Manufacturers have only so much control over the external factors that impact their business—from supply chain volatility to the cost of raw materials and even the impact of weather on shipping. That is why to reduce risks in manufacturing it is all the more important to focus on identifying the internal risks within the organization’s operations that can be controlled.
Reduce Risks in Manufacturing by Managing These Internal Factors
Let’s look at the seven most significant internal risks to manufacturing operations and how to mitigate them. By identifying, assessing, and managing these internal risks, manufacturers can ensure their operations are growing both more resilient and more competitive.
1) Equipment Breakdowns
Equipment breakdowns are costly in terms of production downtime and lost revenue, but manufacturers can prevent them using the following strategies:
- Regularly inspect equipment before each use to help ensure it won’t fail during operation.
- Establish a preventive maintenance program that includes routine maintenance, such as lubrication, cleaning, and equipment calibration.
- Invest in backup equipment to minimize production downtime in the case of an equipment failure.
- Keep an adequate inventory of critical spare parts, reducing the time required for repairs and maintenance.
- Have a clear and concise plan for dealing with equipment failures to minimize the disruption to production processes.
2) Out-of-Compliance Operations
Manufacturers need to identify the specific compliance risks relevant to the organization, such as worker safety regulations, harassment policies, or conflicts of interest, and have a clear understanding of what guardrails exist in each area. Once these risks have been identified, manufacturers can implement policies and procedures to address them, including:
- Provide regular training on relevant regulations and conduct regular audits to ensure compliance.
- Analyze and take action to reduce the waste generated by changing the design, manufacture, purchase, or use of materials or products.
- Establish clear channels of communication for reporting compliance issues and directing employees on how to address them. Effective communications help teams to avoid confusion or repetitive actions, and they can help improve cohesion and engagement within every area of manufacturing operations.
3) Product Recalls
Product recalls damage a manufacturer’s reputation and bottom line. Beyond the costs of recalling the product, there can be related increases in insurance premiums or legal costs that include punitive damages. To reduce the risk of product recalls internally, manufacturers can take the following steps:
- Establish a product safety management program to reduce errors and accidents before they lead to recalls. This program should include a 10-step quality control roadmap accompanying the product and manufacturing process with a process control method to prevent problems.
- Assemble a recall management team that can act quickly and decisively in the event that a recall is required to address a product issue, helping to minimize the impact and prevent further issues.
- Create a communications program for continually educating employees on how to avoid errors that compromise product quality as well as how to prevent workplace injuries. Effective approaches include weekly all-company meetings and extensive use of video courses on the company’s internal employee education sites
- Additionally, reduce the risk of product quality problems by automating pricing, quoting, and customer approvals with a single integrated system, which can help to reduce order cycle times and rework.
4) Expired Inventory
Expired inventory carries significant financial risks. Not only is inventory the costliest asset on manufacturers’ balance sheets; it can affect product quality, cost, and efficiency. Here are four steps for reducing the risk of expired inventory:
- Implement an automated inventory management system to identify slow-moving products or those with shorter shelf lives and monitor them closely.
- Incorporate tracking and monitoring into the automated inventory management system to provide real-time data on inventory levels, expiration dates, and reorder points—helping to ensure that materials, products, and other inventory items are used before their expiration dates.
- Use a pull strategy, only producing products when there is customer demand, which minimizes the risk of overproduction and excess inventory.
- Maintain an accurate inventory count and rotate stock to ensure that older products are used first.
5) Shop Floor Errors
Untrained workers are a leading cause of shop floor errors that lead to delays, unnecessary scrap, and quality issues. To reduce risks in manufacturing associated with untrained workers companies are coordinating strategies to improve communication, training, and supervision. Key actions they recommend are:
- Invest the time to create and strengthen open and mutually beneficial communication channels between shop floor workers, supervisors, and managers. Realize that the more time you commit to communication, the greater the potential for preventing errors and injuries on the shop floor.
- Initiate a training program if one isn’t already in place, and define what success looks like from the very beginning. Training is critical to ensuring workers have the necessary knowledge and skills to operate machinery and equipment correctly.
- Offer hybrid training that combines classroom instruction and hands-on experience on the shop floor to help employees build expertise.
- Have supervisors prioritize being on the shop floor to coach workers, directly reducing the risk of shop floor errors.
6) Outdated Engineering Designs
Outdated engineering designs can lead to having the wrong specifications or parts. There are several steps available manufacturers can take to get the risk of outdated engineering designs under control:
- Create and maintain a system for regularly reviewing and updating engineering designs in order to communicate all changes and modifications to designs clearly and in real-time to all relevant stakeholders.
- Motivate design, engineering, and manufacturing operations to use the system by providing positive feedback on the team’s results.
- Maintain detailed documentation of all engineering designs and changes to ensure a clear and accurate record of specifications.
- Establish robust quality control processes that provide production yield data to design and manufacturing teams, so if outdated engineering designs do create product problems, they can be fixed immediately.
- Use the quality control process as a closed-loop feedback system to catch production errors from outdated engineering designs before the products leave the production center.
- Consider following the Prevention, Preparedness, Response, and Recovery (PPRR) risk management model, which has proven helpful for manufacturers looking to take precautionary measures.
7) Data Security Holes
Holes in data protection can lead to security breaches and ransomware attacks that bring manufacturing operations to a halt. Following is a core set of strategies for strengthening data security:
- Protect the company network and broader digital infrastructure by implementing an IT security system with firewalls, anti-virus software, and data encryption.
- Capture and secure real-time production process data by adopting a manufacturing execution system (MES) and then protecting it with multi-factor authentication (MFA).
- Start periodic systems backups and secure them off the network so hackers can’t get to them during a ransomware attack.
- Develop an emergency response plan in case of a data breach or cyber-attack, including disaster recovery and data redundancy protocols.
- Train employees on data security best practices and how to handle confidential information.
- Consider automating patch management for all software and hardware to reduce the risk of a breach.
By taking practical and pragmatic steps to reduce risks in manufacturing processes, manufacturers can safeguard their operations, protect their bottom line by reducing costs, and maintain long-term success.