How to Compete on a Global Scale with Emerging Manufacturers


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  • Revision 1.0 11/21/2003: Revision 1.1 3/8/2004:
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  • Leadership: The best-practice partners began Six Sigma because their top leaders demanded it. Similarly, leadership has to drive replication (i.e., knowledge capture and transfer) behavior. Ford, Johns Manville, DuPont, Intuit, and Raytheon began Six Sigma at the insistence of their top leader (i.e., CEO). These leaders demand that their organization’s Six Sigma/Lean programs, and organizations, become more efficient through replication. For instance, 75% of the partner organizations indicated that their organization’s executives expect results from Six Sigma/Lean projects will be replicated elsewhere in the organization. Methodology for Replication: Best-practice organizations build knowledge capture and reuse into the Six Sigma/Lean methodology. The Replication Methodology model illustrates the reuse, implementation, and capture process that will make Six Sigma/Lean projects more effective and efficient. Networks & CoPs: Organizations across the world, including the best practice organizations, use networks of Six Sigma/Lean champions and practitioners, as well as communities of experts, to highlight common problems and practices. They solve problems and assist with “controlling” the improvements of Six Sigma/Lean projects. Integrated Tools and Databases : Best practice organizations improve their Six Sigma/Lean processes with integrated IT tools and databases. These tools serve as the repository of project practices, experts, and results and are a key cog in the knowledge capture and reuse chain. Training and Communication : Best-practice organizations understand that knowledge sharing and replication don’t happen in a vacuum; instead, they build capture and replication into the methodology and training on Six Sigma/Lean. They also communicate frequently about the importance of replication. Metrics and Recognition : “Supercharging” the effects of Six Sigma/Lean projects is vital, and simple measurements can help organizations understand where they are getting extra value. Recognition for outstanding efforts helps to reinforce the importance of continuous improvement through knowledge capture and replication.
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  • How to Compete on a Global Scale with Emerging Manufacturers

    2. 2. Let’s get real! <ul><li>From 2002-2003 there have been 60,000 new factories opened in China </li></ul><ul><li>What about R&D centers? </li></ul><ul><li>60,000! </li></ul>Source: Wall Street Journal 09.27.04
    3. 3. Let’s Leverage Our Technology <ul><li>The population of China is approximately 1.3 billion -- this is 5 times as large as the United States and ten times the population of Japan. Further, it equals the sum of all the developed countries. In area, China is 9.6 million square kilometers consisting of 30 provinces. People living in these provinces receive incomes that vary widely and thus offer markets for products of various price, quality and performance. China, now a member of the World Trade Organization (WTO), has experienced 23 consecutive years of growth in its Gross Domestic Product (GDP). It’s the Emerging Manufacturing Center of the World! </li></ul><ul><li>China’s move to the worldwide center for manufacturing is based on several factors such as the eastward migration of manufacturing capability, the fact that China is already the world’s number one producer for over 100 products in terms of quality and its complementary role in terms of economic levels from East to West. </li></ul><ul><li>Global Competition Rule #1: Leverage our Technology with Emerging Manufacturers </li></ul>
    4. 4. Example of Leveraging Technology <ul><li>Pharmaceutical firms and medical device manufacturers often face rigid manufacturing infrastructures, tight regulatory controls, and complex global supply chains. </li></ul><ul><li>These firms spend vast sums developing and marketing new products. </li></ul><ul><li>The distribution and logistics processes remain tied to inefficient manual tools (inventory management, tracking, and forecasting) that erode profits, reduce productivity, and leave them open to theft or counterfeiting. </li></ul><ul><li>What technology could be used? RFID </li></ul>
    5. 5. Ignoring it is Not Going to Make it Go Away This will not get better until we admit there is a problem The fact is that success factors are a function of the Landscape of the digital world we live in! Global TODAY is defined as the cliché: “What a small world!” INFORMATION IS POWER!
