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8/2/2019 Accenture Achieving High Performance Through Manufacturing Mastery
1/24
High Performance through Manufacturing
Accenture Research and Insights intoManufacturing Mastery
Consulting Technology Outsourcing
8/2/2019 Accenture Achieving High Performance Through Manufacturing Mastery
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2
Contents
Introduction
A Global Study on Manufacturing Practices
Manufacturing Masters:Learning from the Best
Insights and Recommendations
On the Journey to High Performance
03
05
07
20
22
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Introduction
Globalization has had a dramatic
impact on every large companyover the past decade. But its impact
on manufacturers and their supply
chains has been especially profound.
For these companies, achieving high
performance is more importantand
more difficultthan ever.
Some of globalizations biggest
challenges involve managing the
complexity of supply chains that
extend around the world. The rise of
economies in Asia Pacific, Eastern
Europe and other emerging regions
creates new customers whose needs
are often quite different from those
of a manufacturers long-standing
customers. Matching supplies (steel,
rubber, parts and other components
of final products) that are sourced
from every region with demand that
is harder to predict and much more
variable by customer segment and
geography has made it far moredifficult to run effective and efficient
supply chains. Couple this with the
increasing market volatility and
the geopolitical situations, and the
complexity of global supply chainsincreases exponentially.
In turn, all this forces companies
to shift production from one plant
to another to load-balance their
manufacturing network, which can be
contrary to lean principles that call
for focused, repeatable manufacturing
processes. Shifting supply around the
world also increases the complexity
of dealing with fluctuating exchange
rates, unfamiliar tax and customsregulations, and special localized
environmental laws. Determining
the optimal places to manufacture
although never straightforward has
become infinitely more complex.
Complicating the picture even more
is the specter of global capacity
constraints. Internal manufacturing
capacity may not always be available
to meet demand, especially when a
companys factories are specialized
or its suppliers capacities are
located far away from the finished
product factories. As a result, many
manufacturers total landed costs
have spiked, squeezing profitabilityand eroding competitiveness. These
companies now need unprecedented
flexibility in their manufacturing
strategies and operationsespecially
in how they source material, a
key cost component.
The case of a consumer-durables
producer illustrates the pressures on
manufacturers. In 2008, its cost of
direct materials had risen dramatically
due to the global proliferation ofraw materials and parts. To reduce
its cost structure, the company
brought together representatives
of its engineering, procurement,
manufacturing and marketing
functions with its various suppliers to
agree on material and part standards
that would reduce complexity and
costs as well as to seek other initiatives
they could jointly pursue to generate
supply efficiencies.
Over the past 20 years, the rising
cost of producing goods for a global
market has forced manufacturers of
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automobiles, computers, consumer
electronics, telecommunications
equipment, machine tools, furniture
and many other products to shift
much of their production overseas
and to other low-cost manufacturing
hubs. But more recently, a number
of the macroeconomic drivers of theoffshoring movement have changed
substantially. In 2008, the US dollar
plunged against major Asian currencies
to its lowest value in five years, but
has recently strengthened again.
Crude oil prices skyrocketed and then
came tumbling down. Labor costs in
developing countries have increased
steadily (in most cases, at a higher
rate than the corresponding developed
economies), eroding some of their
manufacturing cost advantage.
These and other factors have begun
tipping the scales the other way.
While offshore manufacturing remains
attractive, many companies now are
rethinking their production strategies.
In fact, a number of US-based
manufacturers are shifting production
from offshore production facilities back
to domestic or near-shore plants. For
example, Tesla Motorsa producer of azero-emissions, electric-powered sports
carhas moved the assembly of battery
packs from Thailand to San Carlos,
California, next to its headquarters.
Thailand's low labor costs no longer
offset the high costs of shipping
thousand-pound battery packs across
the Pacific. Similarly, a number of
manufacturers headquartered outside
the United Statesincluding Suntech, a
Chinese manufacturer of solar
panels and related equipmentare building American plants to reduce
the high cost of shipping and be
more cost competitive in the
North American market.
Globalization not only forces
manufacturers to rethink their supply
chains; it requires them to pursue
new markets and compete against
new competitors. To grow, many
manufacturers have expanded into
emerging economies such as China
and India. While presenting vast new
opportunities, these new markets
come with the tall challenges of
understanding the needs of a whole
new set of customers and customer
segments. Additionally, these emerging
markets often present new competitorsto global manufacturerscompanies
that have been operating in these
countries for years and, thus, are
intimately familiar with market needs.
