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Three Problems in Manufacturing that Impact Productivity and Profitability

This is an interesting article written by Michael Mantzke and Robert Jonas of Global Data Sciences, and published in IndustryWeek on July 5th.  [Jump directly to the article]

The article highlights 3 key areas manufacturers must focus on to improve product profitability, including:

Data Management:
the biggest challenge they identify is that after integrating disparate data sources, it becomes extremely challenging to even know what data types and trends to analyze. Companies often become overwhelmed with the sheer volume of information they have accumulated and don’t know where to begin.
At aPriori, we see our customers struggling with the same issue. Most have PLM, ERP, and reams of Excel spreadsheets that contain some component of product cost information. It becomes nearly impossible to gain a singular picture of the cost to manufacture an individual product or a component with that product, simply because the information is nearly impossible to aggregate.
when a company has too much inventory or not enough inventory, in both cases it impacts profitability.
At aPriori, by providing a technology platform to enable more fact-based conversations, and a closer, more collaborative design & manufacturing relationship between OEMs and suppliers, our objective is to improve visibility into the pipeline of new products and the timing of when those products need to be manufactured. While aPriori is certainly not an inventory management solution, creating an environment that fosters better, more strategic communication between customer and supplier is a step in the right direction towards a more nimble and efficient supply chain.
Gross Margin
probably the most important piece of advice they provide in the article is: Practice vigilance with suppliers. To maintain strong margins, commit to cost control. Since strong margins come from the cost of materials, it is critical to evaluate how purchases are being made. While I think the point is spot on, it feels a little bit like the tone emphasizes a “policing” of suppliers to make sure they aren’t hiding costs somewhere in their quote.
At aPriori, we philosophically agree that vigilance to costs within the supply chain are critical to profitability, but our recommendation to both customer and supplier is to improve transparency and enable the creation of a more strategic partnership using aPriori’s product costing software which effectively simulates the physical manufacturing process for a given product, and provides both customer and supplier with a much deeper level of data for analysis than ever possible before. When both sides have more information about how to most efficiently manufacture a product, they can develop a product development and manufacturing relationship that leverages the strengths of both parties and truly enables the realization of a “value chain”.
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Connect to aPriori’s comprehensive library of resources on improving product profitability through better product cost management. Our whitepaper on Implementing an Effective Product Cost Management program is a really great place to start.

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