    6. 6. Your Industry FACTOID! <ul><li>The top 10 companies accounted for half of all worldwide sales in 2003. Their relative contribution to overall industry growth, however, has declined to 41% in 2003 from 53% in 2001. In terms of growth, six of the top 10 companies in 2003 grew at or below the overall pharmaceutical market rate of 9% in local currency terms. </li></ul>Where are we going? We need to embrace the change! Global Competition Rule#1A: Form LTA with Best in Galaxy resources with aligned metrics
    7. 7. Which Competitor Will Win? Customers Don’t Care! What is the real difference? Why? The RTY metric! 6  5  4  5  B 6  4  3  4  A Delivery to Customer Manufacturing Global Order Entry Global Sales Company
    8. 8. Current Issues for Manufacturers Can’t Ignore Marketing Factors <ul><li>Struggles against a high Canadian dollar </li></ul><ul><li>A fragile, but recovering U.S. economy </li></ul><ul><li>A weakened relationship with the U.S. (our largest trading partner) </li></ul><ul><li>Fierce competition arising out of China and the potential of further devaluing of the Yuen </li></ul><ul><li>Drug prices in the U.S. are both a political and an emotional issue </li></ul><ul><li>Drug reimportation could harm R&D innovation and thus the flow of new medicines </li></ul>“ One Singaporean worker costs as much as … 3 … in Malaysia 8 … in Thailand 13 … in China 18 … in India.” Source: The Straits Times /08.18.03
    9. 9. <ul><li>Best of the Best (proper resource) </li></ul><ul><li>Relentless Company Commitment (active leadership involvement with integrated defined priorities) </li></ul><ul><li>Full time effort toward the priorities </li></ul><ul><li>Metric Systems to track progress (demand a goal) </li></ul><ul><li>Global Strategies that make an impact to the bottom line of the business resulting in Customer Success </li></ul><ul><li>RADICAL THINKING LEADERSHIP!!!! Inspire!!! Shift the reality! </li></ul>Six Things To Take Away: Y=f(x) Success is a Function of:
    10. 10. Radical Thinking Rules <ul><li>Global Growth is a problem to solve, NOT to manage. You can’t built a great business by managing it. </li></ul><ul><li>Reject Recipe Thinking and replace it with Radical Thinking, or Growth Thinking. </li></ul><ul><li>Great companies begin with imagination . Use the Radical Thinking process of HOW to think about the problem. </li></ul><ul><li>There are two kinds of people: those who conceive the new ideas and those who are inclined to attack ideas. These are the Gremlins that must go. </li></ul><ul><li>Drive a tank through corporate silos. </li></ul><ul><li>One company made up of functions! </li></ul>
    11. 11. What Does Six Sigma Need? <ul><li>One: It Needs a Problem </li></ul><ul><li>Two: It Needs a Process </li></ul><ul><li>Three: It Needs a Financial Benefit </li></ul><ul><li>Four: It Needs a Metric & Goal </li></ul><ul><li>Five: It Needs a Customer Metric </li></ul><ul><li>Does Your Industry have 1 thru 5? </li></ul><ul><li>If No, then you are a Six Sigma Enigma </li></ul>The Challenges are the same regardless of industry or business! You guys are no different!
    12. 12. Six Sigma Myth <ul><li>It is only for cost reduction! </li></ul><ul><li>Project average is 6 months! </li></ul><ul><li>WRONG! It is for all problems: </li></ul><ul><ul><li>Global business modeling </li></ul></ul><ul><ul><li>Business simulation </li></ul></ul><ul><ul><li>Including growth rate </li></ul></ul><ul><ul><li>Global Competition </li></ul></ul><ul><ul><li>HR practices </li></ul></ul><ul><ul><li>Sales targets </li></ul></ul><ul><ul><li>Distribution </li></ul></ul><ul><ul><li>Health </li></ul></ul><ul><ul><li>R&D </li></ul></ul><ul><ul><li>Etc………. </li></ul></ul>In this case the problem is: How to Compete on a Global Scale with Emerging Manufacturing Y=f(x) What are the factors? Does one size fit all?