They typically also operate with
much lower cost structures, which
enable them to manufacture in new,
streamlined ways. Take Tata Motors,
an automaker in India, or Chinese
telecommunications equipment
supplier Huawei Technologies. Both
companies represent a new breed of
flexible, nimble manufacturers. They
are creating severe pricing pressures
for Western manufacturers and
providing attractive alternatives for
customers in developing markets. They
also present the threat of diversifying
into developed markets.
Finally, one of the greatest challenges
to global manufacturing companies
is the competition for supply chaintalent. While attracting and retaining
skilled people is difficult at all levels
from hourly laborers to executive
management the biggest shortage
is in middle management: supply
chain planners, production supervisors,
warehouse and transportation
managers and the like. These people
are in high demand in such countries
as Mexico, China and India.
Many of the most talented middlemanagers in these countries lack
global experiencewhich is critical
as companies in emerging markets
look to expand outside their domestic
borders. This is especially true given
that most companies lack standard
ways of conducting supply chain
operations across their organizations.
Without such standard operating
models, companies are at the mercy
of localized, idiosyncratic ways of
planning transportation routes,
operating warehouses, sequencing
on the assembly line, scheduling
the workforce and conducting other
supply chain activities. That puts these
manufacturers at the mercy of the few
individuals who understand how to
run these activities. Operations thatdepend on individual heroics
are extremely fragile. They invite
expensive bidding wars for their
services and consternation when they
retire or leave.
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The aforementioned challenges
are substantial, and they no doubt
have made the working lives ofmanufacturing executives more
difficult. Thus, its not surprising that
many companies around the world
have struggled to achieve superior
performance in their manufacturing
operations. As part of Accentures
ongoing research on the characteristics
of high-performance businesses, we
conducted an extensive survey of more
than 600 major companies around the
world. We wanted to better understand
the state of their manufacturing
operationshow they were performing
on key production metrics, and the
extent to which they had adopted
advanced manufacturing practices,
capabilities and technologies.
(See Figure 1)
Figure 1. Survey participant demographics.
By Geography
A Global Study on Manufacturing Practices
31%
33% 36%
Europe
Americas
Asia Pacific
By 2007 Revenue
29% 36%
17%18%
6%
Up to $500 million
$500 million to $1 billion
$1 billion to $5 billion
$5 billion to $10 billion
>$10 billion
By Industry
36%
3%
18%
6%6%
9%12%
4%6%
Communications
Electronics & High Tech
Retail
Food & Consumer Goods
Automotive & Industrial Equipment
Travel & Transportation
Biotech & MedDevices
Natural Resources
Utilities
Overall, we found most companies
struggling to produce much better-
than-average performance on keymanufacturing metrics. We also found
that lackluster performance largely was
a function of immature manufacturing
practices and capabilities in key areas.
We gauged manufacturers
performance on several commonly
accepted core measures. For the
survey respondents as a whole, high
performance on any one metric was
rare (see Figure 2). For example, we
found the median percent of overallthroughput was just 80 percent. Their
asset utilization and overall equipment
effectiveness were no better, and
uptime versus scheduled was worse, at
75 percent. Manufacturing lead time
clocked in at 10 days.ys.
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We also probed a number of aspects
of manufacturing operations andmanagement. Here, too, we found an
inconsistent level of sophistication
in practices and capabilities. In fact,
most companies have only basic
capabilities in key manufacturing areas
such as determining where to locate
production, streamlining manufacturing
processes and creating highly flexible
operations that can be altered quickly
and cost efficiently when the market
changes. These three capabilitiesare core to creating manufacturing
operations that support companies
pursuit of high performance. Our survey
respondents overall weakness in these
areas goes far to explain the rather
mediocre aggregate performance.
Specifically, we found most
manufacturers struggling to determine
where to locate manufacturing to
make certain productsthat is, how
to assess costs and benefitslargelybecause they dont use modeling
techniques and are unable to conduct
what-if scenarios. Such scenario
Percent overall throughput: 80 percent
Customer promise kept percentage: 95 percent
Overall equipment effectiveness: 80 percent
Asset utilization: 80 percent
Material efficiency: 95 percent
Manufacturing lead time: 10 days
Percent production to plan: 90 percent
Delivery to schedule: 90 percent
Capital project index: 53 percent
Uptime versus scheduled 75 percent
Downtime versus scheduled run time 10 percent
Workforce satisfaction (% satisfied) 80 percent
planning methods help manufacturers
gain more insight on how to meetcustomer demand: where to locate
the supply base and manufacturing
plants, and which products to produce
in which manufacturing facilities. We
also found only narrow adoption of
proven manufacturing improvement
techniques such as Lean and Six Sigma,
which have helped dramatically to
reduce costs, cycle times and defects
at many manufacturers.
