the manufacturing performance management benchmark report

The Manufacturing Performance Management Benchmark Report

June 2006

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The Manufactiuring Performance Management Benchmark Report

All print and electronic rights are the property of AberdeenGroup © 2006. AberdeenGroup • i

Executive Summary

espite indications of a reviving economy and 2 decades of improvement in manufacturing productivity, continued global competition and increasing de-mands from customers, shareholders, and regulatory agencies are forcing manu-facturers to continue to seek ways to improve manufacturing performance.

Manufacturing performance management strategies have reduced inventory and manu-facturing cycle times, and more complete and on-time shipments of better quality prod-ucts. Yet there seems to be no relief in sight from the constant pressure of mandated cost reductions and higher expectations of customer service.

Today we see a subtle shift in pressures. Customers continue to demand lower prices; however customers’ demand for shorter lead times has now become the number one driver in manufacturing performance management strategies. Cost reductions remain the focus of all enterprises and many still struggle with data collection and cultural issues. The Manufacturing Performance Management Benchmark finds far too few commercial IT solutions being utilized, although Best in Class companies are significantly ahead in terms of deployment as compared with their average and laggard competitors. Better per-formers are getting better while poorer performing companies make little progress, so the performance gap is widening.

Key Business Value Findings Best in Class companies, while still paying close attention to cost containment, have be-gun to turn their attention to outward facing improvements, including customer satisfac-tion and supplier collaboration. These companies maintain and increase their market leadership position through sustained vigilance, more accurate performance metrics, and improved flexibility in responding to demand. Better performance also correlates directly with frequency of measurement. Schedule compliance and complete and on-time ship-ments are very much the focus of attention, but even better performing companies still pay the price with high levels of inventory to ensure customer satisfaction.

Implications & Analysis Lean manufacturing techniques are embraced by over three quarters of all companies in pursuit of manufacturing performance improvements. The pull strategies associated with Lean philosophies was evident in the majority of participating companies, a significant difference from Aberdeen’s study eighteen months ago. There is a significant difference in the business capabilities sought by Best in Class enterprises versus industry average and laggards. While poorer performers are seeking to identify and eliminate bottleneck and streamline operations, Best in Class have moved beyond these efforts to place more emphasis on collaboration with customers and suppliers. These Best in Class companies are more than twice as likely to deploy IT solutions, particularly for planning, execution and control. Even top performers still fall short of expectations in terms of analytical so-lutions: On-Line Analytical Processing (OLAP) has not made its way out of the financial and marketing departments.

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Recommendations for Action The following specific actions are recommended for companies looking to improve per-formance management:

• Measure Key Performance Indicators (KPIs) more frequently – quality devia-tions should be monitored and measured in real time; operational metrics such as shipment performance and schedule compliance should be measured daily; met-rics that measure assets such as inventory should be measured weekly.

• Balance cost reduction efforts against customer satisfaction – as acceptable cus-tomer service levels are achieved, work specifically to reduce inventory levels.

• Use available technology for data collection, operational efficiency and visibility –integrated manufacturing and operations intelligence platforms, as well as ana-lytics and other business intelligence tools

All companies must consider the four elements of performance:

• Planning: scheduling, sequencing or load leveling production

• Execution: instruction, inspection or status

• Control: plan vs. actual status, alerting, re-planning or corrective action

• Analysis: effectiveness or improvement opportunity identification

With very few exceptions, real-time integration across these 4 elements has been either non-existent or a custom effort, loosely coupled at best. All companies would benefit from a more focused effort on closing the loop between the first three of these critical elements, developing a philosophy of continuous improvement and promoting a culture where change is welcomed and embraced.


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Table of Contents

Executive Summary .............................................................................................. i Key Business Value Findings.......................................................................... i Implications & Analysis ................................................................................... i Recommendations for Action..........................................................................ii

Chapter One: Issue at Hand.................................................................................1

Chapter Two: Key Business Value Findings .........................................................4 Challenges and Responses........................................................................... 6 No Silver Bullets ............................................................................................ 7

Chapter Three: Implications & Analysis.............................................................10 Process and Organization ........................................................................... 11 Key Capabilities ........................................................................................... 12 Key Performance Indicators ........................................................................ 13 Technology Usage ....................................................................................... 15 Pressures, Actions, Capabilities, Enablers (PACE)...................................... 18

Chapter Four Recommendations for Action .......................................................20 Laggard Steps to Success........................................................................... 21 Industry Norm Steps to Success ................................................................. 21 Best in Class Next Steps ............................................................................. 22

Featured Sponsors............................................... Error! Bookmark not defined.

Sponsor Directory ................................................ Error! Bookmark not defined.

Author Profile .....................................................................................................23

Appendix A: Research Methodology ..................................................................24

Appendix B: Related Aberdeen Research & Tools .............................................27

About AberdeenGroup ......................................................................................28


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Figures Figure 1: Subtle Shift in Pressures ...................................................................................................... 2 Figure 2: “Better than Industry Average” Performance Attainment ...................................................... 3 Figure 3: Strategic Actions................................................................................................................... 5 Figure 4: Frequency of Operational Measurement .............................................................................. 8 Figure 5: Frequency of Asset-Oriented Performance Measurement ................................................... 9 Figure 6: Capabilities......................................................................................................................... 13 Figure 7: Respondents’ Self-Assessment of Complete and On-Time Shipments .............................. 14 Figure 8: Technology Adoption .......................................................................................................... 15 Figure 9: Technologies Most Important to Performance Management ............................................. 16 Figure 10: Tools Currently used to Monitor KPIs ............................................................................... 18

Tables

Table 1: Performance Improvements....................................................................................... 5

Table 2: Chevron Texaco’s El Segundo Refinery Business Improvement................................ 6

Table 3: Manufacturing Performance Management Challenges and Responses............................................................................... 7

Table 4: Manufacturing Performance Management Competitive Framework .........................11

Table 5: PACE Competitive Framework................................................................................. 19

Table 6: PACE Framework .................................................................................................... 25

Table 7: Manufacturing Performance Management Competitive Framework ........................ 26


All print and electronic rights are the property of AberdeenGroup © 2006. AberdeenGroup • 1

Chapter One: Issue at Hand

Key T

ake-

away

s

• No relief from pressure to drive prices and costs down • Demand for increased speed and agility escalates • Significant improvement in manufacturing performance takes time and effort

espite indications of a reviving economy and 2 decades of improvement in manufacturing productivity, continued global competition and increasing de-mands from customers, shareholders and regulatory agencies are forcing manu-facturers to continue to seek ways to improve manufacturing performance.

Manufacturing performance management strategies have produced reductions in inven-tory and manufacturing cycle times, and more complete and on-time shipments of better quality products. Yet there seems to be no relief in sight from the constant pressures of mandated cost reductions and higher expectations of cus-tomer service.

