Finish Strong® Podcast Series The journey to excellence is not a simple one, nor does it follow a straight line. This podcast series addresses issues important to manufactures worldwide. Becky's insights include commentary on global, strategic, and tactical issues, as well as observations on current challenges and opportunities in manufacturing businesses. Feel free to suggest topics of interest to you; no doubt Becky will have something to say that will make you think.

Product Rationalization

We all know we have to be innovative. Many of us demonstrate that by introducing new products regularly. Do they all make sense? Should we simply add to the number of offerings without subtracting?

The process of ensuring that the products and services offered by a manufacturer are optimal for the company and its customers is call product rationalization. Too many of us don’t do that, don’t build it in to our new product development/introduction process, and waste time trying to determine the profitability of each and every product.

Some sales folk insist we never eliminate a product because someone might want it someday. Some insist that “line breadth” is fundamental to gaining business with large customers. And some focus only on the products that are easy to sell and that provide healthy commissions. None of that is inherently wrong or bad.

Topics like market confusion, internal complexity, cannibalism, brand reinforcement, and offense vs defense products should all be part of your product rationalization process.

The primary need is to have one. Just adding products is rarely the right strategy. Whacking the old ones is rarely the right strategy. But there must be a strategy governing what you develop and introduce, what you eliminate, how you present options to meet the needs of your customers, and how you leverage internal competencies to position your company for strong market position.

And please don’t let Standard Cost Accounting lead you to ill-informed decisions on what makes and loses money for your business.

Firing Customers

Not all markets are good markets for you. Not all customers are good customers for you. And not all orders are good orders for you.

How do you recognize the distinctions beforehand? And how do you fire a customer once you’ve already accepted them?

A good customer for you is not the same as for others, and cannot be based solely on top line potential. Sadly, too many get sucked into that revenue potential and make commitments later regretted.

Examine these six attributes before deciding a potential customer is one that enables the two of you to succeed together:

1) If you are mission driven, and enduring manufacturing businesses are, a company that does not have a viable externally focused mission will not be a good customer for you.

2) If their demonstrated, not written on the walls, core values are not consistent with yours, they will not be a good customer. When the going gets rough those distinctions will rise to the top.

3) Do their current “partners” tell you that the potential customer really knows and behaves in concert with the true meaning of partnership? Partners do not unilaterally change payment terms. Partners do not take your parts out for bid without you knowing about it. If you want to serve companies that respect you, look for true partners.

4) Do the needs of the company match the direction you want to go? If not, the relationship will be short and will add nothing to your business.

5) Are they committed to getting better in all ways? If not, they will stagnate, bringing you with them. While I have little respect for WalMart as a company, it has taken the lead in many important new technologies, bringing its major suppliers along. Is there a near term advantage to a potential customer, knowing you will want to leave them in a few years?

6) Is their risk tolerance aligned with yours? Larger companies can afford to swing and miss a few times. Smaller ones must be very selective on which pitches to swing for the fences. But mission, core values, partnership, near-term alignment can be insufficient if risk tolerance is very different.

But now you have them, and realize they are not a good customer for you. How do you fire them?

First, realize you must. They cannot be part of your healthy future. It is merely a question of how and when. Yes, there is a financial reality to this process, but there is also the very important opportunity cost aspect. What could you be doing that you’re not because of that customer?

Saying “no” is not easy for many of you, but it is a requirement to running a healthy and enduring business. Is it optimal to quote new parts for that existing bad customer? No. Is it optimal to give cost reductions you cannot afford to that customer? No. Is it optimal to obtain a certification that bad customer requires? No, unless they are in a market you want to pursue. Then, yes it is.

A bad customer is part of your overall asset allocation. Consciously decide how much you want to invest in them, now and tomorrow. They are likely costing you more than you realize.

How to Deploy Your Strategy Effectively

Every one of your employees must clearly see how his actions and decisions impact execution of the business strategy. This is accomplished through a line-of-sight deployment process.

