Streamlining operations from quote to delivery

Make-to-order production is on the up. Or more accurately, companies are working harder to make their operations more slick, efficient and cost effective, and using the ideas, techniques and technologies that enable lean, agile, demand-driven manufacturing to do so. That's among the central conclusions from a study carried out for this journal by Benchmark Research and published last month in a Boardroom Report, also produced by Manufacturing Computer Solutions magazine. It shows that an overwhelming 71% of British companies already make mostly or exclusively to-order, and suggests that not only are they extending its role, but getting more sophisticated about how. Or at least they're trying to – which strikes a chord with the number of enterprise software (ERP and supply chain) developers now claiming 'project-orientated', 'demand-driven', 'to-order' and the like in their marketing. Companies like IFS, SSA Global, Oracle, SAP and Microsoft Business Solutions and its partners are invading the territory formerly the preserve of specialists like Cincom, SSI and Lilly Software (now part of Infor). They sense the need out there too, and are following what they no doubt see as the money. As Alastair Sorbie, managing director of IFS, says: "Project-orientated manufacturing is becoming mainstream: if you talk to European companies, even if production is done somewhere else, development is being retained, so there's a lot more design and project work. The whole industry is becoming focused on that. It's like our migration from an agricultural economy to the industrial economy: now it's from a manufacturing to a project economy." That being the case, beyond the top line figures, Benchmark's stats provide several useful pointers that should help guide those working their way through all this. In no particular order, the reasons given for not making everything to-order are most illuminating: they point to real supply chain issues on the one hand, but downright stupidity on the other. Variability issues Seasonality and/or peaks and troughs in demand (reported by many respondents) cannot be ignored, and both are challenges (in varying degrees) for any to-order manufacturing strategy. Put simply, lean's notion of making batch sizes of one isn't going to come easy for those with variable demand, big or configurable product ranges and long lead times. Hence, of course, the value of modern, streamlined 'quote-to-delivery' IT that helps to cut through what can be improved. But when users also tell you that senior management aren't convinced of the approach, or worse, that they have a warehouse they need to fill – well, you know it's education time! When others tell you, however, that communications with their customers and/or their suppliers are not all they need to be, you've just identified an area of genuine weakness most would recognise, and that absolutely does need management and system attention. And by the way, it doesn't have to cost a lot if the will is there from all parties. Just casting our eyes over others of the more serious challenges also helps here. Top of the list is production planning (reported by nearly 70% of respondents), followed by getting shopfloor processes and procurement working responsively enough (each 35%). Both point to other departments and systems that need care and some investment. Tracking materials movements and worrying about engineering change control are also recorded (around 30% each) – but both of these are common issues anyway. Critical to dealing with all of these, according to those in the study that are doing make-to-order well, are: number one, accurate and timely information about the factory; two, factories that can respond quickly enough to required changes; three, excellent communications with the supply chain. 80% of them say those are key, but only 35% are happy with the success of their factory responsiveness initiatives – and that figure falls to 27% when it comes to getting them to deliver up real-time information to the business. It dips even further to 17% for supply chain communications effectiveness. So it's not easy. Worth noting that by far the majority (some 60%) have chosen to change or significantly upgrade their ERP systems to get it all working, while 27% have also strengthened links between their ERP and shopfloor systems – mostly electronic shopfloor data collection (SFDC), production management systems, manufacturing execution systems (MESs) and so on. Those are crucial areas for investment. Mentioned less frequently as critical requirements, but still by more than half, are: tracking goods and materials across the supply chain; having excellent integration between operational IT systems; and fast and efficient systems for other departments which impact on the smooth delivery of what's ordered. So that's likely to be estimating and quoting, engineering design – you know your business. Since it's helpful, we also have good data about the technologies most successfully used to support these requirements too. On the shopfloor, no surprises, it's all about good SFDC and work cell information systems, but the change from last year is a move to greater