E-business forum: making sense of e-manufacturing Part 2

Manufacturing and supply chain management, integration issues and the power of collaborative engineering are the key themes of this month’s e-manufacturing MCS eForum report, our second (see MCS, April 2001, page 28 for the first). To recap, late in March we assembled a panel of IT vendors, consultants, analysts and users at Brands Hatch, and tasked them with making sense of the whole e-business frenzy. It was the first of our MCS ‘e-forum’ events, in association with the DTI, CBI and our sponsors, e-know.net, Oracle and Benchmark. Our goal was to get to the nub of how the different aspects of ‘e’ can transform businesses and manufacturing itself in terms of what actually matters – like efficiency, productivity, costs, customer responsiveness and profitability. We wanted to make sense of the nonsense – to unbundle this meaningless ‘e-business’, and establish exactly where and how the web and Internet technologies can bring real quantifiable benefits, the barriers ‘e’ knocks down and the implications of that, as well as the barriers to entry, how to overcome them and with whom. First then, manufacturing management itself – controlling and monitoring shopfloor and plant operations, maintenance management and so forth. And there’s no doubt that the term ‘e-business’ misses the mark by a mile here. Andy Bates of Rockwell put it well: “I think for a lot of the people in manufacturing, they have point problems and they need point solutions. You can call them e-business if you want, you can call them almost anything, and they don’t really care. “They’re looking at ‘I have an asset base; how do I make the right stuff at the right time and right price out of those assets? And then how do I make as much of it as I possibly can?’. I think if it can be proved that any individual e-business tools allow them to sort that out, that’s what matters.” Exactly. And it’s sobering to reflect that vendors’ concern with badging software types – trotting out acronyms in an attempt to gain class differentiation – may have done little to help uptake, and arguably much to hinder it. But be that as it may, Bates went on to plead what to him is an obvious case for harnessing that which web technologies do best – provide for low cost information flow anywhere, any time, any platform. Point solutions of all sorts, he said, can be developed where hitherto they were not viable, simply because of the relatively easy and cheap ‘connectivity’ web technologies bring. “What always amazes me,” he said, “is the poor manufacturing efficiencies you find in manufacturing plants all over the place.” And he cited published surveys showing how 10 years of investment in this area have yielded nothing better than 1% increase in efficiency overall. “The UK average is about 41%, and 20% is not an unusual number,” he said. “What does that mean? It means that one in five of machines are actually operating at any one time.” And clearly, if you believe that ‘visibility’ of factory equipment – not just from the business level (although that’s critically important) but along operational manufacturing flows – can change that, then there’s a huge case for information flow around plant equipment. And the machine and plant operators too: peripatetic workers equipped with browser-based PDAs (personal digital assistants) is not such a fanciful idea – think of the real productivity per capita gains as ‘operators’ become ‘supervisors’. But it doesn’t stop there – linking in with maintenance (asset management systems in today’s parlance) using web technologies becomes a startlingly obvious thing to do. And when you’ve done that, why not link production and maintenance management screens so that planners are aware of machinery that’s actually available and its running rates? And link spare parts ordering over the web to your suppliers, perhaps via a web trading exchange, and back into inventory management? “When we’re talking about ‘low hanging fruit’ it’s hard to imagine any more low hanging fruit than that,” Bates insisted. Clearly, for most there’s a lot worthwhile that can be achieved at this level – and more coming. There remains, however, the thorny issue of integration from the shop floor ‘up’ to the business systems; not just back office to front office. Many – although certainly not all – in the enterprise software (ERP) community argue that where it hasn’t happened that’s the user’s fault. SAP’s Paul Eggleton said it all: “ERP systems can be well integrated with shopfloor systems: they’ve got open interfaces in all the relevant places to pull that data through. I think, because of the disjointed nature of factory operations they haven’t necessarily been given the investment to link them.” Perhaps? Sam Brown of Manugistics replied: “Yes I think this is the final defence of the ERP vendor: anything that’s gone wrong is because there hasn’t been sufficient investment!” But Bates had a rather different take. He noted last year’s analysts’ reports that showed most ERP implementations negatively impact production. “When you’re implementing an ERP system and expecting it to work with the factory floor in a production environment, you need an understanding of how you make that transaction-based system at the top communicate with the real time environment on the factory floor. And that hasn’t been addressed properly.” Rockwell’s Chris Haines went further. Noting Benchmark Research’s analysis, which shows that 36% of manufacturers believe they’ll have to change their ERP systems before they can get into e-business, he said: “I’m not sure it’s a problem between ERP and e-business software, I think it’s lower down. You can spend a lot of time, effort and money investing in trying to improve the links and find that you’re no better off because the actual problem is the link between the ERP software and the factory floor. And the business is making decisions based on assumptions that are incorrect – big assumptions sometimes.” But there’s another