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With SIMATIC IT your plant transforms …

… into effective market responsiveness.

Manufacturing Execution SystemGiven today’s market requirements and challenges, outstanding market responsiveness is the only key to sustained success. And this is exactly what Siemens SIMATIC IT provides you with – through exceptional flexibility and efficiency of your processes and systematic tapping of hidden capacities. Integrate all processes and information across all levels of your company. From raw materials or parts to the finished products. From the shop floor level to the corporate management level. Reduce operating costs with a future-proof open standard solution. Turn your production plant into your personal tool for superb performance and greater success with Siemens SIMATIC IT. More information: www.siemens.com/valueSetting standards with Totally Integrated Automation.

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manufacturing execution systems

Modern CFOs are not only concerned about managing the company’s money – they are looking for ways to pull the levers of profitability and financial success

throughout the enterprise. For companies with manufacturing facilities, CFOs will find many of these levers in the production plants themselves. While production may seem far removed from a finance director’s training and background, it can be a major determinant of business results.

Many of the assets of a manufacturing company – machinery, tooling and materials – lie in the plants, and the buildings themselves are often specially-built, expensive assets. Everything about how those assets are used can directly affect the company’s success. Such as:

• Productivity and efficiency of those assets and the employees in the plant clearly can impact return on net assets. Initiatives such as Lean and Operational Effectiveness often focus on this lever.

• In addition to the efficiency of the actual production process, the overall end-to-end cycle time through the plant has a major impact on inventory levels and order-to-delivery as well as cash-to-cash cycle time.

• The quality and reliability of the processes the assets in a plant perform determines not only the quality of the products, but also the amount of assets required to churn out a product ready to sell, or cost of goods sold. Scrap and rework are nearly universal in production environments but they actually add cost in achieving the same output. Problems not caught in the plant can result in very expensive warranty claims or recalls.

• Production plants house critical performance hurdles for suppliers. Checkpoints at inbound receiving have metrics such as on-time arrival of inbound materials and meeting order expectations on quantities and specifications. During production, supplied direct materials are

evaluated for performance in the company’s process and as part of the end product. Indirect materials must also perform in the environment.

• The production process is also where the product design team’s work is tested. An innovative new product may never pay off if it does not move effectively through the factory.

• The commitments sales and customer service teams make to customers often rest on the ability of these plants to meet orders on time and to specification. Even for companies that ship from stock, the plants must replenish those stocks as planned or a customer will be disappointed.

However, these are not the levers that the company can manipulate to change outcomes. Within each of these major areas, many individual levers all combine to create those plant-level results.

For example, the efficiency of any one machine may be irrelevant to overall throughput and cycle time if the next operation runs significantly more slowly. The business gain will come only from improving the speed of the slower operation – not the faster one. Similarly, quality relies on each stage of production handing the next one materials that are ready to be processed. Pinpointing the exact location and nature of the problem causing a recurring defect is critical, as is creating a new process to prevent the problem from re-occurring.

anD thE MoDErnMES cFo

‘PinPointing the exact location and nature of the Problem causing a recurring defect, is critical.’

While manufacturing may not be the first responsibility a cfo envisions, for those working with production, it is vital. Julie Fraser, industry analyst with industry directions explains how manufacturing execution systems are offering cfos the keys to succeed.

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manufacturing execution systems

Guiding systemIn short, a plant-level view may seem detailed to the CFO, but many companies don’t have easy access to all of this information at an enterprise level. Even if it were available, that would not help employees solve the problems that diminish performance. Only a detailed view of each operation, shown in the context of its impact on the entire plant or the entire enterprise, can do that.

That is the role of a Manufacturing Execution System (MES), a dynamic information system that drives effective execution of manufacturing operations. Using current and accurate data, MES guides, triggers, and reports on plant activities as events occur, from point of order release into manufacturing to point of product delivery into finished goods.

