Extracting value from data analytics in manufacturing
In an article published in Raconteur’s “Future of Manufacturing’, John Mason discusses how manufacturing firms have turned to data analytics and artificial intelligence and asks how many are failing to reap the rewards. What is needed is a sharper business focus to achieve expected returns.
Aside from the high-tech and leading corporates, adoption of digital technologies in the manufacturing sector remains subdued, a consequence perhaps of not seeing widespread evidence of the tangible benefits. Achieving expected returns on investment from advanced analytics and AI is less a question of technology and more a business challenge.
Success stories among early adopters are well publicised and demonstrate the advantages to be gained when the power of data from multiple sources is harnessed through expert hands and into business execution.
More precision in research and development reduces costs and increases success, product lead times can be compressed, sales and service are optimised for overall value, goods can become services, supply chain efficiencies are maximised, defects are reduced and production assets can operate at their potential.
For many though, there are “missing links” that are preventing the expected value being realised from the potential a wealth of data, analytical skills and technology are offering.
Clarity of business priorities is the starting point and that requires executive level direction. Technology has provided the toolkit, but how it should be used to best effect cannot be delegated to the IT function. The increasing presence of chief digital officers on executive teams is one trend bridging the gap between the business agenda and the role of technology.
“Generating business insight is a critical business capability that unlocks new value yet sometimes seems to be forgotten among the increasing volume of information and analysis,” explains John Mason.
Advanced analytics enable businesses to combine multiple datasets to highlight new information. The same cross-functional thinking is required in the application of this information.
For example, optimising asset performance will require co-ordinated action across production, engineering, maintenance and third-party equipment suppliers to achieve the potential performance uplift that connectivity and predictive analytics can offer. Most importantly, the business and IT functions need to work much more closely, and find a common language.
Risks associated with data security are often cited as a brake on adoption. Having a robust governance framework that defines who owns what information and how it should be used is essential.
50%
initiatives don't deliver their cost of capital
67%
companies reported human and technical capabilities as a bottleneck
Arguably the least considered aspect of a technology-led investment in data and analytics is the practicality of turning insights into measurable results. Success requires organisations to have the capabilities to act on and implement changes. The ability to test, learn, adapt and adopt is needed at all levels, and information needs to be made available to those who are going to use it in a way that is practical. Implementing minimum viable products and adopting “fast-fail” approaches that can quickly demonstrate impact are not widely established practices in many organisations.
Operating models and processes need to be capable of accommodating evolving knowledge, and the perceived threat that time-served, experienced staff may feel need to be overcome. “The expectation that the whole organisation will automatically see the benefits is likely to be unfulfilled. Involvement and ownership are key, as they are for any sustainable business change to work,” says Mr Mason.
When the links are forged for businesses to generate genuine commercial insight and swiftly translate it into action, the potential advantage of analytics will be fully realised.
This article originally featured in Raconteur, August 2018
About the author
CONTACT US TO FIND OUT HOW WE CAN HELP
Infrastructure: back to the old Benchmarks?
Edem Eno-Amooquaye discusses why the Infrastructure & Utilities sectors should refer to established Manufacturing practices as benchmarks for approaches to optimise both productivity and capacity.
Evolving approaches, same issues?
The Infrastructure & Utilities sectors have moved on significantly from an era when Six Sigma and adopting the productivity improvement methodologies of organisations such as Motorola and GE signalled the leading edge of business change.
Infrastructure & Utilities organisations have evolved in the industries and approaches that they look to as benchmarks. In an environment that demands customer centricity, competition, digitisation and advanced capacity management, infrastructure owners now model their aspirations on phenomena such as the dynamic slot control methods of airlines and the real-time data management of logistics companies.
Questions arise when we consider whether the modern challenges being faced by the sectors are being framed in accordance with the solutions that we aspire to offer rather than there being a suitable acknowledgment of the boring facts. These facts are that along with the new challenges, the age-old issue of how to improve productivity remains. Organisations are ‘going digital’ in line with industry trends and customer user experience expectations but have not necessarily gained full control of the basics. In the UK for example, the economy has been shackled by consistently low productivity since the financial crisis and a significant shortfall to productivity levels on par with the other European G7 nations (France, Germany and Italy) has long been maintained. The reason for this shortfall is a source of ongoing debate but the optimum balance between factors that influence productivity such as process efficiency, labour practices, regulation and technology adoption is one that the UK’s G7 counterparts have come a lot closer to achieving.
