Value Chain Optimization

Each business organization has its own challenges, weak points and risk areas. The managers of such an organization are sometimes very frustrated by the symptoms of these shortcomings and they lack the time to solve the root causes of these problems because they are too busy dealing with the effects thereof. Sometimes it is good to have an independent eye to “see the woods from the trees”, or vice versa.

This case study contains some of our experiences in dealing with these issues, the way that we have handled it and some of the outcomes. In most cases the client will approach us with a certain problem, such as: “We need a new factory lay-out because we are running out of space”, or “we are consistently running out of stock”, or “Our deliveries are always late, and we do not have control over it”. These are all examples of symptoms experienced by managers, and usually the root cause of the problems is at another place currently unknown to them.

A good operational process is built on three concepts (picture a 3-legged stool) aligned to each other for complete balance:

  • A clearly defined business process, starting at the client and ending at the client (this is our method with all our clients)
  • Human resources empowered and capable to perform the work (organizational structure, responsibilities, job descriptions, performance measurement)
  • Technology to support the above (production planning system, stock control system, accounting system)

We make sure that all three of these aspects are reviewed and balanced all the time. This balance is achieved from inputs by interaction with key personnel. The strategic vision of the business, the business values and the skills levels of the personnel are important inputs in the development of solutions. We do not have a standard product for sale and we do not follow standardized (commercialized) methodologies. As engineers we have the skills and knowledge to evaluate business processes and to develop concept solutions with the best fit and value add for the client’s business circumstances. We can also develop bespoke software as part of the solution if needed.

The Functional components of a typical small/medium manufacturing concern are as follows:

The Sales function: Determine the client requirements and specify product details. Negotiate price and delivery time. Provide feedback on specification changes and quality problems.

The Planning Function: Obtain production orders from Sales. Do production planning to achieve requirements (e.g. delivery date) and to optimize production processes (e.g. capacity constraints, overtime, material availability).

The Material Purchasing function: Order material as required by the production plan. Provide feedback for rescheduling if material shortages are envisaged.

The Production function: Produce according to product specification, allocated resources and production schedule. Provide feedback on progress against plan and actual resources used.

The Production Control function: Obtain feedback on production progress and compare with production schedule. Adapt the schedule if necessary. Report on progress against plan, potential deviations (red flags) and utilization of resources.

The Quality function: Quality problems are grouped in two sections: Design quality problems are caused by insufficient interpretation of customer requirements or incomplete/wrong specifications. Production quality problems are caused by deviating to specification. Assure that procedures are in place to avoid/reduce both these quality problems.

The Costing function: Feedback to the financial system on material cost, scrap, reworks, labour hours and other consumables as required.

Value chain optimization ensures a seamless operation where all the above functions are working optimally as a whole. The results will show increased profits due to higher turnovers (shorter turnaround times), better utilization of resources (labour and machines), improved quality with savings on scrap and rework. Customer satisfaction and brand building are additional spin-offs.