VOLUME 2, NUMBER 1 | FEBRUARY/MARCH 1999

Multidimensional Management and Manufacturing: Not Your Fatheršs Business Method By Rob Rose - Vice President, Cognos Corporation

Fifty years ago, when the sprawling manufacturing floors of giants like Ford Motor Co. and Bethlehem Steel were the pride of post-World War II America, terms like "globalized markets," "cycle time reduction" and "total quality management" were rarely heard outside the ivy-covered walls of academia. Life was simpler then. Line workers knew their roles and carried them out without a fuss. A riveter was a riveter and was judged on his or her ability to keep the line moving, not by how many "quality points" a "self-managed" team accumulated.

But times have changed. Along came technology that enabled companies to speed up the manufacturing process and open their businesses to new, far-off markets. Unfortunately, while technology advancements and global markets grew at a sprinter's pace, the physical process of changing the way line workers adapted to these changes inched along glacially. A half-century later, manufacturers are still feeling the aftershocks of the information technology revolution.

The good news is that industry today is coping better than ever. Companies have forged skilled alliances between what workers can provide and what technology can provide, and are shying away from failed business experiments like "total quality teams" and "reengineered workplaces." It's a profitable strategic mix that establishes new competitive benchmarks in a revamped global economy.

Now, companies are plugging into new advanced manufacturing technologies that serve as the bedrock in manufacturing plant performance, enabling companies to simultaneously lower costs while boosting productivity. In short, the manufacturing floor has reinvented itself in the last decade of the 20th Century as a newly re-energized profit center that forges the unique talents of the plant worker and the awesome power of high technology.


Winning in the Plant

In fact, the technology/worker partnership is reaping so many dividends for corporations that managers are eagerly using technology to turn manufacturing into an even stronger competitive weapon. That's not as easy as it looks. Managers are faced with the challenges of having to continually find new ways to shorten lead times and to increase plant output to gain the maximum return on assets. More critically, managers have to continually drive production of goods downward to cut costs without sacrificing acceptable quality. In a business world where gains are measured incrementally, the ultimate challenge in wringing more assets from the manufacturing floor is to speed up the pace of those incremental gains. The best way to accelerate the pace of incremental gains is to eliminate the natural barriers to faster growth in manufacturing environs. Let's take a look at the three most prevalent problems plant managers face.


Problem 1:
Manufacturing costs are unnecessarily high; innovation is unreasonably slow.


Breakdowns in process are rampant in manufacturing plants — machine downtime, rejects, rework hours, engineering changes, unnecessarily wasted material. But some breakdowns are treated differently than others. If an assembly line goes down for two weeks, everyone is impacted by it and action is taken to bring the line back up to full steam immediately. Yet hundreds of other less obvious breakdowns get no visibility and are never actively pursued.

The irony is that every line breakdown — or at least the symptoms of a breakdown — is meticulously monitored. Every time a line is stopped, a quality inspector logs the reasons why and the length of downtime. Similarly, every hour reworking a product that wasn't done right the first time, every pound of scrap, and every unit rejected at a quality inspection gets captured in most manufacturing systems. While the data is always at hand, rarely, if ever, is it extracted from the system and presented to managers to use in an innovative and understandable fashion.


Problem 2:
Production managers don't have a good idea of their standard product costs.


Every time a machine failure stalls the production of razor blades, the cost of producing razor blades rises. That unnecessary cost was not factored into the calculation of standard product cost for razor blades. Similarly, every piece of unnecessary scrap and every rejected unit adds to the actual cost, throwing the standard product cost further out of whack.

The peril for product managers — or anyone else in the company — is that they don't have a handle on such cost fluctuations, and thus have no idea just how far off they are on their standard product costs. Meanwhile, sales and marketing are making key business decisions based on the standard product cost. If the standard product cost is incorrect, their assumptions about profitability will no doubt be wrong too.


Problem 3:
Production managers don't understand the reasons behind many chronic problems and, therefore, can't eliminate them.


Even though the reason for every breakdown is faithfully recorded in many manufacturing sites, the real reasons driving chronic problems elude production managers. Consider the problems associated with equipment failure. A typical plant contains hundreds, even thousands, of equipment components and dozens of reasons why each component might fail. Over several plants in a year's production, there may be several thousand instances of equipment failure, causing delays anywhere from a minute to a week. The document that chronicles these several thousand instances defies analysis. The potential gain from isolating the cause of the breakdown may be great — but the price to identify the cause has been too high.


A Fresh Approach to Manufacturing

Fortunately, there is a way to overcome those knowledge barriers. By locating and leveraging those key business points and turning analysis time from days to minutes, managers can use plant breakdown data to their advantage. The key is that managers think logically, simplistically and multidimensionally — that is, by organizing information not in archaic flat tables or spreadsheets, but in multidimensional models that adhere to the actual business dimensions of the organization.

