Agile manufacturing: Adapt and compete with new practices for hardware success

More than ever, manufacturers must be able to adapt to stay competitive. Under pressure to respond to extreme fluctuations in demand, find solutions for supply chain woes, and navigate disruptive go-to-market models, companies need a new approach to product development and manufacturing that builds resilience for a rapidly changing world. Welcome to the age of Agile manufacturing.

Agile manufacturing is a strategy that enables companies to adapt quickly to volatile customer demand and unpredictable market phenomenons.

As Industry 4.0 is expanding more and more into practice, manufacturers are acquiring the technology that’s driving the Agile evolution. Characteristics of Agile manufacturing include a customer-centric approach, a skilled workforce, rapid iteration, and continuous improvement of the company processes.

Agile manufacturing gives companies a competitive advantage by:

• Enabling mass customization

• Increasing bandwidth to adjust to floating capacity

• Allowing companies to pivot during disruptions (like a global pandemic)

• Facilitating distributed manufacturing so companies can resolve supply chain issues quickly

It’s a trend that’s gaining traction. According to McKinsey, 12% of companies say they were Agile from the start. Another 44% are in the midst of an Agile transformation. An Agile approach can avoid potential overcapacity or loss of opportunities while increasing customer satisfaction and employee engagement by 30%.

The World Economic Forum has designated the most advanced manufacturing companies as the Global Lighthouse Network. Despite the disruption of the COVID-19 pandemic, these companies have increased output while creating new revenue streams. The organization states, “By fully embracing Agile ways of working, these manufacturers have been able to respond to disruption and ongoing shifts in supply and demand along their production network and value chains.”

The history of Agile

In 2001, a group of software executives, the Agile Alliance, laid out the vision for a new approach to software development that was more flexible and enabled faster time to market. According to the Alliance, Agile Software Development is an umbrella term for methods and practices based on the values and principles expressed in the Agile Manifesto. Solutions are found through collaboration among self-organizing, cross-functional teams using the appropriate practices for their context.

Agile Software Development became a holistic mindset. Companies recognized the benefits of applying a more flexible approach to developing software rather than adhering to a rigid set of rules. Two decades later, manufacturers are now asking how Agile can apply to hardware development and manufacturing.

The Agile Manifesto emphasizes:

• Individuals and interactions over processes and tools

• Functional software over comprehensive documentation

• Customer collaboration over contract negotiation

• Response to change over adherence to a plan

These principles provide the framework for specific software-development methodologies, such as scrum. In scrum, a rugby term, cross-functional teams of five to nine people coordinate efforts to reach a milestone in a set amount of time known as a “sprint” that usually takes two to three weeks. Instead of a single lifecycle, companies “slice the elephant” and follow a series of steps to design and make a product.

Manufacturing has historically been slow to leave traditional methods behind. The industry is rooted in processes that date back to the first and second Industrial Revolutions, but companies are leveraging technology to develop more Agile capabilities.

Traditional hardware development

Traditional hardware development is often referred to as the “waterfall” model, a linear product-development pipeline in which one step cascades into another, with little flexibility to deviate from that route.

On paper, the waterfall approach appears logical. It was the basis for Henry Ford’s assembly line, a revolutionary idea at the time, where a product moves from one stage to the next in a sequential order. There are benefits to applying this method: It’s straightforward, facilitates mass production, and creates consistency for both manufacturer and consumer.

The basic steps of traditional manufacturing are:

• Requirements: All pertinent information is gathered and documented regarding the project scope, cost, schedules, and risks.

• Design: Once all of the information has been collected, the design gets underway based on customer needs and specifications.

• Realization: Once the design is established, the plan is set in motion and manufacturing begins.

• Verification: When the product is built, it must be tested and verified before it is delivered to the customer.

• Deployment: The product reaches the customer.

• Maintenance: Any service or maintenance issues are addressed to improve the next round.

An example of a traditional hardware process is the development of a package-delivery drone, inspired by the Amazon Prime Air Project. The requirements for this drone are:

• To deliver packages weighing up to 5 pounds within a 10-mile radius in 30 minutes or less (from order to delivery)

• To be safe and comply with government regulations

• To notify the seller and the customer of the delivery status

With the waterfall model, each phase starts only when the previous one is completed: Design > Make > Use. The product specifications—requirements the product must meet—are defined at the beginning and fed into the Design phase, when alternatives are generated and analyzed. The selected design is input to the Make phase, when product fabrication is planned and executed. Deploying the final drone to the customer initiates the Use phase, which includes drone operation and service.