It is not enough to describe the strategy at an all-hands meeting, or even add to that the down-one-level strategy. Stopping the formal deployment process at that points leaves entirely too much to false assumptions and bad guesses.

You are familiar with the 5-Why problem solving process in which we keep asking why until we identify the root cause of the problem we’ve defined.

Strategy is similar. We have a strategy defined at the high level, but must roll it down level by level to understand what its implementation requires.

You know you have accomplished that when every employee can reverse that thinking process by describing their priorities and actions “so that.”

An example:

“I am reorganizing the warehouse and receiving area so that we can flawlessly add new materials and components to our storage so that we can begin producing samples of our innovative new products for market test so that we can expand sales of those new products to the most receptive markets so that we can grow our sales and profits so that we can deliver on our owners’ mission of providing reliable employment as we serve the evolving needs of the automotive aftermarkets.”

By using a line-of-sight deployment process surprises are reduced and prioritization and decision making are improved.

Choosing Your Digital Transformation Partner(s)

No manufacturer can afford to ignore the concept of Digital Transformation. Yes, there continues some small need for manual lathes, but don’t plan your future on that.

In the past several editions of this podcast I discussed several business-side categories of digital transformation, from machine health to connected employees to using blockchain to create and maintain internal quality records.

That information was intended to help you envision the future you are trying to create through digital. It was also intended to help you prioritize.

Now it’s time to act.

No manufacturer has all the information and capabilities needed to design and implement a digital transformation — not even the Siemen’s of the world. They too reach out to external experts.

It’s possible you’ll choose to start slowly with a small company helping you get your arms around machine sensors, data collection/quality/storage/security, and the information you can gain. But that company will not be the best one to lead you through your full transformation.

Research systems integrators, talk with your peers, and visit several executives of manufacturers ahead of you on the journey. Attend trade shows and manufacturing conferences to gain a foundational understanding of the opportunities and challenges you will face.

This electronic data world is rapidly evolving. Whomever is best today may well not be even among the good tomorrow.

When choosing your partners, examine their history of staying in front of the pack, explore their investments and their financial commitments to the future of technologies, and reduce the chances of getting someone whom you outgrow in your first few years.

This is an important choice, and not an easy one. It is no place to focus on lowest bid, but rather on most informed and most driven to stay informed.

Digital Transformation: Blockchain

It is always smart to start with a business case before deciding to move forward with a specific technology in your digital transformation. The same is true with blockchain.

In prior podcasts I’ve described several categories of business benefit to consider in creating your digital transformation roadmap. We’ve considered machine health, connected employees, and more, without focusing on the technologies that make those things possible and effective.

In blockchain, it is important to understand the high-level capabilities of the technology and then determine if that capability is of potential value to you right now.

First and foremost, understand that blockchain is NOT cryptocurrency. It is the technology that underlies much of those, but it is not the same. Think of Excel as the technology that underlies the financial spreadsheets you use. They are not at all the same thing; your spreadsheet is of value to you and uses Excel as the enabling technology.

Blockchain is extremely valuable in creating an agreed upon and verified history of transactions. One use case is known as “smart contracts” in which blockchain recognizes when conditions are met per a contract and can initiate the next step, for example payment approval. This is especially useful in financial transactions and those related to import/export trade.

A second use case is that of traceability.

Now American manufacturers must sign something that assures the minerals used are not conflict minerals. The reality is that very few actually know. We ask our supplier to assure us of that, and based on their word, we assure the next company in the process. Blockchain can enable traceability from the beginning to the end-point of interest.

This is currently in use in much of the diamond industry, where guaranteeing that product is NOT blood diamonds is important to value. Walmart is beginning the process of requiring food suppliers to join their blockchain network to enable traceability of fresh foods from the store all the way back to the field.

If your business is transaction light and traceabilty is unimportant, you can likely put blockchain on the back burner for now. But you do owe it to the future of your business to know what it is and what it is not as you draft your digital transformation roadmap.

Should Your Products Be Smart?

Prior podcasts have introduced the digital transformation business categories of “machine health” and “connected employees.” In this episode we discuss “smart products.”