Multidimensional managers increase the rate at which they consume information by using information "sweet spots" — crucial chunks of corporate data. Using multidimensional software tools that help operational managers analyze those sweet spots in seconds, managers can unplug themselves from the tedium of month-end reporting, concentrating instead on more focused research like value-added analysis. Stoking those fires are businesses that value multidimensional thinking. Top companies like York International and Epson are prime examples of organizations that can distribute those sweet spots directly to operational managers, who then perform their own reporting and analysis.

Corporations that have embraced multidimensional management recognized that half the data-gathering and analysis battle had been won already — without firing a single shot. They recognize that data on their business, suppliers, carriers and customers has been there all along. But the second half of that battle — finding an efficient way of delivering that data to their management teams — can prove daunting. Multidimensional management offers three solutions that address that challenge. Let's briefly examine each.

The Information Sweet Spot: The first concerns prioritizing business intelligence data. Key to the concept of multidimensional management is the fact that some chunks of information are more critical than others. Those chunks are known as "sweet spots" — named after the sweet spot found on the face of a golf club, where the energy from swinging the club is most forcefully and effectively transferred from the club face to the ball. Miss the sweet spot and the result is less distance and accuracy. Smack it with the same velocity but on the sweet spot and, momentarily, you are Tiger Woods.

The most valuable data buried inside a corporate database is concentrated into a relatively finite number of these sweet spots. By identifying and analyzing these sweet spots, the multidimensional manager can cut costs, boost productivity and drive the organization toward the customer- and profit-centric business models mentioned above. This theory runs contrary to popular theory on data analysis that says managers require as much information as possible to make informed business decisions. Not so. The sweet spot establishes that quality transcends quantity when gathering and evaluating business data. Because these sweet spots are associated with selected chunks of information, managers are able to react far more quickly and inexpensively to business challenges.

Thinking Multidimensionally: The importance of multidimensional analysis is proportionate to the challenge presented by an extremely dynamic business environment. If, for example, you have 10 salespeople who sell an average of 10 products to each of 100 customers monthly, and the company tracks five key indicators, the analytical combinations of salespeople, products, months, customers and indicators compound exponentially to the point where it begins to look like the amount of dollars in Bill Gates' Christmas Club account. Simply multiply 10 sales representatives by 10 products by 100 customers over, say, a two-year time period, and multiply that by those five indicators: The result will be 1,200,000 data combinations to evaluate. Paper-based presentation of this vast amount of data is virtually useless, with enough reports generated to rival weighty tomes like the "Tibetan Book of the Dead". That doesn't mean it's not worth drilling down to get to the good stuff. In fact, it's imperative to do so in order to understand key cost and margin indicators.

Multidimensional management tools alleviate this problem by presenting information in the way that managers think. Picture a business analysis software tool that enables managers to navigate comprehensive databases as easy as shifting gears in a Mercedes-Benz on the ride home from work. Simply by removing the cumbersome, time-consuming process of information gathering, eliminating the unwanted data and getting right to the 20 or so sweet spot issues, managers grow more productive and profit margins grow fatter as well.

The Era of Business Intelligence: The evolution of business technology has fueled the growth of the multidimensional manager. Business intelligence software formats information multidimensionally — the way managers think — thus accelerating the rate at which managers can physically process information. As a high-technology mechanism, business intelligence is foremost a tool that quickly and inexpensively funnels data into a multidimensional format. With as little as one megabyte on a manager's laptop, multidimensional reports could be generated at the click of a keystroke. Even one such report might be equivalent to thousands of conventional reports represented on paper. Remember the 1,200,000 data combinations referenced above? With business intelligence software, managers can explore any of the combinations in seconds using a multidimensional viewer (instantaneously comparing the results of myriad combinations), project the results of any combination over time, and hone in on which factors were driving key indicators. Ironically, the cost of working with information — which is basically eliminated through the use of business intelligence — is rarely tracked by corporate accountants. That doesn't mean it's an insignificant cost. In fact, many business observers now consider working with information as the single largest hidden cost of corporate operations.

A recent cost benchmarking study completed by Maritime Tel & Tel (MT&T), a $400 million supplier of telephone services in Eastern Canada, paints a clear picture of the cost of working with data. Measuring the cost of crunching numbers minus fixed investments like computers, financial software and other network-related expenditures, the study found that the price tag in creating, distributing and working with corporate financial reports exceeded several million dollars per year. Every product and service a company produces, every sales review generated by sales reps, every human resources directive is weighted down with this needless expenditure. But business intelligence eliminates that cost, and in the process gives managers the means to master information in powerful new ways to slam a lid on costs across their integrated supply chains.


