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In May 2007, Aberdeen Group surveyed over 400 manufacturers, to discover the pressures companies are currently facing, the strategic actions they are taking to address these pressures, the capabilities they need to take the above action, and the technology enablers they are currently utilizing. The responding manufacturers were then categorized into Best-in-Class (20%), Industry Average (50%) and Laggard (30%) companies based on their performance in on-time delivery, plant throughput and reduction in manufacturing cycle time.
Addressing the Market Pressures
The top pressure driving Best-in-Class (BIC) manufacturers to focus on Lean initiatives is the reduction of manufacturing costs (71%); this is the same leading pressure driving manufacturers in the plastics industry. It is interesting to note that while the top pressure faced by the Best-in-Class, as well as plastic manufacturers, is the same, each group is following a different path to respond to this pressure.
While Best-in-Class manufacturers are focusing on extending continuous improvement team findings across the organization (38%), manufacturers in the plastics industry have taken a different route (Figure 1). Plastics manufacturers are 59% more likely to integrate lean scheduling applications and ERP to reduce manufacturing costs. The second action plastics manufacturers have taken is to synchronize manufacturing execution and customer demand (36%). Both of these actions show us that manufacturers in the plastics industry are more likely to act in a technology centric manner, while Best-in-Class companies are focusing their energy on process capabilities.
Figure 2 is a testament to the fact that plastics manufacturers have invested in Lean technology. Manufacturers in this vertical are more than twice as likely to adopt Lean software and applications in their operations as other manufacturers (Industry Average and Laggards).
Performance Indicators
The table below compares the performance of Best-in-Class and Industry Average with plastics manufacturers.
Plastics manufacturers are operating at a 95% on-time delivery rate, which is equivalent to the performance level of BIC manufacturers. While plastics manufacturers have taken a lead in on-time delivery, their performance in reducing manufacturing cycle time is at the Industry Average level and is below the Industry Average level for plant throughput. Aberdeen Group conducted a deeper analysis on the practices adopted by plastic manufacturers to understand the reasoning behind this low performance.
The pressures of increasing competition, globalization, and the need to reduce manufacturing costs have forced companies to think out of the box. Merely adopting Lean tools is hardly a differentiator for Best-in-Class performance. Adoption of Lean tools has become a necessity for manufacturers to stay competitive. What really differentiates Best-in-Class performance is automating Lean tools through the use of Lean software and applications. As seen in Figure 3, plastics manufacturers are falling behind the curve in automating the use of Lean tools such as kaizen, takt time, lot sizing, and conWip.
While plastics manufacturers have taken a lead in adopting lean technology, utilizing technology to automate lean tools is still a challenge. To understand the reasoning behind the contradiction, we looked at the process and organization characteristics of plastics manufacturers.
We found that plastics manufacturers are 70% less likely to have established Lean center of excellence (Figure 4). Establishing such a center provides the necessary senior management commitment and resources required by Lean professionals to perform at an elevated level. This finding also speaks to the fact that the responsibility of the senior management does not end by investing in technologies. They have to provide the necessary discipline, commitment and resources to their staff so that they can operate optimally and utilize technology to automate Lean tools.
Recommendation
Plastics manufacturers should transition from the use of manual process to the use of Lean software and applications as a way to automate the use of Lean tools. It is important for the senior management to lead this effort by showing commitment and support to their employees by providing the necessary resources to them. This will not only help plastics manufacturers speed up the journey towards Best-in-Class status, but it will also help them to scale their Lean programs in the long term.
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