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Calibrating the Current State to Enter the Digital Age

Tuesday December 18, 2018


Industry 4.0, the rapid integration of cyber-physical systems, and technologies such as software as a service and cloud-based infrastructure are disrupting supply chains across the globe. As with any emerging technology, these tools tended to be expensive at first and the early adopters were mostly larger enterprises. However, as the democratization of these innovations makes them affordable for small- and midsized-businesses, a clear structure and framework are essential to achieve successful evaluation, implementation and monetization of processes.

As a career consultant, I have developed a framework to evaluate potential solutions and gauge how well they fit an organization’s needs. The key is to identify which business process maturity model is most relevant and contains sufficient detail to evaluate as many characteristics of each stage of its maturity.

Entry level 1: At this level of maturity, processes are usually ad hoc and chaotic. Standards and operating procedures are not defined or documented. It is typical to have heroes who fight the fires during crises, and processes are always in a reactive mode. The success of such organizations hugely depends on the competency and efforts of its employees, rather than any proven processes. Automation therefore should be carefully considered or it will only quicken the mass production of defects and rework.

One firm I worked with had recently ventured into the business of drop-shipping products to their customers. Leaders decided to enhance their e-commerce platform by automating the value chain. They would convert orders from their website into purchase orders (PO) in their enterprise resources planning (ERP) system and send the POs to vendors via electronic data interchange to drop-ship the product to the customer. Both the parent company and the vendors had cloud-based EDI services managed by third parties. There was no feedback mechanism built into the new process to alert users of disruptions and no procedures were defined to handle errors and exceptions. After numerous customers called with complaints, an employee stepped up and decided to just pull the list of POs generated each day and email it to the vendor as a cross verification. Though a commendable effort, this was not enough to counteract the erosion of confidence in the new process or stop others from finding ways to circumvent it.

A better implementation project at this maturity level would have been to focus on the process — in many cases, define a whole new process — and use organizational change management to set a strong precedence for adopting the new tools.

Intermediate level 2: At this level, some processes are reasonably well defined and capable of producing consistently repeatable results. Because not all processes along the value chain are at the same level of maturity, local optimization has a negligible global effect. Also, process discipline is not strongly enforced and tends to be abandoned at times of crisis.  

I was once called in to evaluate the current state of an aircraft component manufacturer and recommend some process improvements. My initial glimpse of the shop floor demonstrated that there was some effort made to go lean. There were kaizen boards that summarized root cause analyses and the corrective actions taken. A few work centers had rudimentary forms on standard procedures. They also had implemented ERP with a fully functional material requirements planning (MRP) system. Bills of material, routings and time studies were documented to a degree of accuracy needed to produce a valid MRP output. Workflows and process automation were also implemented.

Yet, this company faced poor service levels. The majority of the work was either past due or cancelled because of delays. A few fact-finding sessions later, I discovered that it was common practice for the sales personnel to accept orders without consulting operations. This caused a steady feed of rush orders, so the production planner would constantly make changes to the plan recommended by MRP. Time fences were completely disregarded; sometimes, changes were made mere moments before a part was picked. This put all of the other orders in a perpetual state of catchup.

Maintaining process discipline should have been strongly emphasized at this stage. This would have made it possible for the business to achieve its lean manufacturing goals.

Intermediate level 3: Here, processes are defined and documented and, to some extent, have improved over time. There is an organization-wide framework of standards and procedures with provisions for some local customization. As a result, processes across the organization are generally consistent, described in detail and rigorously enforced. As a result of this better understanding of the interrelationships among different processes, operations are proactively managed. Companies at this level are ideal candidates for automation and analytics that can help them deliver consistent output, the digital integration of many touchpoints in the value chain, and the extraction of useful intelligence.

An automobile manufacturing plant had state-of-the-art automation for almost all the processes in its facility. There were dedicated personnel who analyzed the data gathered from the thousands of programmable logic controllers connected to machines ranging from conveyor belts to robots. With these analytics, they were able to predict when the connecting wires to a robot’s arm were likely to snap and therefore determine the right time for preventive maintenance. Many such analyses across their work centers helped prevent unplanned downtime and optimized each machine part.

The goal

At the most advanced maturity levels, processes are best in class. They have been continuously improved by a systematic understanding of common causes of variations in the system. Improvement projects are focused on shifting the mean of the process performance matrix toward excellence, while maintaining statistical predictability to achieve improvement objectives. There also are incremental and innovative technological improvements being made over time as companies look for highly custom solutions to meet their specific needs. Most off-the-shelf offerings require heavy customization, so the more resourceful companies design and build their own solutions.

There are numerous maturity models to choose from. Irrespective of the number of levels or dimensions, the key is to select a model that

  • specifically represents the intricacies of the processes you want to evaluate
  • has the right amount of detail to allow for nuances
  • captures the right key performance indicators
  • offers industry benchmarks that managers can use to track progress.

Evaluating processes based on an organization’s maturity offers an excellent framework for setting goals and building strategic plans. This approach has provided many of my clients a structured approach in transitioning their operations into the digital age.