Out with the new and in with the old?
It would be too simplistic a next-step to infer that these age-old issues can be addressed by the age-old solutions, but this does not mean that the basics should be neglected. Perhaps the Infrastructure and Utilities sectors should consider reverting to a more traditional industry benchmarks source and its associated approach to productivity – Manufacturing.
Leading organisations look to continuously improve performance, driven by a philosophy that there is always hidden capacity or cash to be found by addressing the inefficiencies that have crept in over-time and become accepted. In a recent example of this Curzon Consulting looked at the fundamental components of availability, performance and quality to assess how Overall Equipment Effectiveness (OEE) can be adapted from its Manufacturing roots and used in the Water industry. This analysis identified considerable opportunities to increase OEE from today’s current levels and optimise capacity in waste water treatment businesses. Utilities companies have historically built waste water treatment plants in response to the need to deal with waste in specific locations but without a full strategic understanding of demand in an area, let alone a real concern for how to operate most efficiently or the potential for commercial opportunities. The application of OEE offers benefits to waste water treatment businesses that include reduced downtime and maintenance costs, better management of the equipment life cycle, labour efficiencies, increased productivity through improved visibility into operations, increased productivity by identifying bottlenecks, and, increased profitability. This time around, the application of OEE encourages Utilities organisations to look beyond straightforward process improvement to understand the impact that other functions are having on the ability of Operations or Capital Delivery teams to maximise their effective use of capacity. This should be considered within the context of a totex world for infrastructure and utilities organisations where end-2-end asset management, efficiency of decision making across lifecycle phases and relationships (often with alliance partners) between Engineering, Design, Operations, Project Management and Commercial functions are now paramount.
An even more provocative assertion from the Manufacturing industry acknowledges the competition driven and regulatory need for enhanced customer centricity but challenges whether businesses should pursue this at any cost. In a Manufacturing context this questions things such as excessive warehouse costs due to stockpiling of goods under the guise of mitigating against the risk of high demand products being unavailable but in fact being a buffer to mask ineffective supply chains. Parallels can be drawn with the digital platforms that many Utilities organisations are developing. The associated business cases promise the benefits of improved customer service performance against a backdrop of new metrics that will either incentivise or penalise companies, e.g. the Water industries new measure of developer experience (DMEX). These embrace the industry theme of digitisation but may retain inefficiencies as they build and hard code layers of old working habits and excessive touch point (process steps that would be labelled as ‘waste’ according to the age-old solutions). While the value of the human touch in customer interaction can never be underestimated the industry must be careful not to regress and allow productivity to be perceived as something that contradicts effective customer service. Further, digitisation is not an end in itself. Wasteful processes on digital platforms are still wasteful processes. Productivity improvements in the infrastructure asset lifecycle and the Lean design of associated system enabled processes should be considered as critical.
So, where to look for the good news?
Real encouragement and evidence of new direction is provided by Transport Infrastructure organisations. Whilst the European Railway with its objective of interoperability and technical compatibility of infrastructure and systems may appear to have struggled to make meaningful progress, key stakeholders in the Rail sector have observed the plans for intelligent supply chain networks and automation in the Manufacturing industry and realise that embracing the Industrial Internet of Things (IIoT) as the approach to technology driven change in a similar manner will be key to transforming the concept of a digital railway into reality. As timely evidence of this, Network Rail has recently announced its Digital Rail Strategy which is headlined by the commitment that all new trains and signalling will utilise advanced technology from 2019. Not to be left out, Utilities companies are also getting on to the front foot. Disparate remote asset monitoring technologies and business specific customer portals are now being firmly placed within strategies for full lifecycle digital asset data models, integrated systems and artificial intelligence led analytics. This demonstrates that the Manufacturing sector’s evolving approach to technology adoption, a key productivity driver, has remained as a crucial, actionable benchmark for the Infrastructure & Utilities sectors.