We often depict MES as a layer of software between the enterprise or ERP system and the plant automation and process controls systems (see Figure 1). The jagged lines between each layer represent functionality that may be configured differently depending on the implementation. That is, depending on what software is already in place and what type of production is taking place, some of the functions may reside in either MES or ERP at one end and other functions may reside either in MES or Controls at the other end.

The MES layer of software provides:

• Accurate and timely information on the detailed production levers that plant employees need to identify and correct – or possibly prevent – problems.

• Historical data on the production process and product output to leverage in analysis for troubleshooting or for improvement efforts such as Six Sigma.

• Data to use for regulatory or customer compliance about the product and its history as well as the process by which it was produced. • Guidance for operators that illustrates, or in some cases, enforces best practice processes. These processes can improve throughput, quality, plant safety, and efficiency. • Current, plant-wide information for any other system to use, such as for customer order promising, supplier negotiations, engineering evaluations of design changes, materials planning, and cost calculations.

If MES is standardised across the enterprise, it can also provide comparative views of plant operating performance so best practices can be extracted, shared, and become the basis of sound decisions about where to produce and how. It can also help set expectations when outsourcing production and setting up new facilities.

MES provides visibility about operations that many companies lack today. Most companies use piecemeal systems in their production plants for specific functions or production areas. Without the comprehensive view of production MES provides, companies risk making poor decisions across the rest of the enterprise, from sales to engineering to procurement to service.

Beyond management visibility, MES is a system that production personnel use to ensure that activities match best practices. It helps with improvement programs as well as making compliance to government and customer regulations much more time- and cost-effective. With so many of the levers of profitability in the plant, it only makes sense to use the best available tool to manage production effectively – MES. FDE

JuliE FrasEr

Julie Fraser is principal of Industry Directions, an analyst firm that researches manufacturing and its value network. Fraser has over 20 years experience as a manufacturing software advisor and marketer. Prior to Industry

Directions, she was VP Marketing for Baan Supply Chain Solutions, Senior Analyst at AMR, and Editor of CIM Strategies newsletter.

‘WIth So MAny oF thE lEVERS oF PRoFItABIlIty In thE PlAnt, It only MAkES SEnSE to uSE thE BESt AVAIlABlE tool to MAnAgE PRoDuCtIon EFFECtIVEly – MES.’

Enterprise Applications ERP/SCM/CRM/PlM

Plant Execution MES

Equipment & line Control PlC, DCS, etc.

Figure 1

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AdAptAtion And Agilityin this ARC White paper Valentijn de Leeuw, director of consulting, ARC Advisory group,

discusses adaptation, which he describes as the key to business performance from manufacturing it.

The surviving or living company?In ‘The Living Company’ (Harvard Business Review, March-April 1997, p. 51), Arie de Geus reports about companies that live 100-700 years and concludes that most companies have a much shorter life span than they could potentially have. Naturally, we associate this with Darwin’s ‘survival of the fittest’. In fact, when companies strive to be leaders, they consciously or unconsciously believe that market leadership is an indicator of survival. The economy is seen as a battle field and we see the ‘fittest’ as the best armed for the struggle. We have ‘strategies’ and ‘tactics’. We ‘compete’ and are aware of the ‘war for talent’. If we look at the analogy more closely we realise that sometimes living species need to fight for life or take flight. But, most of the time they are in harmony with their environment through cooperation.

What Darwin really meantDarwin’s phrase ‘the survival of the fittest’ referred to his theory that the species best adapted to its environment had the highest chances to survive. Arie de Geus found that long living companies are good at adaptation. It is the quality and the speed of adaptation that determines its effectiveness. Speed of adaptation is agility. The quality of adaptation is the capacity to learn, to challenge beliefs and being creative, for example, by creating markets rather than reacting to them.

Fight is only one option for adaptation. Harmonisation is another one. Harmonisation does not imply losing one’s capacity to fight – the way EU countries collaborate is an example.

Adaptation by harmonisation may mean creating a performing organisation in which employees blossom, having privileged customer relationships, participating in the elaboration of open standards, adopting transparent governance practices or adhering to sustainable development. The individuality and authenticity of your company’s way of being will be your value proposition. Fight has become unnecessary.

