The Case for Operations Performance Management
A new study by the Manufacturing Enterprise Solutions Association (MESA) International proves that manufacturers who use operational metrics to manage their business performance are improving their earnings, net profit, and manufacturing cost as a percentage of revenue.
The study, conducted by independent global industry analyst and market research firm Cambashi, focuses on the role of plant performance metrics programs, and reveals the practices that lead to significant improvements in business performance based on 305 responses from manufacturers and producers across multiple industries worldwide.
Most importantly, the research establishes the importance of linking plant operations metrics to business and financial measures in real-time to reveal impact and prioritize action—in other words, Operations Performance Management.
Highlights of the study:
- Significant improvements in financial performance are possible (and proven) through the strategic use of operations metrics.
- Linking operational activity to business priorities is critical to improving profitability.
- Capacity utilization is the main operational metrics factor for manufacturers who improved Net Operating Profit by 10% or more.
- The most successful companies use Operations Performance Management (OPM) software that enables quick understanding, such as drill-downs for root cause analysis.
- Companies improving on multi-faceted metrics such as overall equipment effectiveness (OEE) are more likely to improve their financial performance.
- For companies with multiple production facilities, consistency in calculation and definition is beneficial (i.e. using standardized metrics to make accurate comparisons).
Three Critical Goals for 2012
Are They on Your List?
Late December is crunch time, and it’s also prime time to review 2012 goals and plan for success in the year ahead.
If you’ve been paying attention to the recent flood of research and business news about the importance of real-time analytics, you know that business as usual is changing. You may be concerned about the increasing complexity of your data environment, which can seem overwhelming. Especially when you see the latest benchmarks showing that the average business generates 40% more data every year. And when you consider that most facilities have at least 20 siloed data sources (even more for larger enterprises).
It all boils down to three main goals you need to tackle:
- Managing the increased volume of data your business generates
- Connecting mobile options for data collection and consumption
- Getting and applying real-time analytics and insight to drive profits
When you accomplish those three goals, you get a unified data environment that powers real-time financial analytics, so you make smarter business decisions. For a deeper dive on these subjects, check out the following links with additional insight:
Unify Your Data Systems to Drive Profitability
How Analytics Make Midsize Companies More Profitable
Bridge the Gap between BI Best Practices and Successful Real-World Solutions
Business Answers at Your Fingertips, the Real-Time Value of BI
Margins: Why You Must Focus on Maximizing Yield
On Tuesday, Walmart confirmed it will order USDA Choice-graded beef for all 3,800 of its U.S. stores, adding the higher grade product to the Select-grade beef that has dominated their cases until now.
When the world’s largest retailer boosts demand like that, it makes an impact. Beef packers are now struggling to meet the sudden uptick in demand, and margins are being squeezed as they turn to higher cost cattle to satisfy the buyer’s requirements. Ironically, they are struggling to make a profit when demand is higher than ever.
You can see a variation of the material-cost theme happening in the tree nut market with pecans, where processors are facing a double-whammy of short supply and increased demand from China. When demand is higher and material supplies are lower, the result is the same: manufacturers struggle to fill orders and see their margins squeezed tight by higher costs. It’s a major issue in the food and beverage industries today.
With raw material and commodity costs volatile and climbing across many industries, the same thing can happen to any manufacturer, in any industry. And since there is a limit to how much additional cost can be passed on to the consumer, companies are wondering how to get ahead. The answer: you must focus on eliminating waste and maximizing material yield.
Check out Tuesday’s webinar: The Top Five Ways to Improve Margins and Control Yield Loss.
Notes from the Field
I often hear back from customers how pleasantly surprised they are at the ease of configuration and the flexibility of IQ-Fusion. They’ve been able to avoid expensive software purchases and meet customer demands in ways they didn’t even anticipate. Our solution has been used as an alternative to and ERP system, and as a way to automatically generate exacting documentation representing real-time production conditions for demanding customers. Since their stories say it best, we’ve created a new section on our site called Notes from the Field. Here, you’ll learn about how other businesses are taking advantage of the cost-effective, flexible options IQity has to offer.
