HELP FOR SMALLER MANUFACTURERS
■■ Constantly juggling priorities?
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sh
Are you…
Quality
■■ Too busy running your company to plan for the future? ■■ Keen to improve your business but not sure how to go about it?
We can help... Pri te Stra
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IfM Education and Consultancy Services Offering support services specially designed for smaller manufacturing companies.
I don’t have the time!
Managers of smaller companies have little time to think beyond the immediate day-to-day challenge of keeping the firm on track. When problems arise, managers are often too busy firefighting to be able to identify the real cause of any problem and prevent it happening again. But such problems must be addressed if a business is to flourish and grow.
We can help you‌
First step – prioritise With time and resources in short supply any efforts to improve the company must be carefully targeted at real priority areas, where improvement will make a significant difference. A comprehensive prioritisation exercise, taking in the whole business, is the first step in our structured approach to helping smaller companies.
Try this simple exercise… Cut out the tiles on the pull-out flap at the back of this booklet and use them to identify your business priorities. The blue tiles represent the five main order winners – ways your business could grow. The red tiles represent the five potential constraints – things holding you back. Place each set of tiles on the grid on the inside back cover, according to how important you think they are for your business.
Do your colleagues agree with you? Get your fellow managers to do the same. Do you all agree? How closely?
Is everyone pulling in the same direction?
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How well is your company doing? Once you are all agreed on the order of importance of the order winners and constraints for your business, the next step is to assess your company’s performance. This will ensure that you focus your efforts on improvements that will really make a difference, helping you to win orders and overcome your company’s constraints. We have developed a comprehensive question set that is designed to rapidly ‘get under the skin’ of your business. It assesses the strength of your company’s performance across all business areas and reveals how well you are doing in achieving your priorities. Strategy
and The prioritisation e cis er assessment ex een a tw be s ke typically ta half days, half to one-and-apany m depending on co staff al du ivi size, with ind r one fo ed olv inv rs membe hour or less.
Pe o p l e & information U n i q u e va l u e
Demand
Cash
D e l i ve r y
Price Supply chain
Plant & equipment
Et hical per formance
Quality
Identifying your real business priorities The results of this assessment will reveal the top priority areas for your company – areas that are vital to your business but where performance is poor. It will also show the low priority areas that are less important to your business but where performance is currently high. Continued investment of resources in these areas should be reconsidered.
■■ Low priority areas where performance is high – continued investment of time and money should be reconsidered
Strategy
■■ High priority areas with poor levels of performance – business improvement needs to be focused here
Low
Performance: How good are we at this?
High
Your priority areas will form the basis of a tailored action plan to develop key capabilities and achieve real improvement.
Low
Priorities: how important is this to the business?
High
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Is your business going in the direction you want? One item that should always be a priority for any company is to develop and communicate a clear business strategy. Many small companies struggle with this but a good strategy will ensure you focus your efforts on the right areas, helping you increase sales and profitability. Companies in which everyone is working towards the same goals are also more rewarding places to work – encouraging people to go the extra mile. If the prioritisation exercise reveals the need for a clearer strategy for your business then we will work with your management team to set one in place. This involves: ■■ identifying the external factors likely to affect the business ■■ assessing your company’s particular strengths and weaknesses ■■ developing and selecting options for your future ■■ preparing a clear project plan with defined responsibilities and timescales The business strategy will guide decision making for several years to come and ensure everyone’s efforts are focused in the right direction. Strategy development lfinvolves four ha s op day worksh in scheduled to fit lity bi la ai av e th th wi ent em ag of the man team.
It may be that everyone is pulling in the same direction – but is it the right direction?
Tackling the real priorities: capability development The next step is to focus on the capabilities you need to develop in order to tackle your priority areas and make a real difference to company performance. The issues will be as varied as the companies involved. They could range from improving product quality or raising on-time delivery performance, to improving cash management or increasing the reliability of key suppliers. We support the improvement process in a number of ways: ■■ briefing sessions for the management team ■■ introduction of new systems and processes ■■ staff training to fill skills gaps We help you with the change process but the most valuable time will be spent by the company itself deciding how best to tackle the issues involved.
Each project is tailored to the needs of the company. There are no standard solutions.
How we work… A typical improvement programme
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Delivery Customers expect the product when they ask for it. It must be available as soon as possible, or on the date we promise, even if customers change their minds.
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Identify priorities & assess current performance
Cash A key barrier to achieving growth will be a lack of cash to invest in value-generating activity. It will be critical that cash is released from inventory and interest payments.
