Key issues 2005 manufacturing

Over the coming year, the number one priority must be to become a more demand-driven business – against a background of producing products faster and with more variants while also bringing on new developments. It's not going to be easy: as Bob Davis, managing director of electro-mechanical products manufacturer Deltron-Emcon – and president of the Association of Manufacturing Excellence in the UK – puts it: "Customers are not prepared to wait, nor are they prepared to hold inventory, nor pay for inventory to be held somewhere else." So simply keeping stock isn't the answer: customers want cost to be driven down as far as possible, and that means their own costs, as well as yours. But with stock holding out of the equation, achieving the demand-driven ideal is indeed going to require a huge transformation, with a commensurate impact on IT systems – in product development, planning and supply chain execution, as well as on the shopfloor. Furthermore, there is no 'right answer' to exactly how processes should be reconfigured, nor how IT systems should now operate. Priorities are bound to be different: from business to business, customer to customer, product to product, and over time. And what this implies first and foremost is flexibility. "Last year the emphasis might have been speed of response to a customer need; this year the same product line might be shifting to cost containment or reduction," says Clyde Bennett, product solution marketing manager at Microsoft. "So you might be driven by a new KPI across the enterprise, and by new and different KPIs by department or even by product." For 2005, no IT system rigidly constructed for one particular type of manufacturing operation can hope to achieve this flexibility. "You might need to go back and add a new date field to the purchased lines record – it has to be easy to do that," insists Bennett. "You won't get people to sign up to the new KPI if it takes three months to get the code changed." Similarly, Haran Sold, director of product marketing for manufacturing and supply chain management with enterprise software vendor PeopleSoft, says: "You need the flexibility to implement theories like lean manufacturing, but in a mixed environment: you might not want all products, all customers and all suppliers on board at day one, because that's not going to happen in reality." Demand-driven manufacturing and lean thinking go hand in hand, and both go far beyond manufacturing itself: getting this right next year means taking into account the flow of enquiries, estimates and quotes through to orders, drawings, product configuration, documentation, BoMs (bills of materials), routings, materials supply, works orders and final products. "There is a misconception that lean is just about the shopfloor," explains Deltron's Davis, "but it is about the whole organisation. Otherwise there is a danger that it is focussed on the shopfloor, and other people will think it doesn't affect them. In fact, from the minute an order comes into the business right until the goods go out of the door, the whole operation needs to be 'leaned'." And that extends to encompass even those processes we take for granted, like ordering and invoicing. "These are often very people-intensive processes," explains Steve McCarthy, UK managing director of financials software group BasWare. "People need to look at these internal business processes: they need enabling technology to improve their operational efficiency – and they need access to the skills and know-how to implement it." Automate processes Deltron-Emcon is an excellent example of how lean can bring about big and wide-ranging improvements: with lead times reduced 75% from four weeks to one for some product lines and customers, and inventory savings of 16%, it has already substantially improved its business. The firm, like many, found a significant amount of time being wasted by employees carrying out unnecessary processes – such as purchasing, which computers can certainly do. "It seemed ludicrous that one person was wasting hours carrying out a process that could be done electronically," says Davis. Underpinned by the purchasing, manufacturing and financial modules of Geac's System21, Deltron has stripped unnecessary transactions out of its purchasing system. "The time saved through this exercise is now dedicated to stripping out further costs and applying greater intelligence to the way we do things – which in turn has boosted productivity dramatically," says Davis. A key point: "This entire project was inspired by a single question," he continues: "If it takes just half a day to manufacture the product, yet takes up to a month to deliver it to the customer, how much wasted time exists in the supply chain?" Which goes some way to explaining why a lean environment is impossible to achieve without IT flexibility. "A true lean culture requires constant attention, review and change," he says. Furthermore, Deltron-Emcon's experience illustrates that you can't go it alone: changing purchasing alone, for example, impacts your suppliers. Intimate communities But improving isn't just about setting up any old electronic link: speed and flexibility in the IT interfaces between companies is essential too. "It's no longer my company against yours; it's my value chain against yours," says George Lawrie, senior consultant with analyst Forrester Research. "It's a question of how much better I and my suppliers and partners can deliver 'customer intimacy', product innovation or a price performance advantage. That may involve switching round partners, reaching more deeply to the customer, and perhaps having a network where I can readily plug in partners from remote countries." In IT terms, that translates to electronic exchange of data, whether by a direct link or by providing access to web portals – both with suppliers and customers. That should be welcomed by all parties and especially customers, as it drives cost out of their processes too. Tim Gray, managing director of Dairi-pak, which makes cardboard boxes, provides a good example. "We are about to have an electronic link with our major supplier: at the moment the orders go by fax and someone manually puts the details into the system." That may not sound too much of a burden, but, he