How to make more of your business make-to-order

"I strongly believe that for UK manufacturing to succeed it has to move more to make-to-order; it also has to be made-to-measure. Because anything that's commodity is going to come out of factories in the Far East." So says Hugh Burnett, chairman of Enterprise Works, and form founder of Newhaven-based CashBases, who has now opened an incubation centre for manufacturing companies on the south coast. Precisely: make-to-order (MTO) business isn't new, but to prosper, to survive even, we need to do a lot more of it. And that's why we gathered a dozen senior manufacturing users from across industry, some consultants and a bunch of software vendors round a table and challenged them to come up with useful advice. How can you, how should you, go about reconstructing your manufacturing company, its business processes, culture and IT to make it lean yet agile enough to serve every customer as if he were the only one – while cutting costs? What you'll find here is excerpts of their frank and open dialogue on everything, from what to prioritise to streamline your businesses and make it more responsive, to how to perform functions better. And that's in estimating and quoting, engineering design, production engineering, manufacturing and supply chain management (the visibility aspects, improving planning, scheduling, execution and fulfilment) – the lot. The good news is that it can be done: it ain't easy, and it ain't necessarily fast or cheap, but a lot of it is about changing your company's mindset to one of being a service company with products, rather than simply a product manufacturer. And that has implications for your departmental structure, people, roles, business processes and information gathering and exchange requirements – even your shopfloor layout and equipment and accounting practices. We've all heard the recurring themes of business culture and KPIs (key performance indicators), but these are probably the most essential to focus upon for what's going to have to be a significant change to get this right – bearing in mind that most of us are already 'making-to-order' at least in part, and that it's not enough. Rod Clarke, senior partner in the Delos consultancy, refers to it as squaring the circle – bringing together all the elements to make a company become, and then stay, as close to demand-driven as possible. Key performance indicators For him, the famous seven KPIs are the inescapable starting point because, put simply, they provide an all-round, stable steer for everyone, all operations and all improvement projects. "Using a common set of measures is what drives the behaviour, the priorities and the focus of an organisation to select the right set of tools and techniques. It helps you measure not whether you've done a good job in implementing lean or ERP or whatever, but whether what you're doing is improving the financial performance of the business." Apart from debate about whether there should be seven and whether they are always the same – sometimes so much needs attention you'll need more and they'll be short term, pragmatic – no-one doubts this as a top level requirement. Everyone also all indicates that KPIs need to be translated to reflect against everyone's actions throughout the business. Otherwise, as Richard Lynch, partner with lean consultancy SA Partners, says: "They know objectively they want to grow their sales by 15% a year, or whatever, but underneath there's nothing in place to drive that in terms of measures or resources." Phil Curnock, logistics director with Allen Gears, says his company came up with 30 KPIs to get it as customer-focused and agile as it has to be, providing bespoke systems to power stations and the like. However, those boil down to "just four or five that really make the difference," and the rest are drill-downs from those – monitoring lead times not just of production, for example, but tendering and quoting. How do you construct them? Will Seager, divisional director with consultancy RWD, says the trick is having a well directed team determined to drive through change, and backed by good leadership. Thereafter, we're into the detail. And at the top level of that is continuing the team theme – getting away from silos of departmental development, silos of improvement and silos of information. As Paul Glossop, process improvement practitioner with The Manufacturing Institute, says, having incoherent improvements linked to incoherent KPIs is going to take you nowhere fast. And that has implications for your IT too. Burnett, for example, says that at Cash Bases, his team made fast custom manufacturing work by "integrating our manufacturing so that an order placed by sales on our system ... took the drawings from the CAD system, set the CNC machines to punch and cut the steel, and followed the whole thing through the organisation." And it was constructed in house by integrating SolidWorks CAD, Exel ERP, Preactor's finite capacity scheduling system and Camtec CAM – a mix because they couldn't find a single vendor. Today, systems are emerging designed to provide that level of integration out of the box – and specifically aimed at getting away from the departmental structures that bedevil slick to-order operations. In2grate, for example, supports a cross-functional team structure with tight integration of data and processes all the way from estimating and quoting, through engineering design and out into production management – so important the closer to project work you get. This is one of the keys to successful MTO. Bob Clements, In2grate managing director, makes the powerful point that for MTO to work well, we cannot afford simply to focus on doing the manufacturing bit better. Improving efficiency, reducing scrap, speeding up changeovers, reducing cycle times: all that remains key, but if China's labour costs are "one twenty eighth of ours", the emphasis needs to be on joined-up