Impact of Manufacturing OpEx programs on the Supply Chain
Over the past few months I have been developing a white paper (available in early 2013) focused on developing a business plan for integrating manufacturing and the supply chain. I have always believed passionately in the value in doing this, and have a high level understanding of the financial impact gleaned from some of the thought-leading manufacturers that have used Proficy to do it.
As part of my research for the paper I took a deep dive into a couple of key metrics, and some of the results I found even surprised me in the scale of possible savings. I had two questions. First, “How much does a 1% improvement in OEE (Overall Equipment Effectiveness) financially mean to the business?” Second, “What would be the savings in reducing my finished goods inventory by one day?”
Obviously this is going to differ by manufacturer but I got some good data from Proficy users that enabled me to provide guidance in the development of the business case and the huge impact taking that step of moving from the plant into the supply chain. Typical product margin savings on OEE implementations were between 9% and 15%. But what was really impressive was the fact that the knock on impact on savings when they were linked to the supply chain. This number was between 6X and 10X of the operational savings realized on the shop floor. The key fact here is you need to have a step-by-step execution plan to achieve these savings over a two to three year time period.
It’s not an event it’s a pragmatic journey.
Now I am not going to give away all the details here. For that you will need to read the white paper in early 2013 which has the exciting title of “Developing a Business Case for Integrating Manufacturing & Supply Chain.” In the paper I will cover the journey and the in-depth calculations I developed to allow the development and execution of this integration business plan with your own numbers.
Have you already taken this journey, have you realized the same savings I have seen from our Proficy users? I would be interested to know.