Made in the USA
On this Fourth of July, Pittsburgh is enjoying national attention following the President’s recent visit to announce the launch of the nation’s Advanced Manufacturing Partnership (AMP), a national investment in technology. Its goal is to enhance our global manufacturing competitiveness, “by helping U.S. manufacturers reduce costs, improve quality, and accelerate product development.” The overall message was clear: the future of American manufacturing depends on innovation.
We couldn’t have said it better ourselves.
For too long, most American manufacturers have settled for the status quo, believing that the way they were operating was good enough. It has taken the pressure of overwhelming global competition to give us the reality check that the old ways just won’t cut it anymore. Our manufacturers need better ways to manage their costs and quality to remain competitive, and not just so that our economy thrives. Our national security–the Independence our forefathers fought for and that we celebrate today–depends on it.
The good news is that innovation has never stopped in America, and it is still at the heart of companies like IQity. We know that the old methods that were once new and exciting are being eclipsed by new technologies. Remember when business owners beamed with pride when they installed their first license-based software on their very own site-based servers? It wasn’t that long ago, but the world has been changing at an increasingly rapid pace, and no sector more so than technology.
With the advent of cloud-computing and new leaps in predictive analytics, companies now have new options for how they manage their operations. The timing is right to usher in a new American age of advanced manufacturing practices.
So IQity applauds the creation of the AMP. My team and I look forward to working with partners in government, academia, and industry to expedite the distribution of these much-needed advancements, and to train skilled manufacturing teams to use them. I am proud to be starting this process in Pittsburgh, a city that remains one of our nation’s most important centers of manufacturing innovation.
Happy Independence Day.
Webinar this Week: Industry Focus on Profitability
This week, I look forward to hosting IQity’s first industry-specific webinar on Thursday, June 30, at 11 am EDT, entitled How Poultry Producers Can Profit in Challenging Market Conditions. This eye-opening webinar represents two things that are unique about IQity Solutions and our flagship business application, IQ-Fusion:
First, this one-industry focus demonstrates the business knowledge that IQity brings to the table that sets us apart from many of our competitors. At IQity, operations experience came first, a quarter century of it. After building our careers working in manufacturing plants, we applied next generation technology to create IQ-Fusion, the solution we knew was needed. In other words, our software arose directly out of the needs we identified from our work in industry. And we’ve built pre-configured industry templates, so whether your industry is food or pharma, or any other manufacturing environment, you can be up and running in a few short weeks.
Second, IQ-Fusion was made expressly to solve the problems that you grapple with every day. Its ease of use and practical application to real-life operational problems is something that sets it apart, and something you’ll see more of on Thursday. Analysts and professionals who know our industries and who know all the competing softwares tell us that no other solution combines both the breadth of enterprise monitoring with the same depth of data collection that we do, all served up in visual interface that is as easily understood on the shop floor as it is in the executive offices.
Taken together, this unique blend of industry knowledge and technical expertise makes us a new genre of business partner: one who knows your problems and can offer you the right blend of professional guidance and new technology to solve them. Whether your field is poultry or not, I invite you to join us at Thursday’s webinar for a glimpse at how we work. Talk to you then!
Up, Up and Away
The movement to the Cloud is unstoppable. From Barron’s to Bloomberg, business publications everywhere are acknowledging its power, potential, and undeniable cost effectiveness.
Moving some or all of their performance management – the intersection of business intelligence (BI), manufacturing or operational intelligence (MI/OI), data warehousing, financial analysis, continuous improvement – to the Cloud is especially appealing for small- to medium- sized businesses (SMBs). These companies traditionally have been locked out of major technology/software purchases because they have required 5- to 6-figure capital commitments up-front, and 7-figure investments over the long run.
The Cloud is a game-changer, allowing SMB’s with revenues of $5 million to $2 Billion access to next-generation software applications and robust, predictive analytics at a fraction of the cost — usually about 20% — of traditional technology solutions.
