- Buyer's Guide
The problems you have in managing the reliability of your manufacturing plant or processes are cross-functional - so, too, must be your solutions. For too long, we've attempted to manage plant reliability entirely by changing the way in which we maintain equipment. Not coincidentally, our results to date have been limited. The problem, as I've stated in previous columns, is that reliability, and hence profitability, can be compromised by so many factors (supply chain quality and dependability, designing or selling a product or packaging solution that exceeds the capabilities of the manufacturing plant, etc.). We must address reliability cross-functionally, which brings me to today's topic: the organization vectors that prohibit cooperative behavior.
Most organizations have a mission and/or vision; it usually has something to do with maximizing shareholder return doing whatever it is the organization does. The problem occurs when the functional teams responsible for serving the mission interpret it in different ways and create independent goals and objectives for serving it within the vacuum of their respective organizational silos. This creates what I call organizational vectors.
Figure 1. When visions aren't aligned among the functional players in the organization, each functional group, operating within a silo, pursues its own objectives, which can create problems for other groups.
In engineering terms, a vector is a force that has both direction and magnitude. For instance, in aviation, a pilot is instructed by the control tower to vector to a particular compass and altitude position at a particular speed, which causes the plane to arrive at the designated position at the designated time. This is important for ensuring air safety. In physical terms, if you have a vector of X force traveling due east (on a two-dimensional plane) and a vector of identical force traveling due west, the physical result is zero - the forces cancel one another - creating homeostasis, the fancy word for stuck! At an organizational level, failure to align the vectors driving the different functional groups within the organization creates a certain organizational "stuckness", which is very costly. Organizations possess many of these vectors (Figure 1), which are often in conflict with one another.
From the experiences I've gained consulting to manufacturing companies, I've concluded that the functional groups do a very good job of optimizing their activities relative to the goals within their functional silo. The problems - and the issues of waste - occur when we fail to achieve vision alignment. I think that most waste occurs between the functional silos, not within them. For example, consider the common scenario where the sales and marketing team elects to offer a particular product or packaging solution that it feels will create a competitive advantage. However, if the manufacturing system isn't set up to create that solution, we're left with the following options:
A) Withdraw the offering from the portfolio, which may be difficult if the marketing team has already committed to deliver the offering to a customer or to the market in general.
Figure 2. When functional groups align their goals to the mission of the organization, the wasted profits associated with functional vectors can be eliminated. Under this model, the goal is to "blur barriers, not disciplines."
B) Manufacture the product or packaging solution using the existing processes and machines, which often leads to compromised availability, speed and/or quality - the three elements of overall business effectiveness/overall equipment effectiveness (OBE/OEE).
C) Purchase a bespoke machine or manufacturing system to deliver the product/packaging solution, increasing the net operating asset in place (NOAP), driving down asset utilization and potentially reducing return on net assets (RONA).
Functionally, where did things go wrong? In my view, the two following underlying organizational root causes lead to this very common scenario where sales and marketing oversells the manufacturing capabilities of the plant:
Clearly, communication is our dilemma. However, I believe communication suffers because functional groups are often focused on the wrong objective within their silo. Irrespective of how they are written, all mission statements require the organization to create value. Very few functional groups pursue value creation within their silo. Some are focused on driving top-line revenue, while others are focused on cost containment. The problem is that you can increase revenue and decrease contribution margin. Most organizations have product SKUs and/or customers that are profit-losers because of excessive manufacturing costs, excessive customer support costs, etc. Also, it's very easy to reduce operating costs and simultaneously destroy profitability. Many procurement teams, for instance, focus their efforts on reducing the cost of raw materials, which is great, unless the cost savings reduce manufacturing effectiveness - affecting availability, yield and/or quality.
What is the moral to the story? Get your organizational vectors aligned. The key to success is to create business processes and a culture (a.k.a. behaviors) that drive and encourage cross-functional communication and to carefully focus the actions of each function on the overall organizational mission, which must be expressed in the form of value creation and contribution margin for the profit-seeking entity. This changes the direction of the organizational vectors back toward the mission (Figure 2).
This sounds easy, but it's not. Functional groups tend to focus on revenue maximization or cost minimization because they are both much easier to measure than value. Measuring value requires that we consider the impact other functional groups have on the equation, which requires communication. Do you see my point? The value-seeking organization works hard to blur the barriers between the functional groups instead of blurring the functions themselves. This requires communication and enables value creation, which serves the mission!