Journey to a Perfect Plant Part 1: Integrating Product and Operational Management
Integrating Product and Operational Management
Global Competitiveness is placing tremendous pressure on cost, quality and responsiveness in manufacturing. Manufacturing nodes are being pushed out to distant locations leading to a loss of visibility and control. Asset efficiency is a premium, but effective comparative measures are difficult to achieve. Plants use copies of master data creating compliance and quality issues. Production personnel lack the decision support information to meet their targets. Business and financial impact of production asset exceptions cannot be monitored or controlled at the enterprise level.
Do you care about Integrating Product and Operational Management? Maybe not, but if any of the following describes the operating environment that you are working in then you should take a look at Integrating Product and Operational Management with in your environment:
- Customer deliveries due date promises frequently missed because of infeasible production plans/schedules
- There is excessive Work In Process, Raw and Finished Goods Material Inventory
- There is a great deal of difficulty in responding to unforeseen changes and re-planning
- You can not detect and resolve manufacturing exceptions as and when they happen
- There is a lack of integration between your ERP & real-time applications
- This is difficulty in documenting and tracking product genealogy for compliance with industry regulations
- Production personnel are spending 30-40% of their work time looking for information across multiple, disconnected systems
- There is a lack of real-time actionable intelligence, although needed by your production personnel for right time decisions
- You can not monitor, measure and control performance (KPI’s) for your people, assets and plants in near-time, to positively affect performance
- There is a high cost-of-quality and compliance – excessive rework, rejects, returns and errors
- The business struggles with conformance to regulatory compliance and their customers requirements
These are all symptoms of the lack of Integrating Product and Operational Management.
This is an environment where by Product & Operational Management is fully integrated. In this environment you have visibility into all aspects of your manufacturing operations, providing the ability to respond faster and minimize impact to the business and bottom line, driving increased yields, asset utilization and order fulfillment. In other words the “Perfect Plant”.
This perfect plant has three major thrusts:
- Asset Performance and Utilization:
Assets are monitored so that events of concern are triggered automatically. Enterprise Asset Management (EAM) processes are optimized and all asset content is available in a single source. EAM processes are tightly linked to Manufacturing Processes. Asset Performance and Utilization has moved from traditional Preventative Maintenance to a Collaborative Model that has Asset Management tightly integrated with Manufacturing.
- Manufacturing Execution:
Manufacturing execution is so effective that it is nearly event free due to proactive monitoring and automated event handling that is tightly coupled with EAM and the enterprise. This means that you have visibility across all critical processes that contribute to success of manufacturing execution. A shop floor level solution exists that extends the reach of your Enterprise Resource Planning (ERP) system and accelerates the operational efficiencies, while at the same time ensuring safe & compliant operations.
- Operational Scheduling / Planning:
The Operations Schedule is such that changes are not driven primarily by unplanned events in manufacturing but rather by demand shifts and other factors. Manufacturing is able to mange & react to these changes more rapidly and reliably. This allows for the optimization of existing manufacturing assets and processes to reduce manufacturing waste and variability. The integration of the plant with the extended enterprise and supply chain increases responsiveness to any changes.
Elements of the Perfect Plant
Production Planning and Scheduling
In today’s business climate, you are under pressure to address challenges posed by globalization, shrinking business cycles, heightened customer expectations, and demands for increased profitability. At the same time, you need the flexibility to respond to business change – without sacrificing profitability, transparency, and internal control.
Your Production Planning / ERP application need to ensure that all the factors that impact operational planning are taken into account.
Production planning must be able to create a consistent production plan to deliver the right product on time and within budget. This requires knowledge of all other activities associated with production, ranging from scheduling skilled trades, operation staff, and equipment, ensuring raw materials & other work-in-process items are available on time in the correct quantity, and quality along with a myriad of other pieces that are required to build production plan. With the amount of information that is required as input to the production plan, it is essential that is information is made available in a timely and integrated fashion to the production planner. The resulting production plan must further be integrated with both the logistics & transportation plan, as well as the suppliers’ delivery plans.
Having integrating product and operational management allows integrated processes be designed and implemented that allow you to improve product quality, and deliver on committed orders through optimal planning, scheduling, and the sequencing of production on the factory floor. It also gives the ability to reduce costs through process automation by integrating suppliers through electronic communication for better collaboration.
Human Capital Management
Traditionally, organizational growth has been enabled by hiring more people. However, today’s economic environment (do more with less) requires that the productivity of existing workers be increased before new headcount is considered. The focus of the organization has been transformed from ”quantity of head count” to ”quality of head count”.
To stay competitive, organizations must efficiently manage people during every phase of employment, from recruitment through training and development. Challenges include mergers that consolidate resources, the fluctuating global economy, shorter product life cycles, the constant demand for quick ROI, an aging workforce, and the huge burden of picking the best job candidates from a multitude of applicants. At the same time, innovation and creativity are essential for success – and that requires skilled and dedicated employees. These valued and skilled employees must be both developed and retained.
The dynamic nature of today’s business world is taking its toll on these employees. Now, it’s more imperative than ever to involve employees in company wide changes, to inspire them to execute strategies and goals that support the enterprise’s objectives. This requires that the individuals’ goals and contributions to the enterprise are identifiable and measurable.
State-of-the-art, goal-oriented and integrated management tools and measures that target an individual’s area of responsibility are required for your enterprise to succeed in today’s economy. This in conjunction with appropriate financial incentives and performance feedback motivates employees to achieve and excel.
