Unintended consequences

With 2013 just weeks away, manufacturers are turning their attention to their IT priorities – and budgets – for the coming year. But for many such manufacturers, the prospect holds very real dangers. "We see it time and again," says Kevin Luxton, founder and chief executive of QiSOFT, a specialist provider of a suite of factory-floor productivity and quality solutions. "Vowing to 'make a difference', manufacturers set out on some big transformative project such as a new ERP system. And in the process, they set back the pace of factory-floor improvement – sometimes by years." How so? How can a major transformative project have such an adverse effect – an effect which is surely the opposite of what management intend? The answer, says Luxton, is that companies overlook the impact that such major projects have on smaller improvement initiatives elsewhere in the business. "ERP systems are business-wide, and a new ERP system absorbs money, resource, and management time and attention from right across the business," he observes. "The result is that smaller projects get put back, or cancelled – even though their ROI is probably significantly higher than that obtained by replacing an old ERP system with a new one." Grandstand view While QiSOFT isn't alone in seeing this phenomenon, says Luxton, the company's product range does give it a grandstand view of the damage that ensues. As a purveyor of systems sharply focused on quality, shopfloor data collection and manufacturing execution systems (MES), QiSOFT's customer relationships are with manufacturing personnel well-attuned to the benefits that such systems can bring. "Improvements in quality, or manufacturing execution, flow straight to the bottom line," stresses Luxton. "You're talking a solid ROI, with solid cash benefits. And when such supposedly 'small scale' projects become sidelined by new ERP systems or other big projects, that's a bottom-line benefit that doesn't occur." Yet it's often not the direct cash cost of the quality system or MES initiative that is the barrier, he adds. "The cash outlay is rarely the problem," he explains. "It's the supposed impact on IT resources, and IT management time and attention, that's cited as the stumbling block. People say: 'Let's focus on one thing at a time' – and then prioritise low-ROI ERP systems over high-ROI quality or productivity initiatives." Just as damagingly, factory-floor hardware is also impacted, and for similar reasons: too much else is going on, and replacing or upgrading equipment out on the factory floor somehow never quite gets done. "We'll talk to customers about a new feature in our standard products – a feature to which they're fully entitled – and discover that they're running on 10- or 15-year-old computers that struggle to support it," says Luxton. "Old hardware isn't just a direct drain on productivity, as well as more costly to maintain, but it impacts on the rate of manufacturing improvement. Compared to the bottom-line impact of a quality or productivity improvement, the cost of a new computer should be an irrelevance." Three steps to success So what can be done? Luxton is realistic, and accepts that ERP system implementation isn't going to go away. Instead, he urges manufacturers to bear three things in mind as they set next year's IT priorities. "First, understand the opportunity cost: know the ROI and cash cost of the smaller-scale projects that you're proposing to defer. That way, you'll see the bottom-line benefit you're not going to get. "Second, don't cancel, or defer indefinitely," he adds. "Define a firm date, and stick to it. To a manufacturer, there's nothing more fundamental than manufacturing, so don't let the IT tail wag the manufacturing dog. And thirdly and finally, try to hold some budget – in cash and resources – in reserve, ring-fenced for factory-floor IT initiatives." Will manufacturers listen? Luxton shrugs his shoulders. "Change isn't essential, to paraphrase quality guru W Edwards Deming: survival isn't mandatory. And starving the factory floor of ROI-enhancing IT equipment and systems isn't a sensible long-term course of action. Smarter companies see this. The remainder? They've only themselves to blame if they don't."