The Importance of Data in Manufacturing
In a world where data consolidation and analysis are becoming ever more vital to business, it can be difficult to know how to best set up your organization’s data strategy to meet future demands.
Furthermore, in the business of manufacturing, where there are so many proverbial moving parts and areas to focus on, it can be challenging to note the advantages and cost savings associated with a coherent data strategy when compared to other areas of the organization (i.e. sales, operations, research and development, procurement, quality assurance, etc.).
However, having access to well-defined and accurate data can lead to insights and cost savings that propel a manufacturer to the next level of their business as well as outperform competitors, for several simple and powerful reasons cited by Kevin Snook, author of Make It Right: 5 Steps to Align Your Manufacturing Business from the Frontline to the Bottom Line.
If you would like to better understand the importance of data in manufacturing as well as how to transform your systems to deliver accessible, accurate data, read on.
Data Is Power
The primary driver for needing access to data in a manufacturing environment is that Data Is Power, especially real-time data. Kevin Snook points out that most manufacturing organizations compile data and review performance on a quarterly basis usually at the end of the quarter.
In his opinion, this is a subpar strategy because it removes the ability to adapt the organization to do better due to the lag time: it takes a full quarter for the factory to understand how it is performing and, when they do find out about it, they have no time to try new strategies to see how it impacts performance. They are essentially always living three months in the past in the organization, and that stifles its ability to adapt new approaches to challenges and make improvements.
Ultimately, this saps more than just morale as expensive and costly issues are often ignored until the end of the quarter, when they have already had time to reap damage on the bottom line and employee sentiment. In the dynamic and ever-changing landscape manufacturing businesses encounter in the modern world, having lagging indicators and a lack of transparency into real-time data places them in an increasingly precarious position.
Systems, Not Spreadsheets
It is important to also note that the data for a manufacturing organization should be stored and analyzed in Systems, Not Spreadsheets. Normally, manufacturers will compile their key performance indicators (KPIs) and metrics into several Microsoft Excel spreadsheets that they have employees or managers sift through, arrange, and report on. This has several disadvantages: first, spreadsheets are notoriously hard to track and manage, especially when they are being handled by multiple team members and not centrally managed.
Second, consolidating data and representing it with charts, metric tables, etc. takes a tremendous amount of time and labor from employees every single quarter, time and labor that could better be spent improving the organization.
Worst of all, there are often inaccuracies within the data and consolidation that lead to incorrect results – this can mean leadership in a manufacturing organization may make uninformed or less than ideal choices because they had less than accurate data to base their decisions on. All of this translates to inefficiencies and obfuscation that can be terribly costly to manufacturers.
Identify and Communicate on Issues
An additional major benefit of having accurate and real-time data available to a manufacturing organization is the ability to Identify and Communicate on Issues.
Kevin’s book provides a perfect example of how powerful this advantage can be:
Kevin visited a factory where all the electrical panels for the manufacturing equipment on the floor were left wide open. This is extremely hazardous, as dust gathers in the circuitry through the open panels and causes electrical failures.
Kevin asked the floor manager why the panels were open, and he replied it was due to the units overheating if they were closed. Kevin responded that the fans and cooling units within the equipment should be able to keep them cool when closed. The manager replied that the fans had long since broken down and were not replaced by management; the fans had broken down because management had not fixed the air conditioning for the floor for a couple years, which required the fans on the equipment to work harder to keep the machines cool and eventually failed, which lead to the floor manager just leaving the panels open during operation and exposing the wiring to dust.
So, now there was a situation that because of a broken air conditioning unit which was ignored the fans on the equipment had failed, which caused them to overheat, which required them to have their panels open where they could gather dust and debris, leading to expensive and repeated electrical failures. The repairs to the air conditioning system and fans would cost several thousand dollars, but in ignoring the issue the factory leadership was paying MILLIONS OF DOLLARS per year in repairs and lost production due to electrical failures resulting from, you guessed it, open electrical panels.
This anecdote begs a simple question: how much money would the organization have saved had they had access to data that explained their biggest issues and sources of loss or if they had a system that allowed their floor managers to adequately convey issues to the leadership?
How much money do manufacturing organizations lose day after day, quarter after quarter, and year after year, because they don’t have accurate, real-time indicators of their performance?
The Cost of Not Evolving
At FMT Consultants, we know that opponents to implementing new systems and data strategies worry about expensive, confusing, and time-consuming endeavors. But we also know that not evolving an organization and leveraging technology to make better decisions can be far more costly. So, if you are thinking of updating your existing IT solutions or implementing brand new ones, remember to ask yourself:
If we do not update our technology and data analysis in our organization, how much is it costing us?
How much money are we really leaving on the table in not updating our systems?
Whether you want to learn more about our specific offers for manufacturers (such as this one to empower procurement and align sales and operations), share your technology goals for 2021, or have a conversation about the importance of data in manufacturing, we’d love to talk. Drop us a line and contact us here.
Thank you and Happy 2021!