Article | December 8, 2021
An agile manufacturing strategy is one that places a strong priority on responding quickly to the needs of the customer, resulting in a major competitive advantage.
It is a captivating method to build a competitive work system in today's fast-moving marketplace. An agile organization must be able to adapt quickly to take advantage of limited opportunities and rapid shifts as per client demand. Agile manufacturing is gaining favor among manufacturers due to its several benefits, including increased work productivity and good control over the final deliverable. Furthermore, the shorter time to market is expanding the global market for enterprise agile transformation services.
According to Market Watch, with a CAGR of 17.9% from 2019 to 2026, the US enterprise agile transformation services market is predicted to reach $18,189.32 million by 2026.
So why is agile manufacturing gaining traction? What challenges do manufacturers encounter when implementing agile manufacturing, and how have industry leaders like GE, Adobe, and Accenture effectively implemented agile methodology in their organizations and become the best examples of agile manufacturing? In this article, we'll take a closer look at each point.
What Is the Importance of Agile Manufacturing?
The term "agile manufacturing" refers to the use of a variety of different technologies and methodologies in the production process. In order to meet market standards and criteria, organizations must be able to adapt quickly and effectively to their customers' needs by bringing agility to manufacturing. To ensure the quality of products and the cost of production are kept to a minimum, agile manufacturing helps firms to regulate their end product.
Because it immediately addresses the needs and worries of the clients, it is an effective strategy as well. By using this method, firms may better understand the market and use it to their advantage by creating products that meet the needs of their customers.
Challenges While Adopting Agile Methodologies on a Project
When we talk about agile challenges when implementing it on any project, some will be routine and some will be unique. So, let's get a quick grasp on the agile challenges.
Communication about the project: Clear communication between the development team and the product owner is critical throughout the project development life cycle. Any miscommunication can have an impact on the product's quality and the end result of the entire process.
Managing the day-to-day operational challenges: Throughout the project, daily minor or large operations play a significant impact on the overall project output. Any obstacles encountered when working on everyday chores should be resolved immediately to avoid any delays or halts in the process.
To make it function, you'll need experience: Any inexperienced product owners, scrum masters, or individuals new to the agile approach may have a negative impact on the project's expected output.
Various project contributors' buy-in: Inadequate training, a lack of motivation to show up from project participants, keeping customers in the loop, and a lack of departmental management are some of the problems that may hinder the accurate implementation of the agile methodology. The presence of one or more of these obstacles in any business or project may jeopardize the agile methodology and its total output.
Though there are many online training courses and books available on how to integrate agile practices into your project, each organization's scenario is unique, as are the challenges they encounter. As a result, handling the situation with experienced personnel that have a can-do attitude is what is required to make it work.
Following that, we'll look at some manufacturing business agile examples and how they've successfully implemented agile methodology in their organizations.
Agile Manufacturing Examples
We'll look at one of the most well-known industrial examples of agile manufacturing that has successfully implemented the methodology and achieved great outcomes. Take a peek at it.
One of the most popular agile manufacturing examples in performance management revamps is Adobe. When Donna Morris was Senior Vice President of People Resources in 2012, she thought the annual performance evaluation and the stack-ranking process were bureaucratic, paperwork-heavy overly complicated, taking up too many management hours for the company. Aside from this, she discovered that it set barriers to joint efforts, creativity, and development.
The Adobe team ditched annual performance reviews and encouraged managers and employees to regularly discuss performance via a system called “Check-in.” Adobe has reduced voluntary turnover by 30% and increased voluntary departures by 50% since making the transition. Moreover, the company saved 80,000 management hours annually.
General Electric famously overhauled its performance management system in 2015, paving the path for other global firms to follow in the electronics industry. Annual performance evaluations and the infamous rank-and-yank performance rating system (ranking employees and regularly eliminating the bottom 10%) had GE decide they needed to update their performance management system. The annual appraisals lasted a decade longer than the ranking system. They are now a more agile organization.
Instead of directing employees to attain goals, managers now guide and coach them. GE also decided to deploy an app they designed called PD@GE to facilitate regular employee feedback and productive performance discussions.
Using the app, each employee establishes priorities and solicits feedback. They can also give real-time feedback. Employees can request a face-to-face meeting at any time to discuss transparency, honesty, and continuous improvement.
These traits will not arise quickly and will require motivation and commitment for self-growth.
According to Accenture's previous system, employees who perform well tend to be the most narcissists and self-promoters. Accenture wanted to revamp their system and reward genuine employees. So they started using on-going performance conversations while focusing on performance development.
Because it required employees to compete with coworkers who may have had a different position, Accenture decided that forced ranking was illogical. The new system is more centered on the employee and aims to assist them in becoming the best version of themselves.
