Can You Find the Gaps in Your Operating System?

At the Michigan Manufacturing Technology Center (The Center), our team enjoys the opportunity to visit clients in their facilities. Seeing the business in person gives us a well-rounded understanding of the current state and where we could potentially help the company improve.
When we engage with clients, the discussion often centers around performance numbers. In all cases, the journey toward continuous improvement starts with the existing condition of operations; it is more than just seeing the plant, we also need to look at the data being collected.
Profitability is most often a common topic to talk about with our clients (for this discussion, we’ll use gross margin). Let’s do a little example to show the full picture.
In this example, let’s say the client’s gross margin is 20% and the minimum they quote is 25%. This begs the question, where did the 5% go? Putting it in dollars, for a $10 million company, we’d ask where did the $500,000 go?
In the graphic to the right, we see three operations, where stamping and CNC machining production flow into welding. Many times, a manufacturer’s operating systems don’t give insights to see the direct labor properly. This can create rework, quality defects and other errors which then cause the welders to “fix” the errors (like burs) in the re-work area, putting a drain on labor availability.
For many companies, using multiple systems can be cumbersome and reduce transparency in operations. We find that even companies with an ERP use secondary systems like an external quality management system, maintenance program, customer relationship manager, time tracking, etc.
However, when we effectively use technology, we can see into our operations in ways we couldn’t before. Installing sensors and harnessing Big Data throughout the production process will help us gather insights and know what is happening on the plant floor.
Similar to the example above, with the addition of amperage sensors, we can identify where production was stopped. These percentages equate to wasted indirect labor. Averaging out the percentages shows where the 5% is going that we were missing. This is just one example of how technology can give us new insights to ways we can improve our operations.
To learn how to improve your operating system, The Center’s Transformation Planner is a great resource. Not only does the Transformation Planner identify manufacturing operational improvement opportunities but it helps to calculate the financial benefits based on the current position and future targets. The Transformation Planner essentially takes the goals you set and shows you what additional revenue potential exists by accomplishing those goals. It is able to calculate benchmarks for more than 30 metrics, such as inventory turns, value-added per dollar in machinery, running time as a percentage of total hours in a year, etc.
Overall, the Transformation Planner enables companies to model how much capacity can be made available by implementing/achieving production improvements. Schedule your free assessment today and get started with our Transformation Planner.
Stay ahead of the game and get started with Industry 4.0. Schedule your free technology assessment here. Manufacturers are encouraged to start training their team with our innovative classes that will assist them in better understanding Industry 4.0 before, during and after implementation. See upcoming courses here.
MEET OUR EXPERT: George Singos, Industry 4.0 Business Leader Advisor
Singos_G.jpgGeorge Singos is the Business Leader Advisor for the Michigan Manufacturing Technology Center (The Center). He has more than 30 years of manufacturing experience in various capacities. For the past 20+ years, he has focused on sales and marketing management both domestically and internationally. Prior to joining The Center, George spent the previous 10 years working in International Business Development. His ­­primary focus was growing International Sales in Europe and East Asia while supporting North American, South American and ASEAN operations.
Since 1991, the Michigan Manufacturing Technology Center has assisted Michigan’s small and medium-sized businesses to successfully compete and grow. Through personalized services designed to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at

Categories: Advanced Manufacturing, Continuous Improvement, Industry 4.0, Manufacturing, Smart Manufacturing, Smart Technology, Technology