thinking, operations and systems for the rest of the business. So true: Lindsay Watson, programmes director at Menard Engineering (automotive engineering firm TWR as was) recounts the tale of "a well known Midlands automotive manufacturer" that was solely driven on manufacturing efficiency and in a 25 month programme was late with one component being developed. "It cost them £7 million: it will be a very long time before their efficiency improvements recoup that money." And he puts the blame on "little or no investment in the design and engineering service," adding: "There is still a major problem in the silo mentality between manufacturing and product engineering. If manufacturing and product engineering were together in the way they work, their processes, their thinking, then those delays and losses would be eradicated." Clements' view: "The sales, pre sales and engineering design phases of businesses have largely been ignored in favour of trying to squeeze that extra bit out of the manufacturing plant, or reduce stocks by another 10%. The reality is that if you are a demand-driven company, if you don't have orders you can't make anything. So let's focus on selling, putting the right product sets together, doing everything to win orders profitably. Because that will start to drive manufacturing, and then the need to be so lean is less critical. Invest in up-front processes "Design and engineering should be the hub of the business: they are the guys who come up with the next killer product that's going to keep you in business… But their time is consumed by contract work so they can't focus on design. If you can streamline those contract design, contract engineering, sales estimating, quoting, proposal, drawing generation processes, you free up design engineers to do what you're paying them to do." Software, systems and integrated processes are one thing. But Forum couldn't gloss over the people and culture issues here. SA's Lynch and Microsoft's Clyde Bennett put their fingers on the issue when they pointed out that the individuality of sales people in particular, but also designers, gets in the way. Making them and the business work as cross-functional teams is about some basics: appropriate incentives, physically locating people together, and setting up a matrix organisation so that teams focus on a customer project, pulling in resources from simultaneous engineering, for example, according to defined processes and workflow. Beyond that it's about changing attitudes, and ultimately parting with those that don't get it – it was ever thus. And it's not difficult to see the kind of IT you need for that: collaborative tools like NetMeeting, simulation tools, a central product definition database with enterprise-wide synchronisation, good project management software and so on – and a culture geared to schedule adherence. Indeed, Nigel Shires from Preactor says that's how Pfizer is managing its drug discovery and production people and resources – using Preactor's APS (advanced planning and scheduling) software to run its internal supply chain. It can certainly work. As RWT's Seager says: "The Toyota system I worked on was cross functional. Production people were supporting design, looking at the CAD, with the design issues and design for manufacture dealt with at digital assembly – all working together to the same strategy and being measured by the same KPIs… And that's totally transportable to other industries. But we can't just bolt-on new solutions to the systems we've used in our 'chimney' [silo] organisations: your systems need re-engineering." But it's not always easy. Mark Burrows, operations manager at Farsound Engineering, says the firm is going that way but it's already taken 18 months. And Keith Hayward, Farsound's IT manager, reckons virtually all of that is about the people, not the IT. Meanwhile, Geoff Teasdale, commercial director at James Walker, reckons his company's problems started with the introduction of new ERP. "We found that the ERP software actually institutionalises departmental cultures… We created cross functional teams to develop customised commodities, but when we put our ERP system in … I found we were farther away from lean than we had been five years ago." Interestingly, he doesn't blame the software vendor: he concedes the point well made by Clyde Bennett, that if "as soon as the cheque's signed, the VP goes out the door, and a bunch of guys are left there to tend this wild boar racing around the office," you're going to struggle to fight the departmental mentality. You've got to have senior management making organisational change to make ERP work the way it must. Or as Pat Neary, with demand-driven software firm PeopleSoft, put it: "The implementation teams, and everybody in the business that's involved in the project, need to understand that the solution you're employing has to support breaking down the silos – and deliver on the new team processes." OK, enough of that. Darren Dowding, planning manager at Cosworth Racing, who has seen that company through radical changes towards very fast, very efficient MTO, with lead times cut from 17 weeks on crank shafts to just six, and from six weeks on cylinder heads to two – "despite 10 to 20 engineering changes per day" – punches the success points home. As he puts it, Cosworth is an organisation of 600 "strong willed, competitive people … in a culture of challenge and win. I got asked recently, 'What do you mean there aren't any in the world? Have you looked elsewhere?" Getting the team spirit working there, beyond the obvious silos, was always going to be tough. But his message is that it can be done, if: people are prepared to stand up and not be slaves to systems; you set up genuine product teams and invest in equipment, people/functions and support systems; accept the consequence of different working patterns and idle time in different cells; and train your people to find solutions, not just report problems. For