As a vital part of the global economy, modern manufacturing continues to provide a course to rising incomes and living standards, innovation and competitiveness. Despite the disrupting factors of the past decade such as pandemic lockdowns, supply chain issues, and environmental and economic events, manufacturing is an evolving industry marked by both ongoing challenges and significant opportunities. To overcome these challenges, the modern manufacturer must strategically align with modernization, digitalization and advancement, commonly referred to as Industry 4.0.
Manufacturers have a massive opportunity to innovate their business models by applying advancing technologies and software solutions, automation and data analytics. However, technology alone is not the end-all solution to achieve top performance and the competitive edge needed to succeed and grow. A critical factor in strategically formulating and ensuring a trajectory of long-term success begins with a careful review of the processes that drive the manufacturer’s business. A business process is a set of linked activities that helps an organization achieve its objectives and strategic initiatives.
The Rise of the Business Process Concept
Adam Smith, in his 1776 book, The Wealth of Nations, first introduced the concept of business process management by evaluating how a single worker engineered pins, switching out tools and shifting skillsets from raw materials to finished product. He noted that the shifting of skills and tools meant considerable time was spent between tasks, thus identifying workers’ time spent as unproductive. When workers performed single tasks linked to building a finished product, dexterity and productivity significantly increased and costs were reduced, thus working in a leaner capacity which Smith termed ‘division of labor.’ By allowing individuals to focus on one task, they were more efficient. Simplification of individual tasks gave rise to mechanization, the cornerstone of the first industrial revolution.
Since the evolution of Smith’s concept, organizations continue to compete with one another to build and improve upon efficiencies. The importance and study of this concept has led it to become a separate science known as Business Process Management (BPM). The discipline of BPM uses ‘various methods to discover, model, analyze, measure, improve, optimize, and automate business processes.’ These processes serve as a framework for continuous improvement.
Manufacturers who invest in Business Process Management as a strategic priority garner significant advantage over competitors. They can lead lean transformation initiatives whereby the organization collectively shifts focus from traditional business practices to a more value-driven approach for their customers. With consistent focus and routine evaluation on what processes drive the business, manufacturers can build a resilient, agile and customer centric organization.
But process, by its very character, can be tedious work. Many manufacturers tend to operate with a limited understanding of their end-to-end business processes, often establishing activities and tasks within disparate groups. This leads to fragmented and at times duplicated operations with a limited understanding of the skills, systems and tools needed to operate efficiently and drive profitability. To safeguard against disjointed operations, manufacturers must measure how well defined and controlled their business processes are, thus defining their business process maturity.
Business Process Maturity Model
Business process maturity is a strategy that seeks to improve the process capability and effectiveness of an organization. Process maturity is then built into a model enabling manufacturers the ability to identify areas of improvement, whereby they can further mature their processes to reach their strategic goals. Simplistically, a model helps a manufacturer evolve to a higher level of performance based on how well they manage their process capabilities. Strong business processes fuel optimal value creation and a continuous cycle of improvement.
When focusing on manufacturing process holistically, there are support processes that make value delivery possible and core processes that play a direct role in business output. Support processes make it possible to carry out core processes effectively and are of strategic importance if they are fulfilling their role. However, in tenured businesses or those with diverse product offerings, or even a newer manufacturer, support processes may no longer add relevance, drain resources or may be providing limited value. By identifying support and core processes that drive critical value and putting parameters in place to measure the impact of those processes, manufacturers can monitor all variables and further narrow in on those that have the biggest impact. Significant impact processes are then further improved, creating a cadence of continuous improvement.
Process toolsets that practitioners may leverage when building a maturity model include principles like Six Sigma and Lean. Six Sigma helps companies reduce variation in process outputs, which results in more consistent performance, in the eyes of the customer. While Lean practices are about eliminating waste and understanding what steps add value in the eyes of the customer. Lean helps companies simplify and speed process outputs.
Process Maturity Model at a Glance
While there are many different models out there, this article will focus on the Process Maturity model (PMM), which is based on five levels of maturity:
- Initial (level 1): The manufacturer has begun to identify its processes and the steps involved in each process.
- Repeatable (level 2): The manufacturer has identified its processes, but the steps involved in each process are not yet standardized.
- Defined (level 3): The manufacturer has standardized the steps involved in each process, but there is no standardization across all processes.
- Managed (level 4): The manufacturer has standardized all processes within the organization, but management of these processes may still be weak or ineffective due to lack of training or other reasons (e.g., lack of focus on improving management skills).
- Optimized (level 5): Finally, an optimized manufacturer will have a comprehensive understanding of their processes and set measurements to monitor critical milestones with rapid response and corrective practices in place to adjust accordingly. Strong management skills along with effective tools will help them manage their processes effectively, so they can achieve their goals faster while also reducing costs associated with operations.
