The average organizational leader spending 20+ years in the in management & C-suite will be involved in hundreds of hiring decisions, allocate millions of dollars in resources, develop strategic plans on an annual basis and impact thousands of culture and direction-setting decisions.
This same average leader will only build around 2.5 plants over the course of their career. Despite their wealth of knowledge and experience up and down the organizational value chain, few leaders are prepared for the intense preparation and incredible complexity that comes when planning a new factory or optimizing current facilities.
Factory planning, when done well, can be a key component in achieving cost leadership and optimizing resources. On the flip side, when done improperly, it can be an efficiency killer and turn a factory into a money pit where hastily-made decisions – from the software chosen to manage inventory to the distance workers must walk to the garbage can – can accrue into major losses over time.
When leaders engage in factory planning, whether the project is greenfield or brownfield, there are three things that are consistently missed that are critical to success.
(1) Systematic, transparent and synchronized project management from the onset. When developing a project plan, leaders must consider perspective from all roles involved – R&D, Materials Flow and Management, Process Engineering, Technicians/Operators, HR, Finance, IT and anyone else who is involved in factory-related activities. When stones are left unturned, the likelihood of unwelcome surprises to arise along the building process increase. Dr. Stefan Maurer, Project Manager at TARGUS Group North America, ArchPoint’s strategic partner for operational execution recalls a recent experience: “We were brought in to help with a client who was struggling to ramp up a new warehouse and had an issue with newly purchased production equipment that did not work with their existing IT system. This only happened as they did not engage the right people in a proper planning exercise which would have prevented this up front.
While this issue seems obvious, we see it all the time in one form or another. Decisions are made in silos and when all the pieces come together, this lack of coordination suddenly becomes very evident – and often a very big problem.
It cannot be overstated how important it is to establish transparent, efficient and fact-based decision making as a part of the project management for factory planning. Who has the final say on what decisions should be crystal clear, as well as the stage gates for major decisions that affect the flow and pace of the project. Appropriate levels of hierarchy will promote alignment and prevent people from being overwhelmed. “I’m sometimes amazed at the time given to inconsequential decisions versus decisions with major impacts on the success of the project. I recall once being involved in a 90-minute conversation about the color setup of machines and different aspects of the plant that was followed by a 5-minute conversation on which product line would receive millions of investment dollars,” recalls Stefan.
Timing is incredibly important to the successful project management of factory planning/optimization and spending too much time on the wrong things or constantly revisiting decisions previously made can wreak havoc on a project schedule and put the whole business case on risk.
Decisions should always be based on hard data and facts and made by the appropriate level of hierarchy (as low as possible and as high as necessary) with the best expertise and perspective. The team should trust these decisions when made and keep the process moving.
Another crucial element to project management is the coordination and tracking of activities. Leaders should be able to check the status of a project without much difficulty. The sheer volume of discrete activities happening concurrently to build/optimize a factory can create a haze around how on-target the project is. Stefan recommends a multi-level project dashboard – a tracking system that combines information from all individual workstreams, timings, deliverables, execution progress, staffing, budgets and risks – set against an overall timeline with milestone dates is an incredibly effective project management tool. This project dashboard combined with good project status reporting capabilities and a regular meeting schedule not only keeps the project on track, but also flags issues with the current plan and allows an organization to change course and drive required decisions when necessary before it is too late.
“A holistic project dashboard creates transparency across each work stream of a project and reveals if the project direction deviates from the result being what the company truly needs. With sometimes 50+ people involved in a factory build, it can quickly become a contest of ‘how bright and shiny can we make it’ instead of the optimal level of functionality for the specific needs of the organization.”
(2) Cost and budget controls that consider profitability targets. “The initial budget for a factory build/optimization is almost always wrong. Large expenditures are always considered and well-thought through, but people tend to forget support items for which uncertainty is high in the early stages of a project – IT adjustments, overseen but required process adjustments, down to doors for trucks and locker rooms, for example. These smaller and support items usually come with a large combined price tag,” says Stefan.
Detailed planning for support processes ensures projected budgets are accurate. Stefan shares, “this is an area that unless a leader or someone on their team has experience in factory building/optimization, it is highly recommended to get outside expertise very early in the process to make sure your budget is realistic. TARGUS has helped to build dozens of factories, so we know where the hidden costs lie. The cost to get outside help is typically much lower than the costs and risks that come with an inaccurate budget.”
As mentioned above, budgets should be tracked and managed on a regular basis as part of overall project management and leaders should consistently check in to make sure resources are being properly spent and allocated.
The budget must be developed very early in the process, align with the reality of the market and organizational goals, consider all expenditures and stick to the scope once defined.
(3) Challenging the team for proper execution. Once the general project planning is complete, good project management systems and protocols are put in place and carefully considered budgets are established, the organization must further detail and execute the plan. Leaders must ensure that all main and support elements are covered when developing the plan detail and that all necessary steps/analyses are done correctly as the project progresses. This will ensure nothing is being missed.
In parallel, successful leaders also need to challenge their team to continuously question and improve the developed processes. Execution and proper development of plan details is where we see clients struggle the most. Poor execution can diminish all the hard work that was done to prepare for a project. Execution requires discipline, constant communication and strong leadership to be successful.
How teams choose to execute a given part of the factory build/optimization plan should also be considered and challenged. “Not all companies can afford the best solution, but all companies can benefit from a cost-efficient solution. For example, if factory equipment is of an older model making a switch to new technology doesn’t always make sense if the equipment isn’t compatible. A leader should challenge her or his team on decisions.,” says Stefan.
This is especially challenging since teams have a tendency to consider what’s best for them and their future in the company rather than what’s the best solution for the business. Asking critical questions and providing clear guidance helps teams stay on track with the ultimate goal of the project – to optimize/build a factory that maximizes organizational efficiency and to improve profitability and bottom line results.
Effective factory planning and optimization directly influences cost drivers, which has a positive effect on the financial viability of an organization. TARGUS specializes in purchasing, operational excellence, logistics and supply chain management. Contact TARGUS today to learn how they can support you to improve your factory planning and optimization project.