Globalization is leading more companies to adopt decentralized organization models—and for good reason. Decentralization offers clear advantages, such as a higher degree of entrepreneurship, increased local adaptation of products, better market intelligence, and faster response times to changes in local demand. However, this model also imposes challenges on manufacturing organizations. In our work with decentralized companies, The Boston Consulting Group has found that many of them show highly variable performance across sites, and limited—or inconsistent—sharing of best practices. As a result, their aggregate performance is mediocre at best.
These organizations need to change. The global competitive environment, which is more cutthroat than ever before, is increasingly complex and competitive, and many of the easy gains have already been captured. Decentralized companies need to implement change that matters, including advanced manufacturing approaches such as lean. As a prerequisite, these companies must learn to apply greater discipline and standardization, as well as mechanisms for continuous improvement.
Through our client work, we have identified three areas that require additional emphasis to implement operational changes—such as lean—in a decentralized organization: the level of standardization, frontline leadership, and change processes. All require a foundation of rigor if they are to succeed. In addition, several enablers can ensure success: performance governance, a continuous improvement process, an organization structure, and capability building. In the aggregate, these elements come together to form an overall production system that can consistently deliver better performance across manufacturing sites.