The Internet of Things (IoT) covers everything from smart dust—tiny, lightweight, wirelessly connected sensor networks—to RFID tags. Pulling it all together is a grand, overarching vision of thousands of embedded sensors recording massive amounts of data that is then collected wirelessly and analyzed in real time.

Factoring in data security risks, lack of standards

and technology gaps, the potential for IoT products and services has prompted even staid macro-economic organizations1 to foresee a bonanza of opportunities and a new generation of disruptive companies akin to Amazon, Google and Netflix.

On the manufacturing front, Industrial IoT (IIoT) technology is enabling the collection of petabytes of machine data. Coupled with

enhanced analytics, this is creating new predictive maintenance and remote servicing capabilities, all of which can reduce unplanned machine downtime, improve availability and increase overall asset utilization.

“IIoT and analytics, engineered algorithms and/or machine learning techniques, provide a new means to predict failures,” writes Ralph Rio, an analyst with ARC

www.tbmcg.com

November 2015 | Issue 3

A TBM Consulting Group PublicationOpEx

Review

Accomplish MoreConsulting Group

The Internet of Things will revolutionize asset performance management. Some industries are already reaping the new technology benefits. Here’s what you can do today to maximize your return on assets.

Also in this issue

2 | Accomplish More In 2016 5 | Create A Growth-Oriented Culture 8 | Lean Transformation Update at SavATree 11 | New TBM Supply Chain Technology Partners 12 | Global Case Studies Focus on Growth

(continued on page 3)

(Your Assets)Run AtFull Speed!ˆBy Ken Koenemann

Are You Giving It All You’ve Got?

Leading ThoughTs

Publisher Angela Scenna: ascenna@tbmcg.com

Executive Editor David Drickhamer

Contributors Ashwin BadveKen KoenemannJeff LeakeSonja LothGary RascoeBill RemyMarc Turpin

Art Direction and Design Crossbow Group crossbowgroup.com

Printing Carter Printing & Graphics, Inc. carterprintingnc.com

November 2015 | Issue 3

A Business Journal for Leaders Who Embrace Operational Excellence

2 | OpEx Review | November 2015 | www.tbmcg.com

It’s often said that successful execution requires a combination of efficiency and effectiveness. As you close out the year and prepare to execute your strategic plans for 2016, it’s a good time to fine tune your organization’s performance along both dimensions.

In this issue of OpEx we look at some of the key operational processes: asset management, new product development, daily management

and strategy deployment. We explore how executing them well can help you achieve both your cost savings and your revenue and earnings growth objectives.

Are these processes as efficient as they could be in your organization? Are they as effective as they need to be? The answer to both of these questions, of course, is that they could be better. The more challenging question is: How are you going to make them better? That typically requires a combination of process improvements and investments.

For example, as presented in this issue’s cover story, a new era for asset management is being ushered in by the enhanced data gathering, connectivity and analytical capabilities collectively referred to as the Internet of Things. You need to determine when the business case for investments in such technology can be made without waiting too long and having to play catch up to your competition. In the meantime there are asset management practices that can be implemented today to improve uptime and reliability while reducing maintenance costs, managing business risks and delaying capacity investments.

Efficiency and effectiveness. Doing things right and doing the right things. Do both to accomplish more in 2016.

Accomplish More in 2016

Ken Koenemann Senior Vice President - Business Development and Marketing TBM Consulting Group, Inc. kkoenemann@tbmcg.com

Advisory Group.2 “This can enable organizations to drive down unscheduled downtime to near zero – with a positive effect on a broad range of KPIs.”

Sensor networks, cloud-based data collection and powerful analytic tools are already being used in mission-critical operations like utilities, mining and airlines. Many process manufacturers have the ability to monitor real-time performance and receive alerts when temperatures drift outside of optimal ranges, production rates slow down or product quality slips.

Such capabilities are slowly moving into other industries. Two out of three discrete manufacturers are actively pursuing IoT initiatives, according to IDC Manufacturing Insights.3 But more than half of those companies haven’t begun a pilot project yet. Rollout hinges on managers’ ability to define a clear business case and return on the investment.