Aberdeen’s previous Manufacturing Performance Manage-ment Strategies Benchmark study, conducted eighteen months ago, found leading manufacturers looked to these strategies and supporting IT solutions in order to maximize current operations and foster continuous improvement. In December 2004, Aberdeen reported the number one pressure faced was the demand from customers for lower prices (69%), followed by the need to meet increased demand with the same level of resources (58%). Other factors were the drive to improve return-on-investment (ROI) (51%) and the demand for shorter lead times (50%).

Today we see a subtle shift in pressures. Customers continue to demand lower prices, with 64% of respondents selecting this as a top influential factor in driving manufacturing per-formance efforts, remarkably similar to results in late 2004. However, customers demanding shorter lead times has now become the number one pressure faced by manufacturers (67%) (See Figure 1). Pressure to improve ROI has eased slightly, but over half of our participants indicated they were pressed to meet increasing demand with the same resources, an indication that the requirement to do more with less is alive and well in spite of signs of a recovering economy. This phenomenon is much more prevalent in companies who do not perform as well (82%). This comes as no sur-prise since success fuels growth.

Competitive Framework Key

The Aberdeen Competitive Framework defines enter-prises as falling into one of the three following levels of practices and performance:

Laggards (30%) —practices that are significantly behind the average of the industry

Industry norm (50%) —practices that represent the average or norm Best in class (20%) —practices that are the best currently being employed and significantly superior to the industry norm

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Figure 1: Subtle Shift in Pressures

Source: AberdeenGroup, June 2006

Companies in the United States and Canada in particular feel the manufacturing economy is still under fire from several directions. North American companies have been chal-lenged by the introduction of lower priced products coming into their markets from coun-tries with inexpensive labor, causing the trend in recent years toward low cost country sourcing (LCCS), in turn, introducing a higher level of complexity into the supply chain. In the meantime some of these offshore companies, having grasped a foothold in US market share, have moved more operations to the United States, yet are still managing to keep costs and prices low. Toyota is a prime example. After establishing its market lead-ership position, it has continued to move operations closer to its US consumers. Today 85% of Toyota parts are manufactured in the United States, which subsequently reduces supply chain complexity, shortens lead times, and sets the bar higher for its competitors. In order to remain competitive, manufacturers need to differentiate by developing flexi-bility to respond to customers who have become more demanding in what they want and when they want it.

In the consumer market, additional pricing pressure is felt from the introduction of con-troversial “knock-off” products. The quality of these imitations of well-known and pre-mium-priced brands has improved to the extent that all but the least cost-sensitive con-sumers consider them in their comparison shopping, thereby squeezing margins and mak-ing pricing pressure a constant.

23%

39%

43%

55%

64%

67%

26%

37%

51%

58%

69%

50%

0% 10% 20% 30% 40% 50% 60% 70% 80%

High demand volatility/market is cyclical

Customers demanding more complete and on-time shipments

Improve return-on-invested-capital/assets

Required to meet increased demand with same assets and people

Customers demanding lower prices

Customers demanding shorter order lead times

2006 2004

23%

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55%

64%

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69%

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High demand volatility/market is cyclical

Customers demanding more complete and on-time shipments

Improve return-on-invested-capital/assets

Required to meet increased demand with same assets and people

Customers demanding lower prices

Customers demanding shorter order lead times

2006 2004



Enterprises that have mastered what Aber-deen describes in the manufacturing perform-ance management competitive framework as Best in Class practices have made significant progress in:

• Reducing manufacturing cost

• Shrinking manufacturing cycle times

• Improving schedule compliance

• Satisfying demand for more complete and on-time shipments

Aberdeen’s December 2004 study observed a disproportional number of manufacturing performance improvement initiatives had produced little or no results and suggested enterprises plan for a long term commitment to programs. Methodologies and technologies are not enough to guarantee success. As out-lined in Aberdeen’s PACE methodology, there needs to be a clear linkage between the business pressures, strategic actions and re-

quired capabilities, as well as technology enablers. Figure 2 clearly demonstrates some improvements take longer to attain. While significant improvements in throughput and complete and on-time shipments can be achieved in 1-2 years, improvements in product quality take longer, but there is value gained from continued improvement efforts. Find-ings also imply that early gains are not necessarily sustained.

Figure 2: “Better than Industry Average” Performance Attainment

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Product

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Cost

Return on

Assets

InventoryTurns R/M & WIP

More than 5 years

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1-2 Years

Less than 1 year

Completeand onlineshipment

Throughput Schedulecompliance

InventoryTurns:F/G

Manu-facturing

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InventoryTurns R/M & WIP

More than 5 years

2-5 Years

1-2 Years

Less than 1 year

Completeand onlineshipment

Throughput Schedulecompliance

InventoryTurns:F/G

Manu-facturing


PACE Key — For more detailed descrip-tion see Appendix A Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows:

Pressures — external forces that impact an organization’s market position, competitive-ness, or business operations

Actions — the strategic approaches that an organization takes in response to industry pressures

Capabilities — the business process competencies required to execute corporate strategy

Enablers — the key functionality of technology solutions re-quired to support the organiza-tion’s enabling business prac-tices



Chapter Two: Key Business Value Findings

Key T

akea

ways

• Best in Class seek market differentiation while others strive to compete • Data collection and culture issues present challenges • Customer satisfaction comes with a price • Best in Class monitor key performance metrics more frequently

anufacturers have traditionally focused on three dimensions of performance: quality, price and delivery. Virtually all manufacturing performance measure-ments fall into one of these three categories, making manufacturing the focus

of performance improvement. Aberdeen’s research findings show that enterprises with Best in Class operations and performance improvement practices were significantly more likely to outperform their competitors in complete and on-time shipments and schedule compliance. However, even in Best in Class companies this achievement was often at the expense of increased inventory levels. This explains why almost a third of Best in Class companies still view reduction in finished goods inventory as a top choice for strategic action.

There are some notable differences in the strategic actions of Best in Class companies versus the combination of industry average and laggards (Figure 3). While better per-formers remain focused on reducing costs, they also pay much more attention to building agility and flexibility into their manufacturing processes, seeking better market differen-tiation. Enterprises that have not achieved this level of performance spread their attention more evenly across the more traditional activities in order to achieve market acceptance, which is a lower standard than market superiority.

Although absolutes are difficult to compare across industries and even from one company to another, Best in Class companies have reduced manufacturing costs 13% on average, as compared to a disappointing 4% for all other respondents (see Table 1.) Measurement of manufacturing cycle times presents the same challenge. However, better performers were able to reduce cycle time by 16% and average lead times were significantly shorter.

