PREPARING FOR THE NEXT IO

NEW INTERNET TECHNOLOGIES ARE SUPPORTING SMART NEW MANUFACTURING PRACTICES, RESULTING IN LOWER COSTS AND A BETTER ABILITY TO ADAPT AND COMPETE, SAYS ANTHONY PEAKE.

espite the current economic adversities affecting the manufacturing sector, many firms are thriving precisely because they have recognised these problems and changed their approach in D order to accommodate them. Many have

looked to rival manufacturing centres in the Far East and America and learned from the new techniques being practised there.

The ideas of lean manufacturing, agile manufacturing and virtualised manufacturing have been prevalent for some time, but were initially only viable for companies starting from scratch or firms who were prepared to take a significant financial risk in building entirely new production and distribution systems and disrupting existing operations. Those

risks may have been acceptable to Toyota and Dell, -ut for the typical European manufacturer with fewer than 500 employees and already paper-thin profit margins, a large up-front investment has simply not been an option. The result has been intensified price pressure on the “traditional” manufacturing sector, prompting a vicious spiral of dwindling sales, lower profits and reluctant job cuts.

Manufacturers are well aware of the need to adapt to survive, but with the pressure coming from all directions, many are at a loss as to how to adapt and - with only limited funds available - where to invest in order to achieve the best result. The temptation to make “quick fixes” like job cuts (see Fig.1) and reduced marketing activities often turn out to be simply adding fuel to the fire in the long term.

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-- 26 24 22 20 18 16 . . 12

10 1978 80 82 84 86 88 90 92 94 96 98 2000

FIG. 1 MANUFACTURING EMPLOYMENT As Vo OF TOTAL IN THE UK

FIG. 2 AN AUTOMATED SUPPLY CHAIN CAN BE BUILT BY DEGREES

Cutting research and development can sound the final death knell for a manufacturing firm, but many perceive there to be no other option.

Nevertheless, the leap from traditional manufacturing to more modern, leaner practices may not be as great as it might currently seem. What once required major investment and disruption can now be achieved incrementally and affordably thanks to the increasing sophistication of packaged software applications. Manufacturers have long been aware of the potential of the Internet to provide a comprehensive communications network uniting suppliers, producers, sub-contractors, distributors and customers, but the execution of a fully Internet- enabled supply chain has thus far been largely out of the reach of all but the largest companies. This is changing. Internet-enabled software is now available to purchase in manageable chunks, meaning that manufacturers can address one aspect of their operations at a time, and gradually add more compatible pieces to build the full picture (see Fig. 2).

MANAGEMENT SYSTEMS Investment in a core manufacturing management system should be the first step in using the latest Internet-enabled applications software to underpin a gradual shift towards more modern manufacturing techniques. “Lean” practices like build-to-replenish and build-to-order require a robust management system that can help firms increase the flexibility and efficiency of existing plants. Today’s software systems can pinpoint the best manufacturing method for each product - discrete, assemble-to-order, engineer-to- order, repetitive, process, lot-based, or flow - at the right time. This enables companies to establish highly customised, hybrid manufacturing environments where continuous improvement programmes are linked to organisational goals.

With inventory remaining one of the largest cost

centres of any manufacturing business, one of the key benefits of a modern manufacturing management system is dynamic inventory management functionality, which can reduce exposure to the risks inherent in uncertain economic times and avoid large write-offs. Companies can now purchase Internet- enabled inventory optimisation software that can provide answers to questions like: “What is my most profitable customer service level?”, “How much inventory should I hold, and where should I hold it?”, and “Should I stock cpmponents, partially-finished products or finished articles?”.

Knowing the answers to these questions can help firms dramatically reduce the amount of inventory they hold at any one time, and thus cut costs out of the business. A case in point is UNITE Group, a British manufacturer of partially pre-fabricated accom- modation for students and NHS key workers. UNITE has been progressively moving towards leaner production techniques, of which inventory management is an important component.

As manufacturers move to leaner, more agile and distributed production lines, one consideration that comes increasingly to the fore is product quality, This is true of both discrete manufacturing businesses, where product quality has sometimes been found to suffer as a result of subcontracting all or part of the assembly process, and process manufacturing industries such as pharmaceuticals, where strict quality regulations leave no margin for error. Today’s manufacturing management software often includes automated processes for quality control, including tools for sampling, quality, analysis and defect tracking.

A core manufacturing management system provides a strong basis for incrementally building out the Internet-enabled supply chain using compatible software components. For example, key to the achievement of a mass customisation strategy is the ability to offer the customer an intuitive interface +

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Configuration

@ Automated * Creation of orders/schedules

p e Creation of BOMs 4 Assignment of routings I' /1 Pirk \ 4 Materials allocation

e Discrete

Manufacturing e Flow

invoice

Mass Customisation = Configuration+Supply Chain Integration (Flow)

FIG. 3 CONFIGURATION SOFTWARE LINKED TO SUPPLY CHAIN SOFTWARE AUTOMATES THE MASS CUSTOMISATION PROCESS

that lets them easily input the exact product configuration they require. This no longer requires long hours of effort on the part of the producer to create an interface for use by distributors or end- customers. Software is available to purchase as a package that provides either a web front-end for Internet sales, or an application that a sales person can use to go through a configuration exercise with the end customer.