Real-time monitoring and analysis of machine performance may be a few years away for many factories. But even without the latest IoT technology, manufacturers can make dramatic reliability and utilization improvements today by optimizing maintenance practices and using the monitoring and data collection capabilities of the equipment they already have in place. Such efforts will provide a solid foundation for future technology capabilities as it becomes economically viable, much like the rollout of a new ERP system that benefits from process optimization before those processes are automated.

Use the Technology You Have Today

Focused entirely on production and output, a large number of plant managers still follow a “run it ’til it fails” approach to their equipment. Preventive maintenance based on time intervals or usage—like changing the oil in your car every six months or 5,000 miles—is effective but requires consistent monitoring, planning, scheduling and review to make sure the work is done.

There’s one significant flaw in such a strategy, however. According to reliability studies,2 the probability of failure increases with use for only 18 percent of assets. That means that four out of five pieces of equipment in your factories exhibit a completely random failure pattern!

As noted above, IIoT sensors and other connected technology promise to enhance the ability to predict and prevent random machine failures but the fact is that most discrete manufacturing equipment already has performance sensors.

The problem is that they aren’t being used. Active machine monitoring and record keeping can dramatically improve uptime by tracking mean time between failure and mean time to repair. Periodic vibration and temperature analysis can also predict machine failures today.

Market and business conditions will always undercut maintenance budgets and activity. But the primary cause of low machine availability and chronic quality issues is management’s failure to make equipment reliability a clear priority. When thinking about critical equipment, production leaders sometimes ignore the obvious. Cranes, for example, are often critical to moving materials from station to station. Why are they so often left off of the critical equipment list?

Step Up to Asset Performance Management

Asset performance management is a catchphrase for everything that helps manufacturers get the most out of their assets. That can mean a variety of things depending upon who you talk to, from software solutions to a variety of operational, engineering and maintenance activities.

At the operational leadership level, asset performance management unites advanced maintenance practices that

OpEx Review | November 2015 | www.tbmcg.com | 3

(continued from page 1)

(continued on page 4)

Signs That Equipment Reliability Isn't a Top Management Priority

• No work order tracking, haphazard manpower planning and poor storeroom management.

• Lack of machine performance data or maintenance records.

• Failure to maintain stocks or ensure rapid delivery of critical parts.

• Poor cooperation between production (making the numbers) and the maintenance department.

• Widening maintenance skill gaps.

Such failures contribute to reduced production speeds, slow maintenance response times, and extended equipment downtime waiting for parts to arrive.

improve reliability with effective production techniques that maximize asset utilization. It starts with measuring equipment performance (See OEE box), and understanding total operating and maintenance costs.

There are three primary benefits to a formal asset performance management program:

1. lower overall maintenance costs. Proactive maintenance is generally less expensive than having to react to a catastrophic failure, ship parts overnight and pull in outside contractors to make repairs.

2. Risk management. The biggest risk of extended downtime is the inability to ship orders, which undermines customer satisfaction and may jeopardize future sales.

3. Capital avoidance. Better uptime translates directly into more capacity, which can support growth without requiring new capital investments.

Avoiding an unnecessary capital expense is probably the most frequently overlooked benefit of better asset performance management. When planning for growth, management teams instinctively start talking about new production lines and

facility expansions. Looking at what the company already has in place and using it more effectively—which often means getting it back up to the rated capacity—will almost always be cheaper than investing in new equipment.

Giving the people who operate the equipment on a daily basis some responsibility for maintenance and managing performance can further improve equipment reliability and availability. Such an approach is a core element of total productive maintenance (TPM) practices pioneered by Toyota.

Our approach to TPM helps clients move from the tool and technique stage to a systems stage. Taking a systems approach requires operations managers to change their perspective from maintenance as a monthly budget line item to a strategy for controlling production costs, reducing risks and creating capacity for growth.