Capability development projects in your business priority areas 4 to 8 days engagement per project
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Business success
How we develop key capabilities Order winners
Delivery performance
Unique value and innovation
Ethical and environmental performance
Quality management
Price management
Aim
To improve delivery performance
To offer more distinctive and compelling products
To deploy firm’s ethical values to win business
To increase quality of products and services
To improve pricing and margin management
Strengthen
•• Production planning and scheduling
•• Idea generation
•• Sustainability strategy and business model
•• Product (quality) design
•• Product marketing
•• Production management
•• Product portfolio management
•• Response to customers’ needs and values
•• Quality systems
•• Supplier management
Impact
•• Improved customer satisfaction •• Reduced overtime •• Reduced stress, increased morale
•• Product introduction
•• Design, supply, production, distribution, marketing and through-life service functions •• More exciting product ideas; delighted customers
•• Win more business •• Reduce operating costs •• Improve customer loyalty
•• Cost management; cost reduction
•• Suppliers’ quality performance
•• Fewer defects; improved customer satisfaction
•• Better strategic pricing •• Improved margins over product lifetimes
•• Improved efficiency of resources (energy, materials)
•• Reduced re-work; lower costs
•• Better informed staff and customers
•• Reduced frustration; improved morale
•• Win more business at higher margin
•• Win more business
•• Win more repeat and new business
•• Win more profitable orders
•• Increase income over the product life cycle
•• Strengthen brand
•• Increase revenues
•• Reduce operating costs
•• Products developed quicker, on time and on budget •• Resources focused on the right opportunities
Business benefit
•• Improved product whole-life performance
•• Understanding of quality across company
•• Pricing strategies; price setting
•• Improve customer loyalty and strengthen brand
•• Reduce costs
•• Reduce costs
•• Increase margins
Business constraints Supply chain Aim
To improve supply chain performance while reducing total costs
Strengthen
•• Supply management
Demand
People and information
Cash
Plant and equipment
To influence demand and generate profitable sales
To increase business performance and productivity through effective management of people and information
Manage cash to minimise business financing costs
Improve utilisation of production assets
•• Performance •• Marketing and sales: management strategy, management and operations • • Employees’ knowledge •• Information and skills; talent management and use •• Product management acquisition •• Sales and operations •• Outbound logistics
planning
Impact
•• Improved supplier performance
•• Stand-out from competitors
•• Increased discretionary effort by employees
•• Improved delivery performance
•• More enquiries; greater conversion; more orders
•• Increased team effectiveness and productivity
•• More efficient order processing and faster delivery
•• Improved information management and use
•• Managed inventory levels
Business benefit
nt Capability developme : es lud inc m – management tea briefing rrent – assessment of cu bility pa ca and required level hes – structured approac to improve key processes and skills ring – support and mento
•• Use of ICT, e.g. MRP/ERP
•• Win more orders •• Reduce working capital •• Develop effective supply chain partners
•• Inventory management •• Cash flow management
•• Production operations management
•• Improved cash receipts and payments
•• Increased operational effectiveness
•• Reduced cash tied up in inventory
•• Better use of capital, labour and factory space •• Improved throughput efficiency
•• Increased employee morale and motivation
•• Stronger sales pipeline •• Improve decision-making and conversion into •• Increase business orders performance •• Increased revenues •• Increased customer retention
•• Creditor and debtor •• Selection of plant and equipment management
•• Better use of working capital •• Reduced financing costs
•• Greater output from existing equipment, labour and capital •• Improved delivery performance
Company examples
Sheet metal business Problem
Food manufacturer Problem
On-time delivery performance typically 50%
Steps taken
• analyse pattern of demand for each product • create production schedules to match this demand • introduce ongoing reviews of sales forecasts
Results
• 99.5% on time delivery • reduced overtime costs • dramatically reduced stress levels
Lack of coordination between sales and shop floor on due dates and priorities for work-in-progress
Steps taken
• created a schedule showing plan and progress of all jobs • schedule available to office and shop floor • orders received are loaded into schedule
Results
• on-time delivery improved significantly • newly-arrived urgent jobs completed more reliably
Waste management company
Hospitality business
Problem
Problem
Company just breaking even – needed to grow but unsure how to do this
Steps taken
• strategy workshops identified different customer groups with varying needs • range of product solutions created to suit each customer group with appropriate price and service levels • internal processes restructured to channel most effort into premium customers
Results
• revenue doubled in one year • new staff taken on • profits increased
Construction materials company Problem
Company operating in declining industry, forcing closure of one of its production plants
Steps taken
• assessment undertaken of the company’s skills, facilities and technical abilities • strategy workshops identified potential new markets • new market chosen and appropriate product developed using existing skills and facilities
Results
• new product launched • land acquired for new facilities • staff numbers expected to grow
Cash flow problems holding back company’s growth plans
Steps taken
• analysis of cash flow revealed high costs associated with repeated machine breakdowns • assessment showed high landfill costs incurred as machines not sorting waste correctly • training introduced for staff to improve operation and maintenance of machinery
Results
