There can be little doubt that over the past 20 years the thoughtful deployment of automation technologies has profoundly changed manufacturing processes at most companies for the better. Factory floor automation has given everyone from production managers to CFOs unprecedented insights into how to get the most out of expensive plants and equipment. Meanwhile, enterprise applications such as enterprise resource planning (ERP), supply chain management (SCM), and customer relationship management (CRM) have provided near-real-time visibility into previously obscure business processes, allowing manufacturers to slash inventories, improve customer service, and keep a lid on labor costs.
The results have been dramatic productivity increases that have allowed many U.S. manufacturers to continue to thrive even as competition from lower-cost offshore locations has become both more intense and more sophisticated. As recently as the fourth quarter of 2005, according to a recent report from the Manufacturers Alliance/MAPI, manufacturing productivity -- particularly in the high-value durable goods sector -- continued to outperform the rest of the economy "by a wide margin." In the fourth quarter alone, the report says, U.S. manufacturers managed to reduce unit labor costs by 2.8%.
To be sure, manufacturing executives have been pleased with the transformation that automation has brought to their businesses. According to a recent Managing Automation survey, increasing percentages of manufacturing managers said technology has been a very important factor in improving their visibility into business processes and enabling decision-making. Growing numbers also described themselves as aggressive or very aggressive buyers and users of technology.
But, while pleased with the impact of automation on their businesses, manufacturing managers want more. From CEOs to IT directors to production and supply chain managers, most have strong, clear ideas about how and where technology must evolve in order to continue to spur manufacturing productivity. In particular, manufacturing managers who spoke recently with Managing Automation emphasized three areas in which technology must still improve if it is to continue to fulfill its potential.
First, they said, software must become better able to model and represent the real world, including the potential risks and rewards associated with specific tactical decisions. Second, IT middleware tools must improve to the point where integration of systems becomes more flexible and much less expensive. And, third, software must better support major business improvement initiatives such as lean manufacturing.
"I've been involved with IT since the early 1980s when we were deploying MRP systems and, overall, the impact of technology on manufacturing has been very positive," says David Rudzinsky, CIO at Hologic Corp. (Bedford, MA), a maker of medical imaging systems. "The tools have improved dramatically, but there's still a long way to go. We're just at the beginning in many ways."
For John Mallon, director of supply chain solutions at ON Semiconductor Corp. (Phoenix), it is critical that software vendors support his company's drive to generate data and analysis that reflect the real complexities ON faces when making important supply network decisions. In 2000, Mallon says, the maker of power management semiconductor devices set out to lay the groundwork for an up-to-date supply chain management system, replacing legacy supply chain tools and manual processes with advanced planning and scheduling tools from i2 Technologies Inc. (Dallas). The idea, Mallon says, was to establish a single version of the truth through demand and supply forecasts that managers in all parts of the business could agree on.
Lately, however, ON officials have come to the conclusion that there is no single version of the truth, or at least not one that remains valid for very long. As its markets have become more fragmented and ON, like its competitors, has turned more to offshore contract manufacturing, Mallon says, "there is less and less clear information about what the current or future situation is."
Since ON can't necessarily rely on a single forecast being correct, he says, the company must become better at contingency planning and risk analysis and management. And that's where Mallon wants help from technology. He is searching for supply chain planning software that will not only generate a relatively reliable forecast but that will also allow ON to perform what-if contingency planning and even provide financial modeling methods that allow the company to understand -- in dollars and cents -- the potential liabilities represented by various supply chain scenarios.
Vendors have slowly begun to provide such tools. Smaller SCM software providers such as Optiant Inc. (Burlington, MA) and Supply Chain Consultants Inc. (Wilmington, DE) have begun to offer products that permit what-if analysis and contingency planning.
Unwilling to expand its roster of software vendors, however, ON has begun to push its principal supplier, i2, to incorporate a scenario-planning capability into its applications. ON and i2, in fact, have launched a joint development project to do just that.
Why put time and effort into helping a software vendor move to the next phase of technology? "It comes down to the question, 'Do you want to lead or follow?'" Mallon says. "If, like us, you say you differentiate based on your supply chain capability, you may find what you need isn't really offered yet. So you have to partner to get it developed."
But incorporating scenario planning into traditional supply chain management technology isn't the end of Mallon's wish list. He predicts a future phase characterized by software that will allow members of expanding supply networks to collaborate on real-time supply chain optimization.
"We need to say, 'How can we optimally operate together?'" Mallon says. "If it means one partner has to suboptimize for the greater good, how do we do that? How do we quantify and understand things like how much inventory to hold, where to hold it, and who pays for it? Tools that tell us that would be the natural next step."
While vendors have long talked about such collaborative supply network optimization tools, Mallon says, "not much has really happened so far."
Plugging the Gaps
While line-of-business executives like Mallon hope and push for deeper, richer functionality in specific software application categories such as SCM, for many IT executives at manufacturing companies, technology's next step will come at the infrastructure level with middleware that can be used to flexibly integrate a wide range of often-isolated software systems.
At Vicor Corp. (Andover, MA), a manufacturer of power conversion equipment, CIO Doug Richardson has spent a good part of the last 10 years building custom integrations between systems such as the company's PeopleSoft ERP suite and its home-grown computer-integrated manufacturing systems. As the number of systems has grown with Vicor's offshore expansion, however, simply maintaining the custom integration code has become a sizable and growing burden.
