The Infosys global supply chain management blog enables leaner supply chains through process and IT related interventions. Discuss the latest trends and solutions across the supply chain management landscape.

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October 20, 2014

Simple Measurements - Levers for Operational Efficiency Gains

Posted by Abhay Dhall, Associate Consultant (Manufacturing Vertical), Infosys Limited

The world of manufacturing is perpetually concerned with improving operational and manufacturing efficiency of a plant. A common approach is the much-used and abused lean manufacturing. Manufacturing companies think of lean manufacturing as a formula but instead it is a philosophy with many facets which can create value by reducing redundancy and non-value processes in a manufacturing system. The philosophy of reducing waste must be applied throughout the value chain of a product and not just during the manufacturing phase because by the time the product is on the shop floor, most likely it has gone through multiple unnecessary systems and processes.

Implementing lean manufacturing starts with asking a simple question "What's essential?" This question should be asked at every stage of the supply chain right from taking orders through manufacturing to logistics. One common trap that companies fall into is to simply focus on improving the time it takes to 'manufacture' the product. In fact, the manufacturing time, although important, often accounts for only a small portion of the total time a product spends in the order to cash cycle. Improving efficiency at every step is important and it is imperative that we look at both upstream and downstream and find ways to improve efficiency in each step. A manufactured product which takes a lot of time in reaching the shipping yard from the shop floor because of an inefficient sorting and inspection facility is as bad as a product which takes a long time in converting from raw materials to finished good. No matter how good your supply chain processes are, if the total time for a product to reach the customer is not reduced, you are losing out to your competitors.

The point to be understood here is that every process counts. As an example, in a supply chain consisting of 10 processes where each process is running at 95% efficiency and is dependent on the previous one, the total efficiency of the system is only 60%. The entire business is like a chain in which each process acts as a link and hence it is important that we consider the strength of the entire chain rather than the individual links.

But that's easier said than done. Where does one start?

You could start with creating a value stream map for your processes. An essential part of that study is to understand the inefficiencies or wastes that are generated within that process. In addition to performing activity mapping for the process, you would also want to measure the critical parameters that define the process. For example, critical measures that define the order fulfillment process are on time delivery, order fill rate, returns etc. What can be measured, can be controlled and what can be controlled, can be improved.

In my next blog I will try to answer the quintessential question of "How to measure the performance of a manufacturing plant?"

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