1663606635428 Herorecessions

How manufacturers can win in the looming recession

July 22, 2022
A tsunami of disposable income will create a predictable rebound resulting in massive supply chain inertia and a shortage of goods.

By Dr. Paul Turner, COO, Raven.ai

The story is textbook.

The cutback in leisure activities and reduction in family expenditure during the Coronavirus pandemic brought about a dramatic drop in consumer spending. Add to that extremely generous stimulus payments and paycheck protection schemes, and the US has a massive $5.4 trillion dollars of hoarded savings in the United States, waiting to be spent. With the latest COVID-19 variants on the rise continuing to cause uncertainty about everything, financial experts predict that this type of saving will continue.

However, the day will come when consumers are more apt to spend again. When unleashed, this tsunami of disposable income will create a predictable rebound resulting in massive supply chain inertia and a shortage of goods. What does this mean for the world? An inflationary surge amplified by geopolitical impacts on energy, fuel and food prices.

In fact, it’s already happening.

The response by governments is to increase interest rates at the fastest rate in 30 years, in order to moderate demand and mitigate inflationary pressures. This sounds like a classic recipe for a significant bullwhip effect leading to the next phase that will include the curtailment of demand, overstocked inventories and a path towards a global recession and stagflation.

Manufacturers need to prepare for this now.

When the predicted downturn hits, it could hit hard. Managing costs and optimizing manufacturing operations will be essential, not only to survive but to emerge from the downturn stronger, leaner and better able to thrive in the post-pandemic economy.

As manufacturers look to consolidate their operations, asset utilization and overall equipment effectiveness will need to be maximized in order to compensate. For example, three shifts running at 60% capacity due to a lack of demand, consolidated into two shifts will need near perfect OEE and asset utilization to be feasible.

For this to happen, manufacturers need 100% visibility into their operational losses that in better times are often overlooked or out of sight. These hidden losses often account for up to 50% of asset downtimes, which can be readily remediated once a light shines on where they are and why they are occurring. Manufacturers need a fully contextualized timeline of their operations with sufficient granularity that can be used immediately by frontline, engineering and management teams to stem hidden losses.

For example: if an asset goes down due to a significant mechanical failure, this is a known loss and standard preventative or even predictive maintenance solutions can work to mitigate the impact and frequency of such events.

However, the majority of asset-utilization losses are often the result of minor or micro-stops of one hour or less. To classify these losses as simply “mechanical” or “electrical” failures misses a critical operational improvement opportunity. That one hour loss may consist of spending 20 minutes waiting for a maintenance engineer, 15 minutes waiting for a new component, 10 minutes to fix the problem and then another 15 minutes waiting for an operator. 

In other words, a production issue that could have been fixed in 10 minutes lost 50 minutes through unproductive waiting times.

This sort of granular contextualization can’t be pulled from a PLC. To gather a fully contextualized production timeline also requires effective operator engagement and intelligent agents to automate as much of the downtime labeling process as possible.

On average, manufacturers lose one-third of potential completed work to inefficiencies annually because they can’t accurately account for where machine and people time is spent on the shop floor. Because of this, the root cause of many losses will remain hidden. As mentioned, comprehensive reporting of the uptime of both frontline employees and machines, both in real-time and in the past, provides organizations with the right tools to solve productivity loss situations—enabling continuous improvement initiatives.  

Organizational investment in cost-effective, smart solutions that make sense of asset downtime and assist in creating an atmosphere for successful operator engagement, will be key in helping identify and optimize asset utilization across the lines. 

Manufacturers that are able to quickly rectify hidden losses will be the success stories that emerge during times of looming recession.