Some manufacturing products are easy to visualize as electronic sources of volumes of data; others, not so much. Yet a significant portion of the products developed, manufactured, sold and/or serviced by manufacturers have great stories to tell, if only we’ll listen.

The two primary reasons to consider smart products are: (1) to simplify or improve the user experience, and (2) to provide information for you — the manufacturer — to improve design by understanding use in the field with specifics.

Kinetico® is a water treatment company that sells both commercial and residential units. Those units have consumables that the user must track and address. To make that much easier for the customer, Kinetico has embedded smart technologies in the units to highlight approaching maintenance needs.

Printers have done something fairly similar, in indicating when they are getting low on ink.

What would make usage of your products by your customers in their various environments, usage patterns, and other variables easier?

Jet engines are made of complex metals (currently) produced through very advanced metallurgical techniques. They hardly seem a candidate for generating masses of electronic data. However, both Rolls-Royce and GE have added data collection, analysis, and prediction capabilities. They now receive a premium, through the “as-a-service” business model for significant improvements in fuel efficiencies and flight routes that save their customers literally millions of dollars. This real-time data capability not only facilitate those immediate operational gains, but also provide information to the design engineers to determine how to develop much improved jet engines.

Without data, so many things we take for granted today would be more difficult.

When considering your digital transformation, smart products is one arena you cannot afford to overlook. Where you prioritize it is one question, but to ignore the potential is short-sighted.

Digital Transformation – Connected Employees

Connected employees is a phrase that can intimate workers and confuse leadership. When clarified, it becomes an integral part of your digital transformation.

Connected employees simply means that as employees move around doing their jobs, they have the information they need where they are at that moment. It requires mobile devices because employees are mobile.

An understanding of the types of mobile devices available and the types of information various employees need in what format will help you envision the physical aspects of this concept. Perhaps now you can see why some companies are prioritizing a private 5G network inside the operations.

No one wants a data dump. Some need a single number, some a graph, some a data set, some a visual picture of what they cannot see without the device. No single device will meet all those needs well. Drive device selection by employee need and convenience, not by what the salesman promises.

Headsets for AR, VR and MR have great potential to help employees, but so far their in-use success is somewhat limited. The reason? Size and weight mean they are uncomfortable to use consistently.

Tablets and phones are familiar to most everyone, but how should they be carried and which is right for presenting which kinds of data?

Think of the gains in productivity from merely eliminating the need for workers to find a supervisor to answer questions that could and should be answered with data out of your systems. Or from the supervisor being able to “see” the problem on his phone or tablet while in a different area. All of this technology, data storage and governance, analytics, and provisioning of information exists and is productive right now.

Machine health and connected employees are two components to consider when thinking about your digital transformation roadmap. It’s helpful to know where you want to be in one-year, two, or five. Not in specifics, but in the capabilities you want the organization to have that are weaknesses now.

Giving employees what they need to do their jobs well seems a fundamental responsibility of leadership, and it is. It’s not magic, but when you see the vast improvements you’ll think it was.

Machine Health and Digital Transformation

In manufacturing, reliable healthy equipment is a fundamental requirement. Yet so many of us struggle with unplanned downtime due to equipment failures.

Digital transformation often has as its first arena in manufacturing machine health.

Initial efforts at machine health have revolved around preventive maintenance executed on the schedule recommended by the manufacturer of the equipment. Some of us are better at that than others.

Another step is knowing if equipment is running at the speed it was designed for. Frequently we run it at a slower speed to optimize how it works for us. That’s an indication of something wrong.

But all of that is merely addressing the basics.

The machine health part of a digital transformation — that is using data and analytics to understand the “why” of our machine operations — takes us to a much better place.

Goals include zero unplanned downtime, cost-effective maintenance, and awareness of the operating environment that best supports the health of the equipment. Predictive maintenance is part of that, but not all of that.

Knowing all critical influences on machine health allows your operations to lengthen the life of the equipment, produce higher quality output faster, and reduce costs.