Business performance from manufacturing ITMany recent studies show that IT and manufacturing IT have a great potential productivity and added value. For manufacturing IT, operations management or MES, the potential for ROI is ten percent or more, and payback usually estimated to be less than a year. In reality, payback is sometimes much longer and returns are not always at the levels expected. Operations do not always adhere, and resist new implementations.

An adaptive framework to implement strategyOperational excellence has shown to improve business performance. It is executed as a programme, supported by a framework which starts with a strategy, and has a set of overall goals, a management system and few operational domains each with target subjects and goals. Targets are prioritised, actions defined and results measured. The management system includes performance management, managing change and managing people. Performance management facilitates

knowledge-sharing and coaching when results are good. It challenges beliefs, and adapts goals and tactics when results are less good. Performance management ensures the goals are reached with a high degree of probability. Each framework component is necessary and all of them need to work in concert. The insufficiency of a component can cancel the effect of the other components. Manufacturing IT as any other enterprise or plant initiative should have a similar structure to be successful in achieving operational and business performance. Manufacturing IT fits very well in operational excellence programs to support the operational domains.In a dynamic environment, enterprises need to adapt their strategies. Strategy changes must be reflected in the frameworks to execute them. When it comes to business or manufacturing systems, they need to adapt quickly to company changes, by having the ability to plug-and-play while retaining overall performance. When sites are sold off, their manufacturing systems must be unplugged from the corporate ERP or when entities are bought or sold, ERP modules must adapt accordingly. Standardisation of interfaces and SOA enable the agility of business and manufacturing systems. Adapting the organisation to systems and vice versaWhen implementing systems for manufacturing or other domains, they need to be adapted to their environment, and vice versa. Operations excellence distills best practices. They should be reflected in a solution template that can be rolled out throughout the corporation.

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The template creates a lot of synergy but will never meet all requirements. The system must create comfort and direct benefits for the end user, and needs to meet their specific, local functional requirements, to ensure usage. The sites or functions must therefore be able to adapt the templates easily and quickly to their specific environment. This is the only way to transform business potential into operational and business performance. Best practices will evolve and should be reflected in new versions of the template that should be downward compatible and have the ability to absorb the existing customisation. Separate roll-out, upgrades and retirement of modules should be possible. The organisation

must be prepared for the change, adopt the principles of performance reporting, sharing experiences and learning. Change management can ensure this. It is of particular importance that local and global subject matter experts as well as corporate and operational management deliver messages consistent with the initiative, listen to feedback and take it

into account. They should be capable of motivating their people, obtaining their commitment and coaching them through the changes. To provide credibility and accountability, corporate and upper management sponsor the initiative and have personal roles in strategic and management system activities.

Adapting products and services to the market and vice versaThe performance management of manufacturing both at plant and corporate levels requires visibility on production quantities and qualities to compare it with production orders, customer quality, and self-regulatory requirements. Manufacturing needs to adapt to requirements and manufacturing intelligence needs to adapt to its different users in the plant or at corporate levels. Customers now also require a subset of that information, to inform themselves on the process, the ingredients and the quality of the product. Information transparency has become part of the

SIMATIC IT enables distributed manufacturing.

SIMATIC ITn SIMATIC IT Production Suite fills the

gap between business systems (typically ERPs) and control systems – allowing the conditions for an increase in the efficiency of the overall supply chain.

n SIMATIC IT R&D Suite is a new paradigm on the market allowing companies to capitalise on their research and development potential and develop new products faster, thanks to a seamless link between research and development and manufacturing processes and data.

n SIMATIC IT Intelligence Suite transforms and unifies real-time, historical and business data collected during production activities from single or multi-plant environments allowing advanced decision support.

‘MAnufACTuRIng InTEllIgEnCE nEEDS To ADAPT To ITS DIffEREnT uSERS In ThE PlAnT oR AT CoRPoRATE lEvElS.’