In reality, this strictly linear process is rarely followed. Rather, teams often use a more circuitous process, in which some iteration does occur and there are opportunities for customer or internal feedback, but only within a given phase. For example, the drone may go through several iterations during the Design phase, and various fabrication options may be considered during manufacturing. This is an improvement to the linear model, but it’s still waterfall.

3 significant drawbacks to the waterfall approach

• It assumes that requirements don’t change. Waterfall relies on a predictable process that can be planned and executed without many adaptations or surprises; customer requirements are specified at the beginning of the project and taken for granted for the rest of it. But reality is different. Sudden changes and unplanned twists are the rule and not an exception, and this linear approach doesn’t account for them.

• It doesn’t allow for enough customer feedback. Here, most of the customer interaction is front-loaded, when the team is capturing requirements. Once the product specification document is completed (and frozen), the team gets to work. But customers rarely know exactly what they want at the beginning of a project, which is a recipe for building the wrong thing, at the wrong price, at the wrong time—even if the original specs are met.

• It requires too much thinking before building. A waterfall-driven design is locked when the project moves from Design to Make. The problem with this process is that the team often learns things during Make that may impact the design, and the customer hasn’t seen anything “real” before the design is locked. Changes to a locked design are difficult and expensive.

Consider those drawbacks in the context of the drone example. A few weeks into the project, the customer learns that a competitor is developing a drone to deliver 10-pound packages in 20 minutes. By now, the customer’s design is “done,” and the team is in the middle of bringing the defined concept to life. Changing the requirements to match the competitor’s would mean redesigning the drone’s structure, rerunning all the certification analyses, redoing the fabrication plans, and more. Yikes!

Agile manufacturing

Although they follow the same general sequence of Design, Make, Use, Agile manufacturing principles take a less conventional route. Events can happen simultaneously or in a unique order to enable customization. Product-development lifecycles are broken down into modular phases known as sprints. The steps of a sprint are:

• Create cross-functional teams: A self-organizing group of five to nine people works together on each sprint. Each team identifies roles, such as the scrum master, who steers the group, and the development team, which performs the work.

• Establish product backlogs: Teams determine the work that needs to be done for a sprint and create their to-do lists.

• Sprint planning: Led by the scrum master, the team determines the scope of work to be performed during the sprint.

• Sprint: The work begins. The development team performs tasks during a set period of time, usually between two and three weeks.

• Daily scrum: The team assembles briefly each day for progress reports.

• Sprint review: At the end of the sprint, the team reviews the end result, whether it’s the final product or a predetermined goal. Teams also discuss what worked well (and what didn’t) to improve the process before beginning the next sprint.

In an Agile environment, manufacturers can iterate and innovate. Customer feedback can improve the process. Changes can be made midstream, and operations can be reconfigured to meet new demands. Breaking up processes into sprints creates a small-batch approach to manufacturing, which means less risk and greater agility. Agile manufacturing often accompanies digital transformation because digital workflows break down silos, connect systems, and enable greater flexibility. In short, Agile operations move from “adapt to change” to “change to be adaptive.”

Tesla, for example, was born with an Agile approach. The company has taken Ford’s vision and flipped it on its head. With his background in software development, Elon Musk applied Agile to manufacturing electric vehicles. With 3D modeling and generative design, the company is capable of making rapid iterations, testing various ideas mid-production, and using customer feedback to develop new features that can be added long after the car has left the lot.

But the Agile model can run up against a few issues if not implemented properly.

Potential issues with the agile approach

• There are more moving parts in an Agile operation. Instead of moving from point A to point B, Agile systems comprise multiple sprints, all requiring detailed oversight. Without proper management, sprints can run over budget and time.

• Becoming an Agile organization requires a bigger upfront investment. Companies incur higher labor costs due to reskilling needs as well as more expensive technology.

• Teams don’t know exactly what they will get in the end, which is the very nature of an Agile approach—but it can make decision makers nervous and potentially cause friction.

