OCTOBER 2021CONSTRUCTIONBUSINESSREVIEW.COM8IN MYOPINIONAbstract: Traditionally, organizations have seen great divides between production teams and commercial teams. The production teams are focused on the optimization ofthroughputsor simply put, more material in less amount of time. On the other side, the commercialteam wants a higher contribution for the volume they are selling. This results in one side pushing for more production per unit-of-time, and the other pushing for more contributions per unit-of-volume. There is a dichotomy here and these siloed performance indicators are often in conflict with one another. Transitioning both groups toward optimizingcontributions per unit-of-time should be the goal. How to get there is the challenge! Article: Imagine the scenario ­the company's order book is booked solid for this quarterand the foreseeable future.The production leaders areurging their teams to stretch their capabilitiesto produce all that they can, as fast as they can. The production team is working hard to keep manufacturing hummingout of every available hourwhile lowering their conversion cost. To accomplish this, they cultivate their momentum around theproduction rallying cry; produce more in less time. In manufacturing, this is typically in units-of-measure (UOM) such aspounds per hour, tons per hour, or count per day. Regardless, this UOM typically has volume in the numerator and time in the denominator. This is of the highest importance, because if they make one moreper unit-of-time, at the same cost, their conversation cost will lower. A win for the production team and typically serves as thebias favorite of their performance indicators.Under the same set of circumstances, the commercial team is pushing for the most profitable order,while being laser focused on the selling side of the business.The team is taking on the "best orders" while leveraging their business relationships. From their line-of-sight, they are focused on a numerator thatis dollar-based while their denominator isvolume. Examples consist of dollars per ton, dollars per piece, or dollars per bundle. They are meticulously working their way through contracts and spot business,typically focused onthe highest amount of contributions per volume. Choosing to take the order at a highest contributions per ton versus the lowest contribution per ton is an easy decision from their perspective. Individually, these two key performance indicators make sense, yet have the tendencyto conflict. Most likely, the production team is screaming that certain product mix slows down the production units. "Here we go again. Nichole, why do we keep running this hard to produce such slow product!" Then, the commercial team is challenging the notion back that it has the higher contributions. "Look Tony, we make fantastic contributions per pound on this product. It is the highest of our entire portfolio!" This is the dichotomy that stifles the full manufacturing potentialnot only optimal market conditions, but all market conditions.This scenario leaves untapped contributions on the table in a fully utilized market condition. While in a non-fully utilized market, it limits maximizing the absolute contributions at lower utilization OPTIMIZING PRODUCT MIX AT ANY UTILIZATION LEVELBy Andrew Bissot, Vice President - Engineering, Manufacturing Excellence, & Reliability at TimkenSteelThe objective is to narrow the evaluation of the product portfolio, enough to establish granularity in attributes that are commercially offered
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