Companies within the manufacturing sector face the continual challenge of finding ways to grow their profit margins and stay competitive. But sooner or later, many manufacturers find themselves facing a frustrating question: Why are profits low even though sales are growing?
According to one financial consulting group, the answer to this question lies in focusing on operating costs rather than sales figures — materials, labor and overhead expenses end up playing a leading role in performance as measured by profit margins over time. This explains why manufacturers are so eager to become more efficient at conducting “business as usual.”
Here are five ways manufacturing companies are striving to become more efficient through the use of better data analytics and data-driven decision making.
Reducing Material Waste
Material waste is perhaps the most obvious sign a manufacturing operation has room to improve its efficiency, although there are myriad forms of waste to consider.
As one expert writes for Industry Today, so-called “lean manufacturing” is a strategy that aims to reduce the occurrences of waste such as:
- Overproduction: Making something before it’s needed
- Wait time: One process is waiting for another to finish
- Transportation: Redundant movement of materials and finished products
- Motion: Redundant movement of people
- Over-processing: Additional processing beyond what’s needed to make a product
- Inventory: Creating product quantities beyond what’s needed
- Defects: Products that end up as scrap
Overproduction, inaccurate inventory forecasting and production defects contribute to material waste.
Smoothing Out Process Bottlenecks
Another form of waste under lean manufacturing stems from procedural bottlenecks — which essentially boil down to wasted time. The first step in smoothing out these process bottlenecks is identifying them, which is where manufacturing data analysis can help. Today’s data analytics platforms like ThoughtSpot allow engineers and other employees to ask questions of data and quickly uncover performance trends, anomalies and relationships. Armed with this knowledge, decision-makers can implement targeted improvements meant to smooth out the process from start to finish.
A better grasp on data can help manufacturers respond in real time to shifting market realities, like finding the best shipping company based on up-to-date freighter information or finding the best supplier for specific parts based on pricing that very day.
Bringing Down Utility Costs
A big chunk of overhead costs in manufacturing go toward simply keeping the lights on and the machines running. Manufacturers can easily find themselves facing exorbitant utility bills. This is why the National Institute of Standards and Technology recommends manufacturers evaluate their heating, cooling, power and equipment for opportunities to make their facilities more efficient. Something as simple as automating lighting and temperature control can greatly reduce expenses and carbon footprint.
Minimizing Equipment Failures
Equipment failure tends to be costly, both in terms of repair and production lost during downtime. Having to conduct any unplanned maintenance on machinery or computer systems takes time away from production.
Manufacturers can do a few things to minimize the risk of equipment stoppage, like upgrading equipment proactively and using data gathered by Internet of Things (IoT) sensors to predict ahead of time when a certain component is at a higher risk of malfunction.
Embracing Cellular Manufacturing
According to the U.S. Environmental Protection Agency, cellular manufacturing has to do with optimizing the physical layout of your production workstations so they are “arranged in a sequence that supports a smooth flow of materials and components through the production process with minimal transport or delay.” The goal here is to reduce unnecessary movements and shift away from a “large batch” overproduction mentality, instead creating cells of right-sized machines optimized to efficiently handle a single piece of the overall puzzle.
Manufacturers who are able to become more efficient in these five areas will see improved product margins and decreased waste — fewer logjams, less overproduction and reduced operating costs.