Do you wish you knew for certain how ambient temperature and humidity, fluid age and viscosity, vibration, changeovers, variations in power to the equipment and more impact the health of each piece of your equipment? With data and data analytics, you can do that.

Every manufacturer has different types of equipment of different ages made by different manufacturers. Each of those pieces of equipment has a different history of use, maintenance, and handling. With data, you can understand all of it, regardless of those distinctions.

Industry 4.0 and the digital component of it are instrumental in the future of every manufacturing company. Machine health is one place to start as you pursue this journey.

Using Data to Transform Your Manufacturing Business

If you can’t lead change, your company cannot succeed. The rate and types of change that success requires continue to expand.

Digital Transformation is a buzzword, but more importantly it is a genuine requirement of any manufacturing business that will succeed over the next several years.

Imagine the manufacturer that considered electricity an irrelevant newfangled technology. Imagine the manufacturer that considered computers an irrelevant newfangled technology. The same fate will befall those who consider digital capabilities and the power of data to be irrelevant to their businesses.

Transformation means a fundamental change; it does not mean baby steps. Pursuing a digital transformation of your manufacturing business will fundamentally change how you operate, how work is done, the products you offer, and how you interact with customers and suppliers.

It is important to begin by getting your arms around large categories of your business operations and how instantaneous access to the right information at the right time and place will be transformational.

A few examples include (a) machine health (b) connected employees (c) smart products and (d) end-to-end supply chain.

You already try to take care of your equipment, generally via gages and preventative maintenance. You already try to provide information to your employees, but too often involve delays and insufficient facts. You already try to develop good products, but overlook the power of knowing how those products are being used and how they are performing could have on product improvements and true innovation. You already try to stay on top of incoming deliveries and outgoing shipments, but continue to be surprised by failures of the supply chain system.

Digital transformation can fundamentally change all of those aspects of your business, and more. If you can imagine it, likely digital can help you attain it with current and evolving technologies.

Addressing Supply Chain Risk

Why are our supply chains in such a mess? While Covid made it much worse, it merely reflected the weakness in how most companies view their supply chains.

There are two primary causes of our current woes, and Covid is not one of them.

The first is that leadership failed to comprehend the importance of supply chain expertise and thinking in ensuring that we can get what we need and thereby get our customers what they need when they need it.

The second is the decision to outsource high labor jobs to low wage rate counties to reduce costs. We all know time is money, but most forgot that when they decided to extend the supply chain. We know that simple is better than complex, but most forgot that when they decided to add complexity to the supply chain.

This was not unpredictable. Most supply chains are operating just as they were designed: to function effectively when there are no upheavals of any kind anywhere.

Many pundits, and sadly many highly visible executives, have placed the blame on Just in Time (JIT) for the current woes. That reflects another failure to understand. JIT is not about carrying the lowest inventories possible. Never was; never will be. Except by those who focus only on current income statements and balance sheets.

The assumption that revenues will be received as long as we get orders and operations doesn’t screw it up is laughable; except that it is that assumption that has us where we are.

So what can you do now to address the risks of your supply chain?

Start by identifying the first tier suppliers for your most critical product family. Not just where you issue the PO, but where the product is actually made and what options that supplier has for producing it elsewhere. You’ll likely be surprised by how little your team actually knows about even this simple starting place.

Next, move to the second tier of that most critical family. Where does your supplier get his critical supplies? What options does he have?

Eventually you’ll move to understanding the first few tiers of your other product families.

Do you use Salesforce? Many do. It has a simple maps add-on, through which you can indicate the locations of your first tier supplier operations. Then your second. As a storm approaches somewhere in the world, you can see if your key suppliers will likely face challenges. Government upheavals? Governments shutting down areas as part of the response to Covid or some other cause.

It’s not hard to get the information to anticipate problems. Yes, it takes attention and effort to set it up, and it takes someone caring enough to look. Will that prevent all your future supply chain challenges? Of course not. But if it flags many of them and you are proactive, the customer impact of changing events worldwide will be reduced.

And that’s your responsibility.