Over the course of my experience in operating companies and consulting I have visited many (very many) manufacturing operations. My service has been in three particular areas: a consulting resource to improve business operations, as a funding resource to bring new equipment to the floor, and as a coach for company owners. I am also a partner in a machine tool shop in southeast Michigan. To be the best resource possible, I have studied hundreds more manufacturing operations. This series on best practices is distilled from those studies and experiences.
A ‘Best Practice’ is a proven methodology which generates results at a level of maximum output, while demanding minimum inputs, in a manner consistent with customer requirements. Typically the practices are consistently performed, managed well and part of a continuous improvement regimen.
Best practices are not easy to implement, largely because implementing them requires change, change in existing process, changes in the way people do things, changes in arrangements, protocols and attention. They require process design effort, communications and active management. They require replacing poor or unsatisfactory habits with good ones. None of that is easy.
So why should you care to put energy into implementing best practices if they are so difficult to get in place? Because the shops that implement, follow and improve them WIN! They win the more talented employees. They win the better contracts. They earn more profit. They have the opportunity to invest more in tooling and better equipment. They are often the stronger competitors in the marketplace. If that is not enough, they also happen to be admired businesses.
Before we start into the five practices, let me describe the successful manufacturing shops which guide themselves into best practices . . . .
First, the owner and executive team have a pretty clear vision for where they want to go as a business, what their product is, how it is sold, who it is sold to and their full intention and focus is on providing a quality product in a safe and profitable manner. Further they manage in a way that engages a talented and complete employee team with the right tools in an environment, which invites participation around how to get better at the business of serving the customer every day.
More often than not, successful shops have an annual business plan, and possibly a five year plan. They possess a learning attitude and constantly look for ways to improve the business and every process in it. Technology is a key component in their success and best practices. For example, according to various studies, 94% of manufacturing organizations over $50M in sales use enterprise resource planning software in their operations. We often find that Realtrac, for smaller manufacturing operations, enables and prepares them for growth as it smooths out operations allows for greater visibility of manufacturing processes and creates organization in the way work flows and is measured. In fact, in a recent conversation with an editor of one of the leading manufacturing publications, Bob Sakuta asked the editor if he was aware of any high performing shops that did not have an ERP system in place. The editor thought for a moment and replied that in fact he could not recall any shops that he had met with, who were considered high performing, that were not using an ERP system.
And to expand on this point, a barrier to growth for businesses under $10M in revenues, is often the establishment of consistent business processes and the reinforcement of their use and improvement. When the right processes and systems are established, staffed with the right people and then followed consistently, a major obstacle to growth is removed and the organization can grow to the next level.
As we proceed into this discussion of best practices, contemplate your own shop and what you do well and not so well. Every business has bright spots and some dark spots. I hope you will find the discussion offers you some ideas for improvement, which will create greater success in your business.
In the next entry, I will describe practice number one, the practice of establishing a complete production planning effort.