Our arguments are not meant toundermine the progress and major
strides that many companies have
made in linking manufacturing to other
core enterprise functions. However,
on average, the companies in our
survey did not have superior levels of
integration and/or collaboration across
their supply chain. Similarly, highly
modular manufacturing processes were
not common across companies in our
sample. Such processes are criticalto flexible productionto create
operations that can be changed rapidly
and cost-effectively when customer
needs change, to incorporate new
technologies and to reduce costs. Thebiggest barriers to such flexibility
typically are twofold: visibility, or the
understanding of how well production
is performing at the companys, its
contractors, and its suppliers plants;
and the ability to conduct what-if
scenario planning, which we discussed
briefly above. In general, our survey
participants did not report having a
high degree of visibility in key areas of
their manufacturing operations.
Figure 2. Performance across key manufacturing metrics by the overall survey
sample is not high.
6
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Despite the fact that globalization
has raised the bar of performancefor manufacturers around the world,
our research and client work have
revealed that a number of companies
have overcome the key obstacles we
mentioned earlier. In the process,
their manufacturing operations
have become a major competitive
differentiator and a key factor in their
superior financial performance.
We refer to this group of companies
as manufacturing masters. Themasters finished in the top 10 percent
in our survey on three core aspects of
manufacturing: cost effectiveness, as
measured by several metrics including
actual versus budgeted manufacturing
costs, line conversion costs and s
crap rates; customer service, as
measured by customer lead times and
the percentage of customer promises
kept; and operational efficiency,
as measured by asset utilization,overall equipment effectiveness and
throughput, and several other standard
production metrics.
Manufacturing Masters:
Learning from the Best
We also identified a group of
companies on the opposite end of thespectrum: the survey respondents we
deemed the laggards those that
finished in the bottom 10 percent in
the three core areas. Laggards differ
demonstrably from masters not only in
their performance on the manufacturing
metrics covered in our survey, but also
in terms of the level of maturity of
important manufacturing capabilities
and practices. Understanding
these differences provides numerousinsights into the keys to superior
manufacturing performance.
Before exploring the differences
between the masters and laggards
in manufacturing capabilities and
practices, it is revealing to see just
how much better the masters are than
the laggards in terms of operational
performance. As Figure 3 illustrates,
masters held a substantial edge over
laggards across the metrics thatAccenture has found to be strong
indicators of manufacturing operations
performance. The gap between masters
and laggards was especially noticeable
when comparing the lead times amongcontinuous and discrete manufacturers
(see Figure 4).
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Figure 3. Masters outperformed laggards on core manufacturing metrics.
Masters Laggards
Percent overall throughput 85 percent 50percent
Customer promise kept percentage 98 percent 86 percent
Overall equipment effectiveness 92 percent 60 percent
Asset utilization 90 percent 50 percent
Material efficiency 98 percent 80 percent
Scrap rate 1 percent 10 percent
Manufacturing lead time 3 days 35 days
Percent production to plan 97 percent 83 percentDelivery to schedule 98 percent 83 percent
Capital project index 90 percent 30 percent
Downtime versus scheduled run time 6.5 percent 19 percent
Workforce satisfaction ( percent satisfied) 80 percent 80 percent
8
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Figure 4. Manufacturing lead times among discrete and continuous manufacturers.
Discrete Continuous
Average Masters 9.2 7.6
Laggards 29 63
Median Masters 5 4.5
Laggards 30 40
9
However, while these figures clearly
show the masters significantlyoutperformed the laggards in
manufacturing, they do not explain
why masters were that much better.
To shed light on this difference, we
compared the manufacturing practices
and capabilities of these groups.
While comparing how masters and
laggards manage their manufacturing
operations, we found a number of
significant differencesones that
correlate strongly with superiormanufacturing performance. Masters
are far more likely than laggards to
excel in six areas: manufacturing
strategy, manufacturing excellence
(process improvement), operational
flexibility, workforce engagement
and productivity, health, safety
and environment, and information
technology. In other words, as Figure 5
shows, we found that sophistication or
maturity of practices and capabilities
in the preceding areas are stronglycorrelated with superior planning
performance. We explore each area in
the pages that follow.
