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Stemming the Loss of Knowledge Capital: A Business Fix for Manufacturers

Written By: wayne thompson
Published On: November 5 2007

Manufacturers are in danger of losing significant knowledge capital. Natural employee attrition, such as departures or layoffs, inevitable retirement, and the brain drain are contributing to an exodus of knowledge. Manufacturers should introduce efficient and effective knowledge management strategies across the enterprise before it's too late. By creating a repository of knowledge capital, manufacturers can increase productivity by leveraging past discoveries, maintaining competitive advantage, and improving customer service.

Loss of Knowledge Capital: The Business Impact

The pressure is on manufacturers to reduce costs. Consider a team of engineers and assemblers that has dedicated time and effort to designing and producing a complex project, only to discover a similar project had been done in the past; consider the waste of repeated processes, the missed opportunities, and the cost of design and manufacturing rework. Reuse of what is already learned increases productivity. In an engineer-to-order (ETO) manufacturing environment, this is particularly significant, as captured knowledge shortens the design and production cycles, and development can be completed faster. It reduces design iterations and manufacturing rework.

A knowledge management system may eliminate the need for physical prototypes, as the design will be correct the first time. This streamlines the design process, and increases automation and production efficiency. An effective knowledge management strategy will likely provide the manufacturer significant competitive advantage by eliminating design redundancy and getting product to market faster. After all, in project-based ETO environments, error-free work coupled with decreased design and production times are the keys to being profitable.

Customers are increasingly demanding that manufacturers be more responsive to their needs during the bidding process. ETO projects are often complex, involving a vast number of materials and a range of component equipment. But to win business, quotes provided to customers must be accurate. Knowing the estimates from similar projects is valuable, as it enables manufacturers to respond to more bids, reuse the information to build better quotes, and provide accurate quotes to customers and prospects. By delivering what is expected better, faster, and on quote, manufacturers are delivering better customer service, and at the same time, keeping their costs in line. Additionally, with knowledge management, customer input can be mapped to projects and alternative bids developed to deliver improved customer service. Manufacturers should shift return on investment (ROI) metrics from product-centric measurements to customer-centric.

Silos of information are preventing manufacturers from shortening production cycles, which threatens their competitiveness. A lack of workflow collaboration across business units has created a communication disconnect. For example, since the shop floor and assemblers often work in silos, separate from the design team, there is a need to improve communication of processes. Time and effort is lost as changes and processes pass through various departments that are often in different locations and working on different priorities. With disparate teams, the sharing of knowledge is critical to successful ETO projects; after all, the engineer's view of the world is different from that of plant managers. Additionally, while teams can be disparate, so can systems, with spreadsheets and manual processes accumulated over a period of years.

Organizations that integrate around a single enterprise-wide system with a common base of information and well-defined business processes will streamline disparate communications and connect design to production and engineer to assembler, thereby getting products to market faster, and helping customers keep costs in line.

Loss of Knowledge Capital: The Organizational Impact

A knowledge management strategy is hopeless without stakeholder management. Manufacturers should invite participation from all stakeholders, both inside and outside the enterprise. Since knowledge capture entails internal change and a shift in corporate strategy, input with respect to what the users want from the system and how the system manages knowledge should be collected to secure a positive launch. Stakeholder management includes buy-in at the executive level (including cost justification), the user level, and at the designer and engineering levels. It also includes external participants, such as partners, suppliers, and customers. After all, a knowledge management system is not static; it's dynamic, with active, continual exchange amongst stakeholders.

How a knowledge management system is introduced in an organization will determine its success. Manufacturers need to manage change inherent in new policies, procedures, and methods. End-user stakeholders need to understand that knowledge management is as valuable to them as it is to the company. They can help identify the potential challenges of such a system. By the same token, end-users can help mitigate issues at the outset, as well as determine acceptable risks.

For these reasons, change should be managed at every level of the organization's hierarchy. To achieve an efficient knowledge capture process, and for sustainable success, companies should create interdependent and continuous communications. The way to overcome resistance is to define an integration strategy early, and then put the pieces in place to accomplish each step of the process. After all, it is the users who will define the ultimate success of a knowledge management strategy.

Even though the ultimate success of a knowledge management system depends on the end users, an effective strategy should involve the rich knowledge lying outside the organization. A cross-functional team of suppliers and partners contributing to an open knowledge management system, together with input from customers, will enable real-time feedback and questions. By opening the knowledge system to these external parties, manufacturers can anticipate and solve customer projects even before the first design iteration. This kind of knowledge management makes the manufacturer more resilient with respect to global competitors, as it takes the manufacturer past concerns of time to market, and on to the business of generating revenue from converted sales. Having input from customers and suppliers well before the manufacturing process begins enables manufacturers to close sales even before the first product comes off the production line. Thus, time to converted sales becomes more relevant than time to market.

From the perspective of executive stakeholders, each application should justify its place in the organization through measurable ROI. To save costs, many manufacturers use customized versions of knowledge management tools developed in house. But these manufacturers are at a huge disadvantage—stuck in time thanks to legacy systems and cumbersome, outdated data storage mechanisms. To be competitive, manufacturers need to move beyond Excel spreadsheets and other manual systems, as old programming languages are difficult to maintain and do not keep pace with changes in business. Today, application logic has improved, and the state of application integration across the enterprise is far better than it was before. Executive stakeholders should devise a plan to reduce dependency on outdated infrastructures, and consider implementing a leading knowledge management solution.

One caveat to consider is that there is an apparent creativity paradox within knowledge management. Though using past knowledge may seem more efficient, a distinct possibility exists of hindering engineering creativity or “outside the box” thinking. Design-level stakeholders may perceive knowledge capture as a threat that may thwart new ways of doing things—ways which may turn out better results. But the reality is that captured knowledge secures creativity. A knowledge management system provides a foundation for creativity and opens the door to endless possibilities. The upside to using past knowledge—that is, avoidance of repeating past mistakes, reuse of knowledge, increased productivity, and improved customer service—far outweighs any downside of knowledge capture.

Conclusion

An effective knowledge management strategy would deliver significant benefits to manufacturers in an ETO environment, including reduced costs and increased productivity; improved customer responsiveness and competitive advantage; and improved communication, both inside and outside the organization. But manufacturers need to move beyond a fractured, disparate process of capturing knowledge, and tackle the issue with structured vision. The change won't come easily, and in many cases it will require a completely new way of thinking about how to capture and store knowledge—an approach that emphasizes interdepartmental cooperation and buy-in across the enterprise, from the executive office to the shop floor. Functional simplicity should be conveyed to users to get them over capture process and data management barriers.

Keep in mind that while executive project champions open doors to funding a knowledge management repository, cross-functional teams and users are the ones who will ensure that knowledge management is as valuable to them as it is to the company. Invite user participation, and couple it with an open system to capture input from knowledge-rich partners, suppliers, and customers.

Additionally, companies must make better use of knowledge management technologies, such as applications that use a central repository of data to store information on engineering or design rules for products and projects. Leading applications offer robust functionality and have similar user interfaces to keep familiarity for business users. Taking a cookie-cutter approach to captured knowledge exposes the organization to the precarious possibility of hindering creativity, albeit inadvertently. But in fact, best use of knowledge management secures creativity, and design engineers will appreciate a dynamic knowledge repository. The key to successful knowledge management is the active participation of all stakeholders.

 

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