This starts with identifying the most critical equipment, examining the current state and developing a clear maintenance plan. It includes a maintenance team skills assessment so important gaps can be addressed, as well as the identification and communication of key metrics, like OEE.

There’s a promise embedded in every capital expenditure. It’s stated in the payback period and other calcula-tions that managers and engineers use to justify such investments. Those calculations are based on equipment capacity ratings and projected run rates. Asset performance management, and advanced maintenance practices in general, can help make sure those projections are borne out, and that promises are kept.

4 | OpEx Review | November 2015 | www.tbmcg.com

(continued from page 3)

1. “Industrial Internet of Things: Unleashing the Potential of Connected Products and Services,” World Economic Forum, January 2015.

2. “APM 2.0 with Industrial IoT,” ARC Advisory Group, Sept. 2015.

3. “Reshaping the Manufacturing and Operations Landscape: Connected Products and Operations,” IDC Manufacturing Insights, May 2015.

Linking these three measurements creates a balanced assessment. Focusing primarily on output, for example, could hurt quality. Likewise, slowing down run rates to improve quality will adversely affect output.

1.

2.

3.

Quality - This includes scrap, rework and yield (input material compared to output).

Performance - This refers to how well an asset is performing relative to its rated speed.

availability - This includes both scheduled and unscheduled downtime, as well as intermittent stoppages.

Overall Equipment Effectiveness (OEE)One of the fundamental tools of an effective asset performance management program is a metric known as overall equipment effectiveness. This metric offers a snapshot of how well your company is managing its assets right now, and identifies potential opportunities for improvement. It can be used to benchmark performance within a facility, or across a global network of plants.

Taking a systems approach requires operations managers to change their perspective

from maintenance as a monthly budget line item to a strategy

for controlling production costs, reducing risks and creating

capacity for growth.

OpEx Review | November 2015 | www.tbmcg.com | 5

Leading Change Today

the DayWinning

By david drickhamer

(continued on page 6)

How Electromac's performance-oriented culture and daily management practices support growth for the auto parts supplier.The Electromac Group, Windsor, Ontario, manufactures lightweight engineered steel parts for the automotive sector. The company engineers the forming process, designs and builds the tools, and then forms and stamps the parts using cold stamping and hot forming processes. Established in 1955, today it employs over 300 people and posts annual sales upwards of $150 million.

Desmond Griffiths, Electromac’s President and CEO, started his manufacturing career on the factory floor. He worked his way up through finance and led the launch of the company’s stamping division, Cannon Automotive Solutions.

" It's important that the kind

of culture that you have is

one where people are highly

motivated, where people

understand the difference

between winning and losing,

where they're accustomed

to being challenged and

working toward goals."

accustomed to being challenged and working toward goals. We've done a really good job of establishing that kind of culture here. It's very performance-oriented, and folks are accustomed to working in teams and pushing hard to get the job done.

So it starts with culture. How does that translate into effective daily management?

Griffiths: I don't like surprises. I want to know that at the end of a month, the end of a quarter, and the end of the year, that we’re going to be achieving our financial objectives.

But the folks on the floor don't understand the finances per se, so we need to operationalize those financial numbers into something that makes sense to them.

We take our financial goals and we break them down into these overarching goals for each business unit. We watch progress versus that goal on a monthly, weekly and daily basis.

TBM: Can you talk about how Electromac manages operations on a daily basis?

Desmond Griffiths: Before you even talk about a daily management system, and trying to measure performance versus expectations, you really have to talk about the culture of the organization. Because at the root, at the heart of everything, culture determines how business gets done.

It's important that the kind of culture that you have is one where people are highly motivated, where people understand the difference between winning and losing, where they're

6 | OpEx Review | November 2015 | www.tbmcg.com

" It's important that the kind of culture that you have is one where people are highly motivated, where people understand the difference between winning and losing, where they're accustomed to being challenged and working toward goals."

Leading Change Today

Desmond Griffiths (center), President and CEO, The Electromac Group reviews daily performance with employees.