Schedule compliance and complete and on-time shipments are much easier to benchmark across companies and industries. Aberdeen found that while Best in Class companies achieved a slightly smaller percentage increase, these better performers were either ap-proaching or had already reached a plateau where smaller increments signal significant improvement.

M



Figure 3: Strategic Actions

0

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Reduce WIP inventory

Reduce raw material inventory

Improve throughput

Improve schedule compliance

Reduce finished goods inventory

Reduce manufacturing lead time

Improve quality

Improve manufacturing flexibility/agility

Reduce manufacturing costs

Best in Class All Others

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Improve quality




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Improve throughput




Improve quality




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Improve throughput




Improve quality





Table 1: Performance Improvements

KPI Best in Class All Other Respondents

Before After % Improve-ment

Be-fore

After % Improvement

Manufacturing Costs1 46% 40% 13% 55% 53% 4%

Complete and on-time shipments 87% 97% 11% 73% 82% 12%

Schedule compliance 81% 94% 16% 66% 77% 17%

Manufacturing cycle time (days) 25 21 16% 30 26 13%


1 Measured as a percent of total revenue.



Challenges and Responses Data collection and culture issues present the greatest challenge to companies seeking to make significant strides in managing manufacturing performance. In general our research found the priority of responses to these challenges appropriate. Data collection is still done manually in the vast majority of companies, including over half of those in our Best in Class category. Yet an equal number of respondents indicated plans for simple and automated data collection, although even better performers sometimes struggle to cost justify automated solutions on the factory or shop floor. However, better performers have done a much better job of creating methodologies to define value and prove the real im-pact on business. Without timely collection of data, performance deviations surface much too slowly to allow for immediate corrective action and effective communication. And without adequate data, it is hard to justify continued support and further investment.

A real-time operations intelligence solution had dramatically contributed to the bottom line at Chevron Texaco’s El Segundo Refinery. A refinery competes on a worldwide ba-sis using commodity raw materials, making productivity levels critical to competitiveness and profitability. Chevron Texaco’s approach was to implement an integrated operations intelligence platform, XHQ (from IndX Software, a Siemens Company) in order to ag-gregate, relate and present operations data drawn from a variety of sources across the en-terprise. A subsequent business value assessment found that the implementation of this solution, combined with a newly empowered workforce, contributed dramatically to the results shown in Table 2.

Table 2: Chevron Texaco’s El Segundo Refinery Business Improvement

Business Improvement Category Multi-Year Average

Reduced Operating Expenses 8%

Increased Facility Utilization 8.5%

Increased Operational Availability 2.5%

Increased High Value Product Production 10.5%

Reduced Environmental Incidents 18%

Reduced OSHA Recordable Injury Rate 39%

Cultural change can be critical to manufacturing performance success. Without a per-formance driven culture with a philosophy of continuous improvement, manufacturers will continue to struggle and performance improvement initiatives will falter and fail. In most instances cultural issues trickle down from the top, making top management com-mitment equally important as a critical success factor.

One in three respondents indicated that IT solutions did not meet the necessary require-ments to support manufacturing performance improvements. While almost half of Best in Class intend to deploy these solutions, only 15% of average performers and laggards in-dicated plans to do so.



Table 3: Manufacturing Performance Management Challenges and Responses

Challenges % Selected Responses to Challenges % Selected

1. Data collection challenges 58% 1. Simple and automated data collec-tion

58%

2. Significant cultural change required 53% 2. Create a methodology to define value

54%

3. No financial justification 42% 3. Measure business impact 50%

4. Lack of top management commit-ment

33% 4. Seek top management commit-ment

38%

5. IT solutions do not meet require-ments

32% 4. Introduce change gradually 24%

6. Workforce unwilling to use technol-ogy

32%

6. Deploy IT solutions in support of MPM

19%

7. Manufacturing processes constantly changing

21% 7. Demonstrate the value of IT solu-tions to supervisors

11%


No Silver Bullets Significant manufacturing performance management improvements come at a price how-ever. Figure 2 in Chapter One illustrated that sometimes initial improvements are not sus-tained. Best in Class companies are not only more vigilant and persistent in their efforts, but Figure 4 indicates they also monitor and measure KPIs more frequently. The widely accepted management principle of “you can’t manage what you don’t measure” applies universally. However, not all KPIs require the same level of timeliness. Operational KPIs which measure product quality, throughput, schedule compliance and operation comple-tions should be monitored daily, at a minimum, in order to trigger effective corrective or preventive action. Best in Class companies are moving steadily towards real-time moni-toring of these dynamic metrics so that performance deviations are known immediately, local corrective action can be undertaken and communicated to downstream functions.



Figure 4: Frequency of Operational Measurement

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KPIs which measure inventory levels, return on assets (ROA), cycle time and manufac-turing costs change more slowly over time, and remedial actions take longer to produce results. Therefore daily or real-time monitoring is not as critical. Our research did how-ever show a dramatic difference between Best in Class and others in how frequently these performance indicators were measured. These findings show a direct correlation between Best in Class performance and frequency of measurement.



Figure 5: Frequency of Asset-Oriented Performance Measurement

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Best-in-classAll others


Dow Chemical is one company which has placed significant emphasis on near real-time performance monitoring. Recent mergers and acquisitions have added new production capability to their worldwide manufacturing grid. With 150 primary facilities located around the world, the company was experiencing considerable variability in perform-ance, performance measurement tools and work process. It found no quantifiable reason for poor performance in underperforming assets and therefore began to question the data integrity. Dow’s solution was to provide near real-time (24 hour) visibility of manufac-turing performance in order to enable rapid response to non-conforming product, service or business expectations. The company implemented Real-time Performance Manage-ment (RtPM) from IndX, a Siemens Company, to provide common data transfer methods from legacy and strategic plant information systems, as well as manual updates. Dow demonstrated tangible progress by implementing pilots in 4 plants across 3 business units, providing drill-down capability to detailed performance data to detect defects, root causes and variability. In doing so, it was able to reconcile differences between run rates and global benchmarks and analyze reasons for discrepancies. Today they have deployed the solution in 60 plants and are well on their way to full implementation across all 150 locations.



Chapter Three: Implications & Analysis

Key T

akea

ways

• Lean Manufacturing techniques that eliminate waste are embraced as a path to manu-facturing performance improvement

• Better performance correlates with frequency of KPI measurement • Laggards are only fooling themselves as the gap in performance widens • Best performing companies emphasize interoperability along with price, quality and de-

livery.

s shown in Table 3, survey respondents fell into one of three categories – lag-gard, industry average, or Best in Class — based on a combination of KPI per-formance and characteristics in five key categories:

1. Process: the ability to integrate manufacturing effectively throughout the enter-prise and the supply chain

2. Organization: corporate focus/philosophy, level of collaboration among stake-holders

3. Knowledge: visibility and understanding of performance

4. Technology: enablement of performance management initiatives

5. Performance measurement: metrics that promote customer focused perform-ance and continuous improvement

Best in Class manufacturers run the tightest ships, managing to focus on customers and supply chain partners without losing control of internal processes. Our research found best performers also make the best use of technology for data collection, operational effi-ciency and enterprise management and provide more proactive knowledge to operators and knowledge workers to enable effective operational decision-making. Laggard com-panies tend to view manufacturing departments and processes as non-integrated islands with little automation or technology to enable performance management. Operators see little beyond their own work stations and have no feel for how their individual perform-ance impacts the rest of the company.

