How Manufacturers Can Get Faster, More Flexible, and Cheaper:

Meeting customers’ expectations for personalization and customization requires flexibility. And such flexibility can provide a distinct competitive advantage — as long as costs aren’t spiraling out of control. In a study of nearly 250 manufacturers over a 10-year period (2005–2015), we found that 78% of firms had improved their ability to fill their total actual market demand but had lost control over costs. Apparently, chasing the often elusive customer came at a cost that many boards and shareholders had somehow overlooked (or had discreetly discounted). We also found that 11% of the companies studied had suffered both a decrease in their demand fulfillment percentage and an increase in their conversion costs, the labor and overhead costs incurred when converting raw materials into finished goods. Hardly a desirable position.

All kinds of companies had failed at operational flexibility. There were companies in a wide range of industries, from automotive and industrial equipment manufacturers to oil and gas majors. There were companies with revenues over $100 billion and with revenues under $5 billion. There were Japanese manufacturers and Chinese manufacturers. There were companies that had more than doubled production levels during the 10-year period, and even those that had reduced production levels by 10% or more. In other words, we found no flexibility correlation with respect to industry, geography, size, or growth rate.

by Raghav Narsalay, David Light, Aarohi Sen –