• costs reduced significantly • cash flow improved • plans for growth now feasible
Benefits at a glance Company sector
Length of project
Revenue Before
After
Industrial electronics
9 months
£1.2m
£2.2m
Refrigeration
18 months
£750K
£2.1m
Food
18 months
£3m
£4.8m
Chemical treatment
12 months
£1.7m
£3.5m
Laboratory equipment
12 months
£5m
£6.2m
Smart metering
6 months
£2.3m but falling £2.3m but rising
Materials handling
4 years
£10m Not profitable
£16m Profitable
Food
18 months
£6.8m
£8.4m
Packaging
18 months
£3.2m
£4.1m
Capital equipment
2 years
£12m
£35m
Employees
Revenue per employee
Other
Before
After
Before
After
11
14
£109K
£157K
Exploited new market opportunities leading to growth
8
10
£94K
£210K
New practices released production capacity
70
70
£43K
£69K
Delivery performance increased from 50% on time to >99% on time in full
25
45
£68K
£78K
Defects halved in <6 months
32
32
£156K
£194K
Profits doubled
20
20
£115K
£115K
Defects halved in 4 months
140
150
£71K
£106K
Moved into new markets
75
75
£91K
£112K
Moved from breakeven to significant profitability
48
48
£67K
£85K
Net profit more than doubled
70
70
£171K
£500K
Growth in UK supply chain
The team The improvement approaches described here are delivered by IfM Education and Consultancy Services (IfM ECS), the dissemination arm of Cambridge University Institute for Manufacturing (IfM). IfM ECS industrial consultants are experienced senior manufacturing professionals – people who have ‘been there and done it’ – typically as operations director, general manager, managing director or owner. They have deep knowledge and experience across manufacturing SMEs, larger firms and/or leading consultancies. Our approach is different to conventional consultancy and involves working collaboratively to co-develop solutions. Our consultants focus on transferring knowledge as well as delivering business results. The findings from their engagements help to inform future IfM research.
Order winners
Business constraints
Order winners
Business constraints
Price
People and information
We want to compete and win business on price. The cheapest provider in the marketplace will get the orders.
A key priority for us will be to maximise the effectiveness and flexibility of our staff and our support systems, e.g. software, processes, decision making etc.
Quality Our ability to provide reliable, fit-for-purpose products and services will be key to our success in the marketplace.
Plant and equipment A key constraint will be our structural assets. We need to reduce bottlenecks and maximise the effectiveness of our equipment, factory space etc.
Unique value
Supply chain
We need to compete on the uniqueness of our offering: developing our product, improving our range and/or enhancing our service, in order to stay ahead of the competition.
A key constraint will be the supply chain of goods and services into our company. A priority will be to optimise the capacity, quality and delivery performance of our suppliers.
Delivery
Demand
Customers expect the product when they ask for it. It must be available as soon as possible, or on the date we promise, even if customers change their minds.
A key priority for us will be to find more customers for our product or service. We can accommodate increased volumes without any difficulty.
Ethical performance Our customers and other stake-holders are concerned about the performance of our humanitarian, social, environmental and regulatory obligations.
Cash A key barrier to achieving growth will be a lack of cash to invest in value-generating activity. It will be critical that cash is released from inventory and interest payments.
Business constraints
Order winners
People and information
Price
A key priority for us will be to maximise the effectiveness and flexibility of our staff and our support systems, e.g. software, processes, decision making etc.
We want to compete and win business on price. The cheapest provider in the marketplace will get the orders.
Plant and equipment A key constraint will be our structural assets. We need to reduce bottlenecks and maximise the effectiveness of our equipment, factory space etc.
Quality Our ability to provide reliable, fit-for-purpose products and services will be key to our success in the marketplace.
Supply chain
Unique value
A key constraint will be the supply chain of goods and services into our company. A priority will be to optimise the capacity, quality and delivery performance of our suppliers.
We need to compete on the uniqueness of our offering: developing our product, improving our range and/or enhancing our service, in order to stay ahead of the competition.
Demand
Delivery
A key priority for us will be to find more customers for our product or service. We can accommodate increased volumes without any difficulty.
Customers expect the product when they ask for it. It must be available as soon as possible, or on the date we promise, even if customers change their minds.
Cash A key barrier to achieving growth will be a lack of cash to invest in value-generating activity. It will be critical that cash is released from inventory and interest payments.
Ethical performance Our customers and other stake-holders are concerned about the performance of our humanitarian, social, environmental and regulatory obligations.
About us IfM Education and Consultancy Services Ltd (IfM ECS) provides a rapid dissemination route for new ideas and approaches developed at the Cambridge University Institute for Manufacturing (IfM). A team of industrial practitioners helps companies of all sizes to apply research-based improvement techniques via a programme of consultancy and education services. This work brings benefits to both parties. Industry receives practical solutions based on the latest applied research; the IfM gains live feedback to help set the agenda for new research as well as an income stream to assist in funding future research activities. IfM ECS is a wholly owned company of the University of Cambridge.
Please get in touch if you would like to discuss how we can help you to develop and grow your business.
IfM Education and Consultancy Services Ltd Institute for Manufacturing 17 Charles Babbage Road Cambridge CB3 0FS United Kingdom Tel: +44 (0)1223 766141 Email: ifm-enquiries@eng.cam.ac.uk www.ifm.eng.cam.ac.uk/working