The infrastructure and utilities sectors must refer to established Manufacturing practices as they have in the past as benchmarks for approaches to optimise both productivity and capacity. In an exciting age of digitisation and customer centricity it will be important to maintain the necessary focus on the principles of productivity and operational effectiveness that underpin efficient business. In terms of the new industry challenges being addressed, rather than waiting to take instruction from the current Manufacturing practices being developed and established, the manner in which progressive Infrastructure & Utilities sector organisations are embracing IIoT and also seeking both inspiration and direction from various other industries indicates that in the not too distant future the sector may itself become a more strongly recognised source of benchmarks for digitisation, connectivity and other future ways of working.
CONTACT US TO FIND OUT HOW WE CAN HELP
New rules for insurance customer growth
Curzon Consulting Financial Services lead Doug Badham discusses the “New rules for customer growth” for insurance companies in an article for Raconteur.
New Rules for Customer Growth
The old norms of insurance cause a lot of customer pain: ever-rising premiums, slow and undifferentiated service, complex procedures and poor communications. But big changes are afoot. Insurance customers want better for less as rapid technology advancement continuously raises service expectations – and disruptive new entrants are riding the wave. Inward-looking insurers ignore this at their peril. Doug Badham said:
“We believe the industry has passed the point where it’s possible to grow profitably by sticking to the old rules,”
Successful net insurance customer growth now depends on embracing a new set of rules.
All customer contact is precious and should be as convenient as possible
Policyholders expect to be treated as valued customers, able to interact 24/7 across joined-up access points as they do in other sectors. Seamless access boosts retention and reduces overall cost to serve, and requires digital enablers to be at the heart of the insurer’s operating model.
“Insurers can no longer hide behind data security and Financial Conduct Authority (FCA) regulation as reasons not to allow multiple channel completion of processes,” says Mr Badham
The focus must be on retention from day one
Keeping customers is harder than ever: switching, reducing or dropping cover has been rising steadily due to household cost-cutting and self-researched offer-hopping, leaving some underinsured. Use of comparison sites also means consumers leave bigger data footprints, which ratchets up competitor targeting of renewal dates. To defend against this, care and consistency must be core to the entire customer journey. The jolt when a frictionless sales process gives way to a clunky claims procedure won’t be tolerated.
As Mr Badham explains: “Optimising claims experiences and making best use of technology to help customers minimise the cost of a claim, or not have to claim, is how retention battles will be won.” Take the LeakBot recently introduced to homecare cover, which alerts customers to first signs of a leak before worse damage ensues. Alongside claims experience, affordability is a prime reason for customer exit and another cornerstone of retention effectiveness will be the increasingly precise, personalised renewal pricing artificial intelligence can deliver.
Have more meaningful customer communication more of the time
Too often insurers’ attempts to communicate have an adverse rather than positive impact. Providers need to treat every customer touchpoint as an opportunity to demonstrate the value of their cover, particularly since April 2017’s FCA renewals regulation, which requires every renewal notice to encourage customers to shop around.
The best will use analytics to provide genuinely beneficial, timely insight that allows customers to understand and minimise their risk, for example: “You are regularly braking sharply and exceeding speed limits.” According to Mr Badham: “What’s happening in health insurance, where providers are transforming from benign payers to lifelong wellbeing partners, is likely to be followed in motor, home and other lines.”
Rebuild or build a brand based on trust and followership
Insurance has become something of a dirty word in recent years, with many incumbents losing customer trust. Restoring it is partly about making the move from a back-office-centric operating model to one that delivers digitally driven customer management and contact excellence. On top of this, compelling brand proof points are crucial to fend off powerful non-insurance brands that have taken a foothold, such as John Lewis, and to combat price erosion from online distribution challengers. It won’t be a case of outspending them. The insurers who cut through the noise of comparison tables and “expert” web articles will be those earning and sustaining customer advocacy through trusted recommender communities and app-based insurance aggregators such as Boughtbymany and Brolly.