    13. 13. Merge versus Internal Growth versus TRANSFORMATION! <ul><li>“ UPS used to be a trucking company with technology. Now it’s a Technology company with trucks.” — Forbes </li></ul><ul><li>Ford: “Vehicle brand owner” (“design, engineer, and market, but not actually make”) –TRANSFORMATION! </li></ul><ul><li>Cost-Reductions, M&A, have helped many organizations weather the downturn, appease the stock holder short-term, but this approach will ultimately delay the inevitability of reaching obsolescence. </li></ul><ul><li>Only the constant pursuit of knowledge & innovation can ensure long-term success.” </li></ul><ul><li>EVENTUALLY YOUR GOING TO HAVE TO FIX IT! </li></ul><ul><li>BIGGER IS NOT ALWAYS BETTER! </li></ul>Six Sigma is a required Knowledge Generator! WHAT DO YOU WANT TO KNOW? IT’S A REQUIRED TOOL FOR YOUR TALENT!
    14. 14. Knowledge is Mostly Tacit Use 6  to convert the T to E Global Competitive #2: Manufacturing is part of the Customer Solution! Explicit Knowledge 20% Tacit Knowledge 80% <ul><li>Explicit </li></ul><ul><ul><li>Documented </li></ul></ul><ul><ul><li>Procedures </li></ul></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>In data bases </li></ul></ul><ul><li>Tacit </li></ul><ul><ul><li>Not documented </li></ul></ul><ul><ul><li>Not shared </li></ul></ul><ul><ul><li>Untapped </li></ul></ul><ul><ul><li>Know-how </li></ul></ul><ul><ul><li>Hidden VOC </li></ul></ul>80% of our knowledge is not documented or shared
    15. 15. FYI – “Knowledge is Power” <ul><li>“ The top software developers are more productive than average software developers not by a factor of 10X or 100X, or even 1,000X, </li></ul><ul><li>but 10,000X .” —Nathan Myhrvold, former Chief Scientist, Microsoft </li></ul><ul><li>Global Competition RULE #3 GET AND RETAIN THE BEST IN GALAXY! PERIOD! </li></ul>Think of the OLD cliché sport analogy: ROHA=(RETURN ON HUMAN ASSETS)!
    16. 16. “ If you don’t like change, you’re going to like irrelevance even less.” — General Eric Shinseki, Chief of Staff. U. S. Army 6  is Change! THE WORLD IS ABOUT CHANGE
    17. 17. What is your Competitive Advantage? You Must drive the right Metrics into Business, or the consequences are all too consuming The Voice of the Customer Example!
    18. 18. Do you Know your Gremlins and their potential Barriers to Global Competition? <ul><li>Gremlin Quotes & attitudes: </li></ul><ul><li>That can’t be done </li></ul><ul><li>I think that won’t work </li></ul><ul><li>I feel that will not work </li></ul><ul><li>I don’t believe it </li></ul><ul><li>Let’s pilot it, so I can show it doesn’t work </li></ul><ul><li>We tried that already </li></ul><ul><li>Change is bad </li></ul><ul><li>That will effect my work load </li></ul><ul><li>That is not my responsibility </li></ul><ul><li>It’s about me </li></ul><ul><li>That’s not coming out of my budget </li></ul><ul><li>That’s A great idea, NOT! </li></ul><ul><li>Filtering Data </li></ul>They’re hidden! Listen to the Actions & Words What are you going to do to remove the Gremlins? USE DATA and FACTS TO DEFUSE
    19. 19. Global Competition Model Source: American Productivity & Quality Center
    20. 20. Examples of Best in Class <ul><li>Intuit is integrating business management system with process excellence (in 3 phases) with the intent to make process improvement a common language. </li></ul><ul><li>Raytheon ensures alignment of R6σ by incorporating R6σ in the business’ strategic plans, operating plans, and reviews. </li></ul><ul><li>DuPont expects 3 percent growth each year to come from Six Sigma projects, driving practitioners to replicate. </li></ul><ul><li>Johns Manville’s Lean Six Sigma program partnered with manufacturing, marketing, and sales to drive to the “Gap to Entitlement.” This creates “pull” for replication. </li></ul>NO SUB OPTIMIZING BETWEEN GROUPS!
