IT will be a key factor in the ability of manufacturing
companies to cope with a downturn by enabling them to cut costs,
build longer and more complex supply chains and respond faster to
changing demand.
Technology already underpins the move to offshore and demand-led
production by making it possible for manufacturers to communicate
with far-flung suppliers, manage shorter product lifecycles and
collaborate more effectively with business partners.
ARC Advisory
Group, a manufacturing technology specialist, recently
completed a worldwide enterprise IT survey into how manufacturing
companies will be spending their IT budgets in the coming year. Top
of users' shopping lists are systems to support supply chain
processes, followed by technology to run their manufacturing
operations better.
But the really hot topic for hundreds of the world's leading
manufacturers, says Simon Bragg, ARC's European director, is
analytics - software containing algorithms for analysing
manufacturing processes.
"Rather than putting in a multimillion-pound ERP [enterprise
resource planning] system designed to solve all their problems,
companies are looking more closely into the question of why they
are screwing up," Bragg explains.
Business process optimisation
is not a new idea. When Toyota supplanted General Motors as the
world's biggest car maker, the Japanese company's success was
ascribed to its adoption of
lean thinking - a determination to cut out waste, an emphasis
on making small, continuous improvements and an insistence on
customer service.
It is no surprise that manufacturers have caught on to
continuous improvement, says Bragg. "You ought to be more
interested in tools that tell you under what circumstances your
processes break, on which products, with which operator, and at
what time, so that that you can see if there is a common
pattern."
Previously expensive analytical software, affordable by only the
biggest companies, has got a lot cheaper. But its wider application
has brought the problem of information overload. Business analysts
struggle to interpret the flood of data now available to them.
"The tools have gotten faster, bigger and more capable," says
Vince Wiggins, vice-president of scientific development for data
analysis software company
StataCorp. "But they are still
tools and require skilled craftsmen to wield them."
Meanwhile, for all the work in this area, Bragg is not convinced
that IT developers have really cottoned on to the potential of
analytics. "It is not clear to me that IT vendors really understand
the tools that could be used with their data," he says.
The wave of investment in
big-ticket ERP systems may be over, but manufacturers are still
the largest group of ERP users, representing around 40% of the
market. During the 1990s many of them struggled to make their big
deployments work, but that looks like a thing of the past.
"You'll always find a company that's having a problem with an
ERP system, but the era of the big cock-up is over," says Bragg.
"People have moved on to relatively small projects with a payback
of a year or two."
Build to order is one trend that is driving IT innovation in
many industries. For Dell Computer, the company that first showed
manufacturers how to link customer ordering systems with
manufacturing to drive down inventory levels, the idea is nothing
new.
"Within one minute of receiving an order, whether by phone or
internet, a signal is transmitted to suppliers that tells them what
to deliver to Dell's manufacturing facilities," says Nicky Hartery,
vice-president of manufacturing operations at Dell. "It is vital to
design, optimise and operate processes from receipt of order
through to customer delivery as a single integrated system."
Car makers are still struggling to match that level of
automation, but they are being driven on by overcapacity and
competition from emerging economies.
Big disasters may belong to the past, but there are challenges,
says Bragg, especially in the continuous process industries. "Take
the example of a mining company used to operating in Australia.
They move to Peru where there is no satellite communications and
they need to train local Peruvians how to do things."
Closer to home, all manufacturing companies are keen to improve
their supply chain performance. Some argue that an efficient supply
chain is the best competitive edge a company can have, linking a
manufacturer with its suppliers and its customers and an essential
element in profitability.
Supply chain partners have two main aims: to keep the amount of
product in the chain as low as possible, and to know where it is at
all times. Effective information flows from one end of the supply
chain to the other are critical to keeping tabs on goods.
But that's no easy matter when up to 40 organisations around the
world may be involved in a single consignment, which might also
have a lead time of up to 60 days. At the sharp end, data capture
technologies such as
radio frequency identification (RFID), barcodes and voice
recognition are being deployed in warehouses and on trucks to
capture supply chain information.