There’s no hiding place from the disruption. Shedding the old rules and becoming a genuinely customer-driven insurer – in the customer’s eyes – is what it will take to thrive in the new environment.
This article originally featured in Raconteur, April 2018
About the author
CONTACT US TO FIND OUT HOW WE CAN HELP
Unlocking hidden capacity in manufacturing
Regardless of the scale or nature of your operations, hidden capacity in manufacturing can be found far more often than you might think.
Curzon Manufacturing sector lead John Mason explains key considerations for manufacturers.
In our experience, even operations that appear to be performing well are often far from efficient. In fact, these inefficiencies have crept in over-time and become accepted and invisible. Requests for more and more capital to deliver capacity increases. High levels of unproductive inventory are the common symptoms that executives see.
One of our clients, a world-leading glass product manufacturer, was suffering from low productivity at their largest European production site and increasing their stockholding to cover poor performance. We worked with them to maximise their production capacity, allowing them to service additional demand. As a result our client achieved a multi million pound increase in operating profit, while simultaneously reducing working capital by 35%.
What can you do to identify hidden manufacturing capacity and locked-up cash?
Challenge your operating envelope. Are plant and people operating together at their maximum, and how do you know? Improvements to equipment and ways of working will have been made over time but often there is no systematic capture and re-setting of new standards. Plate capacity is probably out of date.
Plan for success.
How much output is being lost through sub-optimal routing and low-efficiency changeovers; and are long production runs the best answer to avoid these losses? Has the best sequence been worked out to balance the need to meet customer demand and to minimise lost productive time, and when the planning is right, how good is schedule adherence to the plan? Getting it wrong will hit capacity or tie up cash in excess inventories. Or probably both.
Measures matter. Plants that appear to be performing well might not be. Have you got a handle on true performance with consistently applied definitions and accurate reporting? Are you incentivising the wrong behaviours through driving cost recovery? Carrying high levels of the wrong inventory is often an unwanted consequence of an unmanaged drive for lower unit cost.
Manufacturing is a science, not an art.
Are processes under control? How quickly and routinely does a plant establish maximum throughput of quality product at start-up, and does it stay there? To what extent is there acceptance of variability and reliance on experience and judgement to ‘coax’ the process rather than repeatable and reliable operations? For instance, focusing on Overall Equipment Effectiveness (OEE) to achieve a 2% increase in capacity on a continuous chemical products plant returned a multi-£m profitability uplift.
Eliminate non-productive time.
What is dictating throughput rate? A precision engineering client was achieving just 3% velocity through their process; a huge opportunity to compress cycle times and slash work-in-progress inventories. Are improvement efforts focusing too much on increasing the output of a single stage or machine rather than looking at the system as a whole? We helped another client to halve the throughput time of their precious metals processing activities by eliminating built-in wait time between stages and achieve a 12% increase in their return on assets.
Don’t overlook maintenance.
A plant that isn’t running is lost capacity and poor maintenance operations are often a cause. How effectively are you organising, skilling and utilising all your resources to look after your assets? Having your operators carry out standard routines for example will improve reliability and free up engineer time. Have you got the right asset strategies, information and service provision to maintain plant availability in the most cost-effective way?
Empower your team.
Manufacturing companies are reliant on front line staff for day-to-day efficient use of scarce resources. How well do your people see the opportunities to improve, how equipped are they to unlock the potential and how appropriately are they recognised for their efforts? These questions are not for Human Resources to answer. One of the biggest levers you can pull is effective engagement and development of your operational staff.
Unlocking additional capacity in manufacturing to create value isn’t just the job of Operations:
Look beyond the factory floor. What impact are other functions having on the ability of Operations to maximise their effective use of capacity? How much stoppage, rework and yield loss is as a consequence of the extended value chain? How effective are the interfaces and relationships between Operations, R&D, Engineering, and Commercial functions? We discovered with a capital equipment engineering firm that the root cause of poor performance and lost capacity in the factory stemmed from poor management in the Design Engineering function.
Customer first, but not at any cost.