    21. 21. The Fully Integrated Growth Approach Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Global Pyramid Leadership Culture of Change Six Sigma & Lean DFSS 6s & Lean Supply Base KM (Knowledge Management) Integrating All Elements Genetic
    22. 22. The Basic Architecture -GMS Replication Mandates for Growth GLOBAL MANAGEMENT SYSTEMS GLOBAL MS Measurement Selection Execution Executive CoP Approval
    23. 23. Integration Implementation Plan Customers Customers 3. CoP Training Plan w/Toll Gates 1. Initialization Steps 2. Infrastructure Steps 4. KM Systems Awareness TQM/KM-basics Foundations Readiness 5. CoP/Project-Inventory (All Types-Design/Service/MFG/Transactional,S&M) DEFINE Hoshin Focus Assignments 5S Basic Lean Takt-Time MAIC KM TG3 6. Company Genetics (Standardize/CTB-KOI’s) Y Basic Triz RACI TG1 DFSS Tools Feeder (X’s) (Business) Business Functions (CoP) (People) Employee Base (Our Culture) Linking (Responsibility, Accountability, Consultation, and Inform)
    24. 24. Manufacturing & Marketing <ul><li>The pharmaceutical industry has come under criticism for the development of &quot;me-too&quot; drugs instead of breakthrough therapies, for suppressing or selectively releasing trial results, and for direct-to-consumer advertising that prompts patients to demand particular drugs regardless of the therapeutic benefit </li></ul>Don’t forget : Customer Satisfaction versus Customer Success Who is the customer in this one? “ I’m just manufacturing, those marketing guys tells us what to make!” THAT’S AN EXCUSE! GLOBAL COMPETITION RULE #4 MANUFACTURING business case aligns with customer success
    25. 25. Customers Customers 1. Initialization Steps (Business) Business Functions (COP) (People) Employee Base Phase 1: Initialization (Duration 20-40 days) Measurements & Tasks: <ul><li>Customer Measurements </li></ul><ul><li>Business Measurements by Function (including Supply Chain) </li></ul><ul><li>People (Employee Base) Measurements </li></ul><ul><li>Business Dashboard Corporate wide w/drilldown by function, and by COP </li></ul><ul><li>Initialize Leadership Corporate KOI </li></ul><ul><li>Initialize Key Operating Indicators (KOI) for A thru D </li></ul><ul><li>Gap Analysis on E&F with Level of Entitlement Identified </li></ul><ul><ul><li>Optimize & Align for Growth </li></ul></ul><ul><ul><li>Use cash flow diagram, and ROI analysis tools </li></ul></ul><ul><li>Set MIS/IT function priority on GMS </li></ul><ul><li>Validate Measurements Systems A thru E </li></ul><ul><li>Set Targets for all KOI with initial demonstrated Entitlement levels </li></ul>Note:Use Metric Guidelines, validate or create measurements (Get Rid of NVM)
    26. 26. Business Metrics for Sustainability <ul><li>1: Get leadership involved . Since they set company strategy, they need to be involved in how the metrics are linked to achieving it. </li></ul><ul><li>2: Visually represent your metrics . Prominently display them in chart, graph or diagram form. </li></ul><ul><li>3: Metrics must respond quickly . Once in place, measurements need to provide feedback quickly, so you can identify, correct and re-direct the measured activity. </li></ul><ul><li>4: Metrics must be simple . They must be able to clearly define and communicate the CTQ information you’re looking for. </li></ul>7 Guidelines to follow:
    27. 27. Business Metrics for Sustainability <ul><li>5: Metrics should drive only important activities. Make sure they relate to regular activities and processes. You need to assess what is the most important factor to measure--both in terms of COPQ and COGS. </li></ul><ul><li>6: Take corrective action. Once you have feedback, you and your team can respond and take corrective action. Do this as soon as you can. </li></ul><ul><li>7: Limit the number of metrics. Generally, you should implement no more that 10 metrics at a given time. Ten or fewer—that’s the rule per major business unit! </li></ul>7 Guidelines to Follow:
    28. 28. What are your levels of Entitlement? Y Gap time 1 st Demonstrated Internal, 2 nd Theory, and 3 rd finally External. Active KM, Not Passive Use Multi-Leverage Analysis (within, between(Process Points), overtime: GAP=(Executive KOI-Ops KOI)
    29. 29. Customers Customers 1. Initialization Steps (Business) Business Functions (COP) (People) Employee Base Phase 1: Initialization (Duration 20-40 days) Major Selections & Tasks: <ul><li>Customer Measurements (CTQ’s) </li></ul><ul><li>Business Measurements by Function (including Supply Chain) </li></ul><ul><li>People (Employee Base) Measurements(rewards & performance), e xchange of ideas </li></ul><ul><li>Business Dashboard Corporate wide w/drilldown by function, and by COP focused on the competencies of the organization </li></ul><ul><li>Leadership Corporate KOI </li></ul><ul><li>Key Operating Indicators (KOI) for A thru D </li></ul><ul><li>Selecting leveraging KM with COP per project element </li></ul><ul><li>Select Targets for all KOI with initial demonstrated Entitlement levels </li></ul><ul><li>Multivariable Leverage Analysis ( within, between, and overtime) </li></ul>Note:Use Metric Guidelines, validate or create measurements (Get Rid of NVM) Executive CoP Approval/Execution through RACI/Hoshin planning (Responsibility, Accountability, Consultation, and Inform)
    30. 30. Customers Customers 2. Infrastructure Steps (Business) Business Functions (COP) (People) Employee Base Phase 2: Infrastructure (Concurrent efforts) <ul><li>Technology assessment & requirements </li></ul><ul><ul><li>Storage/Enablers/Speed/Remote/Security/Growth </li></ul></ul><ul><li>Project Leveraging Logic/Tollgates/Backlog/Inventory </li></ul><ul><li>COP networking enables/communication requirements </li></ul><ul><li>ABC converters, Accounting Portals to KM systems </li></ul><ul><li>GUI focus group assessment/requirements </li></ul><ul><li>Flat File generator/Standard report Generator (global sales demands) </li></ul><ul><li>KM mistake proofing on project leveraging selections </li></ul><ul><li>Format for Best practice reports </li></ul><ul><li>Integration/COP Scorecard </li></ul><ul><li>E-rooms with regular sharing schedule </li></ul><ul><li>Swarming w/Emails, Newsletters,Incentives programs </li></ul><ul><li>Growth Mission list (project inventory list) </li></ul>
    31. 31. 3. COP Training Plan w/Toll Gates Awareness TQM/KM-basics Foundations Readiness DEFINE Hoshin Focus Assignments 5S Basic Lean Takt-Time MAIC KM TG3 Y Basic Triz RACI TG1 DFSS Tools (People) Employee Base (Our Culture) Linking Phase 3: Readiness Ground school & Training Training application for Growth Project Selection w/Targets & COP INPUT Assumptions: -Teams have been sorted & approved - Project Review & Approve complete - Leveraging sort, and Priority assignments (Responsibility, Accountability, Consultation, and Inform) Hoshin: Execution, The How to. Independent depending upon Project, Knowledge Generators, Multi Output/TG’s Record in KM, Knowledge Swarming Emails, News Letters, Paycheck flyer, Corporate Award, Pay for Growth, Validate Leverage of KM Active KM!