"It's become enormously expensive," Richardson says. "It is a millstone around our necks."
Not surprisingly, Richardson has recently become interested in the emerging class of service-oriented architecture (SOA) middleware tools that many hope will ease much of the integration burden faced by manufacturers such as Vicor by replacing proprietary interfaces with reusable code based on Web standards. Specifically, Richardson sees promise in SOA-based business process management tools such as Oracle Corp.'s BPEL Business Process Manager product. Such tools allow manufacturers to model business processes that may span multiple systems, then automatically generate code that ties those systems together.
If these tools work as promised, Richardson says, companies like Vicor could create and maintain integrated business processes 10 times faster than they can today. And that, he says, will allow IT organizations to focus their efforts on projects that bring more value to customers and the business.
Vicor is currently conducting a pilot project using the BPEL Business Process Manager tool to tie together the PeopleSoft ERP suite at the company's headquarters and several instances of the Intuitive ERP package, from Intuitive Inc. (Kirkland, WA), which have been installed at various remote subsidiaries.
While Richardson is hopeful that SOA technologies such as the BPEL tool will help solve his long-standing integration problems, he admits that he comes to the new technology with a good deal of healthy skepticism. "I've been in this business a long time, and this is the latest in a long line of things we thought might be silver bullets," Richardson says. "Let's hope this one has the goods."
Also hoping for a boost from SOA-based middleware tools is David Riddle, IS manager for the micromachine products division of Analog Devices Inc., an integrated circuit manufacturer based in Norwood, MA. In the past, Riddle says, Analog Devices had little choice but to employ batch-oriented enterprise application integration tools that were difficult to use and a burden to change. As a result, he says, the company has had to live with less integration of key systems than it would have liked. Today, for example, Analog Devices has little integration between its MES system -- based on technology from Brooks Automation Inc. (Chelmsford, MA) -- and workstations that it uses for manufacturing tool automation.
"We have gaps today where we need to be able to more easily download information such as assembly maps," Riddle says. "What we hope is emerging to fill that gap is event-based integration tools that are based on service-oriented architectures."
Analog Devices has investigated several such tools, including Oracle's BPEL Business Process Manager, Brooks' Activity Manager SOA-based integration tool, and SAP AG's Exchange Infrastructure tool. The company is now in the process of putting together a proof-of-concept test project, probably using Exchange Infrastructure, which is part of SAP's NetWeaver SOA architecture.
Ultimately, Riddle says, if SOA tools prove sufficiently robust, they could help Analog Devices not only fill its internal integration gaps but also integrate and collaborate more responsively with partners.
"The ability to standardize on a shared architecture for product assembly, for example, would allow us to respond to business changes like changes in the supply chain much more quickly," he says.
Software for Trimming Down
Some manufacturing executives, meanwhile, are hoping that technology's next steps will better support the introduction of key strategic business process changes such as the move to lean manufacturing. While lean-inspired changes in plant floor layout and culture have begun to take root at manufacturing companies such as Hologic, affordable technology to support lean has lagged, says CIO Rudzinsky.
Hologic, for example, would like to be able to use item-level radio frequency identification (RFID) tagging to track work-in-progress and enable automatic replenishment of parts. The company would also like to be able to equip all manufacturing floor operators with portable, wireless devices from which they can get assembly and test instructions and even video-based training. Today, operators use shared kiosks to get such information, a strategy that wastes time.
According to Rudzinsky, neither RFID nor mobile computing technologies are sufficiently mature or cost-effective to allow Hologic to invest in them. "The real problem today is one of cost," he says. "We don't feel we're big and rich enough to tag 500,000 medical devices with RFID today. We need to see costs for that technology come way down."
Apparel manufacturer Cascade Designs Inc. likewise is hoping that technology will soon support lean initiatives. The Seattle-based company has begun to move to kanban and lean processes at its three U.S. plants in a bid to cut inventory and its cost of goods sold. But, says CIO Ken Meidell, Cascade is finding that existing ERP systems often don't support lean principles well. Cascade, which uses the JD Edwards OneWorld ERP suite, now owned by Oracle Corp. (Redwood Shores, CA), has shut off the work order and routing modules in the ERP system, which Meidell says aren't lean-friendly. But, he says, the company now needs new lean-centric functionality such as electronic kanban and the ability to track inventory as it moves through the lean plant floor.
"In the first phases, lean often means tearing out or turning off technology," Meidell says. "But now we're into the second- or third-order effects of lean. We need to be able to publish inventory availability and to be able to go through the plant floor and say what's coming. And, for that, we need technology."
Like CIOs and line-of-business managers, manufacturing CEOs want the tools needed to support lean initiatives. These days, however, many CEOs are less focused on technology than on attacking other issues -- such as government regulation -- that drive up costs and undermine competitiveness.
"The next step for us is life after lean and what we need to do to remain competitive," says Kendig Kneen, CEO and owner of Al-jon Inc. (Ottumwa, IA), a maker of scrap and solid-waste handling equipment. "We've done about as much as we can to drive out operating costs; now we've got to attack some of the regulatory-related expenses we face. The U.S. government needs to go through its own lean program."