Manufacturing companies’ sales teams may want the warehouse full of stock to maintain the highest service levels. But what are customers actually prepared to pay for? Is the available capacity being used to generate the most profitable returns or to just build buffers to mask performance of an ineffective supply chain? Sometimes the results are surprising. One such review uncovered the value-destruction of actively migrating customers to a new, ‘better’ product… with a lower margin.
More capital spending isn’t always the answer.
Often the accepted wisdom is that capital is needed to create additional capacity. Have all the alternatives been looked at before committing? How far can improved leadership and good practice operating disciplines take you first? We helped a specialty chemicals producer avoid a multi-million and multi-year plant build when the capacity already existed to meet their needs by optimising the product mix and de-bottlenecking the plant.
About the author
Get in touch to find out how we can help unlock capacity in manufacturing companies.
CONTACT US TO FIND OUT HOW WE CAN HELP
Innovation and sustainability in the UK water industry
Edem Eno-Amooquaye shares his thoughts on why the UK water industry might be missing the point when it comes to innovation and sustainability.
One of the world’s major cities, Cape Town, is expected to run out of water by April…
The usage demands of a growing population, compounded by several years of extremely low rainfall that led to regional drought, have caused this crisis. The local government has responded by determining a daily allocation for water users in order to bring down consumption. In addition, urgent investment is being made in desalination plants, groundwater collection projects, and water recycling programmes.
This is not an isolated incident, and it will not be the last one to affect a major city. We are facing a global water sustainability challenge: 97% of the world’s water is saltwater and understood to be unfit for human consumption, agriculture or industrial use. Of the remaining 3%, only about 1% is readily available for human consumption. This 1% is expected to become increasingly scarce and the global imbalance between supply and demand is forecast to become significantly worse.
This raises an important question about the feasibility of wholesale water being traded as a commodity on a global level. At present, the supply, regulation and ownership of water is understood to be a local issue and many would argue strongly that it should remain as such. CNBC Markets Editor Patti Domm noted in a 2014 article, Why trading water futures could be in our future, that
“history is full of examples where water diversion led to wars or environmental tragedies.”
However, with an abundance of research and commentary being amassed on the subject of water sustainability, there is now wide acknowledgement of the need for innovative solutions to enable the wholesale global management of water. Arguably, this is a focus driven by regions such as the Western United States, India, The Middle East and Sub-Saharan Africa that are confronted with water scarcity issues of a severity that the UK is yet to experience. Regardless, this does not mean that the UK can merely pay lip service to the global challenge or that its management of local water shortage challenges will not need to evolve. It was only a few years ago that Eastern Brazil suffered a major drought and in this case it was the slow response of government that was largely blamed for the water supply crisis and resulting social, economic and political disruption. Lessons on the need to proactively address water sustainability are not being learned. The images of mass demonstrations in Sao Paulo have clearly been forgotten. More recently, and closer to home, what should perhaps resonate more strongly is the ongoing drought affecting Portugal and much of Spain, largely due to three years of low rainfall, where the latter half of 2017 saw rivers come close to running dry. The impact on agriculture has been devastating. Reservoir levels are running dangerously low and clean water now has to be delivered by tanker to many rural communities.
We need to question whether the UK has really grasped the concept of global sustainability and its future role within the wider industry
For the UK, achieving sustainability in the water industry means addressing both current and future challenges, which are both broad and varied in their nature; from meeting the clean water needs of new developments, to managing the uncertainty caused by climate change, addressing requirements for the maintenance and renewal of ageing mains infrastructure, achieving targets to reduce energy usage and improving customer satisfaction.
Whilst we can trust that, as an industry, we have not totally overlooked or forgotten the fundamental challenge of sustainability, there does seem to be a significant disconnect at the moment between the global or holistic view and the UK industry’s latest ‘hot topic.’
Why is retail innovation being touted as the answer to all of the UK water industry’s problems?
Changes to the UK water market mean that most organisations can now choose the company that they want to supply their water retail service. This represents what the regulator describes as “the largest competitive water retail market in the world having opened for business”.
In response to this increased competition, and perhaps compelled by the fear of value chain and organisational evolution, the UK water industry appears to have become heavily focused on retail innovation. But is this really the answer to all of its challenges?
