Plant floor, enterprise intersect at ‘manufacturing intelligence’

Manufacturing continues to be the engine that drives economies around the world. With competition mounting from global suppliers, and an ever increasing push towards mass customization and shortened product lifecycles, there is an increased need for manufacturers to be more responsive and flexible. They must make rapid decisions using real-time information and make continuous adjustments based ...

By Edward Toung, Senior Director, Product Management, Informance International September 1, 2006

Manufacturing continues to be the engine that drives economies around the world. With competition mounting from global suppliers, and an ever increasing push towards mass customization and shortened product lifecycles, there is an increased need for manufacturers to be more responsive and flexible. They must make rapid decisions using real-time information and make continuous adjustments based on changing environments.

Operational decisions at all levels — corporate and plant — must be made with the most recent information, presented in the right context. Currently, what happens on the factory floor and its implications at the corporate level are often not aligned. Corporate operational decisions are often made with outdated and incomplete information, usually because there is no adequate conduit between the corporate IT systems and the data residing in the plants. Similarly, plant decisions are made without consideration of their potential impact on other facilities in the supply chain.

Manufacturers need a comprehensive view of their operations at all times. They must be equipped with the most relevant information in the proper context so holistic decisions can be made appropriately.

A union of three disciplines

Enter manufacturing intelligence! This is the synthesis of three key elements required for global manufacturers to compete in the current business environment.

  • Manufacturing performance : Monitoring of production events and understanding production constraints are the best tools for evaluating the competence of a manufacturing organization.

  • Business intelligence : Insight into business operations are critical for decision making. Root cause analysis and drill-down capabilities are required to uncover hidden improvement opportunities.

  • Real-time information : It is imperative that manufacturers use real-time information to make operational decisions. Weekly schedules and ERP runs are becoming things of the past.

    • Manufacturing Intelligence is the next generation of decision support capabilities for global manufacturers. It is about making real-time manufacturing information, with “drill anywhere” capabilities, available to manufacturing executives and plant staff so they can make the right decisions and improve their supply chain performance.

      Business benefits

      When implemented correctly, manufacturing intelligence solutions stand to provide significant benefits to global manufacturers and their ecosystem:

    • Strategic decision support platforms allowing manufacturing and supply chain executives to make optimal supply chain level improvement decisions

    • Real-time synthesis of production events with actionable information for the plant staff to continuously improve manufacturing efficiency

    • Supply chain objectives such as inventory reduction, cost reduction and capital avoidance can be achieved by actively managing shop-floor production levers

    • Modern IT architecture based on Web services “future-proofs” factories from forthcoming projects.

      • Three supply chain strategies and their financial implications are discussed below:

      • Inventory and replenishment management

      • Production efficiency and cost reduction

      • Revenue growth and capital investments

        • Inventory and replenishment management

          Inventory and replenishment management policies are typically determined by planning models based on customer service levels and demand patterns constrained by supply chain and geographical limitations. While most companies are able to marginally adjust manufacturing capacity and replenishment schedules based on changing business conditions, increasing competition, product line proliferation and a number of other factors provide pressure to be more nimble and agile.

          Building in more flexibility and agility in the supply chain is paramount in today’s manufacturing environment. Companies must focus on a high-performing supply chain and continuously strive to reduce inventory cost, reduce lead times and improve service levels.

          Business levers that are available at the plant level can be leveraged to boost supply chain performance. By understanding and managing critical shop floor levers, companies have the flexibility to adjust their production and replenishment strategy to better react to customer demand while minimizing overall cost.

          Figure 2 depicts the causal relationship between factory level controls and their impact on the supply chain:

        • Manufacturing levers : Shop floor staff can actively manage the following parameters to improve performance

        • Cycle time : Cycle time reduction leads to an accelerated manufacturing process. By removing downtime and sustaining a high production rate, throughput is increased

        • Production variability : Variability introduces waste into the system: WIP, buffers, etc. By increasing production and equipment consistency, products flow through the factory floor faster and cost due to waste is reduced

        • Production uptime : High production availability is a hallmark of a high performing factory. Plant staff should institute improvement programs to reduce unnecessary downtime

        • Plant impact : To lower inventory, manufacturers should consider putting into place two primary production tactics:
          Smaller batch sizes : Running a few large batches during a production day is seemingly efficient. If you consider inventory costs, however, holding large quantities of a single product may not be a good financial decision. High performing plants improve their production uptime by compressing cycle time and reducing variability so that they can accommodate more frequent changeover, producing quantities that are sufficient to meet customer demand. The ability to do frequent adjustments in the plant also increases the flexibility a plant has to react to sudden changes in orders.

        • Higher replenishment frequencies : A plant that produces a high product mix rapidly is able to support a more frequent replenishment schedule to the warehouses.

          • The impact the supply chain can be as follows:

          • Lower inventory cost : Smaller batch sizes and frequent replenishments allow companies to lower safety stock levels. The ordering point and the cycle stock required are also reduced. These factors translate into lower inventory cost

          • Higher customer service level : A higher customer service level is attained with high fill rates. By constantly restocking various products, companies lower their exposure to stock-outs. With an accelerated supply chain with smaller batches, sustaining a high service level is no longer synonymous to maintaining high inventory levels.

            • Simply put, boosting overall plant level performance allows plants to be more flexible and able to accommodate supply chain strategies that ultimately lower inventory management cost and improve customer service level.

              Production efficiency

              Today every manufacturer must relentlessly pursue cost reduction to remain competitive. Streamlining production and taking cost out of processes are concrete actions that manufacturers should master. Companies are accustomed to tackling improvements on a plant-by-plant basis. Areas such as manufacturing performance, cost of labor, production efficiency, etc. are all potential targets for improvement.

              Plant-level improvements are tangible, often with quick and visible payback, but they tend to be tactical. Although important, the impact of plant-level improvements remains small compared to corporate-wide initiatives. A better strategy is to identify common problem areas pertinent across multiple plants and set up initiatives to tackle them. Companies stand to gain significantly from improvement opportunities that span the entire plant network. The objective is to identify cross-plant improvement opportunities that lead to significant cost savings across the supply chain.

              Supply-chain cost savings

              Manufacturers often allow plants to manage production issues and the associated improvement programs, within factory confines. While clear advantages can result from plants being autonomous, higher performing manufacturers are complementing factory decisions with improvement initiatives that yield better results.

              Figure 3 illustrates efficiencies attained by addressing common issues that may cut across multiple plants. An issue that may be minor for a single plant could become a major issue when considered holistically (Example: Issue 3 and 4). Note also that when investing in a solution, the ability to leverage a single investment into multiple plants can represent significant cost savings. Finally, visibility into details that exist across plants allows for the transfer of “best practices” across the plant network.

              Author Information
              Edward Toung is Senior Director of Products at Informance International, a leading provider of enterprise manufacturing intelligence solutions. Over the past decade, he has worked with global manufacturers to improve their supply chain performance and manufacturing efficiency. He holds graduate degrees in Engineering and Management from UC Berkeley and an undergraduate degree from Purdue University. He can be reached at or 650-620-9742 ext. 222