Next Generation Manufacturing

2012 Global Manufacturers Benchmarking Toolkit

MPI's Global Manufacturers Benchmarking Toolkit offers 24/7 online access to detailed best practice and performance benchmarks — from world-class manufacturers — that help to boost performance now.

This powerful benchmarking tool allows you to sort data from more than 1,500 companies in the United States and around the world. Metrics and best practice information are available for human resources, plant operations, supply chain, green/sustainability, and capacity and equipment. Click here to see a complete list of available benchmarks.

View a demo or visit MPI's website to purchase an online subscription today.

Inventories Grow — Can They Be Managed?

As the manufacturing sector continues to recover, inventories are on the rise. For example, inventories of manufactured durable goods rose for the 25th consecutive month in January 2012, according to the U.S. Census Bureau. For nearly two years during the recession, manufacturers have tried to satisfy demand from existing inventories whenever possible. Many manufacturers now will need to re-familiarize their operations with inventory-management practices as they and their markets enter a growth mode. For some, inventory management will be entirely new.

A majority of U.S. manufacturing plants do not use many common inventory-management practices and techniques: just-in-time supplier deliveries are the most common inventory-management practice (in use at 44% of plants), followed by pull systems with kanban signals (38%), and vendor-managed or -owned inventories (38%), according to the 2011 MPI Manufacturing Study. (Plants outside the United States were even less likely to be using most of these practices.) Approximately 17% of U.S. plants use none of the practices identified by the MPI study.

Practice	% of plants
Just-in-time supplier deliveries	47.30%
Pull systems with kanban signals	46.40%
Vendor-managed or -owned inventories	42.70%
One-piece flow techniques	24.10%
Quick equipment changeovers	23.60%
Production leveling/heijunka	18.60%
Parts/goods supermarkets	18.60%
RFID and computerized inventory tracking	10.00%
None of these	16.80%

Source: 2011 MPI Manufacturing Study, U.S. plants

In a rush to satisfy reemerging customer demand, manufacturers are unlikely to allow inventory shortages — raw material and components that go into their products or finished-goods — to prevent them from filling customer orders. And satisfying customer orders should be the first objective. But at what cost will manufacturing executives grow their inventories beyond rational levels of safety or buffer stock and risk profitability? Obsolete inventory was 2% (median) and 5.4% (average) in 2011. More is not necessarily better.

by George Taninecz, VP of Research, The MPI Group

Measuring What Manufacturers Measure

The adage is that you can’t manage or improve what you don’t measure. That is good news for many manufacturing plants that report strong measuring capabilities for a range of fundamental operations performances.

A majority of plants have strong capabilities to monitor and measure location-specific inventory levels (58% of plants rated 4 or 5, where 5=real-time capability); process-specific quality (58%); process-specific safety (56%); and process-specific pace or speed (51%), according to the 2011 MPI Manufacturing Study of 322 plants in the United States and abroad. The bad news is that a surprisingly high percentage of plants have “no capability” to monitor and measure their operations, especially external logistics/distribution performance (18% of plants); in-plant material-handling performance (17%); and process-specific sustainability performance (16% of plants).

Plant’s capability to monitor and measure (% of plants)

	1=No capability	2	3	4	5=Real-time capability
Location-specific inventory levels	6.9%	8.7%	26.3%	30.5%	27.7%
Process-specific quality	3.8%	10.7%	27.6%	30.7%	27.2%
Process-specific safety	7.3%	10.1%	26.1%	35.2%	21.3%
Process-specific pace or speed	6.3%	11.8%	30.9%	28.5%	22.6%
Process-specific productivity (i.e., value vs. waste)	6.9%	14.9%	30.9%	30.9%	16.3%
Individual equipment or machine performance	6.6%	15.6%	32.3%	30.6%	14.9%
Supplier performance	6.2%	17.0%	38.8%	29.4%	8.7%
Process-specific sustainability performance	15.5%	16.6%	35.9%	24.3%	7.8%
External logistics/distribution performance	17.5%	18.2%	34.6%	24.1%	5.6%
In-plant material-handling performance	16.6%	20.7%	34.5%	19.0%	9.3%

Plants that have achieved or made significant progress toward world-class manufacturing status are more likely to have strong monitoring and measuring capabilities (rated 4 or 5) for all of the operations performances. For example, 59% of plants at or near world-class status have strong monitoring and measuring capabilities for process-specific productivity vs. 39% of plants that have made no progress or only some progress toward world-class status.

