IT in Manufacturing


Moving from business intelligence to intelligent operations

March 2013 IT in Manufacturing

Manufacturing needs to be more agile, adaptive and efficient all over the world to stay in business. The response to market needs has to be faster and delivery needs to be at a lower cost than ever before to be globally competitive. Companies are starting to realise this and as such they are looking at ways to increase the efficiency of the business by utilising the available data better.

In my opinion, companies are misdirecting their focus at the top end of the business. Increasing the speed of purchase order processing or invoice generation will not bring about major costs savings for any business, when compared to increasing the speed of product change-over on a production line. Money is continuously being invested to improve business reporting and ensuring financial transactions are captured in real-time. At a great cost.

Compared to the spend at Business/ERP level, the ratio of actual systems and solutions spend at operational levels is very small. I have seen a number of companies willing to spend R200 million to upgrade the ERP system (with no proven return on investment or ROI), but the same company is not willing to spend R2,5 million on a project with a proven ROI at factory-floor level. I believe that one of the main reasons is that the manufacturing industry focus has shifted too much towards the shareholders, to the detriment of the customers. Systems are implemented to ensure accurate and timely financial reporting to executives and shareholders, but to the detriment of ensuring effective delivery of a quality product.

Companies spend a lot of money implementing ‘business intelligence’ systems to enable accurate reporting, bringing together data from various parts of the business into an environment where data can be visualised from different perspectives. This leads to more efficient reporting and decision-making at the corporate level. The problem is that it does not help the manufacturing facility improve output, efficiency or quality.

At operational level, real-time data is needed, in real-time, to make decisions that can directly influence manufacturing operations. The focus here is ‘real-time’. Operational intelligence – OI (or enterprise manufacturing intelligence – EMI) systems can enable better decision-making at operational levels, with the corresponding financial impact. In one of my previous articles my co-author quoted some research that most processes only operate in their optimum state for 20% of the time. Increasing this to 75% or even just to 50% of the time will have huge financial impact, from processing time savings to raw material savings to yield improvements to quality improvements. Managing the state of the process can be done at control, MES/MOM or EMI levels, as long as it is shown to the operator in such a way as to influence his decisions and behaviour.

Whatever measurements are provided to operators, supervisors or managers, need to be considered very carefully to ensure that it drives the behaviour toward an effective business outcome. Take the following scenario as illustration.

Company X prides itself on customer service. They have spent several million ensuring that they meet their delivery schedules. At plant level, operations are measured against compliance to schedule. Teams that meet their schedules consistently are incentivised and those that miss their schedules consistently are disciplined. This measurement has driven behaviour and the company has a reputation for their good customer service.

During a production campaign, one of the extruder dies break. The machine stops and production cannot continue until a replacement die can be located. Luckily the production manager has established a relationship with a vendor that keeps an emergency stock of dies located 30 minutes away from the factory. No stoppage will thus last more than 90 minutes. None of the other extruders are set up to take over the job in progress. To meet their schedule, operators and maintenance personnel are moved around so that all available hands can be utilised to get the machine up and running as soon as possible. The production manager has trained his team so well that the die-exchange process takes only 75 minutes before the machine is up and running again. The operations process was efficient and everyone worked together smoothly. Although the whole team works overtime for one hour, the schedule was met and everyone is happy. Or are they?

What if the order the machine was processing was cancelled just after production started? What if the customer pushed out his delivery date by a week? Would mobilising the workforce to achieve this efficient die change-over process contribute toward the effectiveness of the operations outcome? Not in this case. A whole team has been paid overtime to meet a schedule that has become irrelevant or dated. If however, the operations were more intelligent in their use of data, they could have decided to change over to a different order or even a different product altogether. This would have increased the operations effectiveness greatly as the team would have produced to fill an existing order due for delivery the next day.

Based on the above scenario operations were very efficient, but not very effective. Making operations intelligent requires information in real-time. If the production scheduler knew that the order moved out or was cancelled, and he had the information regarding the machine breakdown in real-time, he would have changed the schedule immediately to stop the production run and change over to a different order. This is making the operations more intelligent to thereby improve the effectiveness of the operations outcome.

Consultants and people implementing business intelligence and operational intelligence solutions often lose sight of what the business is all about. They focus on streamlining business and operations processes and making them more efficient, where the goal should be on making the whole business more effective.

To indicate the point above, I would like to share an anecdote about a company I dealt with a number of years ago. The company consisted of a number of mines and a number of smelters. Transfer of material between the mine and the smelter was at a pre-determined ‘internal transfer price’. This transfer price for its high-grade material was lower than the price it could get from a competitor’s smelter. To increase the profit of the mine, the mine thus sold the high-grade ore to the competitor and sold only the low-grade ore to their own smelters.