An established maturity model ensures an organization is in control of its processes. Organizations who carefully monitor and manage processes have invested in advanced tools and measures and are positioned to produce better results with a culture rooted in high performance. “Environments where business process is a priority and attentions are devoted to continuous improvement efforts cultivates a culture focused on higher order problems. Higher order problems demand more innovation to solve thus the bar continues to rise,” stated Steve Holliday, Director of Digital Advisory Services for Cherry Bekaert.
Beginning a Process Maturity Model for Manufacturing
Across industries, critical performance areas each have a set of advancing capabilities that elevate them into higher levels of maturity.
As a starting point and for purposes of articulating this model, this article will explore the performance area of ‘production’ and what this area may look like within a process maturity model for a tire latex manufacturer exclusively responsible for manufacturing rubber sheets and supplying them to mills. Given the 5 levels of process maturity introduced earlier, a Process Maturity Model framework may look like:
- Initial (level 1): Processes are mostly manual. Supplies are tracked and ordered manually by team members in disparate spreadsheets. All communication with suppliers is direct and conducted as needed. Manual labor teams coordinate and monitor mixing ingredients, cooling and flattening processes. Scheduling is manual, and delivery teams coordinate the transference of rubber sheets for milling. Each process requires human intervention. In the event of equipment failure or accidents, manual steps must be retraced to determine the causes. Key metrics may include shipment of flat sheets to mill and receipt and delivery of supplies.
- Repeatable (level 2): The manufacturer has partially updated legacy control systems with current applications using PLC programming and HMI development. A framework is starting to be drafted, inciting descriptive and diagnostic capabilities but only in isolated areas. Critical process areas are beginning to be mapped out with metrics added. Minimal training on new applications is conducted.
- Defined (level 3): Support and core processes have been clearly defined and mapped, but standardization across systems and functions does not yet apply. Key opportunities for automation are beginning to be identified. An integrated framework for inciting descriptive and diagnostic capabilities across processes is starting to be established. OEE and lean production measures are being tracked and recorded manually. Key metrics continue to evolve and now include contributing operations and overall final distributed sheets to mills.
- Managed (level 4): Support and core processes continue to be reviewed and refined. Full integration of legacy control systems to current technology is established. A fully integrated roadmap with visibility into automated work processes including roles, functions and machines is standardized across the organization. Data automation now includes OEE metrics. Analytics are utilized to monitor performance and manufacturing issues. Inherent weaknesses still occur with process implementation due to management oversight, weak change initiative infrastructure, lack of training, etc. Process data begins to be leveraged to initiate predictive and prescriptive capabilities.
- Optimized (level 5): Critical support and core processes are reviewed routinely. Process data is consistently leveraged to initiate predictive and prescriptive capabilities and rapid response and corrective measures are solidified. OEE and lean production measures exist, and active programs are integrated for continuous improvement. Manufacturers can focus on innovative efforts and continue to advance in their industry.
Typically, organizations grow from level 1 to level 2 and at times level 3 of a model independently with little to no awareness of business process management practices. As an organization advances and begins to adopt new practices and identify further gaps, they look for expertise, whether an internal or external consultant, to continue to advance their efforts.
Process Maturity Model Outcomes
With so many innovative technologies and systems on the horizon, enhanced with smart and antonymous systems, fueled by data and machine learning, the opportunities for manufacturers are exponential. However, the importance of business processes cannot be overstated. With no defined process, or fragmented processes in place, advanced technologies and innovations will fail. Manufacturers must focus on their current processes and how they will mature to reach their strategic goals. Building a Process Maturity Model will help manufacturers create systematic alignment in their processes and a common language that will act as a lens for measuring their successes. In turn, manufacturers reap the benefits by avoiding mistakes and delays, improving cost effectiveness, productivity, supplier and client relationships – all contributing to fueling future growth. For many manufacturers, assessing process maturity and building a model can be daunting. Hiring a strategic consultant can play a vital role in helping manufacturers define, establish and realign processes rooted in driving innovation and accelerating growth.
How Cherry Bekaert Digital Advisory Can Guide You Forward
Cherry Bekaert’s Digital Advisory team is comprised of strategists who have broad industry experience and keen business acumen. Utilizing an agile and flexible approach, we examine what you want to achieve with a focus on people, process, technology and culture. Many recognize the need to create a data driven culture, and Cherry Bekaert is experienced in helping clients define, map and execute on that journey while addressing the organization’s risks, enabling growth and supporting sustainable operations. Leveraging our strategic process, we help digitally enabled organizations – especially middle-market companies – do more with less. Our team stays on top of the latest technology trends, but we know that technology is not a one-size-fits-all solution. Cherry Bekaert is here to guide you on what solution is appropriate and relevant for you to adopt as it pertains to delivering the highest value to your organization.
We encourage you to complete a Process Maturity Model assessment with no cost or commitment required. Reach out to us today to get started!