Production Sweet Spots

Multidimensional sweet spots increase the rate of discovering problems in production. In the process, the sweet spots help speed innovation and thus contribute to lowering production costs. In fact, resolving a problem in a manufacturing plant usually has a multiplier effect. If the problem is associated with a process, solving that problem has a repeated payoff over time. For example, a breakthrough in one plant can be leveraged in every other plant the company operates.

Take the case of Hamilton Beach/Proctor-Silex. When this giant consumer goods company used multidimensional analysis to dig deep into layers of manufacturing data, it was able to cut weeks off customer response and order lead times. They found that the manufacturer with the shortest lead times gets the business, retains its customers and can often charge higher premiums for its products.

Management guru and bestselling author Tom Peters calls the art of turning manufacturing into a marketing weapon "winning in the plant." The formula for winning there is fairly simple: Use the multidimensional sweet spots to quickly discover and resolve problems in the plant. The faster the discovery process, the fewer the breakdowns. The fewer the breakdowns, the lower the cost of production, the shorter the lead time, and the more positive the impact on the market.


Capturing Capacity Management

The first sweet spot for production, capacity management, captures overall throughput in any one plant, or globally across all plants. It reveals scheduling problems and opportunities at the tactical level. At the strategic level, it's a fundamental tool to maximize return on assets on the balance sheet. With capacity management, multidimensional managers can instantly see if they are operating at planned capacity, how successfully they are matching capacity to demand, where the bottlenecks are and what exactly comprises their backlog.

Backlog, as an indicator, also achieves greater leverage in capacity management. Usually production managers know where production is bottlenecked, yet they frequently can't quantify the associated backlog accurately. Managers also can't separate current backlog — orders generated in the current period — from chronic backlog, unfulfilled orders carried over from previous periods. Chronic backlogs are the orders most at risk for late delivery or, in many cases, they may already be late. When production managers can't separate chronic backlog, they can't manage lead time for the customers who are most exposed.


Identifying Standard Product Cost and Quality

Standard product cost and quality is the primary monitoring station for reject rates, number of engineering changes, minutes or hours of production line downtime, pounds of scrap and hours spent reworking things. For one well-known manufacturer of razor blades, quality is so important that multidimensional managers analyze their razor blade production run reject rates on an hourly basis.

Every dimension in standard product cost and quality becomes a benchmark for comparing problem rates. Production managers can compare one plant against another, one assembly line against another, one product line against another or one manager against another. These internal benchmarks increase the rate of discovering problems and successful innovations in business process.

Standard product cost and quality not only reveal problem rates, they capture the costs associated with quality problems and groups them by any dimension — including product. Consequently, product managers can now view the build-up of unnecessary costs by product, and monitor how those unnecessary costs impact their goal of manufacturing at standard product cost.


Identifying Causes of Poor Quality

As mentioned above, every time an assembly line shuts down, someone on the shop floor notes the date and time and indicates a reason for the delay. That reason might be out-of-stock material, an incorrect drawing or calculation, a faulty command-and-control program that runs the machine, poor assembly, equipment failure or any of a host of other things. This shop-floor entry is added to a list of thousands of similar entries.

Using this list to find the dominant reasons driving plant breakdowns is a frustrating and inefficient process, particularly when you don't know at the outset where to focus your investigation. As a result, the investigation rarely happens and production managers fail to identify and eliminate the cause of many chronic problems.

Through multidimensional analysis, causes of poor quality can be identified in a format that automatically brings attention to dominant reasons. Instead of listing every problem incident, managers can count the number of incidents by reason and present the summaries in a highly defined and easily explored sweet spot. Production managers can instantly see which reasons predominate for any type of breakdown. They can slice and dice their reason counts to see if they are related to specific products, vendors, pieces of equipment, operators or a multitude of other factors.

Consider the issue of downtime. In the automotive business, margins rely heavily on the ability to optimize the production process to accommodate fixed-price contracts. Any time lost due to equipment downtime means lower margins and decreased ability to meet just-in-time delivery schedules for customers. Companies need to know what types of failures occurred, why they occurred, how often equipment was likely to fail and what happened to the equipment after a repair was done.

By thinking multidimensionally and by including "cause of poor quality" in the standard production process, analyzing past equipment failures and predicting future failures more accurately than vendor specifications, product managers can reduce loss of efficiency from equipment breakdowns while shortening lead times and meeting those just-in-time delivery deadlines.


The Multidimensional Manufacturer

Using multidimensional sweet spots actually increases the rate of discovering problems and their causes and thus radically improves both quality and lead time, two of the most vital cogs in the manufacturing management process. You don't need a Ph.D. or even an MBA from Harvard Business School to recognize that when you're solving problems faster than your competitors, you can ship faster and price lower — thus turning manufacturing into a marketing weapon.

That's what's called winning in the plant.

Rob Rose is vice president, product marketing, at Cognos Corporation's Burlington, Mass., office. He can be reached at 800-426-4667.




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