ManufacturingCapability Maturity
ManufacturingPerformance
Low
High
Low
High
Figure 5. Maturity of practices and capabilities in key areas are strongly correlated
to superior planning performance.
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Two of the most consequential
decisions for heads of manufacturingare whether to make or buy and
where to locate plants. Masters
appear to be far better at determining
whether to insource or outsource
and where to set up production (see
Figure 6). More than half the masters
develop comprehensive business cases
for make versus buy decisions, which
was the case with only about one-third
of the laggards. Masters are twice as
likely to analyze past facility location
decisions when make new decisions.
In addition, one-third of the masters
use modeling techniques in location
decisions, while only 12 percent of
the laggards did so. And masters
are about eight times more likely to
use sophisticated modeling tools to
determine whether to make or buy.
In making their sourcing and facilitylocation decisions, masters are farmore likely to rely on a range of factors,both quantitative and qualitative. Asshown in Figure 7, masters weremore likely than laggards to factorin capital cost, government or local
Manufacturing Strategy
Figure 6. Masters have a more sophisticated approach to make versus buy and
facility location decision making.
Comprehensivebusiness case for makevs buy decisions
Analyze past decisionswhen making Locationdecisions
Sophistication ofmodeling tools used
Use modelingtechniques to make
location decisions
tax incentives, labor availability,
transportation infrastructure andproximity to customers.
A multibillion-dollar oil-field services
company shows the value of making
shrewd make versus buy decisions.
The company operates more than a
dozen plants around the world, which
provide more than 100 products for
the extraction of oil from the ground
and seas. Soaring global demand for
oil and gas forced the firm to rethink
its manufacturing footprint that is,where and how to increase capacity.
The company developed a five-year
manufacturing strategy to meet
future expected demand. Considering
its markets, countries in which to
manufacture, supplier locations and
other criteria, the company developed a
whole new plan. It built four new plants
in 2007, and by 2009 had doubled its
manufacturing capacity. The strategy
is expected to boost earnings by morethan $1 billion over 10 years.
55%
32%
43%
21%
33%
4%
33%
12%
Masters
Laggards
10
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Figure 7. Masters are more likely to consider a range of factors when developing
their manufacturing strategy.
Capital cost Government
or local taxincentives
Labor
availability
Transportation
infrastructure
Proximity to
customers
58%
67%
71%
21%
42%
50%
54%
67% 67%
62%
Masters
Laggards
1111
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Manufacturing processes that arent
measured, evaluated and improvedsubject a manufacturer to considerable
riskof defective products, inefficient
production (and eroding margins)
and customer defection. The past
decade provides numerous examples
of manufacturers across industries
that took their eyes off their assembly
lines and other plant operations and
rapidly lost market share. The masters
we studied were much more likely to
use proven techniques for continuous
manufacturing process improvement
such as Lean, Six Sigma or other
techniques. Two-thirds of masters
compared with only one-fourth of
laggards routinely use kaizen events
(that is, a short-term project for
improving a process).
Masters are more than twice as
likely to use analytics monitoring.
(Analytics monitoring, also known
as manufacturing performancemanagement, is an approach to
improving manufacturing operations
through metrics and data. In aligning
operational objectives with strategic
goals, it enables managers to makedata-driven decisions and push
operational performance metrics and
accountability to the people who can
improve those operations.) About
three-quarters of masters compared
with 59 percent of laggards said their
entire company has a clear mandate
to implement continuous improvement
strategies. And more than three times
as many masters than laggards track,
audit and report the results of theseimprovement strategies (see Figure8).
Figure 8. Masters implement continuous improvement programs to align with
business and product strategies and monitor their effectiveness to ensure
sustainable improvements.
Manufacturing Excellence
Use of proven continuousimprovement techniques
Entire organization hasclear mandate
Prioritize improvementopportunities based onbusiness, product strategies
Use analytics monitoring tosustain improvements
Focus on processimprovement, but
pursue innovation whenopportunities arise
90%
50%
76%
59%
71%
50%
71%
31%
57%
39%
Masters
Laggards
12
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Many manufacturing masters indicated
they apply their relentless focus oncontinuous improvement to their
supply chain partners. One-third of the
masters compared with one-fourth of
the laggards routinely use Lean and
Six Sigma principles to improve the
operations of third-party and contract
manufacturers. Furthermore, internal
initiatives are more likely to produce
results for masters than for laggards
in large part because masters are more
likely to track, audit and report the
results of these initiatives (see Figure
9). Three-quarters of the masters,
versus about half of the laggards, said
their continuous improvement efforts
improved company performance.
