One of the greatest challenges facing senior executives is creating an organization that delivers satisfaction to its customers while providing its owners with above-average profits and its employees a great place to work. Why is the organization of your factory so important? The accomplishment of those three objectives depends on how well the complex multi-tasking within the factory’s value chain is connected into a seamless, friction-free process.
During my 50-year industry career I’ve been fortunate to assist literally hundreds of manufacturers to organize and improve their factories. Gleaned from that experience the following describes a practical first step for designing a high-performing factory.
Meet the Focused Factory
Forty-five years ago Wickham Skinner, a professor of manufacturing strategy at Harvard, formulated two key axioms that still ring true today:
First, a factory cannot perform well on every measure. A long list of well-known metrics exists for tracking a factory’s success or failure. Skinner believed that a full scorecard of such measures requires trade-offs, meaning that achieving solid performance in one metric caused a low score in another. For example a high score in order fulfillment time can cause an excessive amount of overtime. These trade-offs send confusing signals to managers and the plant floor.
His solution is to employ a single metric that aligns a factory’s entire work force with the company’s marketing strategy.
Second, simplicity and repetition create competency. The learning curve is real. By keeping tasks simple and recurring, a factory can outperform competitors whose more complicated operations are difficult to execute.
These axioms suggested that limiting a factory’s product offerings as well as the scale and scope of its operations improves the chances for success. Skinner responded with a concept he called focused manufacturing. The resulting focused factory exhibits five primary characteristics:
- Measure of Success: A single metric that reports performance of the key task required to satisfy its customers.
- Process Technology: Reliance on proven process machinery, equipment, and materials.
- Products: A narrow range of product offerings with similar processing requirements, lead times, price, and level of standardization.
- Quality Level: A single level of specifications to simplify quality assurance.
- Order Flexibility: Capability to handle small and large order quantities.
Skinner’s vision contrasts sharply with many plants that attempt to be everything to everybody in the quest for economy of scale. In the end the multitude of products, processes, and technologies in those plants results in higher costs. Importantly he also recognized that there are many ways to compete rather than through low cost.
Identifying Your Critical Manufacturing Task
Following Skinner’s thinking the starting point for any organizational project whether you are rationalizing an existing operation or building a new factory is your company’s marketing plan. Well-crafted plans at successful companies recognize three primary contributors to their financial performance:
- Competing with the right product offerings in the right markets – those in which profits are easily made.
- Concentrating on doing the right tasks – those that satisfy their customers’ wants.
- Completing the right tasks efficiently – performance that generates growth and profit.
The tasks are those key activities that enable the creation of the product attributes desired by your customers. Those activities, called process elements, must be assembled into a core competency, the key capabilities of which operational excellence satisfies your customer’s wants and stimulates further demand for your offering. In short, the process elements form the hammer; the competency is the nail.
Derived from your marketing plan, a list of those process elements answers the all-important question: what must the factory do well to deliver your product offering’s attribute?
Product Offering - A product offering is the total package of properties and benefits the buyer acquires from a purchase and consists of two elements: 1 -- the physical item and, 2 -- the attributes that differentiate it from the competitors. These features can include both intangible elements such as how, when, and where the offering is delivered and tangible properties like the level of customization available. For example cabinetmakers can choose to produce a line that features a high level of customization or sell a simpler version of cabinetry that offers fewer styling choices but faster delivery. The underlying product is similar, but the tasks the company must complete for these two products differ significantly.
EXHIBIT 1 illustrates the connection between a primary attribute as stated in the marketing plan and the key process elements required to manufacture a quick-ship cabinet line. The attribute, two-week delivery, requires a core competency, fast order fulfillment, that is supported by four key process elements: extra capacity to maintain two-week delivery regardless of the incoming order flow, fast set-up machinery to enable small order sizes, an inventory of parts with lead times exceeding two weeks, and an information system that ensures timely completion of orders.
The next step is to create a list of all process elements required in the re-organized factory’s production system including the existing capacities and proposed production rate. Included must be all factory floor processes as well as front office activities. Then ask do any of the process elements affect your ability to produce the key attribute? If so, you must adjust the deficient process element accordingly. Once revised you are now ready to re-assemble the required process elements into a conceptual-level production system.
To re-purpose a large existing facility Skinner suggested employing a plant within a plant model (PWP). That design envisions dividing the large space into a number of focused factories each with its own key manufacturing task, management, equipment, work force, and systems. Rather than retooling into a single large all-purpose factory, PWP provides enormous flexibility. For instance, most plants struggle to produce small order quantities of slow selling SKUs. A practical solution is to implement two PWPs, one for large runs of standard items and a second for specials and small orders.
One word of caution: Crafting sound marketing and manufacturing plans is not a one-time task. Every product offering starts on the road to obsolescence the minute it is introduced. For that reason you must constantly assess your marketing plan as if you have NO customers and NO products. Such a zero-based mentality forces your senior leadership to monitor the need to re-focus your factory’s organization.
The objective of Skinner’s approach to organizational design is to focus your resources on the best performing products and markets. When you fail to connect your best customers’ demands to your core competencies, you risk becoming efficient at the wrong processes. As Peter Drucker said, “There is nothing so useless as doing efficiently that which should not be done at all.”
Bottom Line: Anyone with sufficient capital can assemble the physical parts and pieces of a factory. The difference between success and failure is between your ears. It’s how you organize, design, assemble, and operate the elements of your factory that matters. Management matters; the best managers and their factories will ultimately succeed.
Thank You: This edition of Raymond’s View is my 72nd and last. Credit is due to the many teachers and authors like Peter Drucker, Theodore Levitt, Wickham Skinner, and Benson Shapiro, who influenced my approach to facilities/process design and manufacturing management. Thanks also to FDM magazine, its predecessors and successors, for publishing my thoughts since 2002 and to Ms. Penny, my 11th grade English teacher who taught me how to construct a sentence.
Over 50 years Art Raymond worked with manufacturers of furniture, cabinetry, and other wood products around the world to solve management and technical problems and to grow their businesses. As the capstone to his career he served Hooker Furniture Corporation as Senior Vice President, Operations retiring in 2013. Contact him at [email protected].
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