Posted inOpinion

Six critical challenges in production management and how to overcome them

They can be overcome with strategic solutions, advanced technology, and continuous improvement practices.

by Aleksandra Brovchuk, Director of Kladana in India.

Production management involves a wide range of aspects essential for successful manufacturing. However, as industries evolve and new technologies emerge, production managers face increased complexity, impacting efficiency, cost control, and profitability. 

According to the World Economic Forum Manufacturing survey, just 39 per cent of companies have been able to expand their data-driven use cases beyond the development of a particular product or value stream. Reliability objectives were the primary justification offered by 80 per cent of the analysed companies for using advanced analytics in the manufacturing sector. Enhancement of output, automation of shop floors and procedures, and optimization of net working capital are some of these objectives. Depending on the sector, data and analytics may have a 20  per cent average reduction in conversion costs.

These are six critical challenges that often arise in production management, along with strategies to address them effectively.

Challenge 1. Deciphering the “black box” of production

The term “black box” refers to the opacity of production processes, making it difficult to identify inefficiencies or areas for improvement. Complex interdependencies within production systems can obscure performance issues, but key areas need focused attention:

  • Raw materials & inventory reserves management: Ensure adequate inventory levels to prevent stock imbalances and guarantee a timely supply of raw materials
  • Production scheduling & timelines: Develop precise schedules to meet deadlines and effectively assign tasks to shop floor workers
  • Sales of finished products: Align sales with production output to avoid overstocking, and identify the most profitable items
  • Workload control: Balance workloads to prevent bottlenecks and ensure smooth operations
  • Labour cost optimisation: Manage payroll, and use transparent reports on piecework wages
  • Scrap & by-product management: Track waste to minimise losses, increase profits, and reuse by-products when possible
  • Subcontractor management: Ensure the quality and timeliness of subcontracted work to avoid delays
  • Equipment utilisation & maintenance: Maximise machinery and tool efficiency through proper utilisation and timely maintenance

According to a study by the World Economic Forum, 62  per cent of manufacturing executives struggle to derive actionable insights from production data due to a lack of transparency in their processes. Additionally, The most common problems in manufacturing are inadequate knowledge and abilities (26  per cent), data security threats (24 per cent), and insufficiently useful data processing software (22  per cent). A further 20  per cent of initiatives are complicated by unclear responsibilities and complex internal governance (22  per cent).

Implementing advanced analytics and monitoring systems can provide visibility into every aspect of production. Utilise performance metrics and real-time dashboards to detect and address bottlenecks and inefficiencies. Invest in tools that offer comprehensive insights into machine performance, workflow, and output, helping to demystify the “black box” and enhance decision-making.

Challenge 2. Implementing an efficient system

Developing and implementing an efficient production system presents several challenges, particularly when integrating various components for inventory and manufacturing management. Key difficulties include:

  • Large budget required: Significant financial resources are used for the development, customization, and implementation of new inventory and manufacturing management systems
  • System complexity: Inventory management systems can be highly complex and require meticulous planning and integration to meet specific organisational needs
  • Implementation challenges: New system integration may disrupt ongoing operations. To avoid this, successful implementation requires careful coordination, change management, and data migration
  • Staffing requirements: Additional staff, particularly specialised personnel for system maintenance and management, may be needed, further increasing costs
  • Staff education expenses: Training existing employees to effectively use the new systems incurs both time and financial expenses

According to a study carried out by the Manufacturing Institute, 57  per cent  of the manufacturers believe their production systems are not fully optimised, with budgetary constraints and complexity of the systems being major concerns. Further, 43  per cent cited high costs associated with the implementation of systems and staff training.

Many of these challenges can be addressed by taking a more strategic approach to system implementation:

1. Conduct a needs analysis: Assess whether a particular system aligns with the business’s requirements. Develop a step-by-step implementation strategy, outlining mandatory actions and identifying additional actions that can be postponed.

2. Consider phased implementation: This minimises disruptions and spreads costs over time. Opt for user-friendly systems with strong support and training programs to ease the burden of staff education. Start with the basics and address common issues first. A gradual approach is often the best strategy, as rushing can lead to prolonged implementation periods, sometimes stretching into months or even years, with unnecessary expenses.