In a recent survey, the National Association of Manufacturers found that 78% of companies are still experiencing supply-chain disruptions. Transitioning to Agile methodologies can help companies develop solutions to limit future disruptions.

Agile manufacturing is often confused with lean manufacturing. Although they do overlap some, there are distinct differences between the two.

Lean manufacturing is a practice of continually improving the production process by simplifying operations. It was a philosophy started by Toyota and outlined in its Toyota Production System. Lean’s mission is to create value for the customer, boost productivity, and improve efficiency by:

• Eliminating waste, redundancy, and overproduction

• Reducing onsite inventory storage

• Employing pull-based production—manufacturing goods as they’re ordered

• Practicing preventative maintenance to avoid unexpected downtime

• Applying key-lock principles to prevent errors

Agile manufacturing is also about creating value for customers and operating more efficiently. But where lean focuses more on improving internal operations, Agile focuses on a way of being in the world and adapting to external forces, like supply chain issues. The two methods do have a symbiotic relationship, as well. Agile manufacturing leverages lean principles to create a more flexible operation that can pivot and adapt to changing circumstances. In other words, being lean helps a company be more Agile.

It’s important to resist the temptation to apply Agile wholesale to hardware development. Instead, a few Agile practices and principles (mainly from scrum), adjusted for hardware, could make more sense.

Sprint iterations

Sprints could arguably have the most positive impact in hardware product development, as they force teams to go through Design-Make-Use cycles earlier, faster, and for smaller slices of the design. Progress is made left to right. Sprints address all three waterfall drawbacks: They prevent teams from going down the wrong path for too long, shorten the time between “thinking” and “building,” and provide opportunities to revise requirements based on learnings from each sprint. The flexibility to schedule critical design decisions later in the project is another advantage. Agile-based teams can delay some decisions until after several sprints, when they’ve gathered significant information—as opposed to the waterfall model, in which all design decisions are made before moving on to manufacturing. When progress moves left to right, teams can make critical design decisions later in the process.

No static product-specification documents

Instead, requirements are captured in the prioritized product-backlog items. They should be valuable, actionable, deliverable in one sprint, negotiable, and testable. They should also capture the who, what, and why. Instead of listing what the product should do (resulting in a flat list of requirements), list what someone would do with the product (resulting in verifiable use cases).

Collaborative teams

Agile fundamentally redefines the structure and roles of the product-development team. Instead of teams organized by departments (design, analysis, production, and so on), Agile advocates for small teams that are cross-functional, self-organizing, self-managing, and collaborative. A team assumes the responsibility to complete a product backlog item in a given sprint. A scrum team, for example, comprises a product owner (owns the what), a scrum master (manages the process), and the development team (does the work).

Smaller deliverables throughout the process

Opponents to using Agile hardware development argue that, unlike with software, it is not economically and practically feasible to build something for release at the end of every sprint. But physical deliverables are not the only way to make incremental progress. Computer simulations, virtual-reality demonstrations, digital twins, and conceptual or 3D-printed prototypes are all valuable deliverables. The key is slicing the product-backlog items so the teams can release something meaningful at the end of each sprint. Items could be sliced in many ways—for example, by level of fidelity (from rough to final), by level of virtual vs. physical content, or by user roles.

Porsche is a legacy company that began producing cars in the 1940s with traditional manufacturing processes. Fast-forward to 2021, and Porsche’s newest factory in Stuttgart, Germany, is all digital and embraces Agile methodologies. Assembly lines are “flexi-lines.” Autonomous guided vehicles move cars from one station to the next based on the car configuration and resource availability, so the company can customize each order while maintaining its customer takt and optimizing the overall equipment effectiveness. This new factory was born out of Porsche’s commitment to transforming to an Agile organization under the Agile@Porsche banner. Agility coaches were brought on staff to usher in this new mindset and develop an Agile culture across the organization.

As more manufacturers embrace an Agile framework, it’s becoming clear that this methodology—which was developed with software in mind—can apply to hardware too. Manufacturing companies have faced incredible challenges during the past two years. Companies need to adapt and thrive in the face of uncertainty. From large legacy enterprises to small start-ups, Agile manufacturing can help companies assess, adapt, and compete no matter what’s happening in the world.

This article has been updated. It was originally published in December 2016. Diego Tamburini contributed to this article.