A



Table 4: Manufacturing Performance Management Competitive Framework

Laggards Industry Average Best in Class

Process

Non integrated set of manufac-turing functions

Manufacturing functions integrated into a single process

Inbound and Outbound processes across the supply chain integrated with manufacturing processes.

Organization Fragmented functional depart-ments within manufacturing, littlecoordination across depart-ments, no interaction with IT

Lean work cells in pilot stage or in limited use; Manufacturing organ-ized as a single function with regu-lar coordination between functions and departments; little interaction with IT

Lean work cells are common; Manu-facturing organization integrated and coordinated with customer service, logistics and delivery organization; make collaborative decisions with IT

Knowledge Performance deviation known well after the fact, not in time for corrective action and not com-municated to downstream func-tions

Performance deviation known im-mediately after it has occurred, local corrective action undertaken and communicated to downstream functions

Performance deviation anticipated before deviation occurs, corrective action undertaken to prevent product deviation and minimize schedule impact; downstream functions are included in corrective action.

Technology Manual paperwork and/or spreadsheet planning & analy-sis, paper based execution, reporting mechanism only, no supporting controls; no interac-tion with IT; technology deci-sions made independently of business owners

Planning, execution and analysis solutions are separate and loosely coupled. Performance goals and attainment displayed on shop floor; limited interaction with IT; technol-ogy decisions influenced by busi-ness owners

Integrated planning, execution and analysis solution that constantly monitors performance in real time, providing feedback when disruption occurs or are anticipated; collabora-tion with IT; business owners own thesolutions

Performance Meas-urement

Focus is on unit cost and asset utilization at the department level

Focus is on-time ship performance and total cost

Focus is on customer responsiveness; cycle time, flexibility, throughput and resource effectiveness.


Process and Organization While all manufacturing companies understand the dynamics associated with the 3 di-mensions of manufacturing performance – price, quality and delivery – best performing manufacturers recognize a fourth dimension – interoperability – as a necessary compo-nent of the success equation. Successful orchestration of the complexities of operating across an extended supply chain is dependent upon a company’s ability to effectively and efficiently communicate, collaborate and inter-operate with its customers and suppliers. The first step in this journey toward productive collaboration is to make this standard practice internally.

The purpose of collaboration is to shorten lead times, improve responsiveness and drive out costs, including the cost of inventory. Most top performers today have embraced Lean manufacturing philosophies which focus on the following tenants:



• Specifying value from the customer’s perspective.

• Identifying the value stream or set of actions required to bring product or solu-tion to the customer; from concept to product launch, from order-to-delivery, and from raw materials to finished product.

• Making it flow by converting from departments and batches to product teams that redefine the work of departments.

• “Pulling” from the customer back by making exactly what the customer wants just when the customer wants it; let the customer “pull” the product as needed rather than pushing product, often unwanted, into inventory.

• Striving toward perfection is an ongoing process of reducing effort, time, space, cost, and mistakes.

Our research found that 76% of all companies active with Manufacturing Performance Management programs have embraced Lean manufacturing techniques. The pull strategy associated with Lean philosophies is supportive of a make-to-order manufacturing mode, which requires a strong integration with customer-facing departments and functions and coordination with the supply side of the full value chain. A majority of respondents (84%) indicated they operated in a make-to-order environment, as compared to 74% eighteen months ago, further validating the trend to Lean.

However, our research indicates that most companies also use other techniques, such as Material Requirements Planning (MRP), in parallel or in conjunction with Lean. Fifty seven percent of all companies and 64% of Best in Class use MRP, indicating the relative maturity of Enterprise Resource Planning (ERP) implementations in better performing companies. In addition, 40% of all companies and 50% of Best in Class performers have Six Sigma programs in place. Aberdeen’s Lean research has found a growing number of companies combining these two complementary strategies. While Lean focuses on the elimination of waste, Six Sigma focuses on the elimination of process variability.

Best performing companies tear down the walls separating manufacturing from the rest of the enterprise, and further break through the traditional boundaries isolating manufac-turers from the integrated value chain.

Key Capabilities The business process competencies cited as necessary to support strategic actions varied significantly between Best in Class, Industry Average and Laggards. Industry Average companies are focused primarily on identifying and eliminating bottleneck operations, streamlining operations and removing non-value added costs (see Figure 6).

Best in Class companies value these capabilities, but have already made significant pro-gress in this regard and are now able to turn their attention to more customer and sup-plier-focused priorities. These better performers selected capabilities that support a build-to-order environment and those that provide suppliers with upstream visibility. These top performers also keep a vigilant eye on streamlining operations and seek to re-use designs and process changes efficiently. They are more likely to place emphasis on collaboration between customer service and manufacturing than their poorer performing peers.



The attention of laggards is not as concentrated on any particular capability, although, as with the industry average enterprises, the ability to identify and eliminate bottlenecks did outweigh any other capability.

Figure 6: Capabilities

43%

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Laggard

Average

Best in Class

ID & eliminate bottleneck operations

Streamline opns ; remove non -value

added costs

MTO; components delivered to order

Better visibility to Mfg opns

Collaboration: CustSvc & Mfg

Provide suppliers upstream visibility

Re-use designs; process change

orders 43%

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added costs






orders 43%

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67%

18%

18%

27%

36%

36%

36%

55%

0% 20% 40% 60% 80%

Laggard

Average

Best in Class



added costs






orders 43%

43%

14%

29%

50%

43%

29%

11%

11%

33%

28%

28%

61%

67%

18%

18%

27%

36%

36%

36%

55%

0% 20% 40% 60% 80%

Laggard

Average

Best in Class



added costs






orders


Key Performance Indicators Aberdeen defines KPI effectiveness by examining KPI values and the frequency of measurement. As noted in Chapter Two, there is a direct correlation between Best in Class performance and frequency of measurement. Measurement strategies that allow companies to impact performance immediately or before problems actually occur are called “Managing.” This is typically within the day, daily, weekly, or in some instances monthly. Fast moving manufacturing June require performance measured to the minute. KPI measurement frequency that is significantly after the fact and can impact only long term performance is called “Reporting.”

Best in Class do a much better job of gauging the required frequency; they recognize some metrics require more frequent monitoring. These companies also have a more real-istic view of their performance relative to other companies in similar industries.

