UPS touts promise of ‘Smart Operations’ for future manufacturing success

While many manufacturing and supply chain stakeholders swear by Lean and Six Sigma methods to address the many complexities of modern industrial manufacturing, research issued today by UPS indicates that may not be the best approach to success.

Instead, a more optimal approach, according to UPS, is “smart operations,” which it explains refers to the usage of pervasive data collection, advanced analytics, technology investments, and deeper collaboration with partners to prepare their value streams for the next industrial revolution.

In its white paper, entitled “The Rise of Smart Operations: Reaching New Levels of Operational Excellence,” UPS outlines how in the next three years an increasing number of manufacturers will augment manufacturing processes through smart operations, which the white paper said functions as a supply chain strategy that extends beyond factory walls. 

“Smart operations are crucial to the long-term success of manufacturing companies,” said Derrick Johnson, vice president of marketing at UPS, in a statement. “The strategy enables manufacturers with limited resources to serve their increasingly demanding customers more flexibly.”

The white paper includes data from a survey conducted by UPS and IDC or more than 100 manufacturing operations executives, coupled with hosting focus group discussions designed to assess progress companies have made in smart operations implementation.

One of the main findings from this survey was that 53 percent were at what UPS called a relatively low level of over all maturity and another 47 percent indicated their companies progress was further along than that of their peers.

Smart Operations becomes, observed a UPS spokesman, more important for manufacturers of complex and unique products, or products which customer have time-sensitive requirements, coupled with products that seem like commodities are becoming ‘smart’ through connectivity, enabling them to enjoy the benefits of Smart Operations.

Another key finding showed how that while Lean and Six Sigma still remain the manufacturing sector’s standard, there are issues with both when it comes to continuous improvement in that over-optimized processes are often inflexible and leave the manufacturer unable to rapidly adjust to supply chain disruptions and changing customer demand, whereas those manufacturers using smart operations can better successfully position them in fluctuating markets, due to things like increased visibility of inventory location and transportation allowing companies to more efficiently analyze and quickly manage both upstream and downstream supply chain changes.

The UPS spokesman explained that Lean production processes are good for reducing waste and cost while Six Sigma helps remove variability to improve quality.

“Continuously improving manufacturing processes towards these end goals are desirable in a perfect world; however, things don’t always go according to plan,” he explained. “The unintentional consequence of lean processes is that they can become optimized to the point of becoming brittle and unable to flexibly adapt to upstream disruptions in vendor supply or changes in customer demand.”

As for what is driving the shift to smart operations, the UPS spokesman cited how more and more companies are enjoying the benefits of ‘smart manufacturing’ by investing in robotics and automation equipment.

“The Industrial Internet of Things (IIoT) is providing manufacturers the visibility and control to manage inventory just like information,” he said. “And third party partners are able to integrate logistics technology and infrastructure to give manufacturers the flexibility to scale up, almost like ‘Logistics in a Cloud service.’”

Another key takeaway of Smart Operations, the survey found, is manufacturers are continuing to count on external, or third-party, service providers in order to focus on their core competencies, and companies making less progress on that front for smart operations are able to leverage the technology and process improvements made by their partners.

“Many manufacturers are realizing that they don’t need to own all the assets or invest in the capital expenditures to build their logistics capabilities,” the spokesman said. “They can rely on partners like UPS, which invests $1 billion a year on improving global operational networks and information technology so that they can focus on that they do best.”
And with technology such a major part of the smart operations business strategy, the spokesman said there is plenty of room for growth on that front, likening it to the dawn of the Internet, when it seemed impossible to envision the various new business models and capabilities that connecting information and individuals together in real time, , which is in a sense akin to how the Industrial Internet of Things (IIoT) is just beginning to reveal the potential for manufacturers to manage risk, grow their business, operate more efficiently, and better serve their customers with Smart Operations, he said.