators and knowledge workers based on years of practices, capture their operational practices within a system so that new less experienced users to adopt the proven practice. Is this a one off NO, this is the continuous process of improvement which will provide the edge for companies to agile.

As you sit down for the Christmas pudding and we look forward to 2014, there is much opportunity and change ahead of us, and these articles provide solid food for thought.

Have a great festive season, and see you in the new year.