says: "We may in any one day put in 30 to 40 raw material orders. Using an electronic link from Navision [Microsoft Business Solutions' ERP] will save time and mistakes." So much for the commercial and production processes: but a demand-driven enterprise starts much earlier – at research and development. "In many markets now the most important thing is how quickly you get a new product to market," explains Lawrie. Using PLM (product lifecycle management) software tools saves significant time here, and in theory throughout the enterprise – by providing relevant and up-to-date product data to everyone involved in every process throughout the product lifecycle, including marketing, sales, production and eventually recycling. However, in the recent report 'PLM Adoption Accelerates with Refocus on Top-line Growth' from analyst ARC Advisory Group, vice president John Moore says: "While PDM [product data management] solutions have been in the market for a number of years, their adoption and use has been limited to addressing the needs of an enterprise's engineering department." That's not altogether surprising because it's within R&D that the most obvious benefits are to be found. Take the example of Artenay Agro-Dévelopment (AAD), French subsidiary of one of the largest European sugar manufacturers and a specialist producer of cereal bars and breakfast cereals. Innovation, customer service and a fast response to market demands are all priorities there, and maintaining control of its products in development, as well as those still evolving, is seen as crucial. Thierry Lauvergeat, AAD's vice president, says: "The Lascom Advitium PLM solution was important to improve our reactivity and to preserve the quality of our products in the face of strong competition, both in France and abroad. Previously, we were chasing after a lot of information within the firm: now, we can access key product information very rapidly." For him, the benefits of PLM do reach out beyond R&D, with the prompt and efficient delivery of information to customers, for example. The Rossignol group, the world's leading manufacturer of winter sports goods, is also one that's discovered that there are plenty more savings to be gained once PLM's tentacles start spreading. "We used to have about 15 databases for engineering data," says Jacques Lacroix, director of R&D. "So when someone needed access to this data – marketing, the CAD team, production or the moulding department – they needed to send an email and maybe make a call. Finding the right person was not always easy." Stealth approach Now, again using Advitium, data is held in one central repository that provides everyone with easy access. What's more, it's not just a passive store; it's linked to workflow systems that guide the product through development from concept to prototype and eventually the final product – and against a constant battle with time, with new products needed for each and every winter season. "And a year is not enough," insists Lacroix. Here, a full-blown PLM solution such as this is excellent – if you can get everyone to buy into it. And one option for achieving that is stealth. If you can create something that people want, they'll start to demand it. That's the approach taken by Autodesk with its Vault and ProductStream solutions, as Kevin Ison, at its manufacturing solutions division, explains. "Our view is that you need easy-to-implement, easy-to-use systems that do not change business processes, at least not in the first place." Vault is a practical solution to the engineering department's need to store data in a secure place with version control. "It just sits there and works in the background; it does not require a big implementation process," says Ison. "Once Vault is implemented – which doesn't need to be a big project, and can be done by engineers without anyone else knowing – other departments become aware of it and want access," he says. That's when Autodesk steps in with ProductStream, and then the entire organisation can start to get the benefits of PLM. It's clear that for 2005, a flexible ERP backbone, electronic supply chain solutions and PLM are the foundations for demand-driven manufacturing – and then comes demand management. To allow your company to respond flexibly but intelligently to demand, planning systems have to be fed with better data. "You need to factor in the quality of demand, and you need to factor in all the parties who generate or influence your demand, within or outside the enterprise," explains PeopleSoft's Sold. Serious planning And it doesn't stop at good, collaborative forecasting. There's effective planning too – although that doesn't necessarily mean APS (advanced planning and scheduling) to replace MRP, or no planning as in old style, purist lean. At Dairi-pak, planning software has been an essential component of its shift to demand-driven manufacturing: but it is MRP, albeit intelligent MRP. "People expect shorter lead times," says Gray. "We used to get seven to 10 days' lead time, but now customers sometimes order today for tomorrow. That means holding a lot of stock as well as ordering material today for manufacture and delivery tomorrow." The company relies on modern MRP to set production targets and stock levels. At first, there was reluctance to move away from paper-based planning. "But it's easier and much clearer to do it on screen," says Gray. "We now sit around a 42-inch screen showing the planning worksheet, which is calculated working backwards from scheduled delivery times taking into account lead times – and we can then make our own adjustments on screen." Finally, on the shopfloor itself – lean or not – demand needs to be communicated effectively, and information on what's happening where needs to be fed back: so modern MES (manufacturing execution systems) with decent SFDC (shopfloor data collection) are the order of the day. They're necessary for many reasons, but not least, again to enable flexibility. "You can't be too rigid about things," says Lawrie. And consider this: "If the average time for a process is five minutes and you lock everything into that time, then half the time it will be quicker and half the time it will take longer. Instead, you need a signal to perhaps say when the process is 90% complete."