In our last issue: Part I discussed the changing attitudes of investors with regards to their concern over the efficiencies of organisations they choose to invest in. Manufacturers find themselves having to produce 'made to order' products very quickly, with high standards of quality. From shop floor to customer, every step is being streamlined to keep expenses down and attract the ever more demanding customers (and investors). The plant floor can no longer be a grey blur that somehow gets hammered into shape to achieve changing goals. The plant floor is now a clearly defined, flexible resource, with direct connections to the whole organisation. - Ed.
Assets, supply, and the 'necessary evil' of maintenance
People, products and processes make up the manufacturing assets of any organisation. And asset management maximises the return on those assets in a manufacturing environment. Proactive planning around assets has historically been fragmented, at best. Assets have been assumed as a necessary evil by many manufacturers - a cost centre that generally did not receive a lot of treatment, other than the basics in order to meet production demands. Other parts of the business looked at the plant operations as unavoidable costs, especially in terms of assets. And, the assumptions of infinite capacity brought on by ERP master schedules further impeded the efficient management of those assets. At the same time, however, a plant floor operation more concerned with product quality and less with operational efficiencies did not place heavy emphasis on asset management, either. The focus, rather, was meeting production goals.
The management of assets on the plant floor requires tight coupling with the broader supply chain. The flow of primary materials into the factory, management of inventory and stock for maintenance and supply, and delivery of finished goods to distributors and customers has been complex and fragmented. For each entry and exit point, a custom supply strategy managed the flow of that particular good in or out of the plant. Rarely were the supply chains in lock-step with each other, or with the overall enterprise.
It is also important to note that despite infinite assumptions, plants themselves are not utopian. With machines and lines running in some cases up to 24 h a day, seven days a week, they are prone to wear, tear and breakdowns. Any shutdowns to a production line are expensive; an average loss for a discrete manufacturer can run around R10 000/h. And with the lack of asset management programs or supply chain efficiencies, precious hours can pass from the time a machine breaks down to the time a replacement part arrives for servicing.
It is not to say that plant floor employees did not take care of their machines. Traditionally, plant engineers would schedule preventive maintenance on their lines to catch problems before they occurred. The difficulty in doing such maintenance on a particular line was, again, the time required for the maintenance. And when production demands for the plant floor are high, it was hard to justify the time to stop for a system check. The 'if it ain't broke, don't fix it' mentality ruled the plant floor.
So in a historical context, information technology has arrived on the plant floor, bringing the potential for high levels of quality to finished goods and improved process yield, but all optimised within the four walls of the plant. At the same time, little was done to leverage plant floor data for enterprise-level decisions. Furthermore, the management of assets and supply were fragmented. Maintenance was mostly reactive, production was build to stock and processes were optimised for long production runs with little need to change quickly.
Then, in the late 1990s, two phenomena emerged that shook the old ways of running plants to their foundations: one, the Internet as a commerce tool and technology enabler; and two, a very, very fickle consumer.
Emergence of the Internet in manufacturing
'The customer rules' is a traditional misnomer in business that has existed with the underlying assumption: consumers will buy what they are told they cannot live without. In the past, the average consumer would tolerate an inundation of commercials and marketing techniques. Warehouses were stocked with high-quality goods ready to go. In other words, optimise yield and have products ready and waiting for the buyers.
But the consumer has changed over the past 20 years and is not as easily swayed by sales pitches or propaganda. Instead, the customer really does rule - and with an iron hand controlling a mouse. The current consumer mindset is one of control, and it is enabled by the power of the Internet as a buying tool and information source: 'I can order something the way I want - via the Internet, in a store, or some other way. I can request my own features for that product, and I expect it to be delivered when I need it. If not, then I will go somewhere else to get what I need.'
The Internet enables the average consumer to shop more aggressively and select from wider options. And this means that manufacturers cannot assume that the products sitting in stock will meet the need of a fickle consumer. The ability to shop online has been the catalyst for the economic eruption of e-business. Companies have scrambled to create e-based channels to interact and sell goods to consumers. And the pressure from Stock Exchanges for traditional manufacturing companies to sit up and take notice of the Internet has further intensified the race to sell on-line to consumers. Even today as the first wave of dot.com mania has started to crumble, the second wave is forming. Gone is the carefree approach of setting up a website and watching as orders pour in (or do not pour in). The next wave of e-business ventures (and those smart enough to survive the first wave) all know one basic truth: e-business does not work without a world-class supply chain coupled to world-class producers.
Still, the simplicity and ease of Internet technologies has truly evolved the way business is done. It has actually been a natural progression from where business stood five years ago. But it also means that business moves faster than ever; and if a manufacturer cannot satisfy the wants and needs of today's consumer, then it will be difficult to effectively compete and maintain the confidence of employees, customers - and the stock exchange.
The Canadian research firm, Vector Concepts, conducted a June 2000 survey of senior-level management within North American mid-sized 'to-order' manufacturers of automotive equipment, transportation, machinery and instrumentation. The survey covered such areas as primary business issues, e-commerce, engineering change and customer/supplier concerns. Some 60% of those surveyed said that improving productivity on the plant floor was the most important issue facing them. Within this group, about half are looking for ways to shorten workflow process implementation changes. Only 15% of this group said they have systems that currently can customise workflow processes for special orders. The majority said they believe they are losing business opportunities because of this, and some one-third plan to invest in new technologies to accomplish improved workflow customisation in the next year.
The good news is that manufacturers can aggressively compete in the marketplace - and they will find opportunities do so within the fragmented plant floor, monolithic ERP systems, and the needs for effective management of assets, maintenance and the supply chain. Bottom-line, the collaborative nature of e-business provides an exciting opportunity for control engineers, IT professionals and business planners (ARC Advisory Group, Aug. 2000). The Internet has converged the plant floor, enterprise, and supply chain. Tiered supply chains and contract manufacturing are forcing companies to manage the factory and the product in the context of a virtual, or extended enterprise, requiring Internet-enabled applications (AMR, January 2000). Today, most manufacturers have sound financial systems in place, and they are starting to add the right links to integrate with plant-floor operations.
And yet, it is a major hurdle to take the 'fire hose' of data flowing from the shop floor to the top floor and through the supply chain, and coordinating and collating it into usable information for analysis. Those who have been successful have used that critical information to drive up both productivity and flexibility improvements for manufacturing. They have used the information to implement programs that build to order; provide not just preventive, but predictive maintenance capabilities to avoid downtime; focus improvement program investments on areas showing maximum payback and, of course, use the Internet to connect upstream and downstream in the supply chain. There is an interesting tension between the complexity of all supply chain issues for any organisation and the simplicity needed to have maximum flexibility in the factory. And in the race to e-business, one cannot forget the plant floor - electronic management of the factory and product is crucial to the e-business effort (AMR, January 2000).
In our next issue, Part III takes a look at how e-manufacturing can 'take the friction' out of an enterprise.
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