OpEx Review | November 2015 | www.tbmcg.com | 7

Every day we meet at a certain time—at 8:00 in the morning in each cell—we review the goals that we want to achieve by way of safety, quality, delivery, productivity and costs. We ask, "How did we do yesterday versus that goal? How are we going to do today versus that goal? What obstacles are standing in our way?" We make sure that we have countermeasures in place to address each of those obstacles so that we stand our best chance of succeeding.

When you add a bunch of daily wins together, you win the week. And when you add some winning weeks together, you’ve got a winning month. It’s not a surprise then to know that we've hit our monthly or quarterly targets.

Where did Electromac’s high performance culture come from?

Griffiths: Everybody that we hire, and everybody who works at this organization, at some point in their development competed on a team at a high level, whether it was athletic or academic, a chess team, a track team, or a football team. They understand what it means to set goals and work toward something, to be disciplined in their training, and to get the best out of people.

I thought, at first, that this was by accident; then I understood that it was by design. We have always looked for people who understood and wanted to live in a challenging environment, who were comfortable with being challenged.

That's how our culture started. The second thing we do is tell people that they will be taken care of as individuals if they learn to function and put the needs of the team ahead of their own needs. So if the team wins, we all win. In corporate America it's always about climbing the ladder and trying to get to the top. Sometimes people don't really care who they step on to get to the top. We’ve really fostered and created an environment here where we set expectations high, where people understand that the team will be rewarded well, and we all end up benefiting as individuals on that team.

What are some of the key indicators that you watch?

Griffiths: A KPI that we closely watch on the stamping side is uptime, making sure our uptime stays above 80 percent. A whole lot goes into that. It means that our toolmakers, our maintenance folks, our quality folks, are all working to ensure that our assets

continue to run effectively. When we start to see our uptime wane, it means that our support team is getting taxed and they're getting pulled in too many directions.

The other thing that we watch is our vertical alignment. We do skip-level management. For the folks who report directly to me, after we've talked about the objectives that we're going to execute, I will occasionally go and talk to their direct reports to see if the message has been put to them in an unfiltered way, if they clearly understand what the play is, what the goal of the day is.

Going forward, what are some of your biggest operational challenges?

Griffiths: Right now we're in a growth curve. But all I've known in this business is growth, growth and more growth… While you're growing, the Operational Excellence piece is difficult to maintain. You have to be very, very disciplined to make sure that people don't start taking shortcuts, and that they continue to execute on those things that have made us successful.

" We’ve really fostered and created an environment here where we set expectations high, where people understand that the team will be rewarded well, and we all end up benefiting as individuals on that team."

Part of a series of leadership conversations sponsored by TBM Consulting Group, this article is excerpted from a joint interview of Desmond Griffiths and TBM CEO Bill Remy. Go to the TBM website (http://bit.ly/TBM-Electromac) for the complete transcript or to listen to the podcast.

Bill Remy, CEO, TBM

8 | OpEx Review | November 2015 | www.tbmcg.com

We first talked to Daniel van Starrenburg, CEO of SavATree, about the company’s lean transformation in the spring of 2013. Since then SavATree has continued to leverage its Operational Excellence initiatives to reduce rework, integrate

new technology and better execute its business strategy. The returns include double-digit increases in secondary sales, ongoing increases in productivity and safer work practices.

“We have a whole list of initiatives. We have more initiatives than we have time for,” says van Starrenburg. “Everybody is making suggestions for areas of the business that we can kaizen.”

As we wrote about previously, SavATree has applied LeanSigma to its sales process, setting up a visual tracking system and incentivizing administrative staff to follow up on the arborists’ quotes. They’ve now been tracking these secondary sales for three years.

Branching OutSavATree's ongoing pursuit of Operational Excellence continues to generate double-digit returns.

By david drickhamer

about SavaTreeSavATree provides tree- and lawn-care services. The privately held company has 25 branch locations in eight states and over 700 employees.