    32. 32. 4. KM Systems 5. COP/Project-Inventory (All Types-Design/Service/MFG/Transactional) Feeder (X’s) (Business) Business Functions (COP) Phase 4&5: KM Systems & CoP/Project Inventory Execution Executive CoP Approval Selection RACI-we high the resources & focus – Priority is set by Executive CoP! Baseline, sort and assign Priority Criteria: is High Margin dollars, High Leverage(Replication) based on CF&ROI! GMS Measurement
    33. 33. 6. Company Genetics (Standardize/CTB-KOI’s) (Our Culture) Linking Behavior is a function of what you value We measure what we value Do you value Money? Do you value Knowledge? Best Practices are Genetic after >85% Replication (It is the way we do things!) Mandate Replication with Contract (signed/dated) not to perform (Consequences?) What was the reason for not Replicating? -I didn’t want the money! -I am different, statistical data is required to prove not to replicate Swarm Marketing (share success stories) Phase 6: Company Genetics & Feedback into the Culture
    34. 34. Best Practices are an Oxymoron <ul><li>WHY? </li></ul>
    35. 35. SIDE NOTE <ul><li>The chemical and pharmaceutical industries have much in common, as they are based upon processing molecules. The chemical and pharmaceutical industries have been the province of the European and U.S. firms since their inception. Whereas, in most mechanical and electronics-based industries Asian firms have developed sufficient competencies to compete effectively in the global economy, in chemicals and pharmaceuticals this simply has not been the case, except in certain commodity chemicals. It is not difficult to enter commodity chemical businesses because the major barrier is simply the scale of investment. Unfortunately there is very little profit from such commodity businesses in comparison to firms specializing in developing and patenting valuable proprietary molecules. Despite recent articles emphasizing the importance of efficient manufacturing (Hayes and Pisano 1994), the discovery of new useful molecules remains the key to wealth creation. </li></ul>Reference slide only!
    36. 36. Let it be know! <ul><li>One of the fastest growing markets is China. Although it now accounts for only 1.3% of global sales, the country is seen as a huge potential market by the multinationals, a number of which already have joint ventures with local manufacturers. Some are now beginning to expand their presence in China, and, although the decision by Chinese patent authorities to revoke a patent protecting Pfizer 's Viagra (sildenafil) is a concern, if China can increase its intellectual property protection, the sales potential there is considerable. </li></ul><ul><li>Industry experts believe China will be at least the fifth largest individual pharmaceutical market by 2010. India, currently the 14th largest market, is due to adopt the World Trade Organization's product patent rights on Jan. 1, 2005, and is therefore becoming a market of much more interest to the multinationals, as are other countries such as Russia, Mexico, and Brazil. </li></ul>Reference slide only!
    37. 37. Terms to review <ul><li>Modeling of emerging manufacturing processes </li></ul><ul><li>Force modeling </li></ul><ul><li>Thermal modeling </li></ul><ul><li>Wear modeling (performance of cutting tools) </li></ul><ul><li>Surface integrity modeling (performance of machined parts) </li></ul><ul><li>Machinability research </li></ul><ul><li>Supply and Customer Delivery simulation </li></ul><ul><li>Sales and Manufacturing accountability model (Profit Metrics) </li></ul><ul><li>Optimization of manufacturing processes/systems </li></ul><ul><li>Tool wear rate/life estimation </li></ul><ul><li>Tool/process reliability analysis </li></ul><ul><li>Deterministic/stochastic optimization </li></ul><ul><li>Customer Inventory predication models </li></ul>Reference slide only!
    38. 38. Look into the RFID <ul><li>Global eXchange Services (GXS) is a leading provider of B2B e-commerce solutions that simplify and enhance business process integration and collaboration. Organizations worldwide, including over half of the Fortune 500, use GXS' global interoperability and supply chain execution solutions to achieve a balance between supply and demand. Active in the global standards arena, GXS solutions, powered by the Trading Grid(SM), enable customers both large and small, to connect with global partners, synchronize product information and optimize the execution of supply chains. </li></ul>Reference slide only!
    39. 39. “ Beware of the tyranny of making Small Changes to S mall Things. Rather, make Big Changes to Big Things.” — Roger Enrico, former Chairman, PepsiCo
    40. 40. A Final Note On Philosophy <ul><li>Six Sigma Is a Relentless, Constant </li></ul><ul><li>Journey of Improvement </li></ul><ul><li>Does your company have the WILL </li></ul><ul><li>to make the journey? </li></ul>
    41. 41. THE END! <ul><li>Q&A </li></ul>