Maintaining a tight control over your inventory can do much more than just squeeze an extra margin of profit from manufacturing. It can also generate business. Just ask Daniel Smith, an MES analyst for ZF Lemforder Corp., an automotive chassis supplier with headquarters in Dielingen, Germany.

According to Smith, the key to getting this business is basing your inventory control on a manufacturing execution system (MES). In fact, he claims that it is the only way that the facility where he is stationed, in Tuscaloosa, Ala., can keep a nearby Mercedes plant supplied with about 200,000 axle assemblies a year. These assemblies come in wide variety, about 90 variations for the front axles and about 60 for the rear. The automaker needs them delivered in the correct sequence in about four hours from the time that it orders each batch.

Given the variety, pulling finished assemblies from a warehouse in ZF’s 157,000-square-foot facility is not an option. “It would be impossible to have enough space to store them all,” explains Smith. Consequently, ZF makes the assemblies to order, which requires setting aside only two truckloads’ worth of storage space for finished goods, one for front axles and the other for rear axles.

The deliveries include more than just the axles. They also include electronic genealogies containing torque readings, inspection measurements and other quality-control data taken from the manufacturing process. When Mercedes scans the bar codes on the axles as they enter its assembly line, the same genealogy shows up in Mercedes’ information system. If it doesn’t, Mercedes stops the line until it receives the data, and fines ZF $20,000 for every minute that the line is down.

Mercedes and ZF struck this deal when the automaker retrofitted and expanded its plant a few years ago. The new mix of products made there meant an almost 100-fold increase in complexity for suppliers such as ZF, forcing them to tool up for the job. In 2004, for example, ZF replaced its old Unix-based system with SimaticIT, an MES-based system from Siemens Energy & Automation Inc., of Alpharetta, Ga.

The MES relies on radio-frequency identification (RFID) tags to keep track of orders and raw materials. When work on an order begins, it tells the enterprise resource planning (ERP) system, which puts the inventory that will be used for the job into a work-in-process (WIP) status. “As the job comes off the line, WIP is relieved, and finished goods is increased,” says Smith.

The software also maintains an appropriate stock of raw materials, about 14 to 30 days’ worth from overseas suppliers and about two days’ worth from North American sources. In the ERP system, from SAP AG, of Walldorf, Germany, a technique called bill-of-materials (BOM) matching puts all of the parts and possible variations into a table. ZF maintains its stocks based on a six-month forecast of the part numbers that Mercedes expects to use. Four or five days from production, Mercedes updates the forecast with an expected number of orders and the associated part numbers.

“When they send us an order, we match that to our BOM table and assign a build code to that axle set,” Smith explains.
The ability to trace inventory as it travels through the factory has had profound ramifications for ZF. “It’s no longer like having a jumbled mess in a box,” says Smith. “By keeping better track of WIP and finished goods, we were able to reduce the amount of inventory on hand.” He reports that inventory turns have almost doubled, jumping from 33 in 2003 to 60 in September.

Perhaps more importantly, ZF’s supplier rating with Mercedes has been fluctuating between 99.9 percent and 100 percent. This performance has been fueling ZF’s business from Mercedes and other automakers.

Another benefit of going to MES-based inventory control is portability. ZF’s central development group was able to put sophisticated process, manufacturing and business logic into a library and make it readily available all over the world. “At Tuscaloosa, implementation of the MES-specific logic took between two and four weeks. The same implementation is used in Chicago and Duncan, N.C., as well as in England, Austria, Australia and China.

Don’t underestimate the value of this ability, advises Claus Abildgren, marketing program manager for production and performance management software at Wonderware, a Lake Forest, Calif.-based unit of Invensys Systems Inc. In multi-plant rollouts for which the first installation might take four months, he has seen installation at subsequent sites take only two weeks or less.

Generating this kind of ...