The harried director of manufacturing sits at an overflowing desk at his company’s Chicago headquarters as the telephone rings. It’s another supply chain crisis. Parts destined for the plant in China didn’t make it in time. In fact, they’re already several days late.
The call triggers a flurry of anxious questions. Would it be possible to switch production to Singapore? Or how about the Alabama plant? Who has capacity? Will my competitors eat my lunch if I miss these production goals? And really, what can I do to find out about these kinds of problems sooner, in order to avoid these crises altogether?
According to research by the Boston-based analyst company AberdeenGroup Inc., one key is information—specifically, frequently updated details on key performance metrics. Key performance indicators (KPIs) such as quality deviations should be monitored in real time, for example, while operational metrics such as shipment schedule compliance should be measured daily, AberdeenGroup advises.
With the information in hand, manufacturers must then find ways make the data sing. Says Kevin Roach, vice president, software, at heavyweight automation vendor Rockwell Automation Inc., in Milwaukee, “Companies must harmonize their data.” This is not the “four-part harmony” of a barbershop quartet; rather, it’s taking information from many disparate sources that often have differing formats and getting them to sing the same tune so that those understandable key performance metrics may be compiled and displayed.
Roach adds that he’s seen reports predicting that 60 percent of manufacturing information technology (IT) spending this year will be on performance and production management applications. Spending on all the enterprise applications will be down, including enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM). “Those systems are in place,” notes Roach. “Now, the question is, ‘How can they be leveraged for optimum manufacturing?’ Managers have discovered that they can’t implement their ERP and SCM applications because the link to the plant that was promised never materialized.”
Pharmaceutical manufacturer sanofi-aventis, with headquarters in Paris, has plants scattered across many countries that must maintain compliance with many regulations. This requires data standardization in formats recognized by regulators. One of the important products in the company’s portfolio is Altace, a prescription hypertension medication.
The hard, gelatin capsule Altace formulations are just four of the 270 different store keeping units, or SKUs, manufactured at the sanofi-aventis facility in Laval, Quebec, Canada. Each year, the Laval facility produces 450 million capsules, 200 million tablets, 100,000 liters of liquids and more than 150,000 kilograms of ointments and creams.
With the challenges of disconnected and manually intensive processes in place, sanofi-aventis’ managers aimed to improve existing processing methods to boost efficiencies and reduce risk associated with human error. Specifically, the company sought to achieve compliance with U.S. and European pharmaceutical regulations for the next five years—specifically, tracking and controlling certain processes according to the U.S. Food and Drug Administration’s 21 Code of Federal Regulations (CFR) Part 11 specifications.
Daniel Huot, technical expert for sanofi-aventis, was looking to improve his general manufacturing practices, while complying with the 21 CFR Part 11 regulation, a rule that applies to electronic records that are created, modified, maintained, archived, retrieved or transmitted under any system.
“I was specifically interested in a management software tool that would give me control over the plant floor. I wanted to know who was doing what, when and why, for my own peace of mind,” says Huot. He identified Rockwell Software Maintenance Automation Control Center, or RSMACC, a collaborative asset management and maintenance tool, as the best software product to help him meet his goals. This was implemented while his company was Aventis, and prior to its 2004 merger with Sanofi-Synthelabo, which formed sanofi-aventis. But new management meant new goals.
Implement standard metrics
Following the merger, each plant was “requested” to implement a key performance metric that measures the evolution of equipment operation and calculates the margin of potential improvement in productivity and quality. The metric, called TRS, considers how well the machine is performing during a production run, along with the effectiveness of the process before and after. It takes into account the setup time of the machine, its operation and the CIP (Clean-in-Place) phase. This generates important information to management, such as ways to better schedule different lots of production, and it justifies personnel training or maintenance interventions.
Huot knew he needed additional IT tools to implement this request, and chose Rockwell Software RSBizWare PlantMetrics as the best solution. The software analyzes the performance of production assets, while providing advanced reporting, analysis and management capabilities.
“Using PlantMetrics, our goal was to develop baseline TRS calculations—downtime, cycle times, operating time, production numbers, equipment avail- ability—by the end of 2005,” Huot recalls.
Meanwhile, the sanofi-aventis plant in France also implemented a Rockwell Automation integrated software architecture using RSView for access control of specific functions via the electronic signature feature and for redundancy. RSView lets the plant in France view data collected in PlantMetrics by the Canadian plant.
A trend among automation suppliers responding to strong requests from their customers is to develop vertical market teams with deep industry knowledge. How important is this to customers? States Serge Landreau, sanofi-aventis project manager in France, “Representatives from Rockwell Automation demonstrated in-depth knowledge on more than just automation. They really understood the constraints associated with the pharmaceutical manufacturing process, and were willing to work with us to find the right solution.”