What can your company monitor and measure? What can your company improve?

By George Taninecz, VP of Research, The MPI Group

 

 

	1=No capability	2	3	4	5=Real-time capability
Location-specific inventory levels	6.9%	8.7%	26.3%	30.5%	27.7%
Process-specific quality	3.8%	10.7%	27.6%	30.7%	27.2%
Process-specific safety	7.3%	10.1%	26.1%	35.2%	21.3%
Process-specific pace or speed	6.3%	11.8%	30.9%	28.5%	22.6%
Process-specific productivity (i.e., value vs. waste)	6.9%	14.9%	30.9%	30.9%	16.3%
Individual equipment or machine performance	6.6%	15.6%	32.3%	30.6%	14.9%
Supplier performance	6.2%	17.0%	38.8%	29.4%	8.7%
Process-specific sustainability performance	15.5%	16.6%	35.9%	24.3%	7.8%
External logistics/distribution performance	17.5%	18.2%	34.6%	24.1%	5.6%
In-plant material-handling performance	16.6%	20.7%	34.5%	19.0%	9.3%

 

Seeking Support

Manufacturers are seeking out external support in developing their companies, and, in most cases, believe they are getting benefits from outside organizations. A majority of manufacturers indicate they’ve been positively impacted by industry associations; state manufacturing associations, including Manufacturing Extension Partnerships (MEPs); and consulting firms, according to the 2011 Next Generation Manufacturing (NGM) Study.

If you have used outside resources, which of the following have positively impacted your company?

	Percent of manufacturers
Industry association	57.8%
State manufacturing association (including MEPs)	56.1%
Consulting firm	54.3%
University/college	41.2%
National manufacturing association	24.2%
Local/municipal manufacturing association	24.1%
Other	10.0%
No positive impact	5.0%

2011 Next Generation Manufacturing Study

A majority of manufacturers look for support services (as needed or on an ongoing basis) to assist with the following activities:

• Regulatory/compliance issues (67% of manufacturers),
• Operations improvements (64% of manufacturers),
• Workforce skills development (64% of manufacturers),
• Strategic planning (52% of manufacturers),
• Innovation/R&D (52% of manufacturers), and
• Business development (52% of manufacturers).

Have you reached outside your company for assistance? If so, how did it affect your organization?

By George Taninecz, VP of Research, The MPI Group

 

Demo MPI's Benchmarking Toolkit

Every year (and going on now), The MPI Group conducts its Manufacturing Study. This study is known to be one of the world’s most comprehensive annual surveys of manufacturing performance data. But did you know that the data from the study is published in one of the world's largest sortable databases on performance metrics?

The MPI Benchmarking Toolkit offers on-demand access to three years of user-defined manufacturing performance data from U.S. and international manufacturers in a multitude of industries and across a wide range of performance metrics, including essential benchmarks for scorecard analysis, Six Sigma and Lean initiatives, and other process-improvement programs.

There really is no substitute for good competitive intelligence, and The MPI Group offers one of the most comprehensive benchmarking tools available today. Watch this demo of how the toolkit operates or click here to visit our website for subscription information.

The Opposite of World Class – Do You Know These Plants?

Many organizations are motivated to improve by seeing and witnessing operational excellence among their peers and exploring neighboring plants or leaders in their industry. Good companies or facilities seek to set stretch targets and become world-class; other sound operations benchmark for ways to get better and establish more competitive goals. Many plants, though, are looking to simply stabilize dysfunctional operations and apply some means of improvement.

Manufacturing metrics from U.S. plants that participated in the MPI Manufacturing Study, years 2006-2010, reveal operations challenges that face about one in 10 manufacturing facilities. (And these are the plants that at least have the will to improve — they participated in the annual study and are interested in what other companies and facilities are doing.)

• On-time delivery: 13% of plants report on-time delivery rates of 80% or lower.
• Scrap and rework: 11% report scrap and rework rates, as a percent of sales, of 10% or higher.
• Labor turnover: 17% report annual labor turnover of 20% or higher.
• Warranty costs: 9% report warranty rates, as a percent of sales, of 5% or higher.
• Machine availability: 13% report machine availability of 50% or lower.
• Customer retention: 10% report customer retention rates of 80% or lower.
• No improvement method in place: 12% report the plant has no methodology in place to improve – none.

If you’re a customer of plants with metrics like these, you probably know their struggles firsthand and have been on the receiving end of their problems. Or do you recognize your plant in these numbers? How does your operation stack up? Take the 2011 MPI Manufacturing Study to find out.