Agile manufacturing is a way to get the finest results and exceed client expectations on every project. Businesses are benefiting from agile manufacturing because it improves the end product and helps them better utilize their resources. The necessity of agile manufacturing in business is vital, and organizations must overcome the challenges they encounter while applying the agile approach to any of their projects in order to reap the benefits of agile production.
How does agile manufacturing help businesses?
An agile manufacturing process enables organizations to respond to client requests with flexibility when market conditions change, as well as regulate their intended production while preserving product quality and minimizing costs.
What is an agile organization?
Unified alignment, accountability, specialization, transparency, and cooperation are key elements in an agile organization. To guarantee these teams can work efficiently, the organization must maintain a solid environment.
What are the core elements of agility?
Individuals and interactions over processes and tools are the four values of the Agile Methodology. A working program is preferable to in-depth documentation. During contract negotiation, the customer's cooperation is valued.
"name": "How does agile manufacturing help businesses?",
"text": "An agile manufacturing process enables organizations to respond to client requests with flexibility when market conditions change, as well as regulate their intended production while preserving product quality and minimizing costs."
"name": "What is an agile organization?",
"text": "Unified alignment, accountability, specialization, transparency, and cooperation are key elements in an agile organization. To guarantee these teams can work efficiently, the organization must maintain a solid environment."
"name": "What are the core elements of agility?",
"text": "Individuals and interactions over processes and tools are the four values of the Agile Methodology. A working program is preferable to in-depth documentation. During contract negotiation, the customer's cooperation is valued."
Article | December 21, 2021
When it comes to developing a budget for the following financial year of your manufacturing business, many operations managers start with direct labor and material expenditures. But, what about manufacturing overhead costs?
Manufacturing overhead is any expense not directly tied to a factory's production. Therefore, the indirect costs in manufacturing overhead can also be called factory overhead or production overhead.
Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower-cost goods and services, and causes economic expansion that reduces unemployment and increases productivity and job creation.
– Larry Elder
So, this article focuses on some highly effective overhead cost reduction methods that would help you build a healthy budget for the following year.
Manufacturing Overhead Costs: What Is Included?
Everything or everyone within the factory that isn't actively producing items should be considered overhead.
The following are some of the variables that are considered overhead costs:
Depreciation of equipment and productionfacilities
Taxes, insurance, and utilities
Supervisors, maintenance, quality control, and other on-site personnel who aren't producing signs
Indirect supply from light bulbs to toilet paper is also included in the overhead cost.
Manufacturing Overhead Costs: What Is Excluded?
Everything or everyone within or outside the factory that is actively producing items should be excluded from the overhead costs.
Factory overhead does not include the following:
Employee costs for those making the goods daily
External administrative overhead, such as a satellite office or human resources
Costs associated with C-suite employees
Expenses associated with sales and marketing - include pay, travel, and advertising
How to Calculate Overhead Costs in Manufacturing
To know the manufacturing overhead requires calculating the manufacturing overhead rate. The formula to calculate the manufacturing overhead rate i.e. MOR is basic yet vital.
To begin, determine your overall manufacturing overhead expenses. Then, add up all the monthly indirect expenditures that keep manufacturing running smoothly.
Then you can calculate the Manufacturing Overhead Rate (MOR). This statistic shows you your monthly overhead costs as a percentage.
To find this value, divide Total Manufacturing Overhead Cost (TMOC) by Total Monthly Sales (TMS) and multiply it by 100. The final formula will be:
Assume your manufacturing overhead expensesare $50,000 and your monthly sales are $300,000. You get.167 when you divide $50,000 by $300,000. Then increase that by 100 to get your monthly overhead rate of 16.7%.
This means your monthly overhead expenditures will be 16.7% of your monthly income. Being able to forecast and develop better solutions to decrease production overhead.
Five Ways to Reduce Manufacturing Overhead Costs
A variety of strategies may be used by manufacturing organizations to reduce their overhead costs. Here is a summary of some of the most important methods for reducing your manufacturing overhead costs.
Value Stream Mapping – A Production Plant Process Layout
A value stream map depicts the entire manufacturing process of your plant. Everything from raw material purchase through client delivery is detailed here. The value stream map provides you with a complete picture of the profit-making process. This overhead cost-cuttingmethod is listed first for a reason because every effort to reduce manufacturing overhead costsstarts with a value stream map.
Lean manufacturingis also one of the techniques of eliminating unnecessary time, staff, and work that is not necessary for profit and has gained undue favor in the manufacturing process. You must first create a value stream map of the whole manufacturing process for this technique to work. Once the lean manufacturing precept is established, the following strategies for decreasingmanufacturing overhead expenses can be examined.
Do Not Forget Your Back Office Management
Before focusing on factory floor cost reduction techniques, remember that your back offices, where payment processing and customer contacts occur, may also be simplified and increase profitability. Fortunately, automation can achieve this profitability at a cheap cost.
