Moreover, in many organizations, there is little patience for process innovation, which in manufacturing is by its very nature a long-term event. After the production technology is replaced, it could take two to three years before the capital investment bears fruit in the semiconductor sector, five years in major manufacturing, and as much as 20 years in process industries, such as petrochemicals and electricity production. Additionally, to improve processes, companies have to train entire plant communities in dozens of different tools and techniques and completely different ways of working. All of that consumes time and resources.
Some extremely successful manufacturers, such as packaging giant Tetra Pak, Procter & Gamble, and Toyota, have bucked the trend and used in-house machine development and internal process innovation to protect their competitive advantages. P&G has long been a pioneer of novel factory floor environments; for example, letting shop floor employees not just lay out the flow of machinery but design the machines themselves. This approach began at P&G in the early 1960s and has developed in scope, efficiency, and sophistication ever since. In one celebrated example at a P&G plant in Lima, Ohio, a team of shop floor “technicians,” as hourly workers were called, designed a machine for placing detergent bottles into position on the assembly line — a mechanical feat that P&G’s professional engineers had said was impossible. The team commissioned a machine-tool supplier to produce the device, and put it successfully into operation.
But for every P&G, there are dozens of companies faced with an equivalent to Household’s dilemma in the Middle East: Their state-of-the-art factories, more capable than those of competitors on a worldwide basis, are not flexible enough to respond to local conditions.
Sometimes, a promising process innovation effort is disbanded because top management changes or because the sponsoring executives lose interest, even though they have known all along about the nature of the investment they’ve been making. As a result, outmoded technological principles may endure for 30 or 40 years while the company cycles through a series of half-realized quality-improvement or plant-restructuring initiatives. Other times, process innovation is consigned to the plant level only. When approached in this way, companies become little more than multiple small organizations with no scale, unable to harness process technology as a competitive advantage.
Myopia also afflicts efforts to modify existing manufacturing processes. For example, there has been a lot of excitement in the last 15 years about design for manufacturing (DFM), an approach by which companies engineer products not just for their intrinsic qualities but also for how efficiently they can be manufactured. But despite the allure of DFM, the relationship between engineering and manufacturing groups at most companies is chilly or nonexistent. The shop floor community is often excluded from direct communication about the manufacturability of products with the engineering/design function. Even if the two groups are allowed to communicate, manufacturing companies may not have the budget to cover the engineers’ internal rates and therefore may lose contact.
Most companies organize their production and supply operations on a project-by-project basis. As market
conditions change, they move plants from Detroit to Mexico, and a few years later they shift subassembly to Asia. They do not envision their manufacturing system for what it must be: A global, flexible supply chain network that can be reconfigured anywhere in the world as market conditions change. (We think of this dimension as “structural,” because it involves such infrastructure-oriented features as the location and size of plants and the supply chain flow among them.)
Companies that realize this and design their plants accordingly gain a tremendous time advantage. It can take two years to close down a factory — and that’s typically after several years of wavering over the decision to shutter it in the first place. It is far better to design the configuration of individual plants so that it is easy to enlarge, shrink, or reconfigure them based on the business landscape. Then fewer factories ever have to be abandoned and the manufacturing network needn’t be completely overhauled. There’s also an expense advantage as the one-time cost penalty of moving plants from one place to another is reduced.