Hand-held voice terminals are now widely used in warehouses to
direct workers picking and putting away goods, while RFID is
increasingly deployed in the automotive industry to track parts and
finished vehicles.
Dutch car handling company Broekman, for example, has trialled
RFID to track 40,000 vehicles from 15 manufacturers at its
Rotterdam facility. Tags are placed inside the vehicles to protect
them from the elements.
But the biggest spur to RFID deployment remains grocery chains
such as
Wal-Mart in the US and
Metro in Germany. They have insisted that suppliers of food and
fast-moving consumer goods tag their containers to facilitate
handling and reordering processes.
Although the cost of RFID tags has fallen heavily they are still
not cheap enough to slap on any but the most expensive supermarket
lines such as razor blades and clothes.
Some supply chains are now managed by 'control towers' manned by
logistics specialists who monitor and co-ordinate activities. Their
involvement begins with the placing of a purchase order - with a
supplier in China, for example - and runs through to the arrival of
the goods at a UK distribution centre.
Event management software provides an insight into incidents
within a supply chain. With an independent platform it is possible
to exchange information with all the parties involved in the
logistics process and consolidate data to obtain a single view of
what is going on.
This intensive monitoring enables companies to react to events
and redefine their supply chains. Mick Jones, divisional managing
director of DHL International Supply Chain, says, "It gives a
company greatly increased control and the ability to really
understand its cost base from end to end so that it can see the
impact of its decisions on costs. It is an investment in
understanding and mapping the supply chain."
It helps that supply chain software now places more emphasis on
usability. Specialist firm Manhattan Associates has introduced
weather information, maps and shipping data into displays that
indicate the whereabouts and status of goods in the supply
chain.
"Users want personalised information structured for them,"
explains executive vice-president Eddie Capel. "Systems have to be
capable of handling unstructured data and social networking
applications."
Warehouse systems and transport management software need to
dovetail with one another, while business communications and
freight documentation must be exchanged as seamlessly as possible,
using standard formats shared by all supply chain participants.
But the presence of supply chain members without access to equal
levels of technology means integration is not always easy.
Factories in developing countries may rely on spreadsheets, faxes
or the post to transfer product information, so supply chain
networks must be able to cater for a variety of formats.
Sharing information
Electronic Data Interchange (EDI) standards, which cover the
exchange of business documents such as orders, manifests and
invoices, have been a mainstay of supply chain communications for
decades, but in the past they have relied on expensive, proprietary
software.
The advent of web-based business-to-business portals containing
e-catalogues and procurement software is a cheaper alternative.
Although some large companies envisaged trading entirely through
so-called online exchanges at one stage, their experiments proved
over-optimistic.
Nonetheless many organisations are migrating to standards such
as the
AS2 protocol for embedding EDI documents into XML. Wal-Mart,
for example, requires its trading partners to use AS2.
One of the major challenges for any manufacturing company is how
best to manage its products, from conception to the end of life,
especially when the life of so many products is much shorter than
it used to be.
Product lifecycle management software helps here by providing a
single database of all the information needed to manufacture an
item. Specifications, designs, bills of materials, engineering
reports and so on are held centrally and made available to
engineers both inside and outside a company. Packages include
workflow features that help in approving changes and ensuring data
is kept up to date.
The rewards for manufacturing companies that make the right
decisions about IT are clear. They will be more competitive because
they have a greater chance of having their goods available at the
right time and at the right price, and they will be more responsive
to market demands.
"For most manufacturing companies the data is there," says
Bragg. "Now it is a question of how do we use it to improve our
processes?"
Main suppliers of manufacturing software
Manufacturing automation: ABB, Honeywell, Invensys, Siemens
ERP systems: IFS, Infor, IQMS, Microsoft Dynamics, Oracle, Sage,
SAP, Syspro
More on supply chain management >>
More on business intelligence software >>
David
Bicknell's RFID blog >>