Our survey posed performance metrics questions in two ways. Aberdeen first asked com-panies for a qualitative self assessment, asking them to rate themselves in comparison to their peers in the same or similar industries. We then asked for specific quantitative measurements such as the percent of orders shipped on-time and complete. Best in Class companies’ responses to both types of questions correlated well. Companies that claimed to perform better than their peers in on-time and complete shipments, generally per-formed at 95% or better.



Aberdeen’s findings discovered a significant discrepancy between quantifiable metrics and qualitative self-assessment of schedule-related metrics in poorer performing compa-nies. When asked how their company performed relative to industry averages, 60% of laggards rated themselves as “about average” and 10% rated themselves as better than most, but the numbers told a very different story, with an average of 69% of shipments complete and on-time. Similarly, 63% of laggards rated themselves as performing “about average”, and 13% indicated they performed “better than most” in terms of schedule compliance Yet on average these companies were only performing at 56% of full com-pliance. This delusional view of the world gets to core of the matter. Without a clear and honest assessment of performance, the gap between Best in Class and the rest of the world will continue to widen.

Figure 7: Respondents’ Self-Assessment of Complete and On-Time Shipments

57%

43%

0

44% 44%

11%10%

60%

30%

0%

10%

20%

30%

40%

50%

60%

70%

Better than most About average Worse than most

BIC Average Laggard

57%

43%

0

44% 44%

11%10%

60%

30%

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20%

30%

40%

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70%


BIC Average Laggard

57%

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0

44% 44%

11%10%

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BIC Average Laggard

57%

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44% 44%

11%10%

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BIC Average Laggard


The measurement of Complete and On-Time shipments was chosen as an example for two reasons. First of all, along with schedule compliance metrics, it is one of the few universal KPIs that can easily be compared despite industry, size of company, geography or any other variable. And secondly, because it is the one metric that poorer performing companies typically use to fool themselves. Aberdeen interviewed one Vice President of Quality Assurance who had been hired to bring a $60 million manufacturer of flow con-trol valves through ISO 9000 certification. Upon his arrival several years ago, the com-pany boasted a 95% record of complete and on-time shipments. Within months of this VP’s arrival that percentage plummeted to 89%. Had their performance slipped dramati-cally? The answer was a resounding, “No!” The company had actually improved margin-ally, but it also began measuring performance correctly. The valve manufacturer had been measuring itself against an internal scheduled completion date, which typically bore no relationship at all to the customer requested delivery date. Then when the schedule



began to slip, the scheduled completion was pushed out and the new date was used in computing the performance metric. So as schedules were missed, the response was to lengthen the yardstick against which the company measured itself, thus assuring “good” performance.

Technology Usage Figure 8 shows that Best in Class companies are twice as likely to deploy IT solutions as an integral part of their manufacturing performance management strategies. Aberdeen investigated current implementations and plans to implement technology in support of planning, execution and control, three elements that form a closed loop manufacturing system, along with analysis. Findings indicate the use of enterprise applications was not as pervasive as is commonly believed. Where systems are deployed, integration remains a challenge.

Figure 8: Technology Adoption


While almost all companies surveyed expressed interest in and understood the value of existing and emerging technologies, these technologies are not widely used. While work-flow technologies tops the list as most important to performance management (see Figure 9), manual spreadsheets remains as the technology of choice in actual practice (see Fig-ure 10). Aberdeen interviewed companies from all three categories – laggards, industry average and Best in Class and found all aspired to real time data collection, with events managed through automated work flows that would trigger alerts directly from both en-terprise level and manufacturing execution systems.

Dave Simpson, director of operations for The Original Cakerie, the largest privately owned dessert manufacturer in Canada, observed that since most everyone today is overworked, “the only way out is to have the work call you, instead of having to go out and look for problems and opportunities.” Dave would ultimately like to apply event management concepts at the SCADA (Supervisory Control and Data Acquisition) level,

64%64% 57%

36%

36% 21%21%

15%

0%

20%

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80%

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120%

Planning Execution Control Analysis

Implementing NowFully Implemented

Best in Class

17%

12%28%

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29%37%

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All Others


64%64% 57%

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Planning Execution Control Analysis


Best in Class

17%

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All Others




with deviations triggering an automated response and appropriate escalation to page a supervisor. However - first things first. The Original Cakerie, is just now completing its evaluation and selection of an integrated ERP and will follow with the implementation of automated data collection. And yet the company has achieved Best in Class status with respect to complete and on-time shipments and schedule compliance. But without ad-vanced technology, it has traded customer service for high inventory levels. Even so, manufacturing performance improvement efforts, although mostly manual at present, will reduce required inventory levels in half.

Figure 9: Technologies Most Important to Performance Management


Almost 90% of companies surveyed have some level of ERP deployed, although a sur-prising 22% indicated ERP was home-grown or custom developed. While businesses cannot operate competitively today without it, ERP alone cannot deliver Best in Class results, and home grown or custom developed systems typically cannot keep pace with mature packaged applications. In the back office, ERP is an effective tooling for plan-ning, recording, documenting and reporting on the business, yet ERP is not necessarily reflective of reality in manufacturing.

One hundred percent of Best in Class companies have either fully implemented or are now implementing planning systems (applications which schedule, sequence or load level production), although many still rely heavily on ERP and home grown or custom developed systems.

NIBCO, a $500 million manufacturer of commodity plumbing products, is one Best in Class company that has effectively leveraged technology to make strides in their Lean pursuit of the “perfect order.” Ninety five percent of NIBCO’s transactional activity is processed through its SAP ERP system, yet the company realized ERP is limited in its view of manufacturing. Therefore, in 2004, the company implemented tools for strategic decision support to improve visibility using Informance. Data collection technology and real-time analytics allow the company to combine customer service strategies with inven-tory strategies, as well as manufacturing execution strategies.

56%

35% 33%29% 27%

22%16%

10%

0%

10%

20%

30%

40%

50%

60%

Workflow

technologies

Business

process

modelers

Portal

technologies

Rules based

event

management

Triggers and

Alerts

Predictive

technologies

Data

historians

3D

Visualization

All Participants

56%

35% 33%29% 27%

22%16%

10%

0%

10%

20%

30%

40%

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60%

Workflow

technologies

Workflow

technologies

Business

process

modelers

Business

process

modelers

Portal

technologies

Portal

technologies

Rules based

event

management

Rules based

event

management

Triggers and

Alerts

Triggers and

Alerts

Predictive

technologies

Predictive

technologies

Data

historians

Data

historians

3D

Visualization

3D

Visualization

All Participants



NIBCO manages two different components of its business. One side of the business is repetitive and make-to-stock. Items ordered are promised within 48 hours of receipt of orders. Supplying to demanding retailers such as Home Depot has required continuous improvement, both in theory and in practice. The other side of its business is made-to-order. SAP Available to Promise (ATP) tools are critical in determining commitment dates back to the customer. The company has developed a unique “zone” approach to inventory, which weighs factors such as representative lead times, average daily sales and manufacturing frequency. This approach, combined with real-time information, has re-duced safety stock levels yet improved product availability to 98%. John Hall, Director of Lean Enterprise Systems indicates the company has reduced inventory by 41%, but is still on an inventory reduction journey.

