A data-driven approach to reducing operating costs
-Adam Sharman, Senior Partner, Dsifer In New Zealand these cost pressures are compounded by high shipping costs and unfavourable exchange rates that impact New Zealand manufacturers’ price competitiveness and/or margins. All of which is contributing to a contracting in manufacturing performance in New Zealand and most of the world. In challenging times, most organisations look to reduce production costs and non-essential spending. However, too often we see organisations making knee-jerk approaches to cost cutting, resulting in short-term decisions that constrain their ability to improve or accelerate when the economic environment improves. Whilst it may seem paradoxical, challenging cost environments can be the foundation of future growth, if managed through an evidence-based, future-focused approach. In this article we will explore three key ways a data-driven approach to managing through challenging economic environments can help balance the need for short-term cost reduction with long-term performance. Understand the true drivers of production costs Most organisations already collect a huge amount of data at multiple stages of the manufacturing process. However, a significant proportion do not use this data to inform process efficiency, asset optimisation and waste reduction. A data analytics approach that identifies trends in process, machine and people data can identify correlations between multiple factors that explain the drivers of production efficiency, bottlenecks or opportunities to optimise. Having identified these drivers, scenario modelling can then be used to play out different combinations of variables identifying the optimal combination. For example, identifying the root cause of systemic asset failures, and modelling out an optimal maintenance schedule to mitigate future unplanned downtime. Evaluate the true impact of cost reduction decisions Building on the ability to understand the drivers of production costs, a data-driven, evidence-based approach allows for the interrogation of cost reduction strategies to understand their true impact on production and prioritise them accordingly. […]