It was about an 18-month project, but the company reaped many benefits from this information upgrade. The electronic signature implementation helped protect product integrity—especially crucial for a pharmaceutical company.
Factory performance improved, operating costs were reduced and planning was enhanced, such that resources could be more cost-effectively allocated. With the new metrics available, sanofi-aventis can now obtain baseline calculations with which to set goals for ongoing improvement.
Gain competitive edge
Aubert Martin, president and chief executive officer of Siemens Energy & Automation Inc., the big Alpharetta, Ga.-based automation supplier, says that Siemens has developed centers of competency for different vertical industries. He points to one benefit that is perhaps not readily apparent to customers, but is revealed in improved solutions from the supplier. That benefit is the cross-pollination of ideas that occurs when engineers from the various industry groups interact together, and with product engineers in order to find ideas from one area that might work in another.
Martin turns the conversation on global manufacturing challenges quickly to a focus on the business strategy. “The question is, ’How can a company get competitive?’ ” he says. “The first requirement is balance. You need to be in different regions of the world because sometimes it’s better to be closer to the customer. Also, exchange rates vary, and you may need to adjust production due to that. Then, the logistics of the supply chain must be considered.”
A common technology platform is the second requirement Martin lists. “For example, in the motor industry, there is a global motor design that helps manufacturing efficiency. This also optimizes the supply chain by reducing too many legacy products.”
Innovation and technology are crucial to global competitiveness, according to Martin. “If you are innovative, it’s much easier to compete,” he says. “Going global just to reduce labor costs is not the whole story. You must have the latest technologies along with the right product.”
One example can be seen in the automotive industry, Martin says, where the number of models and options available creates an increasingly complex manufacturing requirement. “Companies must have flexible manufacturing so that manufacturing can make multiple models on the same assembly line,” he points out.
AberdeenGroup addressed this issue of global competitiveness and market leadership in its May 2006 benchmark report, “Global Manufacturing: MES and Beyond,” in reference to Manufacturing Execution Systems. “Retaining market leadership requires not only continued performance improvements, but also the ability to profitably marshal global manufacturing resources to effectively serve customers,” says AberdeenGroup Vice President Cindy Jutras. “Well-positioned to respond to future market opportunities, today’s leaders are evolving into global manufacturing enterprises united by business processes that connect remote plants, factories, customers and supply chain partners.” Jutrus believes that future competitiveness will depend on “forward-thinking strategies and the intelligent use of technology” to fuel the continuous innovation of new products and processes.
In its report methodology, AberdeenGroup typically surveys people within companies, then looks at the performance of the companies themselves and groups as “Best-in-Class,” “industry average” or “laggards.” Then the analyst correlates responses with company types and determines what characterizes each.
What the best do
For the May report on global manufacturing, 85 percent of Best-in-Class companies reported that they already have a strategy in place to unify processes and systems across locations. Their top action for realizing this strategy is business process improvement through standardization. Plants and factories are contributing by improving internal flexibility, implementing a common information platform, and delivering real-time information. The same pressures are driving enterprise level initiatives to standardize KPIs across locations, implement a cohesive technology infrastructure, and create a centralized knowledge repository.
How did companies get there? Kevin Tock is vice president of production and performance management at Wonderware, a Lake Forest, Calif., software unit of London-based Invensys. “Companies prepared for the anticipated problems of the ‘Y2K’ period by putting a lot of money into their ERP applications,” Tock observes. “Now, six years later, they are not seeing the connection to the plant floor that they expected. So now they are beginning to invest in production management, or MES, and in performance management, or manufacturing intelligence, applications in order to achieve that plant-to-enterprise connectivity.”
Most engineers are focused on one plant’s performance at a time. The groups most responsible for rolling out global, multi-plant programs are from a new type of professional—manufacturing IT. Says Tock, “IT organizations already do multi-plant rollouts, they know how to do them, plus, they are serious about global problems. The major problem continues to be getting manufacturing people and IT people to communicate with each other and to get them to see each other’s problems.”
Tock notes that sometimes, vendors must be the catalyzing force to bring the two groups within a manufacturing organization together. On the other hand, he adds, “we’ve had IT people look at manufacturing software and remark that, ‘If you didn’t call the objects pumps, valves and the like, it would look like an IT play.”