Charged with IT enablement, John’s small team of 4 people reports into the functional side of the business. Together the team has 115 years of experience and each is paired up with an IT specialist. One of NIBCO’s secrets to success has been its philosophy of own-ership. According to John, "We don't do IT as an ego trip. We require the business to own everything that we do."

In Aberdeen’s Manufacturing Transparency: Turning Visibility into Value report, study participants cited disparate data sources, lack of cohesiveness among plant and shop floor systems and lack of integration with ERP as top barriers to achieving visibility into the manufacturing process. And without clear visibility, in highly capacity constrained envi-ronments, orders cannot be reliably released. Without integrated real-time information, deviations, even if detected early, cannot be corrected before negatively impacting schedules and downstream operations.

While the majority of Best in Class companies reported planning, execution and control systems were either fully implemented or being deployed, only 50%, and even more dis-appointingly, only 30% of all others indicated the same for analytical solutions. In spite of the fact that these solutions have been available for years, they seem not to be well understood in manufacturing. Aberdeen reported similar results in its December 2004, and it appears little progress has been made since then. Spreadsheets remain the tool of choice (84%). On-Line Analytical Processing (OLAP) tools seem to be relegated to the finance and marketing departments. While manufacturing decision makers admit there are better tools, Microsoft Excel has established itself as the universal instrument. Easy to use and easy to understand, it is generally viewed as “good enough.”

However, a select few manufacturers have made use of analytics and other business intel-ligence (BI) tools to bring an improved level of visibility to their manufacturing opera-tions. Vicor Corporation, a designer and manufacturer of power conversion components and systems, has implemented Cognos tools to bring KPIs directly to line of business decision-makers. Joe Jeffery, Director of Manufacturing Systems, said the company’s objective was to de-centralize expertise and service manufacturing’s business needs more directly. He indicated, “We were spending too much time creating metrics and not enough time using them.” Joe and his team services the manufacturing operations by lis-tening to line of business managers’ issues and requirements, creating a pilot and deliver-ing it via a portal to the manager’s desktop. His secret to overcoming resistance is to not ask these operational managers to design multi-dimensional data cubes or drill paths, yet create a pilot they can quickly touch and feel. Acceptance comes from being able to drill into detail quickly and pose very specific questions about actual performance.

http://www.aberdeen.com/summary/report/benchmark/RA_Mfg_Transparency_JB_1962.asp



Figure 10: Tools Currently used to Monitor KPIs


While spreadsheets and reporting from applications such as quality management systems and ERP are the most widely deployed means of monitoring performance, some of the top performing companies we spoke with indicated a broader adoption of emerging tech-nologies. Ford Motor Company is one such early adopter. Ford uses ActivPlant Corpora-tion’s enterprise manufacturing intelligence platform to monitor KPIs. While all Ac-tivPlant data is available in real time, Ford chooses to monitor most performance metrics at the end of each shift, providing a tool for the area manager, together with the assigned work group, to evaluate lost time and waste. However a few selected KPIs, such as “jobs per hours,” are monitored in real time. In addition, Ford also takes full advantage of pa-ging devices triggered by alarms and alerts. Almost every individual not working direc-tly on the production line is equipped with some wireless device such as a belt pager, cell phone or PDA (personal digital assistant). Alarms signal problems while alerts simply notify individuals of status periodically.

Pressures, Actions, Capabilities, Enablers (PACE) We have shown that there is a clear relationship between the pressures companies identi-fy and the actions they take, and their subsequent competitive performance. All partici-pants should examine their prioritized PACE selections and determine whether there are valuable perspectives to be gleaned by comparison with the PACE priorities of Best in Class companies.

What is behind this increased focus and priority? Customers demanding shorter lead times and lower prices were ranked as the strongest driving pressures behind their deci-sions to optimize manufacturing performance. Aberdeen’s PACE (pressures, actions, ca-pabilities, enablers) analytical framework (Table 2) maps the causal relationship between these four factors.

Predictive technologies

OLAP

Executive dashboards

Events trigger alerts to wireless devices

Operator cockpits

Events trigger alerts to desktops

Spreadsheets

Reporting from other enterprise applications

Reporting from ERP

0%

5%

5%

7%

14%

23%

49%

70%

84%

0% 20% 40% 60% 80% 100%

Predictive technologies

OLAP

Executive dashboards

Events trigger alerts to wireless devices

Operator cockpits

Events trigger alerts to desktops

Spreadsheets

Reporting from other enterprise applications

Reporting from ERP

0%

5%

5%

7%

14%

23%

49%

70%

84%

0% 20% 40% 60% 80% 100%



Table 5: PACE Competitive Framework

Priority Pressures Actions Capabilities Enablers

1 Customers demanding shorter lead time


Provide suppliers with up-stream visibility; minimize queue and wait time

Solution that optimizes the path through production; solu-tion that generates early warning demand signals to suppliers and technology infrastructure to connect with supply chain partners

2 Customers demand-ing/competitors driving products prices down


Streamline operations; remove non-value added costs

Solution that helps identify and eliminate non-value added activities (waste)

2 Producing more with the same set of re-sources including peo-ple, machines and equipment

Improve throughput, find hidden capacity

Identify and eliminate bot-tlenecks; optimize through-put through these opera-tions

IT-enabled solutions that can help design the supply chain based on Lean principles and load level the manufacture and delivery of orders

3 Improve return on in-vested capital/assets

Reduce inventory, find hid-den capacity

Build-to-order with materi-als/components delivered for that order

Solution that supports pull-based manufacturing and supplier replenishment

5 Customers demanding complete and on-time shipments

Improve schedule compli-ance

Address manufacturing deviations as they occur; Better visibility into manu-facturing processes

Solution that alerts operators to deviations in quality and schedule in real-time; Real-time processing of alerts and event management

6 High Demand Volatility Improve Manufacturing flexibility/agility

Minimize lot size; provide multiple production paths; increase workforce flexibil-ity

Solution that can dynamically route orders through the shop floor, taking into account equipment and work force capabilities

7 Customers demanding more customization and flexibility - need to process change orders further into the manu-facturing cycle

Create re-usable and con-figurable designs

Better visibility into manu-facturing processes; streamline collaboration between customer service, engineering and manufac-turing; capability to re-use existing designs and easily process change orders

Real-time processing of alerts and event management




Chapter Four Recommendations for Action

Key T

akea

ways

• Take a balanced approach across the four key elements of performance: planning, exe-cution, control, and analysis

• Measure KPIs more frequently – quality deviations should be measured in real time; op-erational metrics such as throughput and schedule compliance should be measured daily; metrics that measure assets such as inventory should be measured weekly.

