Every manufacturer has a mission statement. It's typically phrased in a way that emphasizes the company's commitment to its customers. At PolyOne Corp., a maker of plastics, colorants, and specialty additives, the corporate mantra is: "We help people work wonders with polymers." But that's the external message. Internally, the corporate slogan has a bit of a different ring. It goes like this: "Simplify, integrate, and automate."
PolyOne has been working since the 1980s to standardize processes and automate parts of its business. The goal has been to reduce costs in the organization, produce product as efficiently as possible, and meet customer needs. Back in the 1980s, however, things were much different.
While companies like PolyOne have long held a vision of cutting costs and building a better business, they have had to improvise methods to achieve those ends. Often, departments had to take the initiative themselves, resulting in little more than islands of best practices.
Leading up to the year 2000, as the Y2K computer changeover problem loomed, manufacturers engaged in a flurry of system upgrade and replacement activity, including standardizing on ERP backbone systems. Yet, as many companies soon found out, mammoth ERP deployments, if not done right, can add another layer of complexity onto the IT architecture.
Today, manufacturing executives are again casting a critical eye on the IT and automation infrastructures. They are determined to finally deal with the proliferation of systems and applications, too many ad hoc procedures, and not enough integration. The mandate now is to design a tightly integrated infrastructure to support the company's activities. The watchwords are architecture, architecture, architecture.
This focus coincides with a more intense global business climate characterized by a greater need for speed in innovation and getting products to market, new regulatory requirements, and figuring out how to manage outsourcing arrangements and partnerships on a global scale.
Though a worldwide presence is a business imperative, it has actually resulted in fragmentation at many organizations. As a result, manufacturers are now formalizing the standardization efforts that, in part, began years ago. Companies, such as PolyOne, that are seeking to build a more cohesive organization are finding ways to unify business practices and technology deployments across all departments. This trend is under way across all sectors of the manufacturing market. Alcoa Inc., Arla Foods amba, DuPont, and Molson Coors Brewing Co., to name a few, are in the midst of corporate-wide efforts to create the "one company."
Global chemicals giant DuPont calls its effort "One DuPont" and defines it as having enterprise interoperability and standard work processes across the company. Similarly, PolyOne recently implemented an "operational excellence group" to drive common processes. Alcoa created the Alcoa Business System (ABS), an integrated set of principles and tools used to manage the business, and Molson Coors, following its 2004 merger, created an Office of Synergies and Integration to streamline organizational design. Regardless of the name, the goal is the same: to standardize and harmonize operations.
The business drivers are well-known. Acquisitions, globalization, the need for speed and agility, and managing far-flung networks of partners and suppliers are fomenting the move toward common processes and systems. A company that has manufacturing operations in Asia, Europe, and the United States, for example, will typically approach production in different ways, based on available technology, local regulations, and even culture. That disjointed approach, however, is expensive and may not even be sustainable in the long term.
"The market is changing," says Aubert Martin, president and CEO of Siemens Energy and Automation (SEA). "If you want to leverage the global reach and gain global penetration, then you have to go in the direction of harmonization and standardization. That means having common management principles, not just common goals."
SEA and its parent company, Siemens AG, are suppliers to global manufacturers, as well as being global operations themselves. As a result, Siemens is creating a corporate-wide operational standard it calls the Siemens Process Framework, which defines business and management processes in great detail. The company has also introduced a common IT platform worldwide. Siemens is using SAP in the enterprise and its own SIMATIC IT manufacturing execution system (MES) in its production facilities.
Never-Ending Process
Siemens put the standardization effort in place because it recognized that if it wanted to be a true partner with manufacturing companies, it had to design a business architecture that mirrors its customer base, Martin says.
The Siemens Process Framework has been 10 years in the making. And now, Siemens has it down to nearly a science, Martin says. But the one thing to remember when creating the "one" enterprise, he and others say, is that the effort is a never-ending undertaking of continuous improvement.
While creating commonality and standardization is the ultimate goal for manufacturers operating in today's unpredictable competitive landscape, they must be mindful of their approach. The first step down the path of simplification is to dissect core business processes.
