To Succeed, Every Manufacturer Must Become A Lean, Mean Strategic Machine

It all started with Taiichi Ohno and the Toyota Production System, a new approach to manufacturing designed to eliminate inefficiency from all aspects of the carmaker’s operations.

In fact, such was the success of Ohno’s methodology that it went on to provide the foundation of postwar manufacturing. Leanness became the industry’s mantra while waste — be it of materials, inventory, labor, transport or anything else — was the enemy.

Fast forward to today and, for the majority of manufacturing companies, the need to maximize efficiency, especially in light of ongoing economic and geopolitical uncertainty, remains a top priority. Yet unlike in Ohno’s day, their response to this challenge is digitalization. Already, advanced technologies like robotic process automation, digital twins and machine learning are helping boost productivity, eradicate waste and reduce costs.

Yet as firms progress along their journey of digitalization, many are also overlooking something vital: namely, the link between this efficiency drive and their ability to accelerate their company’s wider strategic objectives. Rather than investing in individual supply chain pilots and operations projects, successful manufacturing firms should consider how their digital operations environment can create new capabilities for the organization as a whole.

Strategic investment

Of course, this requires investment — or, more accurately, a different way of approaching it. The first step for manufacturers, then, is convincing the C-suite to look past the siloed thinking of the past and see digitalization as a way to positively and strategically impact multiple areas of the company.

Sustainability is a great case in point. Few, if any, manufacturing or supply chain leaders are blind to the need to reduce their organization’s environmental footprint. Yet according to a recent EY study, a third admit they lack a business case for sustainable supply chains and nearly half say their company is struggling to measure the return on sustainable supply chain activities.

However, many of the digital solutions designed to drive equipment effectiveness can actually help manufacturers plug this gap. From sensors to data analytics, such tools can also be used to improve energy management and smarten the flow of materials through plants and facilities. This actively supports the firm’s overall corporate sustainability and environmental, social and governance goals.

Likewise, there are investments in so-called “control towers.” Viewed in their operational silo, these centralized online platforms are aimed at giving manufacturers a better understanding of their value chain — from tracking and tracing deliveries to identifying possible supply disruptions. But by using this enhanced visibility to communicate more effectively, firms can improve customer experiences — right down to proactively offering them delivery alternatives when issues arise. This, in turn, boosts retention, drives revenue and ultimately supports their growth agenda.

What’s more, manufacturers that deploy digital technologies to streamline their operations can also contribute significantly to their knowledge assets. That’s because any insights gained can be shared across the organization and used to address skills gaps, accelerate innovation and support rapid decision-making.

Beyond Ohno

Encouragingly, there are already examples of this more strategic joined-up approach in action. Several pharmaceutical companies are harnessing digital operations initiatives to speed up their wider sustainability journey, while other tech firms are having success using digitalization to shift their company’s overall culture and behaviors to enable a more customer-centric ecosystem.

What unites these organizations is their ability to see digital transformation as far more than simply a cost reduction play, using it instead to drive forward their broader business imperatives. Whether it’s to boost sustainability performance, improve customer experiences or strengthen knowledge assets, it’s now up to manufacturers to make this missing link — and capitalize upon it. For years, Ohno’s lean manufacturing principles have shaped the industry. The firms with the courage to go beyond them will shape the future.

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.