e-business: the route to agile manufacturing

Want to turn a problem into an opportunity – aka competitive advantage? Then as an SME (small to medium enterprise) you have to become more ‘agile’ or ‘lean’. Agile incorporates the virtues of lean manufacturing with the flexibility to produce a variety of products on demand. Then again, you need to cut costs by reducing your stock holding, and to improve efficiency by better planning and better management of plant. But as Howard Joseph, sales director at SME enterprise systems vendor McGuffie Brunton, says, this should be familiar ground. “Today, there is a lot more SME manufacturers need to be doing, like integrating all their systems, ERP, CRM (customer relationship management), HR – and e-business.” How can e-business help? Jeremy Hart, McGuffie’s e-director, says: “By ironing out bottlenecks being caused through manufacturers’ interests with customers at the front end and dealing with suppliers at the back end. The efficiency of the process is derived through close coupling of the front and back ends by electronic means.” “This is what SMEs need to appreciate,” agrees Joseph. “Without e-business, you can do a lot to achieve lean, agile, just-in-time working – but it’s equally true to say there are a lot of people who don’t achieve this. e-business has a role to play in offering efficiencies. The focus for SMEs now should be to look at their core systems before investing in e-business. Investing in just part of the solution is not a panacea.” True. And you do have to be slightly careful here. Independent manufacturing IT analyst ARC’s Simon Bragg makes the point. “Remember there are still many companies that haven’t got the basics right. Some manufacturers can help themselves without even investing in IT – by first understanding their business processes and material flows. Try stapling yourself to a customer order, and see at which tasks, and for how long, you sit around twiddling your thumbs.” SMEs under pressure Sound advice, but watch out. Joseph continues: “SMEs are being drawn into e-business, not particularly by the need to have a lean or agile manufacturing operation, but because of pressures from the top. The large enterprises at the top of the supply chain, like Ford, B&Q, Sony or Rover, are pushing down the chain, pressurising the SMEs to come into their fold using web technologies.” “And SMEs find they can’t cope with what they’re given and the demands of the big organisations,” says Hart. “This creates demand on their suppliers to get the required efficiency. That’s where e-business is important.” In short, SMEs need strong links to their supply chains on both sides – upstream and downstream – coupled with complete front-end and back-end integration. Edinburgh Crystal and Sagem are two SME manufacturers, both McGuffie Brunton users, that have walked this walk already. Edinburgh Crystal implemented an Internet-based global customer sales facility a few months ago, built out some new and some improved business processes, and made it work by effective integration with its existing Impact Encore ERP foundation system and others’ third party logistics and payment management systems. And its improvements have not only made the firm’s new website-based sales operation extremely successful, but also helped it achieve truly massive lead time and store replenishment cycle reductions. Andy Thomson, the company’s IT manager says, “While the rapid take-off of the Internet and e-business has created the opportunity to improve our business processes and increase our global market presence, it’s the implementation of Impact Encore that’s enabled us to effectively integrate e-commerce practices into our existing business framework in the first place.” The biggest improvement in reducing sales stock cycle time has been achieved through this and e-commerce integration with Edinburgh’s distribution partner. The combination of that link and improved practices, with the emphasis on timeliness, has enabled the firm to move shelf stock replenishment cycles from four weeks to just four days. Further, strategic market development consultant Lisa Lee-Smith says the company has been able to link the website with its ERP system, and so enable excellent management of order processing and dispatch activities for Internet sales. “The fulfilment operation, from sales transaction and credit card payment to guaranteed delivery – possible through the link to our internal business system – is proving robust, and this is key to the long-term success of this e-commerce sales strategy,” she states. That’s one example; another is Birmingham-based Sagem, part of the £2.4bn turnover European Groupe Sagem, which specialises in the design and development of engine management systems. While design may be the core competency of an increasing number of automotive suppliers, it’s often the people and technology behind the logistics management function who ensure ‘total customer satisfaction’. Supply chain schedules Sagem’s e-commerce project with McGuffie proves this. Currently it covers incoming automotive schedules from customers, but the intention is to push this right down the supply chain and send out electronic schedules to suppliers (first month firm, rest indicative). The system will also receive despatch advice, so Sagem knows suppliers’ goods are on their way. The status changes when the goods actually arrive , and the information will be included in the suppliers’ schedules so wires don’t get crossed and goods-in-transit are not ignored. Sagem – previously part of the Lucas Group – had already established an in-house logistics function. But fast entry of customer delivery information made it more responsive, and performance in meeting customer schedule demand changes improved, as did efficiency. “Overall, stockholdings are down to 30% of what they were when we outsourced the logistic support function,” says Simon Oatley, Sagem’s logistics manager. And McGuffie, like many of the others serving the SME manufacturing sector specifically with expanded application functionality and certainly good e-business hooks, has many others on the go with similar success stories. Clearly, this is not pie in the sky. Manufacturing methodologies consultancy Oliver Wight’s Les Brookes says the main message for businesses when considering IT solutions of any type is that they must not be thought of as a one-stop solution to all problems. Brookes: “Most businesses jumped on the technology bandwagon through fear of being left behind, and have been sold new technology as the solution to all problems. Successful e-businesses have looked at the supporting processes and then designed the e front-end to create a truly lean e-solution – but note they’re in the minority.” And he adds: “Examples abound of where the service provided to a customer rarely matches the glossy front-end technology encountered in the world of e-commerce.” The bottom line: SMEs have most to gain by taking a lean approach to their current business processes, but they need to think clearly about making improvements with e-opportunities – and ensure that these are very tightly integrated with their back end and front end systems.