sophistication – at least in terms of investing in electronic, as opposed to paper-based kit. For supply chain communications it's a similar story, with a substantial re-emphasis on online procurement systems, electronic alerts, barcode systems for automated materials and goods tracking, and also web EDI, hubs and call-off and forecasting systems. Armed with these observations, we can go off and start doing what we have to do to ramp up our competitiveness. Because that's what this is about – and if you still doubt it, just check out the benefits that to-order manufacturing bring, according to your peers doing it right now. Reduced raw materials, WIP (work in progress) and finished goods, along with commensurate reductions in working capital should come as no surprise – and 75% claim the latter, falling to a still tasty 50% for the rest. But many show a great deal more: like reduced manufacturing cycle times, costs and lead times, better estimating and quoting accuracy, improved ability to handle variety and better customer service – all at lower cost. Chicken and egg, very likely, but they did it and are enjoying the competitive edge all that brings. Clearly, you're going to need to attend to much more than your ERP and legacy systems to get this right, but they – and the business processes they automate – are a good starting point. The detail then depends on what you're doing. IFS' Sorbie points to the increased emphasis often needed on engineering PLM (product lifecycle management) functionality, for example. And for large scale, long term project work, there's the well known requirement for good, explicit cost controls and management throughout. For the majority, however, he suggests attention to being able to re-use quotations and bids when orders come in, and pass that data into manufacturing engineering (where necessary), production, publishing and after-sales service – making all the hand-overs as streamlined and cost efficient as possible. Similar thinking drives the requirement for better product configurators – in that case automating much of sales engineering and customer interaction. Then you're into the need for better internal scheduling tools, better visibility and near real-time links with the supply chain – all as per the Benchmark study. Best to get your own perspective on these through the experiences of some already well advanced in their demand-driven projects. Understanding what they're doing (and why) should help to clarify your priorities. Rest assured though: even in very different industry sectors, company sizes and operations, there is remarkable similarity between those doing well. Manufacturers' experience Wika, for example, which makes a vast array of process instrumentation – 35,000 SKUs, mostly pressure and temperature transmitters – is doing make-to-order with systemised lean. That's in the factory and the supply chain, and it's being rolled-out across Europe. Darren Hogg, Wika's group CIO, explains that the company's lean initiatives were all going fine till it found itself having to run with more frequent orders of smaller quantities and varying configurations. "We needed to do better than visual kanbans on the shopfloor," he says. "One of the hardest things to do with lean is to make it part of your standard work. It's the same with material flows: if they're not part of your systems, you can't look for continuous improvement, but you can slip. But if they are in, you can build rules and look for exceptions and then manage those." So that's what its eBecs flow manufacturing system is doing: capturing and automating what were visual triggers, and integrating those with its Microsoft Business Solutions Axapta ERP system. That's allowing several valuable improvements: for example, it's tightening up materials management at the plant supermarkets and enabling dynamic kanban sizing, while also making the company more responsive by automatically flagging live requirements to suppliers. But it's also enabling the business to reconfigure itself. Because eBecs is connected into sales and shipping, orders from sales can go straight to shipping, which in turn pulls demand against the cells and their suppliers. What's more, shipping can smooth demand against delivery requirements and production and material resource – because it can see capacity. Says Hogg: "As shipping sees workload build, so they might pull some more inventory in from this department, or post more onto that group of cells. And they can signal to sales 'I've got capacity here so if you can sell this I can keep them productive'." MRP still plays a part. "80% by value of our component supply is still though MRP," he says. Wika wants to get as much as possible on electronic kanbans, but for those with long lead times it has to forecast. But what's good about its lean ERP approach is that MRP will be aware of kanban signals so it can prevent duplicate ordering. Just as important, Hogg says it's capable of providing a great feedback loop for honing forecast accuracy. Even better, MRP is becoming more accurate so inventories are reducing further. "We now have a plan for every part – that's daily usage at cells including packing, and covering every A and most B