Industry 4.0 may sound exciting for manufacturers – with its IoT-enabled factories, all-singing all-dancing ERP software, and AI-powered insights – but frankly this is fantasy land for the vast majority of manufacturers. Most of the technology to power smart (or even just smarter) factories is prohibitively expensive for most SMEs.
Getting actionable insights from data, on the other hand, is a transformational upgrade that’s available today – and for next to nothing.
It’s also critically important. 2020 has been more volatile than anyone in 2019 could have imagined. To survive, manufacturers – with their long lead times, and vulnerable supply chains – must be laser-focused on the metrics that matter; able to respond rapidly as conditions change.
Here are three realistic steps manufacturers can take for data mastery in 2020.
Step 1: Use live KPIs alongside your reporting
The first step is to start using KPIs alongside your traditional fixed-period reporting.
Remember, reporting and KPIs are not the same thing. They’re similar on the surface, but there are some significant differences between the two.
KPIs versus metrics:
- Specific vs general. KPIs track progress against specific objectives. Reporting metrics answer more general questions about performance
- Live vs historic. KPIs are real-time and comparative. Reporting assesses a particular fixed period
- Fast vs slow. KPIs are digestible at a glance. Reporting is a deeper dive
It’s essential that manufacturers use both simultaneously. Relying solely on reporting for analytics means only tracking performance in retrospect, restricting analysis to those with the time and expertise to process complex reports. It also means missing the opportunity to monitor progress against specific business goals in real time.
4 important KPIs for manufacturers
The biggest blocker to using KPIs properly may be the sheer overwhelming number of options. KPIlibrary.com, a crowdsourced index of indicators, lists over 6500.
Help, however, is at hand. Accountants can advise on where to focus — and cloud software providers can recommend indicators for their areas of expertise. At Unleashed Software we recommend these four KPIs as a key starting point for manufacturers:
- Supplier lead times (stated vs. actual). Manufacturing at scale requires absolute confidence in suppliers — which means tracking and comparing their actual performance
- Margin at the product level (aka Margin by SKU). Taking a closer look at margins provides next-level insights on which lines are producing profit and where to grow sales revenue
- Value of stock on POs and SOs. This is pivotal to optimising stock on hand, ensuring that you to stick to building what you sell while selling what you build
- Average days to sell. Helps keep the right level of raw materials on hand for production and measures the popularity of each stock item
Step 2: Give data access to the right people
With a working KPI process in place, the second step towards data mastery becomes achievable: empowering the right people in the business with relevant insights at the right time.
The right people
Who are the right people? Anyone that makes impactful decisions. That might start with management, but it carries right through to sales, marketing, distribution, manufacturing, fulfilment, procurement and finance. And it doesn’t just mean internal staff — externals such as accountants can give you better advice when they have better statistics.
Relevant data means information that staff can turn into actionable insights. Working with KPIs is a solid first step towards relevancy, the next is to ensure that workers know which indicators to watch. A basic understanding of the information that sits underneath the KPI is also useful, so staff can quickly dig a little deeper.
The right time
There are two aspects to giving access to data at the right time. The first is to make getting insights as easy as possible. A 2019 report by Veritas found that UK staff waste as much as two hours a day searching for statistics. Alleviating that issue will provide an immediate boost to productivity. And it will turn workers into data-based decision makers, able to prioritise the tasks that will add value.
The second is to provide a single source of truth. With so many inputs to play with, conflicting information can be a problem for manufacturers. So it pays to ensure that everyone is working from the same dataset.
Actionable insights: an example
Salespeople are a great example of how actionable insights can work in practice. Giving sales easy access to margin KPIs at the product level means they can make proactive decisions on which lines to push, when to offer discounts and more. However giving them access to actual supplier lead times risks confusing things with irrelevant insights — and giving them margin information that doesn’t match what management sees means staff could end up working at cross purposes. In short, you’ll get the best result by giving the right people access to relevant data at the right time.
Step 3: Focus on productivity
Now it’s time to put the third step into action: making sure that everyone is using data to achieve the same goal.
Empowering staff with the information they need to make informed decisions will help across the board, but adding clear direction into the mix results in a transformational improvement. Create a single top-line goal for what to achieve in 2020 and beyond, and staff can use data to ensure that their day-to-day tasks work towards that goal.
So make it your next job in 2020 to benchmark current performance against your broad business goals — and make sure that all the KPIs staff use are benchmarked too.
Productivity is key
When picking a goal, growing productivity stands out. In 2020 the companies that can prioritise tasks that grow output while reducing input will have a clear advantage. And data-driven decision-making is key to attaining that advantage.
Thankfully, doing more with data is a realistic goal for SME manufacturers. The same affordable cloud software tools that manufacturers are using to streamline their processes, from inventory management to sales, also generate the insights required to push the productivity dial over the next 12 months. It’s just a matter of using them correctly.
How to find software that scales
Keeping up with rapid growth can be tricky for any manufacturer — often necessitating new staff, processes, property and more. The rise of cloud software, however, means that at least you can pick systems that will scale with you.
Watch this interview with Ben Russell-Smith, founder and director of Lazer Lamps, on how they chose productivity tools that they’ll never outgrow.
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.