Strategy and Execution in Smart Manufacturing Must Meet in Middle

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It’s pretty cool that 84% of the 439 respondents in our recent smart manufacturing study agree that when it comes to the topic, their leadership “gets it.” Specifically, they agree that their leadership understands and accepts the need to invest in smart manufacturing. It is a solid reflection of how in the past two years senior leaders have stepped up and made the manufacturing function a priority. This is especially the case atop last year’s fervent acknowledgement of the efforts factory workers made while toiling away on the production lines even as office spaces were abandoned for work-from-home setups. On its surface, some of the deeper analysis of the survey data (see Figure 1) reflects this acknowledgement. Leadership commitment goes deeper: 86% of the C-level respondents — who are also final decision makers in their organizations — agree that leadership “gets it.” Is it time to celebrate eliminating the “myth of lacking leadership commitment”? Not yet. Why? Remember that many of these leaders are the same catalysts of the “go implement Industrie 4.0” or “go make smart manufacturing happen” dialogues with clients that we have been having for well over five years. The presentations and visions are impressive, but the activities to move from “art of possible” to “reality,” less so. Are senior leaders prepared to sustain the momentum of 2020? Or are we again pandering to a mirage of hype that has appeared, flirted with us, and disappeared oh so fast? Yes, it starts at the top, but it must be met from the bottom up. There is value in factory-level pilots — asset performance, quality improvements, cost reductions — because they are easy to measure, rally around and leverage as a platform to improve reliable supply. These minimal viable outcomes are what purchase the credibility which, in turn, creates pull for initiatives to scale, at least in a perfect world. While C-level respondents agree that they “get” smart manufacturing, the most substantial challenges to executing their smart manufacturing strategies are concerning. When contrasted against non-C-level participants in Figure 2 below, the different emphases on investment justification, scalability and leadership commitment alone raise more concerns than instill confidence that meeting top down from the bottom up can be achieved. Now is the time for a serious reboot of capability building that goes beyond initial commitments. The year 2020 was the kick that smart manufacturing needed, but it’s still in its nascence. We are in a scenario where less than 50% of all survey respondents are either implementing or have a fully deployed smart manufacturing strategy. Smart manufacturing is more than digitization. It requires synchronizing activities for capability building, capability enablement and empowering people. Centers of excellence are important, but there’s a bigger picture. The time is now. Here’s how senior leaders and CSCOs, manufacturing operations leaders and stakeholders across IT, HR, engineering and quality can meet in the middle to prevent the strategy and execution gap in manufacturing operations from widening: Go digital gradually: Survey respondents identified technology immaturity as a moderate challenge. However, it significantly impacts how companies will manage pilots, demonstrate ROI and scale successes. Pilots aren’t disruptive in and of themselves — it’s where they are deployed to is where the disruption happens. Reengineering processes, hidden integration costs, and skills or technical burden might be scoped, but cost more than expected. Connecting smart manufacturing and continuous improvement limits disruption and ensures alignment during scale. This connection helps handoffs, eliminates competition for resources, safeguards the predictability of some benefits and creates the feedback loop to continually refine the technologies being scaled. Gartner clients can read: “Scale Smart Manufacturing With a Clear Innovation Strategy.” Shift the performance lens from efficiency to speed: The Internet of Things explosion catalyzed a plethora of pilots for manufacturing intelligence. Providers sell on improving data access, visibility and analysis — and several manufacturers justify initial investments on increasing overall equipment effectiveness (OEE). It’s an easy to measure metric that is well known and linked to many performance-based cultures. The problem is that OEE-driven efficiency and profitability don’t always walk hand in hand — it’s possible to deliver imperfect orders with world-class OEE! Instead, the focus needs to be on speed — order cycle times and service levels. How does smart manufacturing support that? What can be automated? Gartner clients can read: “Lights-Out Production Will Be a Reality by 2025.” What tradeoffs need to be made and how do you demonstrate that to operations and business leaders? Another angle to consider: your investors and external stakeholders will care more about your carbon footprint and other corporate social responsibility indicators than OEE. Revamp the operating system: Going digital has catalyzed a rewriting of the rules and ways of working. In the past two years, a dearth of consistent standard work has been exposed. It’s being attacked. Redeploying existing “pure” lean systems or executing technology projects at sites isn’t the answer. Tactical wins at sites are nice, but when they are not orchestrated as part of an end-to-end capability, they can result in constraints for product supply, creating cost and complexity for the business. The focus has to be bigger. Consider this (as we just wrapped up the Top 25 briefings for 2021): just over one-third of the 2020 Top 25 (including those in the Masters category) have rewritten their operating systems in the past few years. They have done so to connect the dots between sites, network objectives, digital capabilities and current production systems. This creates the end-to-end capability needed. Embrace Gemba: If manufacturing is indeed the competitive weapon of choice in your future, then focus on where the value is created. Last year we witnessed several leaders holding town halls with factory workers. They were accessible, open and honest in a non-patronizing fashion. Gemba isn’t just for continuous improvement leaders or site managers. Senior leaders must understand that this transparency and tireless interest in improving the experience for hourly workers is critical and must be sustained. Otherwise, axioms morph into lip service and damage credibility. Leverage The Ecosystem: How can smart manufacturing be leveraged to lower the thresholds and costs of entry for training and knowledge access? Or how can you leverage it into your partner network — especially small to midsize manufacturers that might lack the sophistication and expertise needed? Not to be overlooked is the focus on partnering with educational institutions and industry consortia to access knowledge and training. Simon Jacobson VP Analyst Gartner Supply Chain [email protected]artner.com

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