SMB’s are poised to reap the benefits of migration to the cloud. More agile and less risk-averse than many larger and more established companies, SMB’s are highly motivated to try new things, especially those who are paying attention and looking ahead. Many times these are forward-thinking businesses with built-in entrepreneurial spirit and a history and continuing practice of innovation.
That said, even large businesses with more than $2 billion in revenue can be highly motivated to identify additional business value. These established leaders now have the option to test newer solutions in small, low-risk areas of their operations. By doing so, they can reveal millions of dollars of opportunity that can be realized by a wider rollout of a cloud-based solution.
In short, migrating from old traditional, on-premise expensive systems to the Cloud can free up extra working capital for any company to generate greater return on existing investments.
Companies interesting in exploring the business value the Cloud can offer should look for the following qualities in any cloud application they are considering:
- Remote collaboration platform
- Menu of wraparound services
- Data connector with buffering
- “App” marketplace
- Robust functionality
- Industry expertise
- Low Total Cost of Ownership (TCO)
- Secure data environment
- Scalability and flexibility
- Real-time visibility
- Ease of configuration
- Speed of implementation
- Intuitive graphic user interface
Companies like IQity can serve as helpful advisors as you evaluate whether transitioning your business to the public or the private cloud makes sense for your company given your unique needs. We can also help you implement a cloud-based Enterprise Performance Management solution such as IQ-Fusion, and/or train your team on how leverage SaaS solutions. To learn more about how cloud-based applications can help with your performance management needs, contact us to kickstart a conversation.
Commencement
June is the time of year when many students around the country graduate and move on to the next phase of their lives: jobs, college, or graduate or professional school. The idea of commencing or beginning a new chapter in life is a powerful one.
Chances are that you are the parent of a graduate, whether now, in the past, or in the near future. It’s a proud moment, and one that lends itself to reflection. As I composed a letter to my son on the occasion of his high school graduation, I attempted to share with him some of the most important lessons that I have learned from a lifetime in business: setting goals, striving for excellence, individuality, tenacity, and courage were some of the recurring themes that I want to pass on to him as life lessons. These are the same themes upon which I built my company, and which define our products and solutions:
Setting goals: I set out to build a solution that would do what none other had yet done: to give businesses an affordable, economic way to maximize their collective business, operational, and human intelligence by leveraging the best of next generation technology and cloud computing.
Excellence: I do not settle for good enough. I will not hire people who settle for good enough. I hold my company and every person in it, to the highest possible standards of achievement and excellence for the sake of our customers. We strive for the best product, developed on the fastest time line, implemented and supported by the smartest operators.
Individuality: A lot of companies say they do the same things we do. But when you take the time to learn about our solution, you find that we are unique in a sea of “me-too’s”. No other Business Intelligence or Manufacturing/Operational Intelligence vendor can offer our unique and affordable blend of products and services, our unifying product architecture, our intuitive interface with financial KPI’s, and our speedily adaptable and easily configurable solution.
Tenacity: It has taken time to do this right, and there were easier options along the way. But determination and dedication, perseverance and tenacity have paid off. I continue to apply that tenacity to keeping my products on the forefront of changing technologies, committing to next wave developments such as mobile optimization, remote collaboration platforms, and open architecture for app building.
Courage: Any one who has taken that first step on their own – from leaving home to starting a business –knows what I’m talking about here. The most courageous thing a man or woman can do in professional life is to put his or her own career on the line. To risk something easy and certain in order to gain something greater.
When our school years end, it is up to us to shape our lives on a continuous journey of endings and beginnings, some profound, some less so. But every Commencement marks the leaving behind of the old, and beginning the new. I invite every one of you to graduate from the old way of thinking, from the idea that you have to go with the “big guys” to get quality and robust functionality, from the idea that you have to pay millions to get it, from the idea that standard is good enough. There comes a time when we all have to move on and embrace our future.
On that note, I invite each one of you to consider taking the IQity Challenge. We are newer than many established players in this space, and you have many options when you choose a new application provider. But in business, as in life, where there is little risk, there is little reward. Celebrate the power of individual thought, have the courage to bet on IQity Solutions, and it will pay off for you.
IQity is here to support your own professional commencement and your company’s next steps into the future. Join us.