And masters were much more likely
to be satisfied with the results of
these initiatives.
Take the case of a global maritime
propulsion system manufacturer in
Europe. It built a new plant that shiftedthe company away from traditional
cell-based production set-ups to line
manufacturing principles. However,
the switch over caused problems in
in-bound material supply and logistics.The company performed root-cause
analysis to understand the barriers
to production by using the kaizen
technique. A cross-functional team
used continuous improvement methods,
set key performance metrics and
instituted changes. Manufacturing
production rebounded, with lead
times in material inspection falling 75
percent, and relations between shop-
floor supervisors and plant workers
improving significantly.
Take the case of a global maritime
propulsion system manufacturer in
Europe. It built a new plant that shifted
the company away from traditional
cell-based production set-ups to line
manufacturing principles. However,
the switch over caused problems in
in-bound material supply and logistics.
The company performed root-cause
analysis to understand the barriersto production by using the kaizen
technique. A cross-functional team
used continuous improvement methods,
Figure 9. Masters monitor and get better return on their continuous
improvement efforts.
Positive impact oncompany performance
Satisfied with results
Results tracked, auditedand reported
set key performance metrics and
instituted changes. Manufacturingproduction rebounded, with lead
times in material inspection falling 75
percent, and relations between shop-
floor supervisors and plant workers
improving significantly.
73%
54%
60%
42%
53%
17%
Masters
Laggards
13
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Masters are much more likely to
anticipate issues on both ends of
the supply chain that could affect
production: with suppliers (for example,sourcing problems) and customers
(including distributors). And they are
much better able to ratchet production
up or down to deal with dynamic
market conditions and mitigate the
risk of market fluctuations (see Figure
10). For example, nearly twice as many
masters as laggards use dynamic
production scheduling tools. As well,
masters are far more likely than
laggards to model tradeoffs between
redundant costs and risk. Masters
will routinely use modeling tools to
conduct what-if scenario analysis
and develop contingency plans based
on this analysis. They also use these
tools to quickly evaluate alternative
production strategies to meet changing
customer demand or react to changing
transportation, labor or other volatile
supply chain costs.
But masters realize that such flexibilityhas a cost. As a result, most (57
percent) create modular products
and services to reduce costs and
enable rapid changes in products and
distribution services to meet fast-
changing customer needs. In contrast,
only the minority of laggards (39
percent) modularize their products and
services. Masters are also much better
at gathering and evaluating the supply
chain data that is critical to providing
upstream and downstream visibility. Forexample, nearly three times as many
masters (76 percent versus 26 percent
of the laggards) have historical data
on factory machine utilization, setup
and performance. This visibility allows
masters to understand the risks and
trade-offs of moving production from
one facility to another to account for
changing market conditions.
More masters (48 percent) use real-
time information on the status of
production machines than do laggards
(30 percent). Masters also are more
likely than laggards to monitor a wide
range of vital manufacturing indicators
(see Figure 11), most notably raw
material inventory, production time
and queue time of critical processsteps, work-in-process inventory and
supplier/vendor quality performance.
Monitoring such indicators provides
visibility to decision makers, who can
use these indicators to predict supply
chain performance issues and react to
potential problems before they become
noticed in the supply chain.
Finally, the majority of masters but
the minority of laggards have full
visibility and predictive capabilities fortheir own operations. And masters are
more likely to have such visibility into
their partners operationsas well as
a formal process for escalating supply
chain problems quickly (see Figure 12).
Japanese juggernaut Honda
demonstrates the power of flexible
manufacturing. In 2001, the company
was able to introduce a new car model
without making a huge investment in
new tools and factories. Honda made
its assembly plants flexible enough to
build a greater variety of vehicles. This
required installing common machinery
such as robots in each plant, as well as
common assembly techniques.
Honda predicted the change would
save nearly $1 billion a year in
manufacturing costs. 1
Operational Flexibility
14
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Use of dynamicscheduling tools
Ability to modeltradeoffs betweenredundancy risk
Figure 10. Masters are better prepared to respond to market changes and risk.