At PolyOne, the operational excellence group that was put into place a year ago selects an area of focus and assigns a business owner to work collaboratively with an IT owner. This is a critical first step that contradicts the traditional way in which projects were tackled.
"In the past, IT was taking too active a role in selecting technology and pushing it out to the business," says Ray Kling, PolyOne's IT manager of commercial applications. "Or the reverse was happening; business [groups] were doing things and then going to IT only when they had a specific request."
The new corporate model pulls these two groups together. "IT is working with the business throughout — from the germination of ideas to identifying the opportunity," Kling says.
Once a core process is sorted out and simplified, the team identifies how the information flows around the company — even between the disparate MES systems scattered throughout production facilities around the world and the enterprise ERP system, which is SAP. PolyOne uses SAP to help define business processes, and technology from webMethods Inc. to implement the integration. (webMethods in April agreed to be acquired by Software AG.) When information is flowing flawlessly, the company establishes a lean methodology that defines the type of information exchanged between applications and the way in which it is transmitted. This acts as the baseline for continuous improvement, and is the automated part of the equation.
Technology is the enabler — specifically, the use of service-oriented architectures (SOA) and business process management (BPM) software. But the shift in approach is what's making the biggest difference for PolyOne and others.
"Going forward, IT will have a more process-centric mind-set," says Gary So, vice president in the office of the CTO at webMethods. "If you look at what these companies are trying to achieve, at the end of the day, their organizations have had to deal with the discontinuity in the process caused by applications. They could only go so far, and then they had to switch over and use another application."
But many companies are changing their thinking. "They now realize the applications are subservient to the process," So says. That's where SOA and BPM fit in, he adds.
Also, before adding more applications into the mix, companies are realizing that first they have to figure out how the company should work. Specifically, they have to identify what business processes need to be changed. To that end, unifying the corporation must be a methodical practice that is mapped out, measured, and continuously improved.
The Performance Framework
Corporate unification programs can't be one-off projects with a foreseeable end date. Instead, they must become part of the corporate fabric. Leaders need to be assigned, best practices identified, and methodologies built.
For example, the Siemens executive team dubbed the harmonization project that spans roughly 80 businesses in more than 200 countries "top+." Top+ outlines goals and defines the exact manner of working to achieve those goals. The company approaches each project in a systematic and uniform manner that outlines clear goals, concrete measures, and desired consequences.
If the goal is to drive sales growth, for instance, the methodology for taking action is available — based on established best practices in the top+ toolbox. But even though there is a pre-established framework that includes benchmarking to measure the success, "you are never done," says SEA's Martin. "This is a management process for each and every day. You have a framework within which you are working, and this management process is helping you to continuously improve."
Molson Coors has designed a similar process framework in order to face global challenges associated with changing consumer tastes. The company has also had to deal with increasing regulatory requirements and restrictions, and the need to compete with popular local brands. When Molson Inc. and Adolph Coors Co. merged in 2004, creating the fifth-largest brewer, by volume, in the world, it allocated $174 million to be applied over three years to streamline operations.
A business process management framework based on technology from IDS Scheer is a core piece of the new business architecture. But the key challenge has been getting the company's 11,000 employees on-board with the vision.
"We are talking about a different model than we had in the 1970s and 1980s," says Debra Boykin, global business architect at Molson Coors. "We have to change, from an organizational perspective."
That change has meant developing a new structure for "managing our work for business value," Boykin says. The strategic technology investment is just one piece of the business process framework. Molson Coors had to do the hard work of reshaping its corporate culture, as well as make other changes, such as developing a new governance structure.
The company established councils to analyze performance and define process roles and responsibilities, Boykin says. In addition to getting employee buy-in, the BPM vision includes a career path for a new breed of employee called the "BPM professional." These BPM pros are responsible for ensuring that standard processes remain the controlling influence within the business, and that the overall corporate culture adheres to a single operational philosophy.
Factoring people into the formula when outlining a business process framework, as Molson Coors has done, is key. After all, the people are the ones who ultimately carry out the mission. But they need an easy way to access information, and they must be empowered as part of the process.
