Sustainable profitability

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Overview:

Many industrial businesses and manufacturing operations were designed, implemented and operated around a set of basic assumptions that have served the industry well over the last century. For example, although it was expected that the values of process variables, such as flow, level, temperature and pressure, would naturally fluctuate in real time, business variables, such as production value, energy cost and material cost, were assumed to be fairly stable over long periods of time. It was also typically assumed that the production operations could effectively work independently from the business operations. Production operations would focus on making the products, while business operations would focus on reporting results. This, in turn, led to a bottom-up business information flow perspective. Business information was used only for reporting results, and only the required data from the operation had to be provided to the business reporting system. Often no business information flowed to the operations.

The traditional focus of industrial operations resulting from these assumptions has been on operational objectives, such as throughput and consumption of resources, as compared to business objectives. Typically, plants were designed to maximize production output, which proved to have the limited agility necessary to meet market demands during economic downturns.

Finally, the labor mindset of the industry resulting from the workforce dynamics of the early industrial revolution is, for the most part, still very much part of the standard operational philosophy utilized in today's industry. A huge separation continues to exist between the professional and management staffs from the operations and maintenance staffs that comprise today's labor force. This separation was necessary during the formative period of the industrial revolution when the available labor force was unskilled and almost completely uneducated. Although today's "labor force" is fairly well educated and highly skilled in comparison, the professional and management teams still tend to work under the traditional assumptions.

For the most part, these traditional industrial assumptions have served the industry quite well up to this point. However, there are current changes underway that are beginning to show that these traditional assumptions will not be effective going forward.

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