Disrupt your operations
Operational innovation can transform your way of doing business
29 November 2016
Operations have never been sexy. If anything they have been the opposite of what sexy looks like. At best, they conjure up images of dust, grime and heavy machinery. Take mining for example. Codelco, the world’s largest copper producer, created its competitive advantage by focusing solely on operations. It transformed digitally by choosing to focus on operations. Not on customer experience.
Here’s the lowdown: Mining used to be a dirty business. And from what we heard in news, it used to be dangerous too. Men would go underground and lose their connect with the world above for days. There were terrible issues around productivity, environmental hazards and miner safety.
Codelco figured that it needed a fresh approach. Either it had to move from a physical to digital model or risk being irrelevant in future. To innovate its operational processes, it initiated Codelco Digital, a radical way of automating business processes.
“Our business used to be related to physical labor. Today it is about knowledge and modern technology,” said Codelco CIO Marco Antonio Orellana Silva, the key driver of Codelco Digital. Thanks to his vision, today trucks on Codelco’s mining sites drive autonomously and information is shared in real-time. Miners don’t go to mines anymore. They go to the central automation facility.
And that’s not it. The digital transformation continues. It is changing the fabric of the entire company. Employees are now engaged to look for ways to innovate and speed up execution. They are not leveraged for their physical strength. They are leveraged for their knowledge. They make decisions based on data. Safety is no longer their biggest worry.
Codelco has disrupted the nature of the mining industry.
You can’t just copy-paste!
When you transform your customer experience, your competitors can watch and learn. But when you transform your operations, your competitors can be caught off-guard.
For they can’t see your internal processes, your skills or your information flow behind your successful outcome.
All they can see is your productivity and agility. But it’s hard for them to figure out how you get it. That’s the reason operational advantage is pretty hard to copy. If it were only about adopting a new technology, every other company would be a Digital Master. But it takes much more than simple process improvement to get there.
Digital Masters perceive technology as a springboard to redefine their way of doing business. They abandon their old assumptions stemming from the limits of their older technology and forge ahead with newer ways of digitally optimizing themselves.
Everything comes at a price, even Operational Efficiency
Let’s say you align and automate your processes to such an extent that even a robot can perform all your tasks without sweating or swearing. Result? You gain tremendous financial benefits. But in the process, machines replace your workforce. That is not an ideal situation for any company.
How can you make your workforce more efficient without replacing them?
UPS (United Parcel Service), the world’s largest package delivery company, is an excellent example of operational efficiency and process alignment. It has aligned every step of its logistical web to such an extent that its drivers are even trained how to walk in slick conditions. And guess what? It seems to be working wonders in improving their efficiency and quality.
UPS has built its operations in a way that a) it delivers on time, b) it gives its customers multiple options to meet their needs, and c) it allows the flexibility of changing delivery choices while the shipment is in route. Regardless of the weather, distance or size of the package.
UPS delivers more than 15 million packages each day in more than 220 countries across the world. And given that there is a gazillion ways to run its deliveries, UPS mines this sea of data to optimize routes to save even quarter of a mile. Thanks to data analytics UPS has been able to shave off 85 million miles driven per year.
It may sound absurd but UPS drivers are encouraged to avoid left-hand turns as it involves longer waiting time and hence wastage of fuel. The company specifically maps out routes with right hand loops. In 2012 alone, it resulted in saving around 10 million gallons of gas and a reduction in emissions tantamount to taking 5,300 cars off the road for a year. That’s a lot.
UPS has managed to do all this not merely by hiring analytics talent but by persevering to train its existing engineers and business people in using these key tools to optimize their processes. It’s a company-wide collaboration.
Automating Innovation can be a challenge
Can you expect a robot to come up with new suggestions? Or tell you, “Let’s try it this way dude.” Not really. But it might seem plausible in the wake of artificial intelligence. Let’s face it. Automation has become more intelligent these days. It’s not just about moving heavy stuff or fulfilling an assembly line.
There are sophisticated information systems that are beginning to automate decision-making too.
Credit Suisse is one such organization that has optimized its operations through intelligent automation yet leaving enough room for innovation. The financial giant has automated its report writing with the help of Narrative Science technology that essentially converts data into narratives.
It analyzes millions of data points on thousands of companies and automatically writes research reports that assess company expectations, risk and upside. What would generally be a long, tedious, spreadsheet driven decision-making exercise for analysts and investors is now an automated process.
Result? The quality of the reports is definitely better. They are a lot more consistent in structure and language. The outcome does not depend on the experience of the analyst to pick nuances in the given data to make interpretations. And there is massive scope for scalability.
Credit Suisse has been able to triple its volume of reports without hiring any new analysts. In fact, its analysts are rather engaged in strengthening relations with new clients. Such is the power of intelligent automation.
Digitizing means linking your supply chain closer than ever
Digital technologies are creating tremendous opportunities to manage supply chains better.
Every element of the supply chain, from suppliers to intermediaries to third-party service providers to customers, is now digitally linked closer than ever.
And Zara is leveraging every bit of it to ace supply chain management.
In simple language, Zara is changing the fate of the retail industry. What its rivals take nine months to put on their shelves, Zara does it in two weeks. Its unique fast fashion business model is fueled by buyer-driven supply chain capabilities. Store managers use personal digital assistants (PDAs) to capture real-time consumer data on transactions and preferences that are seamlessly transmitted to designers and manufacturers at the backend.
Optical readers are used to sort and distribute clothing items at an incredible speed of more than 60,000 items an hour. Cut pieces are tracked with the help of bar codes thus allowing minimal human requirement. Result? Zara is able to control its value chain of designing, producing and delivering in 14 days without the need of stocking in warehouses.
That’s the reason when you walk into a Zara store, you are bound to find something new and something worth buying. Unsold items at Zara account for only 10 per cent in comparison to the industry average of 20 per cent.
Act fast and act now
If you want to gain a distinct competitive advantage, you have to move beyond simple adoption of tools. Connect your processes, your people and your technology in a way that you can outshine all your competitors. And if you need a hand in rethinking your way of doing business, give Lean Apps a nudge.
Photos by Mona Singh