Such software is already in use by large manufacturers, and their feedback used to refine the products for use in the wider market. Take Airbus Industrie for example. Each airline that has a contract

Constantly expanding through acquisition as well as natural growth, APC reached a point where it needed to streamline its operational systems if it was to continue to provide short delivery cycles and excellent customer senice.

Processing over 400,000 lines per year, APC now runs all its internal replenishment orders and customer orders through Oracle Order Management. Customer orders can be sourced from ED1 transactions, the APC web store, or manually entered, while the internal replenishment orders are automatically planned and released by its planning system. The software's ability to seamlessly handle all of these inputs as well as its support for the complex mix of pick-to order, assemble- to-order, and standard item shipments made by APC make it a key component.in APC's overall supply chain solution. As APC's chief information officer, Lisa Sipe, says: 'You get a global perspective in one place, in real time."

with the aerospace manufacturer has different requirements for almost every part of the aircraft, ranging from complex avionics through to cockpit instrumentation and cabin design and in-flight entertainment. There are thousands of different configuration choices and the components are made and produced by a plethora of manufacturers all over the world.

CON FI GU RATOR Using a configuration tool, customer requirements are handled automatically. As the customer specifies their requirements they are automatically mapped to a set of product options. Oracle Configurator can provide real time feedback about selections using a system of prompts and warnings. Giving the customer access to such information quickly and accurately 24 hours a day ensures a valid solution that effectively meets the customer's needs, and just as importantly, meets the customer's expectations.

For Airbus Industrie, this means that it is able to design the optimal solution for each client's requirements in significantly reduced time. In addition, having access to real time information means that many manufacturing issues have been fully addressed before production begins. Errors are reduced and operational efficiencies achieved, thereby streamlining the entire design process and providing a better service to the customer. Where Airbus Industrie has gone, others now follow: configuration software is now available to smaller manufacturers keen to move towards a more flexible and customer-responsive business model (see Fig. 3).

While configuration software can provide a useful front-end to a "mass customisation" approach, the next

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In April 2002 UNITE opened a new plant in Gloucestershire to replace a more traditional manufacturing facility. The new plant is based upon build-to-order principles learned from the Japanese construction industry, and is the first of its type in Western Europe.

the latest Internet-based manufacturing management software from Oracle to reduce the construction cycle and provide consistent quality at reduced cost. ‘We expect supply chain efficiency to increase as a result of automating the scheduling, order

UNITE has chosen to implement

management and inventory processes. This will allow us to reduce our construction time even further and more readily meet demand,” says John Tonkiss, general manager of UNITE‘S new manufacturing unit.

’We also hope to start releasing cash from inventory by reducing stock levels with increased planning functionality and by automating the returns and replenishment processes:

One very important point in the UNITE story is the speed with which its new manufacturing management software was implemented. Anyone who has been through a traditional

ERP implementation will remember the months and sometimes even years of agony before the system finally gets up and running. Now, not only has the software changed, but so has the way it is implemented.

Specialist software implementation firms catering to the manufacturing sector are working closely with the software vendors to reduce the length of IT projects dramatically. In the case of UNITE, an external consultancy called Sysao had the software up and running in twelve weeks, and such timescales are no longer unusual..

step should be to link orders with production by means enables the company to respond more rapidly than its of an order management system that can competitors to RFQs, consolidate materials purchase automatically produce a bill of materials from the across multiple projects, and virtually eliminate paper configured order, and route the order through the trails, telephone calls, and faxes to asuppliers and system by means of a workflow engine. This is the contractors around the world. In an interview with La approach taken by American Power Tribune in November 2002: Technip- Conversion Corp. (APC), a global ON LI NE SU PPLl ER Coflexip’s development director provider of power protection products Philippe Deschamps said that the and services. COLLABORATlON Internet-based approach had enabled

The core manufacturing software 1s NOW BECOMING the company to work on three projects can also be built out at the back end to simultaneously, replacing the project- open it up to suppliers. One of the long- A REALITY by-project basis to which the company touted benefits of the Internet, online r---=- J had previously been obliged to work. supplier collaboration, is now becoming Technip-Coflexip is currently adding a reality If unnecessary IT costs are to be avoided, the new software components to the site to enable supplier collaboration software should be chosen for collaboration on plant design, and is looking at its ease of integration with existing software packages. creating a centralised resource for transportation IT industry analysts believe that for every €5 spent on management. software licences, a further €45 is often spent on Large companies like Airbus, APC and Technip- integration. This is something that the manufacturing Coflexip have led the way in adopting new Internet- industry can do without. based software to underpin new smart manufacturing

Companies with an increasingly outsourced practices and drive costs out of the business. The approach to manufacturing should investigate newly- software that they pioneered has now reached available software tools for online collaboration with maturity, and consequently is becoming more easily suppliers and sub-contractors on product design and available and affordable to the 46,000 or so mid-market project rollout - a new category of software which is manufacturing firms in Western Europe. With often referred to as PLM, or product (or project) increasing pressure on European manufacturers to lifecycle management. Online PLM software has long become more flexible and respond more quickly to been employed by French construction firm Technip- changing market circumstances, the time is ripe for Coflexip to manage the myriad of sub-contractors it this most traditional of sectors to evaluate the latest uses to design and build the oil refineries and software tools that can help move to the next industrial facilities it delivers to customers around the generation of manufacturing. world. Collaboration takes place on a secure website, where all authorised parties have access to Technip- Anthony Peake is Director, supply chain management, Coflexip’s commercial and technical information. This Oracle Europe, Middle East and Africa.

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