A manufacturer’s top challenge—sourcing, sales, or productivity for example—is rarely an isolated issue. Instead, the biggest pain point almost always has multiple, interconnected root causes. But contributing factors can be easy to miss without cross-functional collaboration, communication, and data sharing.
Ask any manufacturing leader to name his or her biggest headache right now, and you’ll probably get a quick response. After all, leaders are feeling the pain of continually tightening supply chains, high energy costs, and a deteriorating economic situation every day. And they are likely doing their best to bring resources to solve these issues. In a recent LinkedIn survey by TBM Consulting, 111 manufacturers across Europe, North America, Asia, and Africa responded to the “single biggest challenge” question by highlighting sourcing as the most common culprit, followed by organizational capabilities, sales, and manufacturing performance/productivity.
While you can likely identify your company within one of these four categories, the honest answer is usually more complicated. A manufacturer’s most acute pain point usually manifests around one specific issue or department that people can point to. Still, it is almost always merely a symptom of a much deeper organization-wide issue. However, business leaders cannot see or solve the bigger, widespread issue due to the many barriers and complexities hampering their resolve.
Typically, manufacturing work is organized across different departments working independently. Because sales, procurement, and manufacturing operate autonomously within their reporting structures, they communicate, interact, and exchange only through conditionality. As a result, leaders fail to coordinate efforts beyond their domains, synergize, and reflect on the bigger picture. Problems that could have been resolved within a minimized space, were the interconnectivity between issues to be managed in a healthy way, end up spreading as wildfire. This often fosters a blaming culture where departments point in unison toward the department with the obvious issues and the most dismal track record.
The survey data support this scenario as the results reveal a fairly even split between what can be classified as external issues such as sourcing and sales volume, and internal challenges such as organizational capabilities and manufacturing performance. On the surface, these challenges may appear to be separate issues. But on closer examination, there are always direct connections between these two forces.
As a real-world example, a major gas company was experiencing an internal performance problem on its oil platforms. During a typical nine-hour shift, the company was recording only two hours of hands-on tool time per employee. But the root cause of the inefficiency was not the lack of capacity, training, motivation, or non-engagement. Instead, it lay in procurement and the failure to plan accordingly, and more importantly, to align the various functions to ensure the right people with the right skillsets were made available in the right business context at the right time. By diagnosing the overlapping negative effects of misalignment, and addressing the underlying external issues, the company was able to more than double hands-on tool time. Consequently, it managed to save billions of dollars in unnecessary contractual and logistical costs.
In the oil platform example, the crux of the solution came down to better operational process controls. Operational process controls are the formalized structure for cross departmental communication and sharing data-driven information that aligns the entire organization. Its application creates a company-wide focus on common vision and goals. Such controls facilitate clarity into functional roles and responsibilities, establish accountability channels, and ensure business area optimization. Ultimately, good operational process controls promote Precision of Execution within the organization. In turn, this enhances predictability, minimizes waste, and reduces risks.
In most manufacturing organizations, operational process controls can be integrated in a short timeframe, and they could drive net profits within a year.
While it seems obvious, this is an important step that manufacturers cannot afford to overlook. Its successful implementation takes real buy-in and a shift in mindset. After all, experts in different departments are hired for their area-specific skills and it is to be expected that they want to focus on what they do best. For example, the CFO may want to cut costs by eliminating extensive training for positions with high attrition rates. But the COO sees a need for better training and more investment in people to keep them onboard. The companies and leaders who want to win and stay ahead of the competition are the ones who are willing to check their egos at the door, listen to each other, and collectively identify where the real barriers and opportunities for business performance improvement lie.
Your data may point to a problem in one department such as sales. But 9 times out of 10, the issue you think is your biggest challenge is just the tip of a much larger iceberg that spans many areas of the organization. The sales problem, for example, could be driven by higher prices, driven by even higher procurement costs, which are exacerbated by ongoing supply chain challenges. With the right focus, a comprehensive end-to-end diagnostic that dives deep into the data and maps the interconnections between different divisions can be completed in a matter of weeks. Its successful execution would provide organizational leaders with the big picture outlook they need to make better organization-wide business decisions and help them understand the ensuing implications of such decisions on each department.
Very rarely will companies get to a sustainable solution by focusing on just one area of the business. Furthermore, because of the deep interconnections between departments and functions, it is often impossible to fix one issue without addressing other contributing factors outside of the domain. Usually, this involves considering both internal and external areas that directly affect each other. This can be particularly true with sourcing challenges where internal organizational capabilities and reporting structure nuances can lead to external complications.
To elaborate, if the sourcing department reports the CFO, and the CFO lacks insight into the nuances of material issues and supplier relationships, there will ultimately be points of friction that will compromise results and hinder progress. With any improvement initiative, it is important to ensure that the right people, with the proper training and skills, are assigned in the areas where they can provide most value. And people should be supported by a formalized practice to measure success, attainment to plan, and adherence to compliance requirements.
Manufacturers hoping to sustain and build on gains need to be diligent about keeping silos from reemerging. Different leaders and departments shouldn’t just come together to address issues, and then retreat to their own domains. Instead, the newly embraced culture should facilitate regular and formalized cross-functional meetings to reflect on the track record and collectively set goals, designate responsibilities, and establish accountabilities channels for the entire organization. Making this a regular part of business operations is the best way to ensure different functions understand and remain aware of their impact on each other and the entire business.
While companies can successfully put operational process controls into place and begin benefiting from the results in a matter of months, it’s important to recognize that breaking down silos and fostering collaboration between departments represents a major cultural change for many manufacturers. Those that are most successful rely on established external change management expertise. While they have sufficient in-house manufacturing experts who can contribute to solving issues and can drive improvements, they usually lack the neutral, third-party perspective to objectively oversee the scope of changes to be made. Furthermore, when leaders in the company are also charged with leading a change effort of any magnitude, their primary day job always takes precedence over the internal project role, causing the change effort not to get the level of attention and dedication it deserves.
A change management consultant, on the other hand, can work alongside the manufacturing leaders across departments to make sure the work stays on track and delivers the anticipated benefits in the shortest amount of time. This they are bound to achieve by the very nature of their relationship with the leadership of the company who can hold them accountable to plan and execute successfully.
Whether you think sourcing, sales, manufacturing, or organizational capabilities is your biggest challenge right now, the real problem is the barriers that exist between departments and functions. A siloed approach will continue to hamstring your business and unnecessarily increase your costs, while preventing the performance gains you need to remain competitive in today’s challenging environment. Commit to putting operational process controls in place and unifying all areas of your organization around common goals. If you start eliminating your silos now, you can recover your investment in the change, and begin realizing significant bottom line improvements before the year is out. We know, because we can and have made it happen for many industry counterparts.
Key Takeaways
Schedule a 15-minute call with your Advisor
Operational Excellence
Don’t miss industry expert insights.
Join a community committed to excellence.
