The Flexibility Imperative
Recently the opportunity presented itself to talk to a group of manufacturing executives about flexibility. As the presentation came together, the major flexibility drivers from our automotive experience became obvious: common architecture, consistent locating points, common components, a common sequence of built-in assembly and common equipment in areas like welding, painting, machining, and so on. These elements are some of the most critical things required from manufacturing engineering and product development in order to become a flexible manufacturer.
As the research was done, the question became, “Do the small and medium sized suppliers understand flexibility and are they working on it?” Our belief is that companies that aren’t flexible are significantly behind and will struggle for survival in this ever changing global market.
In the past, flexibility has been a tool at companies, and today it is a necessity. As companies are being forced to right size their business while also being pulled in many directions from the consumer, flexibility becomes the enabler to meet demand and right size operations. Most people have always viewed flexibility as a manufacturing issue, but even if the manufacturing staff masters the elements of flexibility, they cannot be successful without the entire business working together to provide a more balanced approach to matching supply to demand.
There are three primary elements to the definition of flexibility. First, it is an organization’s ability to adapt to changes in the marketplace without creating unintended consequences in demand; without overexposure of company, assets, resources and supply chain in supply; and without placing increased pressure on the supply chain. Companies that are limited in financial resources will not be able to invest in infinite flexibility, and they must balance this overexposure to be profitable in the future.
Second, flexibility is leveraging knowledge of demand changes at the earliest possible time, taking into account demand changes created by changes in offerings. Companies must work to gain visibility to that consumer through stronger communication with the customer and dealers.
Third, flexibility is really about matching supply to demand exactly, while gaining consumer and supply chain loyalty through a higher level of involvement and transparency. Critical information to share with consumers and suppliers are the company’s business intentions, demand information, and product and process investment strategies. One of the most critical missing links between customers and suppliers is the lack of open, honest communication. This is something that best-in-class companies have done better. They have engaged the entire value chain as partners, developed a communication loop and loyalty throughout the system. This enables them to better match supply and demand and ultimately achieve flexibility.
As companies step back to evaluate the current environment and plan for an uptick going forward, they must face the issue of becoming flexible. Yet flexibility requires financial resources in addition to new product investment that all the companies are facing to reinvent their product lineups and gain share as the market rebounds.
Many of the current lending organizations in North America are concerned with lending money to companies for efforts of flexibility and product renewals. As we look to the future, companies will have to evaluate their current situation and determine what the right “balance” is for flexibility, current legacy operations and future products.
To achieve an integrated flexible environment, a delicate balance of product loyalty/planning, product development, manufacturing engineering and suppliers must be achieved. While developing this integrated model, companies must balance future investment to be successful. Flexibility will be one of the most critical factors going into the future, but the key will be balance to avoid overexposure. It will require all companies to operate in an environment with full collaboration.
Laurie Harbour is the president of Harbour Results Inc., an operational and financial advisory firm that works with companies to optimize their present situation and prepare for the future. Contact her at 248-320-3584.