separate point here – what could be construed as a serious barrier. Could as many as 36% of our legacy systems actually get in the way of progress by failing to provide what’s widely accepted as the prerequisite for ‘dealing’ over the Net – a reliable foundation of integrated IT providing timely, accurate inter-departmental information and functionality? Clearly there are integration issues for e-business: Rod Blackwell of Microsoft cited his firm’s research which shows “90% of orders taken over the Internet are manually re-entered into other systems.” But much of that will be about learning curves and genuine lack of investment. The panel collectively concluded that unless you haven’t achieved what ERP set out to achieve, it’s unlikely you’ll need to rip out what you have. David Waldron of Fourth Shift: “What you’re inviting people to do is go through 18 months of hell putting in a new ERP system just so they are where they were then they started – when actually they can amend what they’ve got and get on with it.” The exception – as Eggleton put it: “I think there are still a lot of companies out there who have never gone through the ERP process. They still have un-integrated financials, un-integrated stock controls and the rest. Trying to move that forward in an e-business environment is going to prove impractical. If they have any ERP implementation they can build on, that’s fine, but if what they’ve got is a little MRP, a bit of finance, a bit of purchasing, they’ve got a problem.” Simple enough? Not quite: Manugistics’ Brown again: “The question we get from our customers who historically put our solution on top of their ERP systems, is not ‘will ERP provide the collaborative technology that we need?’, but ‘we spent so much on it and we still haven’t fully implemented ERP, so is it better to throw it away and start again?’.” His point: if you feel you are unlucky enough to be in this position, why not look at modern enterprise application integration software and service providers (founded on web-based technologies and standards) instead of rebuilding your ERP? “Today, a company can get by with separate inventory management, order management, financial systems – and rely on integration software to manage those.” And there’s another way. Sally-Ann James of manufacturing application service provider (ASP) e-know.net noted that specialised ASPs like hers can provide almost any level of e-business add-on for a very low up-front investment and fixed monthly fee. It’s a tempting alternative. Whichever way you go, clearly it need not be so daunting today as it was, say three years ago. As Simon Eade, IT manager for Caterham Cars said: “About 18 months ago I’d have thought of integration as being more of an issue, and I’d have gone to my [ERP] supplier for my e-business. Without standardisation, XML, it’s not an issue that any one of the vendors here could have solved. It’s only been in the last six months that that has really come on strong, and I can have faith in other vendors to come along and stick something on our system without having a bun fight.” It isn’t just technology though – it’s where you put it. Geoff Turner at MatrixOne said: “Where we’ve come across poor integration isn’t just where people have bought ‘points solutions’ without thinking about how they’re going to integrate them with the back end. It’s where they’ve assumed they need to integrate with the ERP. Actually, what we see is integrating into the engineering data framework, the PDM, and enabling that to provide the link into the existing line of business systems, is much more powerful. It means engineering is at the heart of the business, rather than finance. That’s colaborative commerce.” And it doesn’t quite end there eiteher. Nick Roberts, European director of automotive engineering firm Breed International had a plea for the vendors: “We’ve got about four [ERP systems] throughout our divisions, and what we don’t have is any kind of collaborative tool that allows our global engineering and purchasing through our supply base to work properly. We want something that works with multiple ERP systems. When we buy a company we want to keep it running, whether it happens to be on Baan ERP or whatever – even if it’s only at the level of consolidated financials. But we’re even finding that difficult.” Which leads us nicely onto the Net effect on supply chain collaboration, web exchanges and the inter-company stuff. And one of the biggest issues to grapple with here is the nature of the information, the content you need to share – and then its implications in terms of maintenance, management, back end integration and company ‘culture’. Supply chain collaboration Paul Eggleton again: “One of the big difficulties for suppliers is taking information that you want to get to your customers, and sharing it on an open exchange. What’s the value for a supplier in opening up all that wonderful information to competitors. In fact, none of the exchanges have the ability to support all that information anyway: it’s a five line entry in a catalogue, and then you’re two clicks away from someone else. Content is a real problem.” But ultimately you have to do it. David Tudor of Oracle commented: “Actually providing useful information to your customers, whether in terms of drawings, stock availability or supply chain capacity – you can’t do that unless you’re all collaborating.” That probably means thinking about a private web exchange. “But if manufacturers don’t provide that information to their customers, in two years’ time they’ll go to somebody who can. That’s where manufacturing companies are falling down – they say ‘yes we’ll give you access to information: tell companies our locations, what products we make’, but it’s not adding real value.” And Peter Klein of Synquest added: “There’s [also] integration with your suppliers: you can’t force them to integrate their purchase order with your system.” He suggests that as part of any e-business effort, manufacturers need to think hard