Figure 11. Masters are more likely to monitor a wide range of key manufacturing
performance indicators
Figure 12. Masters have greater visibility into their own and partners operations.
Full visibilityand predictivecapabilities (ownoperations)
Formal model forquickly escalatingproblems
Full visibilityand predictivecapabilities (partneroperations)
67%
35%
58%
23%
Raw material
inventory(stock leveland accuracy
Work-in-
processinventory(stock level andaccuracy)
Finished goods
inventory(stock leveland accuracy)
Production
time and queuetime of criticalindividualprocess steps
Supplier/
vendorqualityperformance
Set-up time
50%
90%
65%
86%
54%
81%
39%
67%
55%
71%72%
81%
67%
42%
71%
50%
43%
30%
Masters
Laggards
Masters
Laggards
Masters
Laggards
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Masters appear to be far more
focused than laggards on makingtheir manufacturing workforce more
productive and satisfied with their
work (see Figure 13). How do we
know? First, while the majority of
masters and laggards measure worker
productivity, masters are still more
likely than laggards to measure this key
aspect of the manufacturing workforce.
Furthermore, the majority of masters
monitor employee engagement, while
only a minority of laggards do so.
The age old adage of what gets
measured, gets performed is
certainly true in this case. Half of the
masters, compared with one-fourth
of laggards, said productivity is rising
in all areas of their workforce (see
Figure 14). We believe one reason for
rising productivity among masters
is they measure this more diligently
and have programs that boost
employee productivity. For example,
nearly half the masters, but only 12percent of laggards, had complete
training programs for boosting worker
productivity. Such training programs
are more likely to be formal in nature
among masters, which also are more
likely than laggards to have formal
employee coaching.
Finally, masters are also more likely
than laggards to formally seek process
improvement ideas from shop-floor
workers, and are more apt to have a
regular way for shop-floor workers
to report problems and submit
improvement ideas.
Figure 13. Masters are more likely to measure employee
engagement as well as employee productivity.
Figure 14. Masters are more likely to say productivity is
risinga fact that seems to correlate with more prevalent
employee training.
Formally measureemployeeengagement
Productivity isrising in all areas
Formally measureemployeeproductivity
Complete programto provide trainingto improveproductivity
67% 50%
24%
12%
46%
95%
78%
48%
Masters
Laggards
Masters
Laggards
Workforce Engagement and Productivity
17
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While some manufacturers may view
this issue as a nice to have whentimes are good, our survey data
suggest companies that take greater
responsibility for workers health and
safety on the job, as well as for their
plants larger environmental impacts,
outperform those that dont (see Figure
15). Nearly twice as many masters had
a formal health, safety and environment
(HSE) program across all departments.
Furthermore, tracking HSE indicators
is one thing; sharing that data is
another. Here again the masters stood
out. Nearly twice the percentage of
masters documented and distributed
information on HSE issues and how
they were resolving them. In addition,
masters are more than four times as
likely as laggards to measure and report
their manufacturing safety statistics
weekly, and are much more likely to
review and update HSE information
quarterly or monthly and hold monthlytraining to improve HSE. Thus, it is no
surprise that masters also are more
likely to reward their employees for
identifying and helping the company
solve HSE issues.
Health, Safety and Environment
Figure 15. Masters are more likely to have leading practices in health, safety and
environment
Externally publishedHSE vision
Formal HSE visionprogram across alldepartments
Measure and reportweekly
Issues and resolutionsare documented /widely available
Monthly / quaterlyupdates and training
Rewards foridentifying andresolving HSE issues
63%
53%
80%
46%
45%
10%
81%
44%
71%
40%
52%
32%
Masters
Laggards
18
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19
Simply put, manufacturing masters are
better at exploiting IT (see Figure 16).They are more likely to embrace IT to
improve production processes, integrate
systems and data, and track the impact
of technology than are laggards.
Workers and managers in masters
manufacturers also are much more
likely to adopt manufacturing
technology71 percent versus
50 percent in the laggards. Such
technological prowess is not due to
spending much more on IT but, rather,to the fact that masters take a more
rigorous approach to managing their
return on that spend. Our research
found masters are nearly four times as
likely as laggards to require a detailed
business case with quantified return
on investment projections (40 percent
versus 11 percent). And the majority
of masters (65 percent) track their
spending on manufacturing IT, while
only 40 percent of the laggards do so.
