Justifying the Manufacturing Intelligence Project
In today’s competitive markets, the ante for successful manufacturing and supply-chain management keeps growing. The companies that survive and thrive do so by stepping up their ability to keep moving in front of corporate and customer requirements.
This means, in part, developing systems that easily collect, manage, analyze and report process data to deliver a real-time, connected view of the entire enterprise. But how do companies drive investment in this Manufacturing Intelligence infrastructure to make the competitive grade not just for now but with the capabilities to meet future needs?
It doesn’t happen simply by having a team of technical and operational leads specify a solution to meet those needs. That only helps identify where to look for potential vendors. It does nothing to secure the project backing and funding that will take the idea from concept to reality.
To move past the idea stage to implementation, the team must make a compelling business case to upper management because ultimately, budget approvers want to know how the project will fit with and support overall corporate goals. That’s when project teams must present systems that can answer questions such as:
- How does performance compare to goals?
- Which facilities perform well? Which ones struggle?
- What prevents the company from achieving goals?
And during the course of answering those types of business questions, the project management team must also develop management as an active advocate for the system and present a clear and compelling cost/benefit analysis to close the deal.
Three common stumbling blocks
While there are many issues to address and roadblocks to overcome, three major stumbling blocks stand in the way of a successful internal sales job of major projects:
- Jargon elimination: It is difficult for management to understand technical jargon. Instead, project advocates must translate those technical terms into something that resonates with those allocating budgets. Recasting the argument into business terms, and presenting arguments based on financial and business goals not only makes the content more understandable and digestible, but more memorable as well – an important factor when competing against other internal projects for scarce funding resources.
- Hard-dollar benefits: Simply put, it is sometimes difficult to demonstrate quantifiable benefits until the project is installed. With that understanding firmly in mind, the team must work to build persuasive financial and return-on-investment models based on quantitative, not qualitative benefits through well-defined operational improvements.
- Annual maintenance requirements: It is often hard to sell management on funding long term system maintenance. That funding, however, is an absolute requirement to ensure a sustainable system and the operational benefits it delivers. This ongoing system support must be part of the initial presentation so it can be incorporated into present and future budgets and operational programs. Failure to do so leaves it an orphan doomed to long-term failure.
The Project Justification Process – The Transition from Technology to Organizational & Operational Goals
How can the project team make a successful pitch to management and close the deal? What strategies can be used to successfully pitch projects?
It is first important to understand that the justification process changes and evolves as a system serves more of the enterprise. As the scope of a solution’s impact on the organization increases, the weighting of technical and financial factors shifts. Technical issues lose their dominance, and the organizational and operational goals become supreme.
Five general justification strategies are commonly found in industrial organizations:
- Influential Sponsor
- Pilot Project
- Integrated with Capital Project
- Comprehensive Business Financial & Technical Strategy
This strategy uses general industry data such as case studies and benchmarking to model project outcomes. This is commonly used because it is easy and requires the least analysis of current corporate practice and planning for change. Unfortunately, the resulting model is often not accurate since general market profiles seldom directly translate into any given company’s reality.
Users of this approach are often not oriented to obtain buy-in from those who have to deliver the results, nor to incorporate standard improvement methodologies such as Six Sigma to assure results can be delivered. When used by itself this strategy is seldom successful for management level proposals. It can however, be a useful component in a larger scope presentation.
It is appealing to bring an influential sponsor into the process. By using political capital one can gain at least short term corporate attention. However, there are significant limitations. While the sponsor may be involved, they are often not heavily committed and their support for the effort can easily disappear.
It is critical to understand the real reach of the sponsor’s influence. This will determine how large a project can be successfully promoted with this strategy.
Again, efforts of this scale often do not involve process re-engineering or improvement methodologies and it is difficult to assure delivered results. This reduces the capability to repeat any success across the organization.
Pilot projects can determine if a system will fit the data and the process. Ideally the pilot will not only reduce the risk of a poorly fitting solution but also identify any additional requirements and produce results to better quantify benefits for the proposal.
Good practices on the front end guarantee that results are repeatable and can be extended to other facilities.
- The pilot should be selected to represent actual needs and designed so results can be meaningfully scaled.
- The pilot must be designed and administered to minimize the Hawthorne Effect where the fact of observing the staff at work can skew the results.
- It is easy enough to narrowly define the requirements and not identify the real needs of other plants or divisions. The needs of other stakeholders must be identified to guarantee buy-in from those who have to deliver results but are not part of the pilot.
- Incorporate a direct linkage with a business change methodology such as Six Sigma to assure results that are reproducible and can be delivered.
As with all experiments, usefulness depends on project definition, execution and analysis. Properly done, a pilot provides valuable data for a proposal targeted at corporate management.
Integrated with Major Capital Project
Backers of smaller projects such as the initial module of a scalable MI solution often link with a larger corporate project such an ERP implementation. Advantages for this tactic include:
- Integration with the capital project on the front end can deliver system design, implementation and maintenance savings.
- Staff and resources are generally available to identify requirements and develop dependable ways to measure results.
- The process generally includes business process change management methodologies to assure the results can be applied.
However, there are significant problems that must be tracked and actively managed:
- The very scope of these projects means this strategy likely will not be available for other efforts.
- If the larger project and its technology are not successful, the planned savings may not be realized and this may adversely affect smaller project justification.
- Larger projects and their advocates typically do not identify or focus on the requirements for other plants or divisions that are not part of the mega project.
The final consideration is that solutions such as MI can be overshadowed by the major capital project with resource allocation and implementation schedules often short changed. When this happens it frequently compromises operational needs.
Comprehensive Business, Financial & Technical Strategy
This strategy is the most dependable way to successfully pitch larger scale projects and provides a good discipline for projects at any level. By orienting the project proposal to satisfy organizational goals, management is more likely to be convinced of the system value and accept the project budget.
Justification for broader integrated programs must include reengineering of:
- How results are measured;
- How decisions get made;
- How new work processes are established.
Because of the more comprehensive evaluation of enterprise impact, management can move from hoping it will get done to having full confidence to execute a plan. By dealing at this level of decision making, there is a better chance to fully integrate the project into budgets.
With management buy in and budgets IT can be enabled to properly integrate MI into general corporate automation programs and establish a system migration and life cycle investments methodology. This substantially reduces the chances of the MI system becoming orphaned.
These options vary in their effectiveness for different levels of funding and corporate impact. Be aware, the first three strategies tend to be inward looking and are often not well coordinated with corporate goals and metrics.
Another variable is the associated implementation of process management and improvement methodologies such as Lean or Six Sigma to assure that results can be delivered. In general, the greater the corporate scale of the project, the greater the necessity to incorporate process management tools.
Evaluating proposal strategies enables project management to focus on the highest-value factors when it comes to corporate acceptance and resource allocation. While each of the five strategies discussed have their strengths and weakness, the important takeaway is awareness of the implications of each and intelligently selecting the most appropriate one to justify and sell the MI initiative.
A webinar presented by Ray Zimmermann, Systems Innovation Management, “Organize and Justify Your EMI Initiative”, thoroughly examines this process of successfully presenting projects to all levels of management in greater detail.