2020 could be a challenging year for manufacturers, however, it’s also a year of preparation.
According to Deloitte’s 2020 Manufacturing Industry Outlook, many manufacturers are working to increase resilience in their operations by getting their “houses in order.”
Part of the solution for difficult economic times is to lean into key markets and customer segments — which includes increasing capacity.
There are many benefits to increasing capacity. It can:
- Decrease per-unit cost and improve profit margins
- Help gain labour economies of scale (particularly useful for businesses with challenges keeping skilled staff)
- Potentially decrease energy costs
- Enable better customer service as businesses with increased capacity can respond to large orders, manage seasonal business, and make more products to maintain the current level of sales
- Support better planning by reducing lead times and working towards a demand-driven model
How to Increase Capacity Efficiently and Effectively
An increased capacity makes businesses more resilient and will help prepare for growth now and in the future. However, it is important to have a strategy.
Some companies try to grow too quickly and encounter issues fulfilling orders, which trickles down to other departments. For example, Forever 21 experienced trouble when they tried to expand globally too quickly and subsequently filed for bankruptcy protection.
There are three key areas of focus to consider when working to increase capacity — software and technology, planning and people, and processes and workflow.
Each of these must be addressed and aligned to fully prepare for growth.
- Software and Technology
To start increasing capacity, you need to ensure that you have the right tools in place. This includes software systems, such as an Enterprise Resource Planning (ERP) solution or a Customer Relationship Management (CRM) program. While these may already be in place at your company, they must also be properly integrated.
These software systems are often most effective when aligned across the organization. If all departments are accessing the same data, it creates more efficiencies, minimizes errors, and helps plan for growth.
It’s also important to ensure that any other technology — such as smart inventory control systems and online order management systems — are integrated with this software so that everything is accessible, and you can see how it works together.
A completely integrated software solution will be able to keep all data aligned, which helps increase efficiencies and reduce errors. In turn, this will streamline production while boosting customer service.
Another critical function of technology is making sure that machinery is kept up-to-date. A 2017 study from Vanson Bourne found that 70% of companies admitted that they lack full awareness of when equipment is due for maintenance, upgrade, or replacement.
As an article from Industry Week noted, “If Machine X is the bottleneck and can produce 10 items an hour and runs 24 hours and 7 days a week, then the total output of the plant will be no more than 1680 per week (24 hours x 7 days x 10 items per hour).”
Technology and software are creating innovations in this process as well. Through installing IoT sensors into equipment and syncing it to software solutions (such as an ERP system), manufacturers can track notifications for repairs and find ways to create efficiencies for capacity planning.
You can start small with this by putting a sensor in one piece of equipment and scaling as needed. This is a prime example of software and technology working together and is often the start of a digital transformation journey.
- People and Planning
If your orders increase, are your people prepared? Part of capacity planning is ensuring that you have the resources needed to fulfil a growth in sales. This may include hiring staff, strategically outsourcing or working with current staff to better utilize software.
Be sure to also consider staff across all functional areas. The increased capacity will not only affect your production teams and supply chain — it might also affect the sales department, customer service, support, and more.
Training is important to factor in, as well. The Vanson Bourne study also found that 23% of all unplanned downtime in manufacturing is the result of human error. Do employees have the skills to find improvements to make at their own workstations? Are they creating delays because they don’t understand the production process and how something small that they are doing could cost — or save — a lot of time for someone down the line?
While the software and technology are important, it is equally critical for the people involved to have a growth mindset. If there isn’t buy-in across the organization, increasing capacity will be extremely difficult to achieve.
Collaboration and communications tools will also help plan for growth. Progress doesn’t happen in a silo – even if the direction comes from the C-suite, all departments need to work together to achieve goals to the best of their ability. Understanding the roles and challenges of others within the business can also help foster a culture of development and find even more efficiencies that contribute to the growth goal.
Furthermore, increased collaboration and communication are a huge asset in today’s world where the office and plant landscape is changing. More staff are working remotely, some plants are running lights-out, and teams are split between different locations and even different time zones. In this type of setting, it is more important than ever to have the right tools — and the adoption of those tools at full capacity to ensure you never hit silos as you grow.
Software helps bridge space and time gaps in modern teams. Collaboration tools will integrate with your business systems to allow for enhanced communication with ease of information retrieval.
- Processes and Workflows
Last, but certainly not least, you need to make sure that your current procedures and workflows are set up to handle increased capacity.
Do you have mapped processes and know where your pain points and bottlenecks exist? If not, it is time to figure that out.
Sometimes bottleneck processes are less obvious and aren’t easily tracked and resolved. Again, this can go back to software. Certain ERP or warehouse management systems can help find ways to optimize the supply chain in real-time by monitoring processes, tracing job speed, reviewing operations, and more.
Automation can also help boost production and reduce hold-ups. By automating what you can and digitalizing processes, you can help increase capacity while maintaining efficiencies.
A 2015 study from McKinsey found that 64% of working hours spent on manufacturing-related activities globally were automatable with currently demonstrated technology — and the capabilities have come a long way in the five years since then.
AI technology and machine advancements can work at a much greater speed and perform repetitive movements without strain — and with greater precision. Technological advancements also give your staff more time to plan and program, so they can find even more efficiencies.
When properly implemented, improving processes through automation not only increases capacity, but also improves quality control and quality of life for staff.
Done deliberately, increasing capacity is a terrific way to respond to changes in the market quickly, reduce lead times, fulfil larger orders, and scale a business sustainably. By planning ahead and making sure software, people, and processes are aligned, the path to growth will be much easier to traverse with less risk and more reward.
Is your business preparing for growth or considering increasing capacity? What challenges is your business currently facing in doing so? Share with us on social media. SHEA is on Twitter, Facebook, and LinkedIn.
Start preparing for growth today. SHEA Global’s consultants work with businesses to strategically increase capacity. Reach out to us for a free consultation.