Reinventing Manufacturing

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<strong>Reinventing</strong> <strong>Manufacturing</strong> New Productivity Levers Productivity will move beyond Lean and into an environment where sensors, data and analytics optimize operations in real time. Going Beyond Lean Since the early days of the Lean movement 8 epitomized by Toyota and described in the 1990 book The Machine That Changed the World, thousands of companies have launched initiatives to eliminate waste in their factories. However, with Lean in the mainstream, it is no longer a differentiating lever by which companies in developed countries can compete with those in low-labor-cost countries. The answer to what comes after Lean is threefold: (1) more Lean; (2) Lean in inputs and other functions; and (3) Lean beyond the company’s walls. First after Lean comes “more Lean,” since many companies are still applying Lean to only a portion of their manufacturing operations, thereby leaving significant opportunity on the table. Within any given industry and market, significant productivity differentials continue to persist, and they prove that some players in that industry or market are more Lean than others. In addition, in markets that came later to the Lean game, such as China, “classic” Lean still has an important place on the management agenda, as labor costs are increasing quickly and basic Lean principles are increasingly being used to keep these costs somewhat under control. Second, even for those who have rolled out Lean successfully across their own operations, there is still opportunity to look beyond their production and management systems to focus on input factors and supporting functions. While it is true that Lean is increasingly the standard (e.g., nearly all applications for A.T. Kearney’s annual “Factory of the Year” benchmarking competition state Lean as a key element of driving performance in their operations), those standard Lean programs mostly focus on reducing shop floor labor costs and material waste. But Lean goes far beyond direct labor, as it starts with truly understanding the customer’s needs and then focuses on delivering in a way that minimizes any kind of waste, not just waste in materials or labor. It incorporates assets, resource inputs, inventories, indirect manufacturing and even other company functions, from R&D up to Sales (see Figure 9). Third, to achieve the next step change in productivity, manufacturing companies will have to push Lean beyond their walls. For example, consumer electronics companies face the challenge of reducing their time to market in order to outperform their competition. One way to do this is by maximizing operational flexibility by leveraging third parties and minimizing their own assets through better collaboration with suppliers, clients and other stakeholders in their ecosystem. By doing that, these companies effectively extend Lean beyond their internal operations to reach a more efficient level of interoperability among partner entities. Figure 9: Lean Dimensions Operations excellence strategy Interoperability Flexibility and modularization Input factors Lean Labor Assets Resources Source: A.T. Kearney Going beyond lean Direct manufacturing Fully capturing the impact of lean Indirect manufacturing Functions 18
Major Drivers of Change The Internet of Things (IoT) and Data Analytics Another new paradigm of productivity is being enabled by the ubiquity of low-cost sensors, pervasive connectivity, and near unlimited computing power— collectively described as the “Internet of Things” (IoT). The Internet of Things and the advanced use of data analytics will be pervasive. A.T. Kearney estimates that the number of IoT devices will go from half as many as traditional connected devices in 2013 to double that number by 2020 (see Figure 10). 9 This growth will translate to approximately 3.5 connected devices for every human being on the planet. 10 This adoption rate will vary by location, but in many communities within California—which is at the forefront of most things related to technology—the adoption rate is expected to be at the higher end. Figure 10: Estimated Worldwide Growth of Traditional Connected Devices and IoT Connected Devices (Billions) 30 25 20 15 10 5 0 2008 2010 Source: A.T. Kearney 2012 2014 2016 Internet of Things Traditional Connected Devices 2018 2020 As manufacturing industries start to incorporate an increasing number of sensors into their manufacturing processes, the amount of data being gathered will rise significantly. This increased visibility of the manufacturing process will create a positive feedback loop. For manufacturers, the use of IoT will ultimately deliver value through a combination of three levers: (1) reduced cost through improved productivity and operational efficiency; (2) improved capital efficiency through lower asset downtime; and (3) increased revenue through improved customer experience and value-added services. The applicability of these value levers can be expected to evolve over time (see Figure 11) and be realized in at least four types of applications. Process Control: The use of sensors in manufacturing processes will grow in number and sophistication to provide higher resolution, precision and frequency of information to the process control brain which, in turn, will be able to more promptly and accurately correct the course of production and increase throughput and yield. Asset Management: Sensors will enable real-time monitoring of machine performance. Maintenance programs and methods of the past will give way to continuous machine communication, the optimization of maintenance activity, and ultimately higher asset availability. IoT in Production and Post-Production: Produced parts will also be able to communicate via embedded sensors and alter the course of production in real time. For example, a silicon wafer could know its own performance characteristics and needs for testing and could transmit that information to the manufacturing and quality testing process. In addition, once they leave the factory and become operational, sensors could also communicate their use and performance back to manufacturers. This will allow manufacturers to continuously improve the design and manufacturability of new products. 19
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Page 7 and 8: Executive Summary Manufacturing wag
Page 9 and 10: PART One Technology is revolutioniz
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Page 13 and 14: Major Drivers of Change Figure 2: I
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Page 17 and 18: Major Drivers of Change Technologic
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Page 31 and 32: California’s Shifting Landscape:
Page 39 and 40: California Manufacturing Highlights
Page 43 and 44: INSIGHT The Future of Making Things
Page 47 and 48: INSIGHT From Light Rail to Locomoti
Page 55 and 56: Reinventing Manufacturing 3 Strengt
Page 57 and 58: Strengthening California’s Enviro
Page 59 and 60: SPOTLIGHT CalCharge: Charging Batte
Page 71 and 72: PART Two Humboldt Del Norte Mendoci
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California Manufacturing Regional C
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Title of Current Report Section 89
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Appendix B: Methodology APPENDIX B
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Appendix C: California Manufacturin
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Reinventing Manufacturing 28. Shih,
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Reinventing Manufacturing

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