• Balance cost reduction efforts against customer satisfaction – as acceptable customer service levels are achieved, work specifically to reduce inventory levels.

• Use available technology for data collection, operational efficiency and visibility – inte-grated manufacturing and operations intelligence platforms, as well as analytics and other business intelligence tools

n Aberdeen’s December 2004 study, best performers were found to have a different philosophy concerning the value drivers of manufacturing and the role manufacturing performance management strategies play. Best in Class enterprises had begun to

make the shift from internal cost reductions to more of an outward focus on customer service. This shift appears to be continuing, with best performers using performance management strategies and IT solutions as vehicles for market differentiation. Not only have they shifted focus toward customers, but also to improved collaboration with sup-pliers and partners in the value chain.

All companies must consider the four elements of performance:

• Planning: The strategies, processes and supporting IT solutions which help manufacturers schedule, sequence or load level production in order to reliably meet the combination of customer satisfaction, throughput and financial goals. Planning capabilities are crucial to ensure schedules are feasible, resources are leveraged, sequence and change-overs are minimized to improve operations.

• Execution: The strategies, processes and supporting IT solutions which provide instruction to the work force and automation to better meet schedule and quality requirements. Execution systems include equipment and technology to support work instructions, testing, inspection or work status, inventory status and replen-ishments. Execution capabilities synchronize resources and track performance

• Control: The strategies, processes and supporting IT solutions which measure plan vs. actual performance in real-time, alert the work force to actual or poten-tial deviations, and proactively re-plan or suggest corrective action.

• Analysis: The strategies, processes and supporting IT solutions which aid in un-derstanding complex operations and their impact on financial performance. Analysis determines operational effectiveness and identifies improvement oppor-tunities.

I



With very few exceptions, real-time integration across these 4 elements has been either non-existent or a custom effort, loosely coupled at best. All companies would benefit from a more focused effort on closing the loop between these critical elements, develop-ing a philosophy of continuous improvement and promoting a culture where change is welcomed and embraced.

Whether a company is trying to gradually move its manufacturing performance from “Laggard” to “Industry Average,” or “Industry Average” to “Best in Class,” the follow-ing actions will help spur the necessary performance improvements:

Laggard Steps to Success 1. Make sure your foundation is secure. Leverage enterprise and manufacturing

control and execution solutions to synchronize operations and performance measurement.

ERP is a necessary infrastructure upon which improvements can be built. If ERP is deployed, take a good hard look at the acceptance and discipline across your organization. If your foundation is not structurally sound, take the time and effort now to shore it up. Also look at current manufacturing processes and identify ways in which you can gain better visibility and control over what is happening in the plant or on the shop floor.

2. Make sure key performance indicators accurately reflect performance

Many manufacturing organizations fall short of Best in Class status because their performance metrics are too constrained. They look only at internal metrics such as asset utilization and cost and they ignore the impact on the customer. Achiev-ing 98 - 100% complete and on-time shipments is meaningless unless the target lines up reasonably well with customer demand. Establish scheduling metrics that keep the customer foremost in priority. If business processes are not built and followed with the customer’s needs at the core, then consistent client satis-faction is at risk.

3. Measure more often

Most poor performers rely on monthly reporting of metrics, which prevents them from adequately managing the results. Frequency of measurement correlates di-rectly with improved performance. Quality deviations should be monitored and measured in real time. Operational metrics such as complete and on-time ship-ments and schedule compliance should be measured daily and key performance indicators measuring assets such as inventory should be measured weekly.

Industry Norm Steps to Success 1. Gain better balance between internal cost reductions and customer satisfaction

Many industry average companies have made significant progress in improving quality and schedule compliance, as well as increasing the percentage of com-plete and on-time shipments. But many times this is done at the expense of in-ventory. Pay particular attention to cycle time, production efficiency, and pro-duction variability to accelerate the supply chain while limiting inventory expo-



sure. Look beyond the basics of ERP’s infinite capacity view to gain a more real-istic picture of manufacturing.

2. Extend performance management efforts into the supply chain.

Focusing on customer satisfaction is an intuitive next step, but don’t stop there. Collaborate with suppliers to improve flow of materials and processes through the supply chain. Simple web based supplier collaboration solutions go a long way toward improving overall performance. Best performing companies empha-size interoperability along with price, quality and delivery performance.

3. Look to technology solutions to take that next crucial step. Reduce paper and spreadsheet-based processes, and consider Web-based technology solutions.

Outdated or lack of appropriate technology will breed error and inefficiency within a manufacturing organization. Once clear business and customer require-ments are in place, consider leveraging or expanding existing technology invest-ments. Begin to close the gap between enterprise applications and manufacturing execution systems. Accelerate the automation of data collection and leverage this data with analytical tools.

Best in Class Next Steps 1. On-time shipments and product quality are now “givens.” Seek performance im-

provements that will produce the flexibility and agility that will lead to market differentiation.

As competition continues to drive prices down and customers become more de-manding, expecting what they want, when they want it, the only way to be com-petitive is to offer something others cannot.

2. Take full advantage of emerging technologies.

What was considered bleeding edge technology just eighteen months ago has matured, reducing the associated risk of adoption. Start with workflow technolo-gies, but don’t stop there. Enhance overall processes with both passive and active event management, taking advantage of triggers and alerts and wireless mobile technology. Let the exceptions call out to the decision-maker in order to take ap-propriate remedial or preventive action.

In addition to increased product quality, better delivery and better margins, taking the above steps can directly impact a company’s overall costs, revenues, and profitability.



Author Profile

Cindy Jutras Vice President and Service Director Manufacturing Research AberdeenGroup, Inc.

Cindy Jutras is vice president of manufacturing research and service director for Aber-deenGroup. In this role Cindy oversees all research programs, products and services, re-lated to Manufacturing and ERP. Prior to joining AberdeenGroup, Cindy was a Senior Director at SSA Global and Vice President of Product Strategy for interBiz, a division of Computer Associates. She has also led manufacturing consulting groups and held a vari-ety of positions in software design and development, project and general management for manufacturing, consulting and software companies. Cindy is the author of the original supply chain concept, Virtually Vertical Manufacturing, as well as the book ERP Optimi-zation.



Appendix A: Research Methodology

etween April and May, 2006, AberdeenGroup and AutomationWorld magazine examined the manufacturing performance management strategies, experiences, and intentions of more than 130 enterprises in automotive, high-tech, industrial products, and other industries.