Obviously this led to the smelters running very inefficiently from a power consumption perspective and they required a high-grade material to supplement the low-grade ore they receive from the mines. The smelters then bought semi-processed high-grade material from the smelters of the competition. This worked very well and increased the efficiency of the smelters to profitable levels again. But, in effect the smelters were buying their own high-grade material (supplied by their own mines) back from the competition (who was making a healthy profit on the deal). If this situation was known to a wider audience and debated by executives, various alternatives would have been possible that would have benefitted the company more. For one, they could have changed the transfer price so as to negate the advantage of selling to the competition smelters, giving the smelters the opportunity to process a better mix of high and low-grade ores. They could also have negotiated a deal with the competition to toll-process some of their high-grade ore to the semi-processed state, thereby paying only for the processing and not for the ore as well. Lastly, with the value they lost by selling high-grade material to a competitor, they could have built a plant to do their own semi-processing and so cut out the middle man.

From a financial and business perspective, both the mine and smelter operations became more efficient and profitable, but they did not become more effective. In effect, they gave money away.

In the final analysis, it does not help a business to automate or make any process more efficient if that process does not also make the business outcome more effective.

For more information contact Bytes Systems Integration, +27 (0)82 654 0290, [email protected], www.bytes.co.za





Share this article:
Share via emailShare via LinkedInPrint this page

Further reading:

ESG as a growth lever
RS South Africa IT in Manufacturing
Leading organisations are treating ESG not as a compliance obligation but as a practical tool for operational efficiency, supply chain resilience and business performance, with data and collaboration central to unlocking its value.

Read more...
Preparing Africa’s data centres for the demands of autonomous AI
Schneider Electric South Africa IT in Manufacturing
Africa’s data centre infrastructure must evolve significantly to support agentic AI workloads, with GPU-intensive computing, advanced cooling and reliable power demanding a fundamentally different approach to facility design and investment.

Read more...
Virtualising the control room to reshape building management systems
Schneider Electric South Africa IT in Manufacturing
Schneider Electric explains how virtualising building management systems frees facilities teams from ageing hardware, delivers stronger cybersecurity and enables portfolio-wide control from a single interface.

Read more...
AI infrastructure solutions for data campus
Schneider Electric South Africa IT in Manufacturing
Schneider Electric and Motivair deliver more than $290 million in power and cooling infrastructure for TeraWulf’s AI-ready Lake Mariner data campus.

Read more...
Africa’s data centre evolution: AI, edge computing and new energy demands
IT in Manufacturing
With less than half a gigawatt of active white space capacity serving over a billion people, Africa’s data centre sector faces a stark gap that AI’s surging power and cooling demands are set to widen. Vertiv and Open Africa Data Centres unpack how modularity, edge computing and smarter energy strategies could change the equation.

Read more...
How data and AI are unlocking South Africa’s next mineral frontier
IT in Manufacturing
Data, AI and blockchain are reshaping how mining companies explore, extract and prove the provenance of resources, opening a new frontier for South Africa’s mining sector.

Read more...
Luna Rossa partners with Siemens for 38th America’s Cup
Siemens South Africa IT in Manufacturing
Siemens details how Luna Rossa is using digital engineering and simulation tools, from CAD to structural optimisation, to design a faster yacht for the 38th America’s Cup.

Read more...
AI is raising South Africa’s cybersecurity stakes
IT in Manufacturing
As AI accelerates both the sophistication and scale of cyber threats, South African organisations face significant gaps in cloud security, data governance and identity management that need to be addressed before AI capabilities are further embedded into business operations.

Read more...
How modern EAM is becoming the driver of productivity, resilience and sustainability in mines
Schneider Electric South Africa IT in Manufacturing
Modern enterprise asset management is turning maintenance from a routine function into a strategic priority, helping mines extend the life of ageing infrastructure while improving productivity and safety.

Read more...
Physical AI solution with potential to transform South African manufacturing
IT in Manufacturing
NTT DATA and Hyster-Yale Materials Handling have deployed physical AI in an industrial assembly environment, embedding intelligence into production workflows to improve quality assurance and cut deployment timelines significantly.

Read more...









While every effort has been made to ensure the accuracy of the information contained herein, the publisher and its agents cannot be held responsible for any errors contained, or any loss incurred as a result. Articles published do not necessarily reflect the views of the publishers. The editor reserves the right to alter or cut copy. Articles submitted are deemed to have been cleared for publication. Advertisements and company contact details are published as provided by the advertiser. Technews Publishing (Pty) Ltd cannot be held responsible for the accuracy or veracity of supplied material.




© Technews Publishing (Pty) Ltd | All Rights Reserved