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Matt Durante is a seasoned operations leader with years of experience guiding and growing product lines. He’s handled IT infrastructure, quality systems, production management, facility planning, and everything in between, recognizing that a manufacturing facility is a complex weave of interdependent systems and people. In addition to having been the COO of a business and US Army veteran, he has taken on several writing projects over the years and maintained multiple websites.
Drishti recently hosted a webinar on rethinking ROI in manufacturing. In part 1 of our recap, we discussed the first section of the webinar, in which we defined what the old ROI model was and why it was problematic. Our Founder and Chairman, Prasad Akella, was joined by Steve Shepley, principal at Deloitte Consulting, and Brian Masse, strategy and operations manager at Deloitte.
In the dialogue, the team determined that the old model didn’t capture enough value for new solutions, as it only took into consideration a simple, linear approach. In other words the value of a new asset or solution would equate to X number of employees removed from the floor or Y number of parts per hour at a particular workstation. The team also agreed that it was definitely harder to account for the value added in newer manufacturing solutions.
In the second part of the discussion, therefore, the team took on the task of defining what models an organization should use when determining the ROI of newer manufacturing solutions (like Drishti); for the full conversations, watch the webinar recording.
Capturing value
The lowest common denominator of value will start with how a solution affects an individual workstation, which is how the old model works, but in order to capture the full value, we need to take a more holistic approach.
Steve offered that solutions now offer large transformational potential and that a paradigm shift needs to occur in value thinking. He wants and expects large potential when he sees technology like Drishti in place:
“The ability to dynamically schedule my factory on constraints and performance, that’s 100 million dollars in value versus getting that one guy to pick [parts] faster, which is a few thousand [in value].”
The potential for the individual to pick more parts per hour is still there when looked at with a narrow view, of course, but if we start looking at other factors, then we start to see real value.
Steve considered how a solution scales across multiple workstations in a factory. This is interesting to think about; however, it still captures only a small portion of the solution's value. After all the impacts on all the workstations are measured (all point solutions accounted for, including cost of implementation), we can then consider the effects to support functions.
Deep effects
With Drishti, for instance, knowing what is happening at each of the places of value — where the work is being done — creates the opportunity for insights into training, leadership, quality and engineering.
Prasad mentioned later in the conversation that these effects equate to better feedback loops.
Consider that planning takes place constantly. There is a manufacturing schedule — a monthly or weekly shift plan at the smallest level that gets created. Steve brought up the point that one minute into a shift, the plan often goes out the window:
“Five people don’t show, the material is unavailable, a machine is down, then everyone has to sit and wait and these effects are left out in point solution thinking.”
The idea of the ruined plan clarifies the value of feedback loops as solutions that have the ability to “dynamically observe and potentially control many of the variables and deliver the right insight to the right decision maker at speed, which is where the real value starts to take place.
Brian offered that this equates to much more, and said that you’re actually implementing risk reduction, which is valuable in and of itself. He also went on to make the point that with solutions like Drishti, you’re actually capturing the value of the individual, including positive outliers. He mentioned that not everyone is good at the same thing, even experienced employees. This statement prompted Prasad to mention the potential to play “Moneyball” in your factory during those times when plans are compromised due to absenteeism of other factors. In other words, having the ability to “put the right skills in the right place” is valuable.
Putting the right people in the right place dynamically, faster feedback loops, better insights for support functions, overall risk reduction and capturing the value of the individual leads to a lot more value than just X number of parts or employees per time period. It means a waterfall of benefits.
Steve mentioned the waterfall effect, saying “You see how it scales across the factory. We have sources and buckets of value.”
Network effects and beyond
The buckets of value are everywhere in a factory. If the organization begins to take these buckets into account, then it’s clear that the smallest source of value is the one to the individual work center. We begin to capture the value of synchronization. Synchronization accounts for the functional effects at the workstation and the speed of decision making which increases in the exponentials, which is where the real money is saved.
What’s more, there may be unintended positive effects, as well. By capturing the creativity and value of the individual, you may have increased retention and made a champion for your factory, something especially important in an industry with a high turnover rate.
These effects can be felt everywhere in a factory, from improved production KPIs to warranty reductions from the increased quality and reduced risk. A company can only begin to capture the value of a solution by widening its gaze and viewing all the buckets. Only then can they shift from the old ROI model and see the holistic value of new technologies, and make an informed decision about where to invest. For a deep dive into the discussion, make sure to watch the full conversation in the webinar recording.
