Cloud Computing Finds Its Target with Mid-Size Manufacturers

June 1, 2011
Small and mid-size manufacturers are finding "software as a service" to be more than just the latest rage in Internet computing. It can be a practical way to stretch your IT dollars and enable global operations.

Some early adopters embrace new technology just to have it, but not Molly Hunting at Shape Corp. in Grand Haven, Mich. Her feet remained solidly on the ground while she investigated the merits of some new software delivered as a service on the “cloud.”

Her employer, a global manufacturer of automobile bumpers and other roll-formed products, had been looking for an enterprise resource planning (ERP) system to replace its aging one and the patchwork of management software surrounding it. “We weren’t really looking for cloud computing,” admits Hunting, director of information technology (IT). “In fact, we were skeptical about it at first.”

In the end, however, she and her colleagues decided to try this method of delivering software as a service (SaaS) anyway, because the application itself fit the needs of their business perfectly. It would eliminate the need to buy, integrate, and maintain other software packages that would be required to add the much-needed functionality that other, more-generic ERP packages did not provide.

Hence, Shape joined a small, but growing club of small- to medium-size manufacturers who are using the cloud to outsource their IT infrastructure to specialists. This group is using the Internet to access a variety of manufacturing software, including human-machine interfaces (HMIs), manufacturing execution systems (MESs), and ERP applications.

In essence, cloud computing is a method for delivering a shared pool of configurable and elastic computing services over a network, such as the Internet. These services can include such things as computing capacity, data storage, and application software. The idea is to make the delivery of computing services comparable to the delivery of electricity. Rather than generating the service onsite, the user buys it from a provider, who invests in the means to generate it. The provider delivers as much of the service as the user needs, sometimes buying extra capacity at peak times from other vendors.

The most popular category of cloud services is the delivery of applications, commonly called software as a service, or SaaS. Providers allow their customers to access and use software over the Internet, thereby eliminating the need for the users to install, run, and maintain the application on their own computers. Although most people identify cloud computing with SaaS, two other cloud services also exist: platform as a service (PaaS) and infrastructure as a service (IaaS).

Outsourcing ERP

In Shape’s case, the service is its new ERP system, Plex Online, which resides on the computing systems and data centers operated by Plex Systems Inc. of Auburn Hills, Mich.  Shape’s 1,300 employees access all business and shop-floor functions—from bills of material, to engineering change tracking and quality control to shipping—over the Internet. Through an investment in shop-floor integration, the programmable logic controllers (PLCs) on the presses and other manufacturing equipment also communicate directly with the system.

CLOUD COMPUTING: See more stories on how cloud computing has the potential to “disrupt” other automation disciplines.

Consequently, not only is pertinent business information available to authorized employees, but manufacturing metrics also reach the right people as needed. Based on tool and machine utilization, for example, the system schedules preventive maintenance and reports the downtime and productivity data necessary for keeping efficiency high. It also either collects quality-control data automatically, or requires it to be entered manually before processes can continue, in order to enforce quality standards and generate a traceability tree.

When Shape’s employees use these functions, they are accessing the one and same source code that all of Plex’s customers use. “Everything is happening in our system, and we’re just sending HTML down the Internet connection,” says Mark Symonds, chief executive officer (CEO) and president of Plex Systems. He explains that the software can do this with a relatively small amount of bandwidth because his staff wrote the application from scratch to run natively on the Web.

No disruptive migrations

Working with one set of code has a number of advantages. For example, it streamlines implementation. Users can turn on new features, rather than performing disruptive and oft-painful migrations. And the initial implementation tends to be quicker. Hunting reports that Shape was able to install Plex Online in all of its locations and at two of its subsidiary companies in 10 months. When visiting other users while shopping for an ERP system, “we were finding ERP implementations that had dragged on for multiple years and still hadn’t completed phase one,” she notes.

Hunting is finding that adding sites as her company expands is even faster than the initial installation. She points to the new plant Shape is opening in the Czech Republic. “I asked Plex to copy the configurations that we were using in our Mexico plant,” she recalls. “A week later, the software was up and running in a new area of the world.”

Another advantage of accessing the ERP software over the cloud is that Plex Systems takes care of typical IT maintenance, such as data storage, backups, and disaster recovery. Besides saving data in its main data center in Michigan, the company also continually transmits redundant data to its backup data center in Ashville, N.C.  “Like most SaaS providers, we have invested way more in this than most manufacturing companies would, because it’s our core competency,” notes Symonds.

Security is another investment that economies of scale permit SaaS vendors to make. Not only are the data encrypted as they travel the Internet, but Plex Systems and most other providers also employ a full-time security staff to update patches and oversee other procedures. “The security breaches that you usually hear about are mainly because people don’t keep their software up to date,” says Symonds.

Because experts at Plex Systems take care of these tasks, Shape does not employ programmers, database administrators, or IT security specialists onsite. “I have three business analysts and a junior analyst who support the Plex application for all of our locations,” says Hunting. “Our time is spent on more value-added activities, as opposed to maintenance activities.”
Strategic choice

Results like these were necessary to convert Hunting and her colleagues into believers in the power of cloud computing, but not everyone approaches the technology as skeptically as they did. In fact, cloud computing was an enabling technology for the strategic plan from the beginning at Chirch Global Manufacturing LLC, a 20-employee metal stamping and fabricating shop based in McHenry, Ill.

