McKinsey: How Manufacturers can Ensure Future Productivity

Richard Sellschop is a Senior Partner at McKinsey based in Connecticut, USA.

Originally from Johannesburg, South Africa, Richard has 23 years of experience at McKinsey & Company.

He has recently taken on the leadership of its Global Mining Service Line and prior to his current role led the company's initiatives at the intersection of manufacturing, technology and heavy industry.

He shared his insights on the state of global manufacturing productivity with Manufacturing Digital, expanding on key strategies the industry can adopt to ensure productivity and enhance success.

Why is global manufacturing productivity stagnating and what can be done to address it? 

The manufacturing sector has shown pockets of positive productivity growth in recent years.

However, many industries, particularly in heavy sectors like metals and mining, continue to face persistent challenges in improving their productivity levels.

The past few years have been marked by tremendous disruption, including the COVID-19 pandemic and significant changes in global supply chains.

For many companies, these challenges have resulted in a reduced focus on operational stability, continuous improvement, and extracting value from new technologies, digital solutions and analytics.

To address these issues, our view is that a combination of approaches is required.

This includes implementing operations excellence methodologies, building upon lean practices and other proven techniques.

Additionally, it involves the thoughtful application of technology, including digital solutions, analytics and innovative technologies.

These tools can be used to accelerate and augment human capabilities, ultimately helping to stabilise and improve operations across various industries.

You note few organisations are excelling and that the ones that do go beyond purpose and strategy. How do they go beyond and what does this look like for manufacturers? 

The organisations that we see excelling have five common characteristics:

1. Purpose that defines why the organisation exists, creating a common cause, and a strategy that defines the path to achieve it.
2. Principles and behaviours that shape the culture of the organisation, creating an environment of trust, respect and constant innovation.
3. Management systems to empower both leadership and frontline, helping define goals, track performance, identify improvement opportunities and build new capabilities.
4. Technical systems that eliminate waste, variability and inflexibility to deliver value to stakeholders.
5. Technology (Digital, Analytics, Innovations) that accelerates human capabilities to continuously improve and augments what people could otherwise achieve.

We call the artful combination of these five elements 'Next Generation Operations Excellence.'

It goes beyond what has been achieved before and makes it repeatable and achievable in many different manufacturing environments.

What regional variations exist when it comes to manufacturing productivity and progress? What do these tell us about global conditions and supply chains?

Labour and talent availability vary significantly by region, influencing manufacturing productivity and progress.

These regional productivity variations impact global supply chains by affecting where companies choose to locate production facilities and source materials.

Factors such as technological adoption rates, workforce skills, availability of skilled labour and overall labour costs all play crucial roles in shaping these regional differences and their subsequent effects on global manufacturing landscapes.

What is the path forward for manufacturers to succeed and ensure future productivity?

A successful transformation journey requires thoughtful design incorporating the five characteristics highlighted above.

It begins with setting a bold ambition that serves as an inspiring "north star" to aim for. It's crucial to separate short-term needs, such as achieving this quarter's numbers, from longer-term aspirations.

Attracting and motivating top talent is essential for driving change. Finally, organisations should boldly experiment with new technologies, focusing on achieving impact and scaling up, while avoiding the trap of "pilot purgatory."

This comprehensive approach enables companies to navigate the complexities of modern business environments and achieve lasting, meaningful change.

Do you have any final pieces of advice for manufacturers today? 

We are living in an exciting era characterised by ground-breaking technology, enhanced capabilities and immense potential.

By embracing disciplined execution, courageously integrating new technologies, and pursuing bold innovations, organisations can pay off handsomely. 

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