components. C parts are now our greatest opportunity for reducing inventory – and with sporadic demand it's a matter of looking at standard deviations and getting the buffers right, or can we change design and have one item that covers five parts from local suppliers that puts it up to a B part." So that's one way. Meanwhile, Fairline Boats – which runs much closer to project engineering, making luxury power boats to-order at sites around Oundle and Corby in Northamptonshire – is focusing squarely on its supply chain. Indeed, what started as a drive to streamline and automate supply chain operations through ERP, has now broadened into a supplier portal project that's looking very impressive. The company has 11 production lines, and is heavily dependent on its suppliers for some 12,000 live parts – everything from barrels of resin to performance marine engines. Hence the interest in doing better, which started with cleaning the data and BoMs on its Syteline (Infor) ERP system, and using that to start planning boat demand for supplier forecasts, as well as labour projections, work-to lists and so on. That was fine with low volume trials but soon showed up limitations. Fairline supply chain director Matthew Taylor explains: "We were sending forecasts and call-off instructions to our suppliers as PDFs on email, but that's not robust enough for high volume exchanges. You need EDI, but that's difficult for smaller industries because of the costs and technology." Hence the web. Taylor looked at several systems, hosted and not. He says they're all comparable, but he chose Infor's SupplyWeb portal software on price and the fact of its integration into Syteline – and it's looking good. "Our suppliers are broadly supporting the idea – most are saying 'bring it on; others are more nervous. But we're starting small and rolling it out to groups of suppliers. Then it'll provide rolling 12-month forecasts, call-off instructions, as well as net change, alerts and exception management, depending on their appetite for it all." He is enthusiastic. "This is absolutely the right thing to do. We'll be able to roughly halve the inventory we currently hold to smooth out exceptions. So we'll be using our working capital more effectively. In the end we'll drive for something near to zero inventory, and with excellent line-side material availability too, we'll also increase our manufacturing efficiency." All well and good but back in the factory, James Walker, the gaskets, seals and packings manufacturer, provides an excellent example of back-to-basics systemised lean geared here to getting the all-important shopfloor responsiveness that makes demand-driven manufacturing viable. Here the impetus for investment was the user interface and detail of the automation and workflow: get it right, so operators see your system improving their ability to perform, and they'll use it. Get it wrong, and we know what happens. In brief detail, the company needed to link its lean, mostly visual, operations to its Oracle ERP system to get the business better in touch. Geoff Teasdale, James Walker product stream operations director, explains: "ERP systems aren't designed to manage the complexities of plant floor processes [and] the interfaces aren't always intuitive enough for plant operators." Its solution: Oracle partner Mestec's MES, designed to link ERP to the shopfloor and deliver real-time barcode data collection and production management functionality. That's very valuable here: "We're a high volume operation, but high variety, low volume of each," says Teasdale. "So we have to link strongly with MRP for purchasing, which means we have to keep MRP accurate. Mestec does the transactions – issuing raw materials, transacting to the next process or completing the item, acting as a front-end to Oracle." That's fast, visible, simple and provides for traceability. Adrian Wakefield, James Walker's business services director, says that since its introduction on the first product stream making custom mouldings, "we've seen a 35% increase in productivity, dramatic improvements in on-time, in-full delivery, and there's still room for more." Now it's been implemented on five of the company's seven product streams – a considerable investment involving multiple cells – and Wakefield says there are already major efficiency gains there too. "Is it making us better at make-to-order? We have up to date information going to and from the shopfloor, and that's helping us to be more agile. We're able to adjust more easily to changes in demand and changes to customer requirements. And the simplicity of the interface means it's good at engaging people on the plant floor. So yes, in conjunction with lean, we're shortening the information steps between customer and the shopfloor – and that makes a big difference." Interestingly, however, with MES supporting lean make-to-order on the shopfloor, the supply chain becomes the limit. "Lean lowers the water level of inventory and exposes the rocks of poor processes – and those include our systems and processes," says Teasdale. "So we now need to be able to give our suppliers their demand signals more quickly." Which leads us right back to supplier portals and web kanbans.