Manufacturers have done a good job in recent years of squeezing the inefficiencies out of their operations and improving productivity. Most large enterprises have a Lean manufacturing program in place to one degree or another. The competitive global marketplace now requires it.
But there’s one area of potential improvement that has received only minimal attention, and that’s resource productivity. Even the term sounds odd—resources like water, oil, and energy are just the cost of doing business, right? You use them and throw them away. This has been the traditional approach. But, a recent article from McKinsey & Company’s web site, “Manufacturing growth through resource productivity,” argues that manufacturers are being forced to change, due to rising resource costs on the one hand, and increasing customer demands on the other. The article proposes 5 key factors that enterprises need to consider in order to seriously improve their resource productivity:
- Apply Lean concepts and procedures to resource management
- Start with the goal of maximum resource efficiency instead of just improving existing processes
- Track profit per hour, in real-time, including energy and resource costs
- Think more holistically by changing process, culture, and organization
- Recycle resources instead of automatically consuming them
These are all interesting ideas, but the one I want to focus on is profit per hour. What’s striking, and challenging, is the idea of measuring and reporting this metric in real-time. How could this be done? Where would the data come from?
Is Profit per Hour a Metric You Track?
A lot of cost and some material data are in an ERP system. But, in order to know true profit per hour on a real-time basis, you need access to more information. You need to know everything that happens on every production line to a high degree of granularity – as it happens. And, you will need the ability to relate all activities to resource use and their related costs. This means answering questions like: How many products were just made in the last hour? What resources are being used, and at what cost for each production run? Does resource use vary over time and why? How do different plants compare?
This kind of data integration and detail is not possible in the traditional manufacturing environment of siloed operations and legacy systems. It is possible, however, with an enterprise solution for Manufacturing Operations Management (MOM). A platform-based approach, which some of the leading companies have been deploying for several years now, can address this challenge.
A MOM can provide a standardized platform across plants for manufacturing execution and visibility down to the plant floor, and across related operations including warehouse, production, labor, quality and suppliers. As enterprises expand their use of these platforms, the data for tracking resource productivity will become more readily available. This data can then be harvested with new Business Intelligence (BI) tools.
An enterprise MOM platform can also help address other changes proposed by the article, particularly #1 (Lean operations) and #4 (holistic thinking), because these platforms can help enforce best practices in people and machines.
There are many reasons for manufacturers to adopt a standardized MOM platform for use across their entire enterprise. Now resource productivity can be added to that list.
Given the obvious value of measuring profit per hour with resource costs included, and the fact that the MOM platforms needed to enable this are becoming widely adopted, it seems a safe bet that managing resource productivity in manufacturing will move from “a good idea” to “a must-have to compete” in the next few years.
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