What are YOU spending on BI this year?
In a recent Forrester Research study on 2011 software spending trends, Business Intelligence (BI) ranked as the top priority. Advanced analytics, collaboration solutions, and SaaS (Software as a Service) were also noted as important and growing trends.
After years of being led to believe that their existing systems gave them insights that were “good enough,” I think it’s great that businesses are becoming increasingly aware of the power of predictive analytics and the speed and economy of cloud-based SaaS or on-demand software. These are both transformational developments.
Most solutions still don’t go far enough, though. Traditional BI focuses on only 15% of the total cost of doing business, especially in manufacturing, where 85% of the costs are tied up with expenses related to production: people, plants, equipment, and technology. This category of costs — Cost-to-Produce – is a gold mine of opportunity for businesses who know how to unlock the value hidden there. The platforms upon which traditional BI programs are built are fundamentally different from–and do not communicate effectively with–the 20+ other business systems many companies juggle, such as Manufacturing and Operational Intelligence, among others.
The right solution can go beyond the typical boundaries of BI. IQ-Fusion is one of them, with a unifying architecture that transcends those limitations and plays nice with other disparate systems. Its built-in analytics and complementary remote collaboration platform make it a total, closed loop Enterprise Performance Management that allows companies to identify hidden value while getting more out of existing systems.
The bottom line? If you’re considering an upgrade or investment in BI this year, good for you, you’re one of the ones who “get” it. Just one thought: consider first whether the software you want to buy will help you leverage your existing investments. Or, does it mean ripping and replacing everything you’ve already got in place? (That’s not your only option anymore.)
Memorial Day
Today, you might be joining me and millions of our compatriots in a great American tradition: The Memorial Day Cookout. If you’re like most of us, you have an array of items on your grill – steaks, burgers, hot dogs—and of course, chicken.
Here at IQity Solutions we love chicken, and not just because it tastes great with my family’s secret barbeque sauce recipe. We love it because we’ve worked side by side for more than 27 years with the hardworking folks who raise and process those chickens for us – the leaders and employees of companies like Tyson, ConAgra, and Pilgrim’s.
You may have seen the recent article in the Wall Street Journal and in Morningstar about the challenges facing American poultry producers in today’s market. The economic headwinds of oversupply, underpricing, and commodity costs comes as no surprise to anyone in the industry. As the article’s author reminds us, most companies are at a stalemate, trying to wait out unfavorable market conditions and just survive the storm. But I know something the Wall Street Journal doesn’t know, and now you will, too: poultry producers have another option. Its name is IQ-Fusion, and my company invented it. (Forgive me if I sound proud, but it’s a day for American pride!)
Poultry producers can’t control driving economic forces, but they can control their own operations. Now, despite years of advances in automation technology, we still don’t see producers making the most effective use of the technology, equipment, and people in their plants. Why? Because they haven’t had a way to connect what’s going on in their plants with their desired outcomes in real-time. (They also don’t realize how much opportunity is at stake. But that’s a subject for another post….)
IQ-Fusion delivers, once and for all, a real-time, meaningful connection between business outcomes and plant performance that reveals exactly where operational improvement opportunities lie and how much each one represents in dollars. What that means is a powerful and efficient new way to reduce conversion costs. And in a market where poultry producers are facing long-term losses for months or years at the mercy of outside forces, IQ-Fusion opens the door to achieving profit within one business quarter. Like a secret barbecue sauce recipe that transforms plain chicken into a sumptuous feast, IQ-Fusion has the ability to transform any poultry operation from typical to exceptional.
So as I reflect on Memorial Day, I realize that IQity Solutions and our innovation, IQ-Fusion, is a classic example of American ingenuity and hard work. I for one am grateful to live in this land of opportunity that has allowed me to make my vision a reality. On this solemn and proud holiday, please join me in honoring those who have fought for and served this great country and who gave us the freedom we all enjoy to pursue our dreams.
And later, as you stand around the grill with friends and family, give a nod to the producers of the finger-lickin’ feast on your table. Save me a drumstick. Thanks, guys.