Manufacturers increasingly use robotic process automation (RPA) to sell directly to customers rather than rely on complex supply networks. This automation eliminates costly human mistakes in data input and payment processing by automatically filling forms with consumer data. Moreover, the time saved from manual data input (and rectifying inevitable human errors) equates to decreased labor expenses and downtime.
Automating Your Manufacturing Plant
For a long time, manufacturers saw factory automation as a game-changer. As a result, several plant owners make radical changes in their operations using cutting-edge technologydespite knowing it realistically. Over-investing in technologies unfamiliar to present industrial personnel might be deemed a technology blunder. Investing in new technology that doesn't generate value or is too hard for current staff to use might be a mistake.
It's usually best to start small when implementing newtechnology in manufacturing. Using collaborative robots in production is one way to get started with automation. They are inexpensive, need little software and hardware, and may help employees with mundane, repeated chores that gobble up bandwidth. It is a low-cost entry point into automation that saves labor expenses and opens the door for further automation investments when opportunities are available.
Reuse Other Factory Equipment and Supplies
Check with other factories to see if they have any unused equipment or supplies that may be "redeployed" to your manufacturing plant. Redeployment would save you time and money by eliminating the need to look for and install new equipment while lowering your overhead costs.
Outsourcing a fully equipped factory, equipment, or even staff can also assist in lowering overhead costssince you will only pay for what you utilize. As such, it is a viable method to incorporate into your production process.
Employ an In-house Maintenance Expert
An in-house repair technician can service your equipment for routine inspections, preventive maintenance, and minor repairs. This hiring decision might save money on unforeseen repair expenses or work fees for an outside repair provider. Having someone on-site who can do emergency repairs may save you money if your equipment breaks after business hours.
Manufacturing overhead costis an essential aspect of every manufacturing company's budget to consider. Smart manufacturingis intended to be productive, efficient, and cost-effective while effectively managing production expenditures. Calculating the manufacturing overheadcan provide you with a better understanding of your company's costs and how to minimize them. Depending on the conditions or geographical needs, each manufacturing plant's overhead expensesmay vary. As a result, identify your production overhead costsand concentrate on reducing and improving them.
What are manufacturing overheads?
Manufacturing overhead cost is a sum of all indirect expenses incurred during production. Manufacturing overhead expenses usually include depreciation of equipment, employee salaries, and power utilized to run the equipment.
What is a decent overhead percentage?
When a business is functioning successfully, an overhead ratio of less than 35 % is considered favorable.
How can I calculate the cost of manufacturing per unit?
The overall manufacturing cost per unit is determined by dividing the total production expenses by the total number of units produced for a particular time.
Article | May 18, 2021
For twenty years as an editorial contributor to Quality Digest magazine, I have had the pleasure of authoring or collaborating more than 80 articles for the publication. During this two-decade tenure, I have worked with Dirk Dusharme (pictured left), Editor in Chief of Quality Digest.
Quality Digest’s website receives more than three million page views each year, which provide editorial content, live broadcasts, videos, and on-demand webinars presented by industry experts on international quality standards, leadership, manufacturing, metrology, statistical process control, training, and more.
Quality Digest continues its important role as companies navigate a post-COVID reality with a critical role of safety, quality, efficiency, and resiliency. Quality elements are no longer an after-thought. It is essential when examining automation, lean manufacturing, and new paradigms for best practice. During COVID, all of us became more remote savvy and the demand for visionary content and information essential.
According to Dusharme, “Since their debut almost a decade ago, Quality Digest's "enhanced" webinar events have raised the bar for the traditional webinar experience. Our audience has come to expect concise, informative, and engaging presentations with subject matter experts who know what they are talking about. Apart from the traditional quality topics, we delve into areas that broaden our audience’s knowledge. These topics range from cybersecurity, to supply chain management, to understanding and dealing with cognitive biases. Our goal is to provide up-to-date, actionable information that our audience can immediately put to use. Live video feeds of the presenters and the products, interactive Q&A sessions, surveys, and valuable downloads all make up our usual webinar experience, followed by next-day access to the on-demand recording and materials.”
Enhanced Webinars from Quality Digest feature real-time streaming video of host, subject matter expert, and a case study in action. Users can email questions, chat, or download files in real-time. This modality is ideal for visual case studies/product demos, team or customer training, and new product/new service announcements.
Article | June 28, 2021
Manufacturing journalist Thomas R. Cutler visited the remarkable and magnificent country of Uganda.
Foreign investment is coming into the country and that is a good thing; it is not however, enough. To tap into this workforce corporate citizenship and contribution is essential. Just as I underestimated the stamina needed to climb the mountain to experience the gorillas, the role of transforming Uganda requires a careful, well-thought approach.