Requirements for Real-Time Operations Management

April 5, 2010
It is an interesting and challenging time to be in manufacturing.
Changing market dynamics, globalization, increasing competition and fallout from the economic downturn have upset the status quo. Unfortunately, many manufacturers will be caught flat-footed, unable to respond effectively because of the limitations of their aged plant information technology (IT) systems.Knowledgeable manufacturers can use new information technology to break away from the pack and help them emerge from the difficulties brought on by the recent economic downturn. With the transformative power of operations IT, manufacturers can make their enterprises—and their critical value networks—the most responsive, the most flexible and most profitable, by leveraging collaborative manufacturing principles and modern operations management platforms.Advances in communications and information infrastructure have made the world more connected, providing purchasers with global access to products and to many kinds of services. It is much easier to exchange ideas, information and money, so it has become commonplace to reliably source materials and services from global, least-cost suppliers.Producers have also become more global in the way that their operations are distributed. While companies have always built plants in different regions to serve local markets, today, many plants are being located offshore to serve home markets. These investments take a global view of the best locations considering all factors such as local labor costs and skills, construction costs and time for regulatory approval. They also add complexity to operations management.Most manufacturing companies see more competitors and have to deal with tougher pricing, changing customer needs and more product innovation, while managing more distributed operations and complying with more and more governmental regulations. Customers demand faster turnaround, lower prices, consistently high quality, smaller lots, tighter delivery schedules and terms, more products with more variations, component traceability, product recycling, real-time information about orders in progress and more. They want their manufacturing partners to be more flexible and responsive. In too many cases, production operations simply cannot comply with this request.Operations-level manufacturing systems have not kept pace with the changes in the environment. The industry has gone through a period in which significant technology investments were made in business systems, such as enterprise resource planning, and the plant floor was left behind. In the plant, manufacturers often have accumulated hundreds of special purpose applications. Many of these applications have no one trained to support them, little or no documentation, and they may run on obsolete hardware and operating systems. They are poorly integrated to other systems—if at all—and you can’t get at the data inside. The problem has been growing, and given what’s going on in the global economy, it’s time to acknowledge that this is a recipe for disaster.Enable real-time performanceLeading manufacturers now put a priority on plant floor IT investments, in some cases making the strategic decision that this will constitute the bulk of their IT spend over the next few years.Three key drivers make this a necessity for manufacturers. First, customers continue to pressure them to be more flexible and responsive, but existing applications and plant IT infrastructure limit what manufacturers can do to respond. They need to operate as a real-time enterprise. Second, the cost of supporting the collection of legacy and custom solutions throughout their distributed networks of plants has become intolerable. This is especially vexing, considering that the bulk of this support goes to systems that are largely “part of the problem.” Third, feasible technical solutions to these problems are now finally available.A real-time approach to IT in operations must include three things:  a technology platform, the ability to connect easily to other systems and robust, industry-specific functionality.Greg Gorbach, [email protected], is Vice President at ARC Advisory Group Inc., Dedham, Mass.

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