Agility is paramount in the CPG industry. This is driven by rapidly changing consumer tastes and preferences, competition – which drives the need for greater differentiation, varying degrees of automation and manual labor forces, constantly changing packaging technology and platforms, and several other factors. Agility is simply defined as the efficiency of change. In other words, how efficiently can you go from your current state to your desired future state? In the CPG industry especially, the future state is a constantly moving target. If your supply chain can’t keep up with the rate of change, then it has no alternative than to become obsolete. This explains the significance of increasing Manufacturing or Operational Agility.
There are several benefits to increasing Manufacturing Agility (this list is not completely exhaustive):
- Satisfy a more diverse SKU portfolio with fewer production lines, requiring a smaller manufacturing footprint
- Drastically reduce the product development cycle from ideation to commercialization
- Scale production capacity to fit fluctuating demand without inflating costs
- Significantly reduce the time frame from improvement idea to gainful implementation
- Create opportunities to increase asset utilization by picking up orders from competitors and store-branded products
In the CPG industry, the more agile factories or operations win in the long run. Agility helps to keep costs low while making the changes needed to stay competitive. It also brings down the risk of changes significantly since they are less cost prohibitive. There are three main areas where CPG companies need to focus on increasing Agility; people, processes, technology. And there are several approaches to increasing Agility in each of these areas.
People Agility is referred to as scaling the labor force up or down to meet immediate production needs without inflating costs. This can only effectively be done without compromising critical process knowledge and skill sets. Many CPG companies experience significant peaks and valleys in demand throughout the year. In many cases, manufacturers build inventory or find some way to avoid needing to scale man-power, maintaining a flat workforce with “normal” work hours for each employee. What ends up happening is that they eat labor costs during valleys because productivity slows and people are idle; then they eat labor costs during peaks due to excessive overtime. When you maintain a full workforce when productivity slows, the workforce loses its operational discipline, which is needed for when production demand is high. This creates frustration for both management and the labor force. Its also an expensive way to manage a factory. Below are a few ways to increase the scale-ability of the labor force:
- Use a fixed crew and fixed production rates but vary production hours based on demand. This would make for inconsistent work hours for employees but help maintain the operational discipline needed for peak volume times. During valleys in demand, production could be scheduled at standard rates; when the crew finishes the work, they could be deployed to other productive work or process improvement projects.
- Have a fixed full-time crew (based on business case analysis) and use temps to support surges in volume
- Run with a fixed crew (again, based on business case analysis) and outsource surge volumes to contract manufacturers
Process Agility refers to the efficiency of changing processes and procedures to meet business needs. In CPG, as well as many other industries, processes need to change constantly to increase competitiveness, reduce costs, increase quality, improve safety, increase moral, improve service levels ,and many other important reasons. Processes in this sense include the specific steps taken by people or technology to get something done. The more Agile a factory or operation, the easier it is to change processes to suit the needs of the business. For a factory that lacks Process Agility, it requires at least 5 years to implement a Continuous Improvement program such as Lean Manufacturing. Contrarily for a factory with great Process Agility, Lean could be implemented and self-sustaining in as few as 2 years. Below are some techniques to be employed to increase Process Agility:
- Implement systematic management systems that drive operational discipline such as Impruver. Impruver sets standards for the management function and is designed to drive the discipline needed for Continuous Improvement. Click this link for more information on Impruver.com.
- Develop and execute a world-class training program. This helps to significantly reduce the learning curve for on-boarding new employees and implementing process changes with current employees. Click this link for more details how a world-class training function works.
- Employ Lean practices such as Standard Work to develop efficient processes and reduce learning curves. Also use tools such as Kaizen and Root Cause Analysis to drive rapid process improvement.
Technological Agility refers to the ease of changing the technological capabilities used for the efficient making of a product. This could mean changing packaging ability from a canning to a pouch filling; or from vacuum sealing to over-wrap; or from a carton to a sleeve…I think you get the idea. In the CPG industry, formats change frequently. By now, every marketer in CPG has identified the impact that an attractive new packaging format has on product sales. Those same marketers can tell you how frustrating it is when they get push-back from the manufacturing folks that “there’s no way we can do that”. Well the truth is that it can be done – it can always be done. The only factor is what it’s going to cost, which is a function of Technological Agility. A factory with high Tech Agility can run multiple packaging formats on the same production line. On the other hand, a factory with low Tech Agility needs a separate line per format at best; and at worst, simply doesn’t have the capability to efficiently process different formats. Below are a few ways to improve Tech Agility:
- Use of sensors and servo motors to automatically adjust for changes in package sizes. This also helps for automating product changeovers.
- Design line layouts that allow processing equipment to be swapped in and out based on production needs. This creates modularity and makes better use of the factory footprint.
- Outsource smaller runs to contract manufacturers to test market results instead of investing in new equipment
- Employ 3D printing for late-stage-customization to increase SKU variety without making significant changes in other production areas
- Engage plant technology and process experts in the product development and design processes. This reduces the time wasted on designs that are not feasible and cannot be manufactured.
- Leverage data sharing systems so that information from across the supply chain can be used in the product development process. This allows people to understand performance data, capabilities, capacities, costs and other key information across the supply chain.
As new generations usher in new ways of experiencing life, manufacturers in the CPG industry need to have the Agility to keep up with changes without inflating costs. Agility not only enables market leadership, it also removes a significant amount of risk from experimentation – bringing the fun back into the factory. An Agile factory or supply chain creates business opportunities for itself and its customers, who may also need contracted work for store-branded products in new and exciting formats.
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