This means that a continuous, integrated process and system are required to help employers to:
- Effectively plan talent needs
- Attract and retain the very best talent
- Speed time to productivity
- Motivate the right behavior
- Develop targeted capabilities and knowledge
- Retain the highest performers
- Enable talent mobility across the organization
- Grow the skill base of employees
- Manage Health and Safety activities
Increase efficiency from optimal allocation, and tracking of labor
The disconnect between Manufacturing and Enterprise business processes inhibits Line Of Business Managers and Production Personnel from a “Single Version of the Truth” and results in lower visibility and responsiveness. Personnel spend 40% of time wasted in looking for data needed across multiple systems that they need to gather for their jobs.
By having the information integrated and made visible can enable you to measure and control actual production costs against targets, see manufacturing exceptions and respond, as and when they happen, and to monitor, measure, analyze, control and improve key performance indicators (KPIs) against targets.
This can lead to decreased variability increases product quality and customer satisfaction, enable proactive problem & variance detection and management of quality issues, and allow enhanced quality compliance supporting continuous quality improvement
By providing the information in an integrated and visible form some of the typical benefits delivered are:
- 5% – 21% increase in Asset effectiveness
- 3% – 8% increase in 1st Pass Quality
- 3% – 5% reduction in waste
- 2% – 5% reduction in energy costs
Enterprise Asset Management
Enterprise Asset Management is one of the key parts of a Perfect Plant. Without the production asset operating effectively, how long can quality product be produced?
Best in Class Boast Superior Results…
Graphic source: AberdeenGroup, December 2006
As you can see from above, a considerable impact can be made by just effectively managing the assets. As companies go from a reactive maintenance strategy (if it breaks, fit it) to a more proactive maintenance strategy (predictive maintenance, root cause analysis, reliability center maintenance) asset up time improves along with asset productivity, and the associated maintenance cost goes down. Along with this, is an increased requirement for visibility into the state / condition of the asset, how it is performing.
Getting this information can be a challenge. This can range from requiring the skilled trades to record on paper various asset conditions while they are making their rounds, using mobile devices as part of the normal operating procedure, and to use automatic / sensor data collection devices that send the information to a manufacturing intelligence & information system for analysis.
Interestingly, some analysts feel that mobile technology is moving from the tactical area to the strategic, so more enterprise mobile solutions should be considered instead of just a spot solution for one particular area and application:
- “By 2009, companies that deploy mobile technologies to 100% of their field force will see 1% to 2% operational margin improvements.” Gartner Wireless Conference, February 2007
- “By 2009, 50% of enterprises will have migrated away from tactical mobile application silos (supporting a single application) to strategic platforms capable of supporting multiple applications, managing devices, and securing data and transport”. Source: Gartner MAG MQ Report Sep 2006
Governance Risk & Compliance
According to Gartner, an analyst company, how a company manages its risks is critical to its competitive position and reputation. Stakeholders – including shareholders – are concerned about these risks. In demanding “no surprises,” they are asking for increased transparency and greater depth of real-time risk reporting. Companies need an integrated solution that simplifies compliance and risk management and automatically collects and reports on risk information across the enterprise.
Part of this risk is becoming in violation of trade & embargo regulations. Each customer and supplier has to be checked against official sanctioned-party lists, each shipment has to be checked for embargo restrictions, and additionally export and import licenses have to be managed.
As the world goes green, emissions management becomes a greater concern for most companies. Each company / facility needs to track, analyze, and record emissions data to ensure compliance with defined international emissions standards. Integration with plant and equipment maintenance systems is essential to support equipment calibration and maintenance tasks, while sophisticated processes and tools are needed to calculate emissions (such as greenhouse gases) that cannot be measured directly or easily.
Environmental compliance regulations compels companies to collect, organize, analyzes, and evaluate data about products, factories, suppliers, countries, and customers required to provide proof of compliance with environmental directives that regulate the development, manufacture, distribution, disposal, or recycling of products.
Each one of these activities occurs every single day in most facilities, without being fully integrated into the operational execution and management activities the company is left open to considerable risk and exposure.
How to Get There
Are you worried about or trying to:
- Increase overall performance of the manufacturing operations business functions?
- Maximize the utilization of the manufacturing assets?
- Drive greater operational efficiency from the manufacturing execution functions?
- Fully leverage available best-in-class solutions for the scheduling business functions?
The Perfect Plant as an expression of Integrating Product and Operational Management aligns and improves key performance indicators across manufacturing reducing manufacturing costs via:
- Reduced manufacturing costs 5%
- Through manufacturing process monitoring and increased visibility
- Increased plant efficiencies 25%
- Optimization of manufacturing processes and integration with the enterprise
- Increase production yields 10%
- Proactive monitoring of manufacturing events
- Reduced maintenance costs 10%
- Streamlined maintenance processes and alignment with manufacturing metrics
- Reduced asset capital investments 10%
- Improved asset performance through greater asset reliability
- Reduced inventory 10%
- Manufacturing lean process enablement streamlining and reducing variability of execution
- Reduced premium freight costs 20%
- Integration of manufacturing events with the enterprise and supply chain
- Increased value chain agility and customer responsiveness
- Complete value chain integration and visibility
As business become more and more competitive and everyone is required to do more with less (less money, less time, less investment, less people), businesses can not really afford not to investigate the benefits of Integrating Product and Operational Management in your environment. Once these benefits are identified then it is time to start the journey to your “Perfect Plant”.
The first step is to decide on the elements of what makes up your perfect plant. Better quality analysis, enhanced maintenance strategies ensuring better uptime, shop floor visualization capabilities, more effective procurement, or any other items that are important to you.
Once you can “see” your perfect plant you can start prioritizing the individual items base on various benefits and start out to implement those items piece by piece.
However, they say the devil is in the details. Let’s look at some of these details. In a series of blogs to follow, I will share some of the blunders that finally led to success. Each blog will cover a real-life case about just one step in a company’s journey to the prefect plant.