"Knowledge tends to collect in all kinds of corners of the enterprise," says Jesper Joergensen, director of product marketing at BEA Systems, a supplier of middleware and BPM software. Companies often focus on what they correctly see as broken business processes, but miss that the root of the problem is not having an integrated architecture that allows for knowledge collaboration, he says.
With access to information and the knowledge needed to do their jobs, people will contribute to a corporate improvement program — especially if they know they must. At Siemens, "Everyone is accountable," Martin says. How does the company know if the system has failed somewhere? "You see it in the financial results," he says.
Six Sigma for Dummies
In addition to the hard numbers in a company's financial statements, manufacturers can measure organizational improvements through other metrics, such as key performance indicators (KPIs).
Manufacturers understand KPIs. They've been applying these metrics for years through Six Sigma and lean practices as part of plant process improvements. Six Sigma trains practitioners in statistical methods of analysis in order to define, measure, analyze, improve, and control (DMAIC) manufacturing processes. These improvements are done on a project-by-project basis, but collectively they contribute to significant bottom-line savings. And lean is all about eliminating waste. Both of these concepts, while prevalent on the plant floor, can be applied to enterprise business processes (see 8 Steps to a Unified Approach).
The reason these methods have not been used to date is that manufacturing groups that practice Six Sigma and lean typically live in a separate domain from IT.
"There has never been a connection between IT and Six Sigma," says Bruce Williams, co-author of the books Six Sigma for Dummies (Wiley Publishing, 2005) and Lean for Dummies (Wiley Publishing, 2007). He joined webMethods in March as vice president and general manager for BPM solutions. "Everyone lives in their own little world. Six Sigma people act as specialists and look at how to get a project done to get the incentive bonus, and then they are on to the next [project]. And IT is not looking at Six Sigma saying, 'Great stuff.' They are in their cocoon like the rest of us," he says.
This may be starting to change, however. "One of the things I've seen recently is that companies organizationally are starting to put these together," Williams says.
Alcoa is one company that has begun to connect the dots.
The Alcoa Business System — the fundamental building block that uses a common language for describing how the business is run — is built on the principles of the Toyota Production System. ABS's three overarching principles are: make to use (on-demand, defect-free products); eliminate waste (solve problems); and people are the linchpin of the system (engage all associates).
ABS involves a common technology infrastructure initiative that includes Oracle Corp.'s eBusiness Suite 11i as the enterprise's standard backbone application. And while the company's products are diverse, ranging from aerospace to aluminum, some businesses are moving to a standard control platform, as well. At Alcoa's Global Refining business, Honeywell's TotalPlant Solution (TPS) and Experion distributed control systems using Honeywell's Business Flex manufacturing applications are the standards, as are Rockwell Automation PLCs.
The system outlines common practices, and then each business division adopts more focused approaches. For example, the Quality Automation Solutions for Alumina Refineries (QUASAR), delivered in a co-sourcing arrangement between Alcoa and Honeywell, identifies the standardized process control infrastructure and applications for the largest seven of Alcoa's nine alumina refineries.
"The objective is to bring the best practices that each refinery developed across the whole organization," says Dennis Mason, process systems manager for Alcoa's Global Refining business. In this case, QUASAR fine-tunes the ABS approach to fit the business segment.
That's smart, says PolyOne's Kling, who has learned that having common processes just for the sake of commonality isn't necessarily a good thing. "If you say everyone does it the same way, you may find it is not the best way to do things for a specific business market served," he says. In fact, too much generalization can weaken the framework.
That's exactly why Alcoa put QUASAR in place. It is improving production, process efficiency, and the bottom line for the refining business. Under the ABS program, the parent company closely monitors the refining business, as well as all of its other business units.
Collectively, the standardization and unification effort is working, according to the company's Web site. At the end of 2003, Alcoa reported that ABS improvements led to an annual savings of $1 billion. By the end of 2006, Alcoa was projecting that savings would reach $3.3 billion.
Savings are an important part of creating the "one enterprise." Overall, however, the efforts under way at Alcoa, DuPont, Molson Coors, PolyOne, and Siemens will help them deliver on their respective mission statements, whatever they may be.
"The outcome is [that] we are a better manufacturer," says Peter Stamp, Alcoa's manufacturing and process systems manager in the Global Primary Products group.