So for 2006, your what should new dawn bring?

As we stare 2006 in the face, and wonder what the hell happened to 2005, there are some important issues to resolve and priorities to set – and that work needs to be done before the Christmas festivities bring sane thought to a grinding halt. We're talking business strategy, but also then the operational stuff. The work we put in now to getting all that as right as possible will determine the scale and speed of our success or indeed failure over the next year or two. For us in manufacturing business, that means some fairly intense navel gazing, probably at three levels. First up are the key business drivers impacting, or likely to impact our companies. At a senior level we live and breathe them daily – or we should – but now it's time to reaffirm that we've got them right and that we're not missing anything. Threats and opportunities are far less stable than they used to be. Second, we need to reassess the implications of those for the matrix of our existing organisations, and to check the vision of change we have for them (the future state in lean thinking terms). It's not just about capex: a critical part of that has to do with our business processes – improvement and automation within and between departments, probably throughout the organisation. Just as important, we need to reconsider what our future state means for our suppliers, partners and customers – who they are and how we are going to interact with them. Then third, we need to take that big picture business view, and map it to our IT and network infrastructures. This is key: our supporting and enabling IT needs to be high on the business agenda – and considered not just in light of what our customers are demanding or our competitors threatening, but what's become possible since we last conducted any overall review. IT capabilities too are anything but stable. Taking it from the top, headline concerns are almost universally reported as: sharply stiffening international competition (particularly from China, India and eastern Europe), skills shortages, ongoing customer demand for cost-downs and lead time reductions, alongside a relentless drive for faster and more responsive service – which often translates into jumping higher through ever smaller hoops. But also still rising in prominence are issues like compliance, security, business continuity and disaster recovery, as well as outsourcing – of production, design etc, not just IT. Truthfully, it's becoming a long and ultimately somewhat sector-specific list. Cost-cutting plus Looking at the big ones though, those inevitably resolve down to cost-cutting – with consolidation (of product ranges, suppliers and the rest) but also automation, 'vendor-managed inventory' and the range of to-order initiatives top of the list of solutions. But it's not just those: there are also moves to improve efficiency and cycle times across the board, in tandem with ramping up product innovation and associated services, improving flexibility and moving to get more connected routes to market. 'Connected' is the operative word there: enlightened manufacturers are looking to their ICT (information and communication technologies) to deliver on the promise of the 'collaborative' enterprise. What does that mean? It means simply: concurrent, rather than sequential working where possible; automation (at the business process level as well as in production); everyone working from the same data (role-based, allowing better inter-departmental and inter-company understanding and focus); and the business in touch with every aspect of its real (rather than supposed) status and its implications – and with its future. See our own survey (panel over page) for hard details and some useful guidance. But first stick with me for some useful observations from those in the know. Bruce Richardson, senior vice president of research at analyst AMR, makes the point that too many in manufacturing don't consider just how much IT has changed over the last decade, and what that might mean to their systems and operations. "In the mid 1990s we were aware of supply chains, but nobody talked about supply chain software. PLM [product lifecycle management] software didn't exist; CRM [customer relationship management] software didn't exist. Now, all that is in enterprise suites. "The most profound development has been the Internet: the browser is now the most common user interface and that's about to be replaced by portals. We're reaching the age of portal-based 'value chain' systems where suppliers can log onto the Internet system and see their requirements; customers can log on and configure their requirements, track orders and so on – and it's all becoming seamless. If you like, all the promises of the last decade are becoming virtual!" Beyond those thoughts, what would he focus on? "What do CIOs want for Christmas? The answer is there's about to be another huge wave of innovation – like the emerging sensor and mesh networks, or some of the SOA [service-orientated architecture] developments finally enabling applications to talk automatically to each other using web services… We're looking at ubiquitous real world and business computing." And the take-aways? "Think about the notion of 'composite applications': there will be a DIY market for applets in which you won't need to involve your IT department. Applications that aren't in any ERP system that enable you, for example, to monitor sales of new products and tag them against component costs – whether demand is coming through your ERP system, CRM, phone calls, or from the retail chain – and log that against allocations and price trends. We're getting even closer to the goal of being able to monitor and understand day-to-day performance in real time and make informed business decisions on the fly." Looking at sensory networks, Ken Douglas, technical director at BP, makes the point that there are huge improvements to be had from shopfloor data collection and tracking and tracing throughout supply chains. "You can get a lot of information on a barcode, and if you need a bit more, try 2D barcodes," he says. "You don't need RFID to take over from hand written labels!" But he also suggests companies consider the value of "an expert sitting alongside all your assets providing information about their state, location, whatever, all the way from raw materials to finished goods." Which is precisely what RFID offers. "There are a lot of fundamental changes in technology that are allowing us to acquire information about the physical world much more cost effectively and much more easily," he observes. An example? "We've piloted RFID at the early stages – for example, attaching RFID readers to forklift trucks at our Port Alan lubricants plant so that we can track packaging materials into the plant, right though the various operations and out to martialling and onto the pallets and transport. It means we get detailed visibility throughout our plant operations. "Right now we have got a business case for that: it's not one that would pass our normal BP tests for ROI, mostly because the RFID tags are still too expensive. Here, they are disposables so the cost/benefit is not as good as it could be. But we believe that the cost of RFID tags will fall by at least 50%, and also that as we learn more about our processes through detailed tracking, we'll be able to take more cost out of them and improve our flexibility which will lead to competitive advantage." Compelling yes, and there are plenty of other opportunities – like managing closed loop supply chains involving products with expensive packaging like drums and trays, where automatic identification will help with everything from managing compliance to plant operations, maintenance and fraud. Being able to see into the real world at this level of detail could enable cost savings and service level improvements from tighter management – and the sensor and data integration issues are being resolved, as early adopters prove. Meanwhile, Prof Dan Jones, world-renowned lean thinking guru and author of the book 'The Machine that Changed the World' urges us to think first in terms of "brilliant processes," starting with the proven lean thinking concepts and methodologies, but extended to supply chains, and only then supported by IT. He points to Toyota's own claim that it gets "brilliant results from average people managing brilliant processes, whereas its competitors get average or worse results from brilliant people managing broken processes." Jones is adamant that achieving lean supply chain excellence isn't only about cutting inventories and time in a supply pipeline. Every bit as important is getting good flow to achieve what he terms 'rapid reflexive replenishment loops'. Information flow is key here and while Jones counsels against "simply buying a better scheduling system to do it", he concedes doing it sustainably is far from easy, potentially taking years. Others believe that for SMEs, while this kind of replenishment cycle should be a goal, for as long as customers are kings, it may never happen. In the meantime, good scheduling systems have crucial roles to play.