On the surface, risk management, particularly for the manufacturing industry, seems like a formidable, somewhat intimidating topic. It is quite important and is definitely a subject that must be addressed.
A ton of information has been and continues to be written on the subject. In fact, a quick Google search for “best practices for risk management in manufacturing” yields about 268 billion results (in approximately 0.73 seconds).
Plug “risk management” into Amazon, and you’ll find hundreds, if not thousands, of book titles for works written on the subject in virtually every industry possible. Some come complete with editable templates for the reader to use when conducting risk analysis.
I’m going to present you with best practices I value along with a few interesting sources you might not have considered. And, yes, I’m going to mention a few that Worximity is perfectly positioned to help you with in your quest for manufacturing success.
But I would like to make a statement before I begin that you might not read in articles written by many other authors and experts—a statement so simple yet so profound that many overlook it altogether. While risk management in manufacturing seems like a tall order to fill, a huge mountain to climb, the fact is: Risk management is already hard-coded into our internal thought processes.
- You’ve got an appointment that you can’t be late for. Which route do you take?
- New neighbors are coming for dinner. Serve something standard or get creative?
- Do you go to your usual vacation spot or try one you’ve not been to before?
- Storm clouds on the horizon. Hat? Umbrella? Stay in the house?
I know, these are fairly mundane. But we all make decisions every day with potentially good or bad outcomes. Everything we do carries some element of risk. But it can be managed with a little research, some history, and identification and evaluation of the actual risks involved. And that is part of the process for risk management in manufacturing as well.
What are the top risk management challenges for manufacturing?
Depending on who you talk to and the industry they’re in (or how granular they want to get), the top risk management challenges run anywhere from 3-15 or more, including:
- Workforce shortages
- Unstable supply chain scenarios
- Improvements to productivity
- Supply chain interruptions
- Workplace safety
- Product liabilities
- Errors and omissions
- Foreign exposures
It goes on to list several more areas that can, for the most part, be included in the five listed above. Even in the plethora of other lists for identifying challenges in risk management for manufacturing and other industries, four common categories stand out:
- The procurement of ingredients, resources, and equipment
- The processing or manufacturing method
- The product (quality, reliability, and reputation)
- The people in the workforce and in management
The first category, procurement, has been brought to the front in recent years. Due in part to supply chain disruptions caused by various pandemics and health-related outbreaks and global volatility from political and/or military conflicts, it has garnered much attention in the manufacturing community.
I don’t want to belabor those issues, but it’s imperative to develop a plan to mitigate supply chain disruptions. A good portion of your risk management plan should address the availability and control of machine parts replacements and should include preventive maintenance, parts room stocking, and alternate sourcing.
That is just a part of the overall process of risk management in manufacturing.
Risk management best practices begin with a plan framework.
In the manufacturing industry, risk management is not a haphazard, ill-thought-out process. A 2012 article in Harvard Business Review suggests that instead of formulating a list of rules for employees to follow, you should build a framework that includes identifying all risks and categorizing them as to importance, compliance, and whether they were internal or external risks.
The article focused more on brick-and-mortar professional businesses rather than manufacturing, but the idea of a framework is pure gold. A framework is that from which everything else is supported and strengthened.
While you may have a dedicated team to develop your risk management program, be sure to include employees at every level. The more eyes on the landscape, the more quickly potential problems will be seen and addressed. Make sure everyone—from the shop floor to the boardroom door—is participating in and accountable for the risk management plan.
At the beginning or initialization of the plan, all risks need to be identified and categorized by severity or potential damage or disruption to the process. You should also determine the likelihood that the risk will actually occur.
By identifying the potential risks and assessing both the severity and likelihood of their occurrence, you can build a prioritized list for their remediation or removal. This helps ensure that your time, money, and resources are put to the best, most effective use possible. You will have to spend time and money on risk management, but spend it wisely.
Understand that while this is the first step, it is also an ongoing endeavor.
While one identified risk may be removed or mitigated, others could more than likely pop up. Often, risks are like Hydra from Greek mythology—cut off one, and two more will sprout to take its place.
Technology and the industrial internet of things can assist you.
Once risks are identified and managed or remediated, monitoring for changes must take place. While humans will do this, technology will help maintain consistency and become an early warning system.
But just having the technology doesn’t help much in and of itself. Your workforce must understand what it does and how to use it properly.
Your workforce must not only understand the technology that runs the machinery but also the tech that monitors it. Technology has more than the ability to monitor for imminent errors and bottlenecks. It also allows you to tweak your process and improve the product and product throughput. Real-time data collection and analysis are useful as long as the operator or foreman knows how to read it and what to do with it.
Here are 5 final thoughts on risk management for manufacturing best practices.
It should be evident—even obvious—that there isn’t a one-size-fits-all, cookie-cutter approach to managing risk in the manufacturing industry. Not only are risk management best practices customizable, but they also must be custom-designed for your facility’s needs and requirements.
But there are some concepts that form the backbone of the framework mentioned. These are best practices touchpoints to use as you design and ramp up your risk management plan:
- Foster an attitude of risk accountability in every employee and empower them.
- Ensure risk management accountability comes from and is bought into at the senior management level.
- Continuously and consistently assess your workplace and business for risks,
- Measure and prioritize all risks for impact, probability, and remedy cost to spend your money wisely and get the best return on investment.
- Develop strategies for long-term risk management, including controls, metrics, and tools, and reduce top-priority risks as quickly as possible.
After all that is completed, the final step in the process is to repeat it.
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