Beyond Benchmarks

Before you start reading this article, take a moment to think about a large process improvement in your business that would really move the needle on performance. Perhaps it is increasing your right-first-time percentage by 20%, or reducing your product cycle time by 25%, or maybe it is increasing the performance of your manufacturing lines.

What would you and your business achieve if you could make this improvement in a matter of months and then magnify it across your business? How would this change your business approach if you were able to do it without investing any capital? The pharmaceutical landscape is changing and margins are continuously shrinking, particularly on off-patent drugs. Would such step-change operational improvements allow you to compete against generics or allow you to keep manufacturing in-house and onshore? 

That said, write down three things that would be different about your business and the broader implications those differences would have. The range of opportunities that you can uncover by taking an analytical, assumptions-free view of your process may be larger than one might imagine. In the rest of this article we will share three common sources of hidden opportunities and how you can start exploring these in your business.

The first potential source of opportunity comes from challenging targets based on industry benchmarks. In a recent engagement, a client was looking to improve the performance of a high-efficiency packaging line. The company was considering capital investment to increase capacity and meet an anticipated, but uncertain market demand. The line’s maximum capacity was believed to be 75% of its boiler-plate production rate, considered to be an industry-leading level of performance. Their line was already consistently performing at that level and hence, was believed to be running at “maximum” capacity with little room for improvement, leaving capital as the only option. Investing capital to meet a demand that may not materialize was a risky strategy and the company’s leadership was looking for other options to increase capacity.

Opportunities were identified by comparing current performance to the perfect world of zero losses, stoppages or off-spec product. This “Zero Based” approach identified opportunities to make improvements immediately, without the time and financial burden of installing and commissioning new equipment. Rather than comparing the performance to the best-in-class 75%, the team focused on performance in a perfect world. Every second that the line was not running at its maximum rate was identified as opportunity. Some skepticism remained — after all, we don’t operate in a perfect world, rather one where customers want a variety of products, packaging materials are not consistent, mistakes are made and equipment breaks — all causing downtime. 

However, before dismissing the “perfect world” as unachievable and treating problems as unsolvable, consider the example of safety goals. Safety is an area where businesses have truly adopted the idea of the perfect world, i.e., the notion that all injuries are preventable, which is the ultimate goal. 

Just as it was applied to safety, the Zero Based Analysis approach can also be applied to other business metrics. By identifying the gap between where one is and the perfect world, we can uncover the biggest opportunities for improvement — rather than limiting ourselves only to those that would lead to the best previous performance. In this specific instance, this approach led to a challenging of assumptions around required changeover times and average output of the line. The result? A 20% improvement in the line’s output. This allowed the business to meet its growing demand and avoid spending millions of dollars in additional capital. Had the team continued to believe there was no room for improvement, this increased performance would not have been achieved. To quote Henry Ford: “If you think you can or you think you can’t, you are right.” Believing in the opportunity may not guarantee success, but not believing in it will certainly guarantee failure.

Rated speeds are similar to best-in-class benchmarks and can often obscure large opportunities. A rated speed is a speed limit that implies the machine, process line or system simply can’t perform any better. A client in the food industry was eager to rationalize their production from multiple facilities into one manufacturing line. However, at current performance, the line did not have the capacity to accommodate the leadership’s rationalization plan. The team worked on increasing capacity and found that the line was rated at 1,000 units per minute. However, what would happen at 1,001 units per minute? 

Was it impossible? Would the machine simply not work? They found they could achieve over 10% increase in overall production rate by consistently running at higher rates. Thus, the second source of opportunity comes from not immediately restricting one’s self to what the “experts” say is possible. 

Other food for thought on rated speeds: the Bugatti Veyron is the world’s fastest production car and its top speed is 253 mph, not 250 or 260, but 253. In fact, the only time the top speed of a car is a round number is when it is electronically regulated. What are the suspiciously round numbers in your process? Do you have batches that take exactly one day, quality control processes that require 10 hours of dwell time, or packaging equipment that runs at 100 units per minute? This is not surprising as equipment is typically commissioned before any optimization effort to understand the precise limits of the machines and picking a round number makes sense. Likely, there is equipment in your facility with these defined limits that can be challenged to uncover tremendous opportunity for improvement.

Once one starts challenging these constraints and asking questions you will, no doubt, hear that something is done a certain way because that’s always the way it’s been done. This is where the third common source of hidden opportunity lies. This constraint often leads to doing an additional quality check because the original process is inconsistent, or adding a person on the packaging line because the automated process stacks boxes incorrectly.  

An organization may raise inventory levels for fear of not having the right products at the right time. Ultimately, this leads to scrapping product every year due to obsolescence. In the perfect world there would be no obsolete products and just enough of every product to fulfill customer demand. Given current forecasting abilities, the perfect world may not be achievable, but by accepting the tradeoff between high inventory and good customer service as inevitable, one would never even consider improving the situation. Yet, when analyzing historic trends and converting slow-moving, hard-to-forecast products to make-to-order, one company was able to reduce inventory by 23% and improve service levels. Is there a process in your production environment that has always been done a certain way? Do you have problems that have been solved by adding labor or adding an extra quality check?

Consider these three common sources of hidden opportunity. Upon closer examination you may be surprised by the untapped potential in your business. The time is right for anyone interested in boosting the performance of their processes to go look for the suspiciously round numbers and try improving them by 2, 3, or even 10%. Make a list of the problems you have stopped trying to solve. How much value could you generate if those problems were solved? How much hidden opportunity exists in your business? How much of this opportunity can you uncover and realize this year?