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The Optimisation Contradiction: One key thing manufacturers forget when optimising their factory

Manufacturers are often early adopters of new technology. Particularly on the factory floor where it can help drive productivity and increase output. However, this attitude is not applied to the wider business functions, where they could really be of benefit in helping create a competitive advantage.

/ Strategy
July 10th, 2019

Manufacturing - The Optimisation Contradiction: How to improve factory efficiency

It is well known that inefficient operations reduce margins and weaken your competitive position in the global market. It is also well known that manufacturers are famous for their dedication to cutting out inefficiencies wherever they can in their operations.

But whilst the shop floor has received the benefits of technologies such as robotics, softer practices such as visual management and initiatives such as lean, manufacturers’ dedication to optimisation is seemingly contradicted by how many of them have forgotten to apply the same fervour to another key area of their operations: the back office.

This is the Optimisation Contradiction.

Why should you optimise the back office?

What happens in the back office doesn’t stay in the back office. Inefficiencies here directly counter the rewards of your wins on the shop floor and since inefficiencies are often allowed to build up, their counterproductivity is multiplied.

As an example, there’s little point holding the shop floor to incredibly high-efficiency standards if at the same time as much as 68% of the paper being printed in the back office is unnecessary. Imagine if there was a 70% material wastage on the shop floor. That would be unacceptable.

So how can you make your back office a productivity powerhouse like the shop floor? We believe that through the intelligent application of IT, it’s not just possible but it provides additional opportunities to improve your firm.

How to make IT deliver an advantage in the back office

1. Embrace Software as a Service

Monthly instalments will give you more control over your IT budget, better-optimised software and often live support to assist with overcoming roadblocks. All of which keeps operations in the back office running smoothly.

However, there is some ill will towards Software as a Service (SaaS), as many manufacturers see subscriptions as more expensive.

The issue with this mindset is that it looks at the software in a static point of time and ignores the continual updates and support SaaS applications have. When you buy a one-off piece of software, you get what it is and nothing more. Any bug fixes, feature updates or integrations will need to be acquired separately, either as an add-on or as part of the next major release. When you buy software on a subscription, you get continual updates and new features as standard.

2. Categorise and control your talent

To complete work effectively, you need people with the right skills in the right place. This might seem obvious but so many firms fail to assign their talent optimally – probably because they’re trying to assign 100 people with different skillsets to 20 tasks which require different combinations of these skillsets. It’s impossible to do in your head but IT systems excel at this sort of thing.

With a talent management system, your HR team can see exactly the skills each employee has and therefore allows you to intelligently recruit whilst controlling and developing your existing talent. Employees also gain visibility into their training program – resulting in greater engagement.

By managing your talent pool this way, it leads to a better-skilled workforce, better allocation of these skills and an overall more engaged and efficient workforce.

3. Optimise processes with ISO

Every manufacturer should have already strived to ensure their shop floor processes are to ISO standards, but few turn their sights to the back office once this goal is achieved.

In the back office, ISO 22301 and ISO 27001 are the two key accreditations.

  • ISO 22301 is about minimising IT downtime and ensuring data integrity with redundancy and network resilience, and backups and encryption.
  • ISO 27001 is about securing your assets (personal information, intellectual property e.t.c.) through policy, software and hardware with the aim to prevent an intrusion or breach.

If you do decide to proceed with accreditation, an external consultant can help you to identify and resolve any weaknesses before the assessment process. Once you’re adhering to ISO principles and have become ISO certified, you’ll not only be far more resilient against disruptive incidents which threaten your efficiency and productivity but it’ll be easier to pick up business since it’s proof of your dedication to continual improvement.

4. Secure your position

In March 2019, Norsk Hydro – a global manufacturer of aluminium – was hit by the LockerGoga ransomware. The malware spread from the back office into networked machines on the shop floor and ended up impacting global processes, forcing the company into manual operation mode. Overall predicted losses were £41.2 million.

To put this into perspective, Norsk’s quarterly sales volumes for Extruded Solutions were 333,000 tonnes. Factoring in the losses equates to an increased unit cost of £123.72 per tonne or 12.4 pence per kilogram. Cleary a massive hit to the bottom line.

Cyber-security in the back office should now be important for obvious reasons. But despite being essential, some companies negligently assume they can get away without basic security in place. Typical areas of negligence are multi-factor authentication, patch management and rights management – the lack of even one of which instantly compromises the optimisations you’ve worked so hard for, not to mention endangering your reputation.

If you want to improve your security posture but don’t know how then Cyber Essentials accreditation is a good place to start. You’ll need to go beyond this since it only addresses the basics so something like ISO 27001 should be your true goal since it’s much more robust.

5. Digitise and automate

Another clear sign of the Optimisation Contradiction is that whilst manufacturers have strived for 100% automated shop floors in their quest for efficiency, they have at the same time forgotten to automate and digitise even the simplest tasks in the back office.

For example, even something as simple as obtaining a signature requires a long, physical process. First, you would need to print and hand over the paper for the person to sign. Then, scan the document to send a digital copy to the requester and shred the physical one for security. Finally, upon arrival, the digital signature would be stored in a safe location. With e-signatures, you can remove the physical processes of printing, sharing and shredding.

Automation can also help tackle highly repetitive or routine tasks in the back office, to free up time for more strategic, value-add work. By implementing automation in the back office, you should see more KPIs being hit and a more efficient workforce overall.

6. Modernise legacy systems

The general rule for hardware is you should refresh laptops or PCs every 3-5 years and servers every 4-5 years. Whilst it’s tempting to sweat IT assets, the lost efficiency and increased volatility means doing so will likely cost you much more than you ‘save’ by not upgrading.

Updating hardware allows back-office workers to work much faster. Less waiting and more responsive systems result in more streamlined workflows and therefore higher employee uptime.

But it’s not just the raw speed and efficiency values to look at. There’s also the matter of reliability. As hardware ages, it rapidly becomes more prone to failure. A study undertaken by Google revealed that one-year-old hard drives have an average failure rate of >2%. A figure which quadruples to 8% by the time the hard drive is two years old.

The wasted time and potential for data loss due to ageing hardware is something to bear in mind when considering the cost of an upgrade. Ask yourself if you can afford to spend time recovering or recreating key data and then decide whether you should upgrade to current hardware.

7. Make things lean

Much like the ISO standards, lean is something many manufacturers already apply to the shop floor, but you can gain similar benefits in the back office. By managing the IT systems in use, eliminating excessive bureaucracy and redistributing talent and resources, you can create major improvements to efficiency.

Lean in the back office ranges from small changes such as moving the office printer into a more ergonomic location to undertaking upgrades to IT infrastructure and setting up a rolling upgrade cycle for hardware.

Performing a thorough analysis of back-office functions against lean can give you valuable insights into where problems are arising, allowing you to make genuine process improvements and cost savings.

Below is an infographic to help you with applying lean in the back office.

Applying lean can help with improving factory back office optimisation

In summary…

To truly improve the efficiency of your firm, you need to be directing attention to the processes and systems both on the shop floor and in the back office. It’s easy to think that processes not directly related to production have no influence on efficiency, but they do.