before they act. “Don’t try and join together what you’ve got now and then just stick something on at each end and say that makes it ‘e’!. Look at your total processes, what you’re trying to do and what integration you need – and where you can minimise it.” As always, how much notice you need take of this depends upon your business and your products. Graham Wylie of web content publishing firm Enigma put it thus: “For a large part it depends on the type of content and whether it drives the business. So in terms of after-market maintenance, for example, [deep information sharing] drives the business – it drives new profitability for the manufacturers. But by the time you come down to some of the more commodity products, then information is more a ‘nice to have’.” OK, so what about more transactional supply chain integration? The panel agreed that being ‘e’ connected is becoming essential – at least at a local level as OEMs start to follow the electronics and high tech, or even the retail sectors and demand more of their manufacturing suppliers. Blackwell said: “If you look at the way Dell works with its suppliers, it forces them to have complete transparency through the supply chain, in every item from a CD writer right down to components. OK that’s a hi-tech example, but why aren’t other companies doing it?” Transactional e-business And Tom Kneen of Cisco confirmed that for the company most often cited for its supply chain management excellence, this is the way. “The whole ethos behind the Cisco supply chain is less about technology and more about the fact that we share all the information we can with our manufacturing partners. We pretty much outsource all our manufacturing and share not just our forecast information, but two or three weeks of our order book as well. And then it’s up to them to decide how they can deliver and to what cost. It’s about having a much tighter relationship with a smaller core set of manufacturing and supply partners.” Ultimately though, it always comes back to who has power over the supply chain, and that can be complicated. Bates: “What people have in their minds is, the customer is big, the supplier is smaller and their supplier is smaller still. That’s not the way it is: when you look, the customer is small, the supplier might be big, and some of his suppliers might be big and small. So who forces who is very complex, and it’s very difficult to work out a technology that’s safe and reliable.” Eade agreed: “In the automotive industry we're small fry. We use Titan Motor Sport for steering racks, oil pumps and so on, but their biggest customer is Lotus, and it doesn't matter what we say, we come second to them. We might have to wait three weeks for parts if Lotus puts in a big order. So yeah, getting transparency through an open system would help us a lot: we would know what was really happening and work round it, rather than being fobbed off.” Westland Transmissions’ Mike Askew crystallised it as fairness and transparency. “We use small contractors; we tend to be sympathetic to their size. In the last 10 years, and it’s been more acute in the last five, we’ve come under more pressure to deliver more value for out customers at lower cost. That forces us to look at the whole value chain, including the contractors.” And aside from using dubious forecasting tools, he concluded: “By and large, the suppliers do a significantly better job for us if they know what we know.” Like what? “Like anything associated with schedule definition, even a limited forecast that we might do for our customers. Like some of our business planning assumptions, new products that we’re interested in. We’ll be sharing more about what our business plan is on product specifics, keeping them more informed on progress.” And Breed’s Roberts nodded approval: “I think there’s huge benefits to gain from working much closer with our suppliers… Not only on the collaborative side but on the forecasting side; it’s an obvious area for improvement.” Engineering design So finally to engineering design – and the intra- and inter-departmental and inter-company collaboration that ‘e’ technologies are becoming so good at. Breed’s Roberts said that as a mid size organisation, collaborative engineering is fundamental to him. “Unless we compress our design engineering cycle times, we can’t compete – integrating with suppliers on how we design the product is the way to go. We want to make sure when we’re buying in, say, an assembly, that we put the last part of that design into the conceptual stage such that they can configure for final demand when they get it at four hours notice. Tighter and tighter collaboration, more and more information sharing, even into the planning stage, is the direction we’re heading in.” And web technologies are being harnessed beyond this. MatrixOne’s Turner: “When we’re looking at highly complex products and engineering, collaboration is key to improving the product development life cycle, but strategic sourcing has an important role here too.” Roberts: “The area of procurement is of significant interest to us because it’s such a large part of our business. But one of the difficulties is ... we’re taking away from procurement the ability to say, ‘let’s control our pricing by having two or three vendors compete’. Because if you do that you’ve done three times the collaboration with three suppliers. But if we select a partner, then you’ve given the power back to the supply base on price. How do you maintain the price control yet have a partnership arrangement? “And our procurement team want help. We’ve got multiple IT systems, and they just can’t get hold of information. They want the forward view – just what it is we’re going to buy, linked right into our sales forecast – and they just can’t get it. So there’s a potential win there, plus the collaboration side, and it would help to prevent our procurement team just being middle men between the engineers and suppliers ... and we get better products.” It’s a win, win, win as they say.