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Operational optimisation: Beyond the factory walls
Articles- Oct 30,26
As we focus our efforts on optimising operations, we journeyed from discussions on operational flow, including the “why”, “where”, “what” and “how”, before looking at data-based operational decision-making and automation. In this month’s column, Zurvan Marolia highlights that focus within the factory walls alone does not guarantee optimisation. We need to look “beyond the boundary
So, we have looked at the processes within our factory, and we have taken the necessary steps to have a factory beautifully designed, appropriately automated and efficient by design, and yet we find that we fall short on our delivery commitments!
So, what do we do? It’s time to look “beyond the boundary”.
The factory is only one part of the system. The factory operates within an ecosystem that we refer to as the supply chain, which encompasses (and the list is not exhaustive):
- Suppliers
- Inward material movement
- Inventory management (raw materials)
- Warehousing (finished goods)
- Movement of finished goods
- Distribution channels
- End-customer point service
- Management of spares
- After-sales service
A missing component, a delayed shipment, a shortage of raw material or a supplier's inability to restart production can bring the most efficient factory to a standstill.
The disruptions of recent years—from the pandemic and semiconductor shortages to more recent and current geopolitical tensions, shipping disruptions and sudden commodity volatility—have exposed a fundamental truth:
Operational excellence cannot stop at the factory gate.
The question is no longer simply, “How efficiently do we manufacture?”
It is also: “How resilient is the system that enables us to manufacture?”
For years, our focus has been on enhancing our efficiencies in each of the areas mentioned above. Whereas the sum total of each of these delivers an optimum product cost when the going is good, the moment disruptions happen (which are fast becoming the “new normal”), the costs incurred far outweigh the benefits of optimisation of the manufacturing processes.
Optimising each element independently makes the entire system more fragile.
Let us take a quick look at some of the strategic approaches to building supply chain resilience. There are two areas that are particularly important:
1. Supplier Networks
2. Inventory Optimisation
Supplier management
Not every component requires multiple suppliers, but every critical dependency deserves scrutiny. At the risk of sounding academic, I see great merit in using the “Kraljic Matrix” as a guide.
Strategic items: High risk, high profit impact. (Focus on deep partnership and co-development).
Bottleneck items: High risk, low profit impact. (Focus on widening the supplier base).
Leverage items: Low risk, high profit impact. (Focus on competitive bidding).
Non-critical items: Low risk, low profit impact. (Focus on automation of the procurement process and efficiency).
This helps us focus our attention on specific areas, keeping procurement costs at optimal levels. Most importantly, involve suppliers as partners rather than treating them simply as vendors.
A supplier who understands your future demand, product roadmap and criticality requirements is better positioned to support you when circumstances change.
Inventory optimisation
Traditional inventory management tells us that we need to find the right balance between ordering costs and holding costs. However, inventory optimisation is achieved when we balance the cost of ordering, cost of holding and cost of stockouts.
Rather than applying one blanket inventory rule across the organisation, there are multiple approaches to inventory optimisation, the essence of which boils down to:
Lead time × demand variability × supply risk × criticality.
It is a balancing act, and here, relying on data for decision-making becomes invaluable (refer to my column in the September 2026 edition of SM&E).
Resilience vs efficiency trade-offs
There is an important trade-off between efficiency and resilience. Efficiency seeks to eliminate redundancy, while resilience sometimes requires deliberate redundancy.
The question to be answered as a business decision is: What level of resilience is economically justified by the consequence of failure?
This is where the concept of risk-adjusted cost becomes a guiding tool to help us evaluate the optimal levels of redundancy.
Lessons from recent global disruptions
COVID-19 pandemic, the Russia Ukraine war since 2022, the current West Asia war and the Super El-Nino are enough and more examples that living with disruptions has become the new normal, and the winners are those who have built resilience into their supply chains and developed operational agility in their operations.
A resilient supply chain does not mean a supply chain that never experiences disruption. Disruptions will happen. The measure of resilience is how quickly the system can absorb the shock, adapt and recover. This requires moving from a reactive mindset to a deliberate one.
I would like to add a footnote here that one of the significant and steadily growing causes of disruption is climate change, and we shall cover that in greater depth in a forthcoming column.
"Resilience is the new efficiency... Disruption isn't an anomaly but a recurring feature of the global economy. The shift underway today is clear, and resilience is a competitive advantage."
- Association of Supply Chain Management
"Looking at the world through a sustainability lens not only helps us 'future proof' our supply chain, it also fuels innovation and drives brand growth."
- Paul Polman, former CEO of Unilever
(Disclaimer: The subject is extensive, and it is difficult to do justice to all its aspects within the scope of a single column. Readers seeking further insights or details are welcome to connect with the author.)
About the author:
Zurvan Marolia is the former Senior Vice President of Godrej & Boyce Mfg. Co. Ltd, part of Godrej Enterprises Group. He is a former member of the National Manufacturing Council of the Confederation of Indian Industry (CII), and a former Chair of the Manufacturing Council of Godrej & Boyce. Marolia is now a freelance consultant. Readers are invited to share their comments and views on this article at zurvan@takttime.com.
Zurvan Marolia
Operational Optimisation
Supply Chain Resilience
Supplier Management
Inventory Optimisation
Kraljic Matrix
Risk Management
Manufacturing Efficiency
Data-Driven Decision-Making
Godrej & Boyce
Godrej Enterprises Group
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