3. Appoint a dedicated manager or company owner: Assign responsibility for decision-making and overseeing the implementation process. There is also another option: experienced consultants or vendors can be employed to streamline the process and effectively manage any complexities that arise. 

Challenge 3. Navigating profitability and unit cost calculation complexities

Relying on tools like Google Sheets, Excel, or even a copybook for inventory and cost management is often inefficient and prone to errors. Common issues include frequent human mistakes, such as incorrect or delayed stock updates and price changes that aren’t properly logged or traceable. There’s no centralised system for all business processes, making it difficult to manage everything in one place. Additionally, controlling employee access becomes challenging. The lack of analytical reports and dashboards leads to only an approximate understanding of actual profits and expenses. These limitations significantly increase the risk of miscalculations and data misinterpretation, ultimately harming profitability.

According to a Deloitte survey, 45  per cent of manufacturers struggle with accurate cost calculation, directly impacting their ability to price products profitably. 

1. Implement advanced cost-tracking systems: Use automated technologies for real-time cost tracking and data management. Continuously refine pricing methods through thorough cost analysis to improve financial stability.

2. Assign differentiated access rights: Restrict access to critical functions to minimise human errors in calculations and ensure data accuracy.

3. Use multiple methods for unit cost calculation: Factor in all relevant costs, including raw materials, labour, operational expenses, and equipment maintenance, for a comprehensive view of production costs.

4. Leverage customizable solutions: Opt for software that allows you to add custom fields, generate tailored reports, and create specific documents to ensure precise and efficient unit cost computations.

Challenge 4. Production synchronisation

Maintaining a smooth workflow and on-time delivery is difficult when production line components are out of sync. Departments often work independently, without enough focus on coordination. As a result, there can be an excess of semi-finished products, the production of items no longer in demand, and a lack of awareness regarding the final goods required.

To effectively coordinate efforts across departments, integrated scheduling and planning technologies should be implemented. Incorporating methods like Just-In-Time (JIT) and Total Quality Management (TQM) can streamline production, reduce delays, and provide real-time inventory visibility. Regularly reviewing and adjusting production schedules based on data and market demand will help maintain efficiency and minimise waste.

Challenge 5. Optimising raw materials purchasing

Effectively purchasing raw materials requires a balance between maintaining low inventory levels and securing favourable terms with suppliers. Without an MRP (Material Requirements Planning) system in place, businesses often face challenges in managing their raw material suppliers, leading to issues such as understocking, overstocking, cash flow gaps, unfavourable purchasing terms, and frequent inventory counts.

Up to 58  per cent of businesses report having trouble managing their raw materials, according to data by the Institute for Supply Management. Without proper cost control, production efficiency may be compromised, and excess semi finished goods can pile up in warehouses due to limited storage space.

To avoid these challenges and optimise raw material procurement, consider implementing advanced inventory management systems and forecasting tools. Building strong relationships with suppliers can also help secure better terms and ensure timely deliveries. Additionally, adopting just-in-time inventory practices can minimise losses from obsolescence and reduce holding costs.

Challenge 6. Enhancing productivity

The goal of enhancing productivity is to maximise the efficiency of equipment, labour, and industrial processes. However, increasing a company’s output can sometimes lead to inaccurately estimating the profitability of its products, misallocating time during each stage of production, and ultimately decreasing overall output. This often results in higher expenses and reduced competitiveness.

According to the National Association of Manufacturers, 49% of manufacturers prioritize increasing efficiency but struggle to develop and implement viable solutions. To overcome these challenges, invest in automation and technological advancements to boost production capacity and minimize manual intervention. Employ continuous improvement methods such as Kaizen and Six Sigma to identify and eliminate waste. Additionally, provide ongoing training for staff members to help them manage their work more effectively.

Conclusion

Effective and profitable production management can only be achieved through the integration of accurate production measurement with value-added digital solutions. Addressing essential challenges requires careful, phased implementation, particularly when introducing new software to address specific pain points. Specialized software offers several benefits:

  • Provides exact cost calculations
  • Improves inventory management
  • Integrates both production and sales orders
  • Determines profitability based on integrated data

Adopting connected technology and committing to continuous improvement practices can enable manufacturers to:

  • Eliminate obstacles
  • Streamline operations
  • Achieve remarkable gains in efficiency

This approach leads to reduced costs and an effective production system, paving the way for sustained success and a competitive advantage in the industry.