These comments are backed by Aberdeen Group’s research. Says Jutras, “The proverbial gap between ERP and the factory floor (cited by 52 percent of respondents) continues to be the top IT-related challenge. The disparate nature of systems within the four walls has greatly contributed to an executive top-of-mind issue—the inability to deliver timely information.”
Then there is the question of whether manufacturers should spread their plants out globally at all. Or, if they already have, then what’s the optimum arrangement?
John Vande Vate, Ph.D., is executive director of Georgia Tech University’s Executive Masters in International Logistics program in Atlanta, as well as a visiting professor at the Massachusetts Institute of Technology. He notes that companies rushed overseas both in order to lower labor costs and in the hope of gaining a market there.
According to Vande Vate, there are a number of issues that must be considered in global manufacturing. “First, there is working capital, or the money you have to put into the company to keep it running. Dell Computers was famous for being able to operate with negative working capital—that is, it took in parts from suppliers but didn’t pay for them until the end product was sold, effectively using the suppliers for working capital.”
Watch working capital
Simple offshore outsourcing can actually increase the need for working capital, Vande Vate says. “Say you manufacture in China, then it takes a couple of weeks on the ocean, then time at the dock, then time on a truck—all the while you own the merchandise. So labor costs may go down, but working capital requirements go up.”
Another issue is responsiveness to the market. Customers now expect an individualized product. “My favorite example,” says Vande Vate, “is BMW. Considering all the options, the company offers 1032 different vehicles. You can’t forecast the demand for those, so forecasts get worse. If you’re manufacturing far away, once again, working capital goes up while responsiveness goes down.”
Manufacturers must also consider how complicated the relationships can be when different interdependent shops are located in different countries. Establishing a trust relationship can be a daunting experience. Then there is security— an essential consideration in the post-9/11 world. “Bringing in things from various countries with different logistics infrastructures could expose your company to risks as to just what is in the container,” adds Vande Vate.
Sometimes, it’s crucial to bring the sales force into the automated business process when you are manufacturing globally. James Staten, director of product marketing and business development for Azul Systems Inc., a Mountain View, Calif. manufacturer of high performance servers, says, “We manufacture a high-end product that is sold directly to the customer by our sales force. There are tons of options and configurations. We manufacture globally, and we sell globally.”
Azul is a “fabless” semiconductor company that designs the electronics but contracts the actual chip fabrication to a third party. Chips are manufactured in Taiwan, then shipped to California for assembly into the boards and product. Software-based testing is done by a company in Bangalore, India.
In the past, Azul’s sales cycle was largely manual. A sales person calling on the customer would write the requirements for forwarding to the factory. Then, the order entry department would call the representative to confirm, then talk to the field application engineer to confirm technical details before entering the order for manufacture. The system took from two days to a week for processing and was prone to error.
To address this issue, Azul implemented a product called Fastraq, from Selectica Inc., San Jose, Calif. This is an application built to work within Salesforce.com, a Web-based application in which remote sales people can enter information from wherever they have Internet access. The result is faster customer fulfillment and fewer mistakes—an important advantage, given the company’s global supply chain.
Summarizes Rockwell Software Marketing Director Matt Bauer, “When things are all comparable within a company, then managers can prioritize and go after the bottlenecks. The sales cycle for these products takes a lot of upfront consulting. Companies must go through a process of data harmonization—that is, take a look at all the data, see what’s replicable and how it can connect. Then they make the technology selection.” The most successful implementations are those who have a strong executive sponsor and crossfunctional team, Bauer says.
Adds Rockwell’s Roach, “It’s OK to run a pilot program, but the real return on investment is when you roll it out to 10 to 20 plants. That will save millions of dollars.”
In its May 2006 benchmark report, “Global Manufacturing: MES and Beyond,” Boston-based analyst firm AberdeenGroup Inc. looked at survey participants’ responses and divided manufacturers into three categories, with recommendations for companies lying within each.
The categories are “Best-in-Class” (those who have achieved operational excellence within the four walls and across facilities), “industry average” (companies that have achieved some level of excellence in manufacturing operations, but have yet to achieve global operational excellence), and “laggard” (those who are just beginning their journey toward excellence). Here are AberdeenGroup’s recommendations for each group:
BEST IN CLASS: Deliver real-time intelligence to the boardroom; continuously improve manufacturing for operational excellence; leverage technology to fuel ongoing innovation.
INDUSTRY AVERAGE: Set global manufacturing standards; create strategic alliance between manufacturing and corporate IT; create value-focused metrics program.
LAGGARD: Gain visibility and control over production; close the information gap between the plant and corporate; empower customer-focused teams to drive improvements.
For more information, search keywords “global,” “MES” and “performance management” at www.automationworld.com.