Although Lean and Six Sigma practices are widely followed, they ultimately are insufficient to address the complexities of modern industrial manufacturing, and companies are instead turning to “smart operations,” according to a new white paper from UPS. These operations combine pervasive data collection, advanced analytics, technology investments and deeper collaboration with partners to prepare their value streams for the next industrial revolution.
Indeed, over the next three years, a growing number of successful manufacturers will enhance their manufacturing processes with smart operations, a broader supply chain strategy that extends beyond the factory walls, according to the paper, “The Rise of Smart Operations: Reaching New Levels of Operational Excellence.”
While Lean and Six Sigma methods remain the standard for manufacturers, continuous improvement has a downside. Overly optimized processes can become inflexible, leaving the business unable to adjust rapidly to disruptions in the supply chain and changing customer demand. Manufacturers which use smart operations are better positioned than others to compete and thrive in today’s fluctuating markets, the paper notes, because increased visibility of inventory location and transportation allow companies to better analyze and quickly manage changes to their supply chain both upstream and downstream of the factory. Consequently, the use of smart operations “separates manufacturers who thrive from those that merely survive,” according to the paper.
“Smart operations are crucial to the long-term success of manufacturing companies,” says Derrick Johnson, vice president of marketing at UPS. “The strategy enables manufacturers with limited resources to serve their increasingly demanding customers more flexibly.”
UPS and market research firm IDC conducted the survey of more than 100 manufacturing operations executives and hosted focus group discussions to assess how far along companies are in implementing smart operations. Interestingly, 53 percent of the responding executives said their companies were at a relatively low level of overall maturity. Still, 47 percent of the respondents said their company’s progress toward smart operations exceeded that of their peers.
There are five areas essential to smart operations, the paper explains:
- Connected products: Increasingly, industrial manufacturers sell products that are connected. This connectivity allows companies to offer better maintenance service, which sometimes even generates new revenue streams.
- Connected assets: Manufacturers with connected assets are better able to monitor their operations to anticipate and even correct problems before they occur.
- Supply chain decision making: The data and analytic tools used in smart operations help manufacturers resolve issues in the supply chain faster.
- Buy-side value chain: Smart operations allow manufacturers to automate purchasing with their vendors and manage the inbound transportation of those supplies.
- Sell-side value chain: Smart operations allow manufacturers to change transportation modes and speeds as well as destinations based on shifting customer demand.
At the heart of this business strategy is digital transformation enabled by investments in technology for data collection, advanced analytics and connectivity for products, assets and partners throughout the value chain, UPS says. One top-tier automotive supplier’s executive responding to the survey said, “We are no longer an automotive company, but a technology company in the automotive business.”
The UPS paper also reports that manufacturers increasingly rely on external service providers, freeing themselves to focus on their own key competencies. Companies that have made less progress toward smart operations can take advantage of the technology and process investments their partners have already made.
What are your thoughts on either the whitepaper or smart operations?