By George Taninecz, VP of Research, The MPI Group

In Baseball and Manufacturing, Some Stats Matter the Most

I like baseball, and I like baseball statistics – especially sabermetrics. These advanced statistics, referring to the acronym for the Society for American Baseball Research, are transforming how those in the game and those observing the national pastime gauge performance. For example, wins above replacement player (WARP) is, according to Baseball Prospectus, “the number of wins this player contributed, above what a replacement-level hitter, fielder, and pitcher would have done, with adjustments only for within the season.” WARP quickly reveals the value of a player to an organization.

Imagine having a go-to metric for manufacturing that similarly and quickly gauges the value of a plant to an organization. To that end, MPI computed overall plant efficiency (OPE) for U.S. manufacturing facilities, using 2010 MPI Manufacturing Study median and weighted data and U.S. labor data. OPE is a multiple of the following three factors:

• Overall equipment effectiveness (OEE): multiple of three subfactors for an equipment effectiveness metric.
• Labor operating efficiency (LOE): multiple of three subfactors for a labor effectiveness metric.
• Capacity usage: measure of production volume as a percentage of designed capacity.

OPE for U.S. plants was approximately 18% in 2010 (see below). How do your plants — or functions and departments within your plants — stack up?

Overall equipment effectiveness (OEE)	Machine availability % Quality yield % Run rate as % of optimal run rate	80.0%
Labor operating efficiency (LOE)	Empowerment % Annual labor retention % Nonabsenteeism %	38.2%
Capacity usage	Production volume as % of designed capacity	60.0%
Overall plant efficiency (OPE)	OEE X LOE X Capacity usage	18.3%

Source: MPI 2010 Manufacturing Study and U.S. Bureau of Labor Statistics.

By George Taninecz, VP of Research, The MPI Group

Participate in the 2011 MPI Manufacturing Study

MPI has extended the deadline to participate in the 2011 MPI Manufacturing Study. Participants receive a free 24-page Executive Summary of this year’s findings and six months of free online access to benchmarks from four years of the study ($495 value). Participation is anonymous:

1. Go to www.MPIManufacturingStudy.com
2. Complete the study questionnaire anonymously and submit by the extended deadline of September 26, 2011.
3. After submitting, you can provide contact information at a separate website to receive your free Executive Summary and free six months of online benchmarking.

I've Heard This Before; Can You Say It Again?

In his Lean Journey blog, Tim McMahon cites two of the most-often quoted sayings around the issue of peformance measuremnet.

1. What gets measured gets done;
   What gets done well gets rewarded;
   And what gets rewarded gets repeated.
       Source: Unknown
2. Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.
       Source: Albert Einstein
   

The heart of the matter, he points out, is somewhere in the ample space between these two points.

Per Einstein and McMahon, it's certainly possible to measure too much. 

Per Unknown and McMahon, measuring the right things keeps your focused and moving forward. 

By the way, if you're interested in figuring out what to measure, or comparing your metrics against a worthy pool of peers, take a look at the newest data from MPI Group: The 2010/2010 Manufacturing Executive Summary. Just released, it contains vital operating metrics from a pool of hundreds of plants across the United States and worldwide.

If You Measure It . . .

If you measure it, it will improve. Manufacturers tend to believe that statement. There’s really no other way to quantify improvement (or lack thereof) without some method or means to establish a baseline performance and monitor progress — for a company, process, function, person, etc.

Yet many manufacturers fail to rigorously measure how they’re performing with strategies key to their success in coming years. For example, according to the Next Generation Manufacturing Study, 26% of manufacturers have no measurement systems or reviews in place to assess return from supply-chain management and collaboration; another 31% have only “ad hoc monitoring of basic measures and ad hoc reviews.” For strategies of green/sustainability and global engagement, the lack of measurement is even more pronounced.

Measurement systems for reviewing return from the following strategies:

Now measuring would be meaningless if it didn’t actually correlate with improvement — but it generally does. For example, 65% of manufacturers with better than ad hoc measurement systems or reviews of process improvement efforts report that productivity has increased by 25% or more the past three years, compared to 43% of manufacturers with no measurements and 48% of manufacturers with only ad hoc measurements and reviews.

Look around at what’s important to your company, be it one of the six NGM Study strategies or your own unique objectives. Do you measure and review it? If not, you may suddenly find that your performance is no longer competitive and that, like hundreds of manufacturers the past year, your company has become a field of lost dreams.

By George Taninecz, VP of Research, The MPI Group