Daniel van Starrenburg, CEO, SavATree

LeanSigma TranSformaTion

OpEx Review | November 2015 | www.tbmcg.com | 9

of switching over to a tablet-based field estimating system. They’ve found that each proposal generated by an arborist using a tablet saves the office an average of 10 minutes. At a branch where the entire sales team is using tablets, that frees up an enormous amount of time, which they are capturing and investing in additional improvement projects.

Using the tablets, the service specialists now post the start and completion of each stop, which gives branch managers a live view of every job during the day. In addition to work-in-process monitoring, the technology enables SavATree to track and compare performance between crews and branches.

Van Starrenburg emphasizes that, while such technology offers a host of potential capabilities, it takes time to roll it out and fully realize any savings. Like anything new, people have different adoption rates and comfort levels.

“But one of the things that we can't do is have a bifurcated system, with a paper-based system and an electronic system,” he says. “Because then we won’t realize all the benefits from going electronic.”

The Power of Strategic Priorities

SavATree’s adoption of strategy deployment is also maturing. Also known as policy deployment or hoshin kanri, strategy deployment helps corporate leaders translate their long-term vision for the business into an annual improvement plan, key performance indicators, and high priority projects. It then provides a mechanism for monitoring progress and implementing countermeasures when necessary.

SavATree tracks performance and progress toward its annual goals using typical green and red indicators. The company’s

Today the company is in the process of switching over to a tablet-based field estimating system. They’ve found that each proposal generated by an arborist using a tablet saves the office an average of 10 minutes.

“We're on track this year to exceed last year by 20%,” says van Starrenburg. “It's not only sustaining itself, it's actually improving, so that's pretty exciting.”

One area that they’ve been attacking over the past year and a half is rework, how often things are done right the first time, which is a classic indicator of process quality. SavATree dispatches over 360 trucks every day, and each crew performs anywhere from one to 20 services a day, which adds up to a substantial number of jobs per day across the company. A year and a half ago they started tracking how many times a crew had to go back to finish a job they thought was finished or repair something that had been damaged.

“We found out what our defect rate was, which of course surprised everybody,” says van Starrenburg. Extrapolating the costs of those return trips over the course of a year quickly added up to a fairly staggering number. Of course customer satisfaction suffered as well when people had to call to get a job fixed or finished.

To reduce rework, SavATree held a series of kaizen events for each service line. The kaizen teams analyzed the root causes of the return visits, then established new protocols for wrapping up and leaving each job site. Since instituting the new procedures, rework for lawn care services has fallen by 77 percent, and rework for plant healthcare services has fallen by 85 percent.

Compounding Returns

At the same time that SavATree has been rolling out and enforcing standard operating procedures, it is implementing new technology to further eliminate manual work and improve productivity. Today the company is in the process

10 | OpEx Review | November 2015 | www.tbmcg.com

branch managers are expected to do root-cause analysis and develop countermeasures for anything that’s red or moving in that direction. They then share those countermeasures on a monthly conference call with the company’s Strategic Deployment Team, which is made up of senior managers and the director of continuous improvement.

One area that SavATree’s senior leaders targeted as part of their strategy deployment process was safety. Looking at their safety metrics, they realized that they had plenty of lagging indicators, like workplace injuries and days away from work, but no leading indicators. So they looked for measures and incentives that would influence safe work practices on a daily basis.

Field safety evaluations had long been a standard job expectation of operations managers, but they were conducted sporadically. As part of the strategy deployment process, the executive team made the safety reviews a corporate priority, and established completion targets for operations managers based on how many crews they supervised.

“That transformed that whole area of our business. We went from almost no inspections to more inspections taking place

than we required,” van Starrenburg reports. “The beauty of this practice is that when a manager goes to a job site and makes a safety inspection, he can immediately identify any defects and reinforce procedures to make sure that we're operating in the safest way possible.”

To offset the need for more people as SavATree’s business continues to grow, they’re starting to look at revenue and productivity per employee, and benchmark against the industry. They’d like the business to grow faster than their employee base, says van Starrenburg. Their operational improvement and LeanSigma work helps in the search for talent as well.