Industry forums are directly referring to the adoption of futuristic, leading edge retail models as the solution to the industry’s sustainability challenge. Top online retailers such as Amazon, Apple and easyJet are being referenced as benchmarks for how the water industry needs to develop its customer experience and interaction. Adding confusion to the mix is the rebranding, selling-off and proposed disaggregation of the business retail arms of many water companies as they double-down and nestle in to the comfort blanket of wholesale services in order to reinforce their positions within an industry evolving at an uncomfortably fast pace.
The emerging consensus that retail innovation or mimicking the customer service model of online companies is the Holy Grail or missing piece of the puzzle for the water industry to overcome its sustainability challenge needs to be questioned. Huge changes will be required across all stages of the water value chain to effectively address sustainability. And right now, there’s certainly much less palpable excitement and fanfare around new methods of managing water resources or wholesale business transformation and resilience.
The risk is that the UK is separating itself from the global water resources management challenge, where innovation is focused on water security and the management of water as a scarce global commodity.
Recent reports published by major infrastructure and asset management firms on the development of water utilities promote frameworks for creativity and innovation that, rightly, focus on developing new approaches to serving customers and managing assets. However, they only refer to sustainability as an ‘additional benefit’.
We must challenge the definition of sustainability and the stakeholders who are shaping these discussions in the UK. A choice must be made as to whether we want to seriously contribute to addressing sustainability of water as a global resource, or be limited to viewing sustainability from the medium term perspective of the current players in our local industry.
Arguably, it’s also questionable as to whether these players have really grasped the bigger picture. Maybe the ever-increasing thoroughness of the regulator’s incentivisation and performance management of improvements in customer service and satisfaction metrics have disproportionately skewed the agenda towards retail and customer service.
Or perhaps the UK players deserve more credit. They do have a bit more in their sights than just retail innovation. Ofwat’s PR19 suitably focuses on building resilience and defines the avoidance of dependency on single assets as key to the long-term provision of water services, as well as the ability to adapt and recover from disruptive events. So there are allusions, even if indirect and aided by interpretive leaps, to the need to extend beyond local assets and boundaries in order to sustainably manage demand and supply.
Added to this, some clear steps have been taken. Although research documents and consultations are yet to spawn innovative transformational plans, since its 2011 Water for life white paper the UK government has acknowledged the need for advancements in water abstraction to create a more dynamic system for effective sharing of water resources. In A Green Future: Our 25 Year Plan to Improve the Environment, published at the start of 2018, the government encourages innovation and looks to formalise plans around improving access to water to encourage trading and storage, the growth and implementation of robust long-term plans that develop new water resources where needed, and reforming approaches to water abstraction. Water re-use and alternative water solutions are also being actively promoted and pursued by companies such as Anglian Water, which demonstrates recognition of how exploiting the multiple uses of water is one of the best ways to maximise sustainability.
Most notably, in 2010, Thames Water opened the UK’s first major desalination plant, the Thames Gateway Water Treatment Works, and heralded a step change in technological innovation and drinkable water yield from desalination. However, investment is yet to gather real pace across the rest of the industry. In line with predictions that we will see the number of desalination plants across the world double by 2050, The Institute of Chemical Engineers has set the expectation that the UK will pioneer this revolution in global water management with an additional three major desalination plants and up to 800 smaller units. It will be important for the UK industry to collectively focus on sustainability and water management in order to reassert itself as a world leader in this area.
What's next for the UK water industry?
As is the case for retail innovation, the UK water industry must aim to be at the leading edge of sustainability and implementing water management solutions such as desalination and new technical and commercial solutions for treating and recycling water produced by industrial activity.
The next step must be for the UK water industry to globalise its ambitions, plans and particularly its actions. We need to acknowledge that whilst water sustainability may appear to be just a local challenge, it is a significant issue for which the solutions must extend across local, regional and national boundaries. Perhaps, some of the noise and energy around the UK ‘topic of the moment’, retail innovation, would be better directed towards this cause. The vision and initiatives promoted by organisations such as the World Water Council would be an appropriate reference point.
About the author
Nothing found.