“For us, using the cloud was a strategic decision about outsourcing IT,” explains Anthony L. Chirchirillo, CEO. “Small companies like ours just don’t have the resources to hire high-salaried IT professionals.”

Yet, having an ERP system and the necessary infrastructure to support it is crucial these days for interacting with the large, global companies that constitute his customer base. For this reason, the contract manufacturer is using an ERP system called Epicor Manufacturing Express Edition, which Epicor Software Corp. of Irvine, Calif. delivers over the cloud as a service. “Rather than running around maintaining computers and modifying software code, we stay focused on our customers,” says Chirchirillo.

Part of that focus is managing the company’s relationships with a group of tool-and-die makers in China. Here too, the cloud plays an enabling role in executing the strategic plan, which is built around the economic realities of today’s metal forming business. The progressive dies that Chirch Global builds cost between $50,000 and $250,000 each, mostly because building them requires two to three months of labor-intensive work by highly skilled people. Because of their lower labor costs, the Chinese can produce the dies much cheaper than their American counterparts can.

The opposite, however, is true in the stamping operations that use these tools to produce parts from sheet metal. “Once the machines are setup and running, labor is really a nonfactor,” explains Chirchirillo. “We are very competitive here. In fact, on a per-piece basis, we are on the low end [of the cost spectrum], especially after you add duties and transportation costs.”

Shops that build their own tools or subcontract them locally routinely lose bids on production work. Rather than fighting this economic reality, Chirchirillo instead gives his customers a choice of a tool built in McHenry or one built in China under the technology-enabled oversight of his journeyman tool-and-die makers.

The tradeoff in this choice is cost versus time. The Chinese-built dies cost less, but the distance makes delivery longer and tends to inhibit customer interactivity. Distance, therefore, can be a problem for customers who want rapid turnaround or want to work with their suppliers during new-product design. “Yesterday, for example, we had a design change that involved knocking off 0.0001 inch,” notes Chirchirillo. “We did it in two hours, and the customer came here to look at it.” This kind of customer service is impractical for dies built on the other side of the world.

Chirchirillo believes that the company’s global business model and its investment in the cloud-based Epicor Express has enabled his company to make a quantum leap ahead of the competition. For evidence that he is right, he points to a return on equity that exceeded 50 percent last year and a 17 percent surge in revenue. “This is technology of the future, particularly for small and medium size businesses that don’t have the deep pockets to invest in IT to grow their businesses,” he says.

Although cloud computing can certainly offer small companies advantages previously enjoyed only by bigger ones, this technology, like any other, has its limitations. “Some automation, especially that for high-volume manufacturing, really needs very high performance,” explains Rich Carpenter, chief technology officer at GE Intelligent Platforms in Charlottesville, Va. “In these cases, bandwidth limitations make it difficult to put data in the cloud.” A high-speed supervisory control and data acquisition (SCADA) architecture on the ground is best here.

This is not to say, however, that cloud computing is useless everywhere in these plants. Quite the contrary: Most plants have a mix of automated tasks, some of which do not need the guaranteed high speeds available only through local networks. Consequently, some of these tasks can profit from cloud computing.

A case in point is remote monitoring, diagnostics, and preventive maintenance. GE Intelligent Platforms is offering a cloud-based remote monitoring and diagnostic service to companies that have assets spread across wide geographical areas. “It’s expensive to have an IT infrastructure at each location,” notes Carpenter. So, instead, users can install communications devices to transmit data to GE’s diagnostic services in the cloud. “They can then see their data through standard web pages without having to drive out to each unit.”

One customer using this service is the Atlanta-based Performance and Reliability Center operated by sister division GE Energy. Using GE’s Proficy suite, the service monitors more than 1,100 units in GE Energy’s fleet of turbines in the field, and provides its customers with real-time performance data and diagnostics on developing problems. “Through the cloud, [GE Energy] can help a power plant to assess the health of its turbines and suggest any maintenance or other work,” says Carpenter.

Because the cloud is elastic, it allows adding computing resources when demand exceeds current capacity. Carpenter reports that, to avoid this problem without having to maintain a costly reserve, GE sometimes rents capacity on the cloud. These additions and subtractions are transparent to the user, which is another reason that manufacturing is heading for the cloud. 

June 2011, Related Feature – Consulting the Cloud
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About the Author

James R. Koelsch, contributing writer | Contributing Editor

Since Jim Koelsch graduated from college with a bachelor’s degree in chemical engineering, he has spent more than 35 years reporting on various kinds of manufacturing technology. His publishing experience includes stints as a staff editor on Production Engineering (later called Automation) at Penton Publishing and as editor of Manufacturing Engineering at the Society of Manufacturing Engineers. After moving to freelance writing in 1997, Jim has contributed to many other media sites, foremost among them has been Automation World, which has been benefiting from his insights since 2004.

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