Tuesday, 14 October 2014

So, Reshore and Servitize?

This blog and “Bring back, Lean out…” published a couple of weeks ago are a much shortened version of an article published in the September ’14 edition of the LeanManufacturing Journal. 

The article explores the reshoring of production out of low labour cost sites to a range of Western countries and introduces the servitization of manufacturing companies to deliver advanced services, one form of servitization.

Combining the two potential transformations described above brings a manufacturing operation closer to your critical mass of people and closer to your customers. Being closer and how you allocate your resources can be used to maintain the same business model or try and take advantage of a servitization model offering advanced services. Those services might include a life cycle support or Rolls Royce pounds of thrust type solution. Those services might be a game changer in the field, supporting growth that can only be financially supported by an efficient, fast response, low in WIP supply chain. The key will be going back to the Voice of the customers (VOC) to work out what they will buy and how the value can be provided. That will drive the real purpose of the re-shoring, rather than just “bring them back home”.

How Lean helps

With the purpose clear, and the value understood, now we should look to apply the right Lean tools to deliver a new value stream map. Consider:

·      The longer the process to be transferred back the longer each transfer step will be. Look to standardize and transfer in chunks, keeping the work going through your transfer team at a manageable level. Consider moving part-manufactured goods for finishing in the home market. Consider machining parts in the home market and finishing them off shore. Prove each step is capable first.
·      As-is and future Value Stream Maps (VSM)s are an obvious tool. Consider, what steps can be removed with re-design? If products are rented to customers for use then financial transactions will become flows instead of lumpy one-off transactions. Credit control and accounts receivable processes will change in size and type. Similarly by changing to an Advanced Service Business Model the organization structures and span of control of a business can change

Servitization and re-shoring need supply chain operations

Servitization clearly puts 'value creation' and 'value delivery' at the forefront of the competitive strategy.  Value creation is closely related to demand creation and value delivery is closely related to demand fulfillment. Consequently, the implications of servitization are not only to the supply chain (demand fulfillment side) but also to where the demand is created in the first place.

What’s next?

In my experience almost any business faced with decisions about re-shoring, changes to business models such as servitization and lean implementation find themselves stretched. There can be housekeeping activities required to prepare for such large changes and a significant amount of “headspace” required to work out what it all means and how to tackle it effectively and competitively.

So having explored the topic and some ways to tackle it what are the next steps, where do we go from here? Machan Consulting is working in association with Professor Tim Baines from the Servitization Centre at Aston University and Dr. Benny Tjahjono at the Cranfield School of Management  to research who has done what already and what new entrants need to know.

We are looking for businesses to contact us with their experiences and what they are hoping to do. With a good enough response we plan to run a spring 2015 forum at Aston for those volunteer businesses to share, explore and learn from each other. We also anticipate some solid research to publish in late 2015 to help the whole sector.

So if you are a manufacturing business that is:

o   Looking to do this, and looking for help/involvement in this project
o   Or preparing their structure/organisation for the change
o   Or have been there and would like to share their learnings,

To indicate your interest with this research and join us go to www.machan.co.uk/reshoreservitize