The supply chain is the backbone of modern industry, and deals with all aspects of the sourcing and movement of goods from suppliers to manufacturers, through distribution channels, to the consumer. Production (preferentially termed manufacturing in certain industries) is naturally one of the most crucial stages in the supply chain, as it involves the actual creation or assembly of products or product components. Efficient production is essential to meeting consumer demand, reducing costs, and maintaining profitability. Let’s explore the basics of production in the supply chain and briefly discuss best practices.
Production is the process of transforming raw materials, components, or ingredients into finished goods that are ready for sale or distribution. In certain industries, production may not result in finished goods per se, but rather in components, which are then shipped or transported to other companies for further assembly into finished products. Depending on the industry and on the goods or components being produced, production may involve various activities, such as manufacturing, processing, assembly, quality control, and packaging. The production stage is critical because it is where value is added to raw materials (or sub-components), and any inefficiencies, bottlenecks, or quality issues at this stage can have a profound impact on the entire supply chain and all stakeholders dependent upon it.
Effective production management ensures that products are created to the right specifications, at the right time, and at the right cost. Production must be well-planned and well-aligned with other functions, such as sourcing/procurement, inventory management, demand planning, sales, and logistics to create a seamless flow of goods and services, ideally while maintaining a minimum of overstock at any point along the supply chain.
One of the most well-known production strategies in modern business is lean manufacturing, which focuses on minimizing waste and maximizing value. The goal is to produce high-quality products efficiently while using fewer resources—whether that means raw materials, components, money, labor, or time. Lean manufacturing seems to attract lots of clever, occasionally gimmicky management strategies and philosophies, such as the Japanese-based 5S method (Sort [Seiri], Set in Order [Seiton], Shine [Seiso], Standardize [Seiketsu], and Sustain [Shitsuke]), or “the 4 P’s of lean manufacturing” (Philosophy, Process, People and Partners, and Problem Solving), or “the 5 M’s of lean manufacturing” (Manpower, Materials, Machines, Methods, and Measurement), or many others. Entire books can be (and have been) written on just this concept alone, and business leaders are continually looking for the next big thing that will magically make their production process seamless, efficient, and inexpensive, while resulting in top-quality products.
People and things being what they are, it’s clear that this will forever remain a worthy, if unattainable, goal, at least to some degree. However, whether you subscribe to the 5S method, or Six Sigma, or the 5 M’s, the 4 P’s, or the 5 W’s, or the 8 wastes, and/or the 76 and a half silent Q’s, sincerely examining the merits of each and applying the strategies suggested can certainly result in improvements and advances toward lean manufacturing, and the over-expenditure of resources can be reduced. Today, Just-In-Time (JIT) inventory management can help many companies reduce waste and improve overall production efficiency, though JIT is not always possible or desirable in some cases. And as we’ve learned recently through the pandemic and the cataclysmic supply chain disruptions that resulted, JIT is only effective when all links in the chain are functioning optimally.
As industries become increasingly digitized, automation and robotics have become valuable tools in improving production efficiency. By automating repetitive tasks, companies can reduce human error, speed up production cycles, and lower labor costs. In many cases, robotics can be used in areas like assembly, materials handling, sorting, and packaging, freeing up human workers for more complex tasks that require flexible problem-solving and creativity.
Delivery companies like FedEx famously use computer/optical sorting and automated conveyor systems to dramatically improve efficiency. Amazon is now using robots in their warehouses to move products more efficiently and speed up order fulfillment. These are just two examples.
Maintaining product quality is non-negotiable if effective production is the goal. High-quality products build trust with customers, reduce returns, and improve a business’s reputation, leading to repeat sales and revenue growth. Best-in-class companies utilize quality control systems and philosophies to improve each stage of production, identifying issues with materials or processes early and addressing them before they become costly problems. Tools and approaches such as Six Sigma, Total Quality Management (TQM), and Statistical Process Control (SPC) are commonly used to ensure that production standards are met consistently. Investing in Quality Management software systems can be helpful in simplifying QC processes, reducing errors, improving the final product, and increasing profits.
In today’s complex and increasingly globalized supply chains, collaboration and communication between different stakeholders—suppliers, manufacturers, distributors, and customers—are more important than ever. Using digital tools such as Enterprise Resource Planning (ERP) software, manufacturers can stay in constant communication with suppliers and other departments, ensuring that production schedules align with demand forecasts and that any issues can be addressed promptly.
The concept of agile manufacturing refers to the ability to quickly adapt production processes to changing conditions, such as shifts in consumer demand or supply chain disruptions. As Jennings and Haughton famously penned, It’s Not the Big That Eat the Small… It’s the Fast That Eat the Slow. By being flexible and responsive in production, companies can reduce lead times, customize products to specific customer requirements, and handle unexpected changes in the market without significant cost increases.
To remain agile, it’s important to balance things like specialized equipment against the price of making any changes. In other words, it’s usually better to invest more in equipment or processes that can be adapted to multiple types or styles of products (think a 5-axis CNC milling machine or high-end 3D-printing setup, for example), versus initially saving money by purchasing equipment or investing in processes that are more narrow in scope but which can’t be easily adapted or updated. That’s false economy, and is inherently contrary to the “agile” mindset.
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