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Further informationSiemens AGWebsite: www.siemens.com/value

shop Floor, bottom linEPlant operations and manufacturing efficiency are appearing more and more regularly on the radar of the C-level. As such, manufacturing execution systems are increasingly the subject of cross plant, strategic IT investments part and enablers of the fulfilment of corporate (IT) strategies, whereas before, the decisions to implement MES or MES functionality, were usually taken on the plant level, or on a functionality needs basis.

Before, the decisions to implement MES (manufacturing execution systems) or MES functionality were more likely to be taken on the plant level, or on a functionality needs basis. Now, within manufacturing organisations, the need to converge the top floor visions and shop floor system needs becomes imperative. Driving overall value (through governance, quality, cost management, etc) is a need, but sustainable value creation processes

require optimum market responsiveness. This can only be achieved by having the right technological enablers in place.

Siemens software, SIMATIC IT is offered in the MES area, including SIMATIC IT Production Suite, SIMATIC IT R&D Suite, and also SIMATIC IT Intelligence Suite, and provides the exact window for the establishment of cross-plant and cross-divisional coordination – taking care of plant specific requirements as well, thanks to its hierarchical (modular and scalable) approach.

This allows companies to implement a cross-plant technological enabler that enforces value-driven strategies on the one hand and performance measures on the other. As such, SIMATIC IT provides more than production performance for single plants, or visibility for advanced decision support. It also enables distributed manufacturing and is key in unifying the various dimensions of the value chain, product and production lifecycles and asset lifecycle.

SIMATIC IT Production Suite fills the

gap between business systems (typically ERPs) and control systems, creating the conditions for an increase in the efficiency of the overall supply chain.

SIMATIC IT Production Suite is a collection of highly integrated components with a broad range of functionality, designed to coordinate the systems within each factory and standardise production across the entire enterprise for a better performance.

SIMATIC IT R&D Suite is a new paradigm on the market that allows companies to capitalise on their brand value and R&D potential and develop new products faster, thanks to a seamless link between R&D and Manufacturing processes and data.

SIMATIC IT Intelligence Suite transforms and unifies real-time, historical and business data collected during production activities from single or multi-plant environments allowing advanced decision support at plant speed, by providing the right visibility to various layers within the enterprise.

‘whole product’. For efficiency and effectiveness, products and processes must be adapted to manufacturing. Close collaboration between research, product and process development and manufacturing is required. The integration of manufacturing and research and development systems can greatly enhance this process. It should be easy to compare products as produced with the intended design and make design modifications to improve efficiency and quality in production. It should be a low effort to update and maintain product definition information consistently and at the granularity required in systems for innovation, manufacturing and the enterprise.

For a given product portfolio, manufacturing capability and demand, production schedules should be optimised for profitability. The adherence to schedule determines the actual profitability. Manufacturing intelligence ensures the feedback for improving schedule adherence. Production schedules become outdated

quickly when the market is dynamic. It should be possible to reschedule regularly and quickly, re-optimise and make trade-offs to adapt to this dynamic and seize market opportunities. The instant visibility on the manufacturing capability is of the greatest importance to ensure this agility.

Research and development plays a major role in learning and innovation by adapting products to the market needs, and creating new products for existing and new markets. Visibility on market feedback is needed regarding current products, and products produced at pilot scale need to be tested on consumers and clients.

To do so, the requirements for manufacturing systems at pilot scale are the same as described above for large scale production and need to integrate transparently with functional and corporate systems.

There are several software players in the market, that have a sufficiently broad vision on customer requirements and that are coming close to offering

products and services compatible with both the functional and strategic requirements described above.

ConclusionThe long-living enterprise is adaptive at all levels. It redefines itself and their markets by keeping a close eye on their performance. It adapts strategies to business performance and enterprise capabilities, and vice versa. Its manufacturing adapts to the enterprise and client requirements and market dynamics. Its product definitions are adapted to manufacturing and market demands. They also adapt the market by creating new demands. Business, manufacturing and other systems fulfil business goals and adapt to strategic and operational requirements. They are deployed within a framework for strategy implementation. FDE

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