him, from a systems point of view it's managed by Preactor finite capacity scheduling, and more accurately the simulation, the 'what ifs' it provides. "Predicting with facts is a part of the culture now. We don't give views or express opinions any more; we look at the facts. It's become the heart of our manufacturing data systems: pretty much firmly established and invaluable. And I think, we'd be lost without it." More than scheduling In fact, that system is used to drive far more than production scheduling. It's used: to advertise delivery dates (and changes) to customers (internal and external); to express value of stock being generated and cell recoveries; to inform suppliers of changes so they become part of the virtual team; and to drive engineering design to meet available and committed production slots. "They understand now that manufacturing isn't like a load of Spitfire pilots that sit there, and when the bell rings they suddenly make the thing you've just thought of. We make things all the time, and if you want something new and different, you have to collaborate… We've broken down some of the rules, and realised that sharing information does help." His view is inevitably at odds with those who suggest that engineering design needs to be at the centre of the universe: "If you make things, you can sell them. You can design to your heart's content, but if you can't make it, you don't make any money. Companies need to shift the balance of power so that manufacturing is at the heart – and measure what sales you can actually sell." And he adds: "The vision for the future is to have no rules at all, but a business process that goes all the way through, and KPIs for the whole business rather than departments all trying to understand each other." Unsurprisingly, he's more keen on 'agile' than 'lean' – although he accepts that lean can be what you want it to be! He's also anti-acronyms: "Are you JIT? No we've moved to JIT2 because that's got a number in it," he quips. And, "Have you heard of GSE? 'Are you GSE? Save pounds!' It actually stands for 'geo spatially enabled'! What that means is if you want something and there's more than one on a shelf, you get the one that's nearest!" OK. Rounding off now, there's no doubting the key technology enablers for MTO. There are clear benefits, indicated by our own research (news page 5) but there are also problems to resolve as we go for adoption. Consider portals – both as collaboration tools providing access to engineering data with a unified database of BoMs, part numbers and the rest, but also for underpinning transactional and scheduling data interchange. Menard's Watson indicates the huge plusses in his organisation – especially for automotive clients wanting to manufacture in China and North America – but points to the inescapable issue of security. Allen Gears' Curnock adds that it's not just online hackers we have to worry about, but employees. And then there's the old 'I want your information, but I'm not prepared to give you mine.' The point: we need to think the permissions and protection through – but do so, because both of the main portal application types are among the essentials for spreading efficient, supply chain-based custom MTO. Forum also agreed that on the operational supply chain execution side, while 'standard' EDI is fine for the many larger organisations already using it, web EDI, with private hosted portals and trading exchanges like Exostar in the aerospace and defence sector, are a low cost and pragmatic way to go. There are additional issues around interfacing the multiplicity of approaches currently out there, but these can, in turn, be dealt with by third parties like Seeburger and SupplyOn. And when you hear that Ford, although not migrating away from EDI, already has portal-based implementations, it's plain this is not future-gazing. David Buttery, Ford's European manufacturing and supply chain IT manager: "In some of our manufacturing plants we're providing portals to the local supply base, and producing every hour on the hour an insight into the pool of material from lineside so they can get a better understanding of the fluctuations." He also alludes to work being done at Ford to get more clarity on constraints in the supply base, "because we're finding demand is fluctuating so much from our original capacity forecasts from two years ago when we started putting the vehicle programmes together … and invested in the supply chain and tooling." Which also raises the question again of sales forecasting, particularly in an MTO environment – the applications and algorithms out there to help, and how all that filters down to procurement and production forecasts. The cynic's view: as Rod Clarke says: "There are only two types of forecasts, one that's wrong and one that's lucky." Automate what you can Finally, returning to smoothing sales and engineering, it's worth noting the automation aids, like Driveworks, that can make an enormous difference to design capacity. Maria Sarkar, managing director, makes the point that, if all the data on how to build even a complex product is captured, her system allows sales users just to add dimensions, materials and options, so that drawings are generated automatically and error-free. Not only does that mean engineering released for design work, but customers getting a first class, fast design service – and the data all ready for production planning and manufacturing, right first time. One thing's for sure: the world is changing – and it's worth repeating that your existing investment in MRP, for example, and the spreadsheets that surround it, may well have to be re-engineered – at the very least re-purposed – to get you up and running as an agile member of an agile supply network. Whatever you do, you've got to prepare yourself to be able to participate and respond quickly in the coming demand-driven world, where traditional planning and smoothing aren't enough.