Information Technology
Figure 16. Masters do a better job capitalizing on
manufacturing technology.
Integration ofinformation sources
and systems
IT support approach
Level of useracceptance
Programs to increase
user acceptance
52%
44%
76%
46%
71%
50%
46%
53%
Masters
Laggards
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Insights and Recommendations
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The findings of our research are
consistent with what we have learned
through our extensive work with
global manufacturers around the
world: that sophisticated
manufacturing practices and
capabilities can mean the difference
between average and market-leadingperformance. Specifically:
Developing a dynamic global
manufacturing strategy by modeling
and achieving the right trade-offs
across various key factors can lead to
a revenue uplift of 20 percent to 30
percent in three to five years.
Adopting and internalizing bottom-
line-driven and proven manufacturing
excellence principles can lead to areduction in operational cost by 5
percent to 15 percent.
Integrating manufacturing
with product design, planning and
scheduling, S&OP, and service
can reduce time to market by up
to 20 percent.
Building operational flexibility by
using modeling techniques and creating
visibility into leading indicators that
help anticipate and address supply
chain issues before they occur can help
substantially reduce fixed cost through
better asset utilization.
Achieving a high degree of employee
engagement among manufacturing
personnel can boost employee
productivity by 5 percent to 10 percent.
Tightly integrating manufacturing IT
systems can lead to better
return on those IT investments while
helping to ensure the
ability to meet compliance and
regulatory requirements.
In addition to the preceding benefits,
achieving manufacturing mastery
can lead to as much as 13 percent
higher throughputs, 15 percent better
equipment effectiveness, 30 percent
more uptime and 75 percent reduction
in lead times.
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22
The twin vectors of increased global
sourcing of products and materialsand the increasing global demand
for goods and services require
manufacturing models to be
changed fundamentally, not tweaked
incrementally. Consider how Tata
Motors reinvented the way an
automobile is designed and assembled
to produce a $2,500 car (the Nano).
Tata started from scratchnot simply
taking existing automobiles and
removing expensive features from them.
In a similar way, manufacturers of every
product must conceive of radically new
ways to produce and distribute
their products.
Manufacturers could consider using a
model such as the one popularized by
Sun Microsystems, in which functions
and operations traditionally performed
in-house are outsourced to partners
given great visibility into the companys
business processes and capacities. Or itmight be a completely different, near-
sourcing strategy driven by rising
energy and labor costs.
Whichever model a manufacturer
chooses, achieving high performancewill be difficult simply by conducting
business as usual. Increasingly,
maintaining the status quo is a bigger
risk in a world where new customer
demands, challenges and competitors
lurk around every corner.
On the Journey to High Performance
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Emilio Mostoles
Notes Contacts
Amit Gupta1Quality, flexibility give Honda
edge, Joe Miller, The Detroit News,January 7, 2001.
Special acknowledgement and
thanks are due to followingpeople for the effort and timethey invested in the preparationof this report: Jonathan Wright,Rup Banerjee, John Calder, BrooksBentz, Mike Engoian, Fred Hajjar,Ruchir Gupta, Varadaraj Shanbhag,Derek Jones, Scott Egler.Zeljko Nikolic
Chicago, United [email protected]
Madrid, Spain
Sydney, Australia
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Copyright 2009 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.
About Accenture Supply Chain ManagementAbout Accenture
The Accenture Supply Chain
Management service line works
with clients across a broad range of
industries to develop and execute
operational strategies that enable
profitable growth in new and existingmarkets. Committed to helping clients
achieve high performance through
supply chain mastery, we combine
global industry expertise and skills in
supply chain strategy, sourcing and
procurement, supply chain planning,
manufacturing and design, fulfillment,
and service management to help
organizations transform their supply
chain capabilities.
Accenture is a global management
consulting, technology services
and outsourcing company.
Combining unparalleled experience,
comprehensive capabilities across
all industries and business functions,and extensive research on the worlds
most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses
and governments. With more than
181,000 people serving clients in over
120 countries, the company generated
net revenues of US$23.39 billion for
the fiscal year ended Aug. 31, 2008.
Its home page is www.accenture.com.
We collaborate with clients to
implement innovative consulting
and outsourcing solutions that align
operating models to support business
strategies, optimize global operations,
enable profitable product launches,and enhance the skills and capabilities
of the supply chain workforce.
For more information, visit
www.accenture.com/supplychain.