“If we have a superior safety record, if we have a superior customer service record, if we have high levels of satisfaction among our team members, that's all going help on the recruiting side,” he concludes.

As part of the strategy deployment process, the executive team made the safety reviews a corporate priority, and established completion targets for operations managers based on how many crews they supervised.

LeanSigma TranSformaTion

OpEx Review | November 2015 | www.tbmcg.com | 11

TBM Partners with Supply Chain Technology Solution Providers

TBM News

supply Chain sciences Inventory Optimization solution Improves service Levels and Reduces working Capital RequirementsTBM has partnered with Supply Chain Sciences (SCS), which offers a cloud-based platform for optimizing inventory levels through advanced mathematical models. Modeling functionality allows users to test supply chain scenarios and see the potential impact of network changes. TBM

Consulting will help clients leverage the software capabilities to optimize inventory and stabilize planning processes.

“Our clients typically achieve a 10-40% reduction in inventory and an increased service level of 5-15% with a payback time of six months,” says SCS CEO Dr. James A. Rappold. “Pair those results with TBM’s deep experience driving process improvement and our clients will be able to implement and sustain gains—and leverage those gains for longer-term profitable growth.”

Visit www.tbmcg.com/optimize

Activ Technologies Brings Real-Time Visibility and Process Rigor to Complex supply Chain NetworksTBM partner Activ Technologies offers a cloud-based platform for manufacturers and suppliers that helps shorten the lead time, effort and manual intervention required to detect and manage changes in OEM production schedules.

“In almost every client we see a significant opportunity to build

upon automation improvements by helping organizations to lean out their complex supply chain networks,” says Activ CEO Mike Roberts. “By combining our disruptive cloud-based technology with the world class consulting expertise of TBM, we are bringing a unique ability to solve complex problems in a space that continues to grow more complex.”

Visit www.tbmcg.com/visible

TBM Consulting is helping clients leverage cloud-based technology to better manage inventory and production schedules.

TBM is pleased to announce two new partnerships that will help our clients leverage emerging technology to improve productivity, enhance profitability and increase cash flow. “Our supply chain networks are increasingly complex and there is a tremendous need to wrangle reams of data into manageable chunks of actionable information,” says Bill Remy, TBM Chairman and CEO. He anticipates strong client demand for the combined capabilities of TBM and our new technology partners.

For more information, contact Jeff Leake, Managing Director, TBM Consulting Group at 919.438.5535.

Follow our blog www.tbmcg.com/blog

Join us onOurBlog

TBM, the TBM logo, LeanSigma® and Dploy are registered trademarks of TBM Consulting Group, Inc.

Accomplish MoreConsulting Group

TBm onLine reSourCe

CenTer

New Global TBM Case Studies Focus On Managing Growth

strategy deployment Re-energizes german electronics service Center Regenersis refurbishes electronic devices for a global client basis. The company’s service center in Sömmerda, Germany, was struggling with acquisition integration issues and low morale. To position the business for future growth, TBM worked with management to set bold objectives, create a strategic plan and roll it out.

Read More at www.tbmcg.com/regenersis

a growing danish Manufacturer stays nimbleLINAK manufactures electric linear actuators. Today, the privately held company employs around 1,800 people. Like many firms, as LINAK grew, its new product development processes became inconsistent and slow. TBM worked with a cross-functional team to redesign the development process to hit launch dates and reduce lead times by 30-40 percent.

Read More at www.tbmcg.com/linak

smartsource® app: The Power of TBM at Your Fingertips• Stay current with industry

reports, briefings and webcasts

• Learn from real-world casestudies and validateyour strategies

• Browse, view, download andshare our entire resource library

download TBm SmartSource® for your Smartphone or tablet for free from the app Store™ or google Play™ now!

more online at tbmcg.com

China • Brazil • France • Germany • India • Mexico • United Kingdom • United States