Responding manufacturing, logistics, and operations executives completed an online sur-vey that included questions designed to determine the following:

• The degree to which manufacturing performance management impacts corporate strategies, operations, and financial results

• The structure and effectiveness of existing performance management procedures

• Current and planned use of automation to aid these activities

• The benefits, if any, that have been derived from manufacturing performance management initiatives

Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on manufacturing performance management strategies, experiences, and results.

The study aimed to identify emerging best practices for manufacturing performance man-agement and provide a framework by which readers could assess their performance man-agement capabilities.

Responding enterprises included the following:

• Job title/function: The research sample included respondents with the following job functions: business process management (33%), manufacturing (28%) pro-curement (14%), supply chain/logistics (12%) and IT (5%). Job titles represented were manufacturing/operations executive or director (31%); manager (28%); CEO or other C-level officer (16%), and internal consultant (19%).

• Industry: The research sample included respondents exclusively from manufac-turing industries. High-tech manufacturers accounted for 19% of respondents, followed closely by industrial equipment manufacturers at 14%. Automotive manufacturers represented 12% of the sample, while manufacturers of metals and metal products accounted for 9% of respondents. Other sectors responding in-cluded medical equipment, construction/engineering, and aerospace & defense, chemicals and pharmaceuticals.

• Geography: Study respondents were from all parts of the world. Almost 64% of the companies are headquartered in and 70% have plants located the Americas; 22% are headquartered and 65% have plants in EMEA (Europe, Middle East and Africa; 14% are headquartered in and 49% have plants in Asia Pacific;

• Company size: About 30% of respondents were from large enterprises (annual revenues above US$1 billion); 39% were from midsize enterprises (annual reve-

B



nues between $50 million and $1 billion); and 32% of respondents were from small businesses (annual revenues of $50 million or less).

Solution providers recognized as sponsors of this report were solicited after the fact and had no substantive influence on the direction of the Manufacturing Performances Man-agement Benchmark Report. Their sponsorship has made it possible for AberdeenGroup and AutomationWorld to make these findings available to readers at no charge.

Table 6: PACE Framework

PACE Key

Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows:

Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, com-petitive)

Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product/service strategy, target markets, financial strategy, go-to-market, and sales strategy)

Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products/services, ecosystem partners, financing)

Enablers — the key functionality of technology solutions required to support the organiza-tion’s enabling business practices (e.g., development platform, applications, network con-nectivity, user interface, training and support, partner interfaces, data cleansing, and man-agement)




PACE and Competitive Framework How They Interact Aberdeen research indicates that companies that identify the most impactful pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of com-petitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute.

Table 7: Manufacturing Performance Management Competitive Framework

Laggards Industry Average Best in Class

Process

Non integrated set of manufac-turing functions

Manufacturing functions integrated into a single process

Inbound and Outbound processes across the supply chain integrated with manufacturing processes.

Organization Fragmented functional depart-ments within manufacturing little coordination across depart-ments.

Manufacturing organized as a sin-gle function with regular coordina-tion between functions and de-partments

Manufacturing organization inte-grated and coordinated with cus-tomer service, logistics and delivery organization

Knowledge Performance deviation known well after the fact, not in time for corrective action and not com-municated to downstream func-tions

Performance deviation known im-mediately after is has occurred, local corrective action undertaken and communicated to downstream functions

Performance deviation anticipated before deviation occurs, corrective action undertaken to prevent product deviation and minimize schedule impact; downstream functions are included in corrective action.

Technology Manual paperwork and/or spreadsheet planning & analy-sis, paper based execution, reporting mechanism only, no supporting controls

Planning, execution and analysis solutions are separate and loosely coupled. Performance goals and attainment displayed on shop floor

Integrated planning, execution and analysis solution that constantly monitors performance in real time, providing feedback when disruption occurs or are anticipated

Performance Meas-urement

Focus is on unit cost and asset utilization at the department level

Focus is on-time ship performance and total cost

Focus is on customer responsiveness; cycle time, flexibility, throughput and resource effectiveness.




Appendix B: Related Aberdeen Research & Tools

Related Aberdeen research that forms a companion or reference to this report include:

• Manufacturing Transparency, December 2005

• The Lean Benchmark Report: Closing the Reality Gap, March 2006

• Global Manufacturing: MES and Beyond, May 2006

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

http://www.aberdeen.com/summary/report/benchmark/RA_Mfg_Transparency_JB_1962.asp

http://www.aberdeen.com/summary/report/benchmark/RA_Lean_JB_2845.asp

http://www.aberdeen.com/summary/report/benchmark/RA_GlobalMES_JB_3086.asp

http://www.aberdeen.com/



About AberdeenGroup

Our Mission To be the trusted advisor and business value research destination of choice for the Global Business Executive.

Our Approach Aberdeen delivers unbiased, primary research that helps enterprises derive tangible busi-ness value from technology-enabled solutions. Through continuous benchmarking and analysis of value chain practices, Aberdeen offers a unique mix of research, tools, and services to help Global Business Executives accomplish the following:

• IMPROVE the financial and competitive position of their business now

• PRIORITIZE operational improvement areas to drive immediate, tangible value to their business

• LEVERAGE information technology for tangible business value. Aberdeen also offers selected solution providers fact-based tools and services to em-power and equip them to accomplish the following:

• CREATE DEMAND, by reaching the right level of executives in companies where their solutions can deliver differentiated results

• ACCELERATE SALES, by accessing executive decision-makers who need a so-lution and arming the sales team with fact-based differentiation around business impact

• EXPAND CUSTOMERS, by fortifying their value proposition with independent fact-based research and demonstrating installed base proof points

Our History of Integrity Aberdeen was founded in 1988 to conduct fact-based, unbiased research that delivers tangible value to executives trying to advance their businesses with technology-enabled solutions.

Aberdeen's integrity has always been and always will be beyond reproach. We provide independent research and analysis of the dynamics underlying specific technology-enabled business strategies, market trends, and technology solutions. While some reports or portions of reports may be underwritten by corporate sponsors, Aberdeen's research findings are never influenced by any of these sponsors.


AberdeenGroup, Inc. 260 Franklin Street, Suite 1700 Boston, Massachusetts 02110-3112 USA

Telephone: 617 723 7890 Fax: 617 723 7897 www.aberdeen.com

© 2006 AberdeenGroup, Inc. All rights reserved June 2006

Founded in 1988, AberdeenGroup is the technology- driven research destination of choice for the global business executive. AberdeenGroup has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehen-sive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, AberdeenGroup offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services.

The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analyst’s judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders.

the manufacturing performance management benchmark report

Business

better performance

class companies

performance gap

accurate performance

poorer performing companies

class enterprises

focus of attention

customer satisfaction