Three Global Manufacturing Imperatives

In addition to the traditional issues of producing and shipping products, todays manufacturers are facing a new set of challenges, pressed upon them by their respective positions in the global economy. How they respond to these will likely determine their success or failure into the future.

Three Global Manufacturing Imperatives

As Thomas L. Friedman explains in his book The World Is Flat, ever-accelerating advances in technology and communication have shrunk the world to the point where up-and-coming economies now challenge the developed world to run even faster just to stay in place. Nowhere is this more evident than in the manufacturing sector, where the rate at which the issues are changing is accelerating. In addition to all that they had to address in the past, now companies must also respond to at least three significant new global imperatives: Global environmental awareness rising cost of energy and the environmental impact Ever-increasing need to be more agile customer demand is driving the economic order quantity to one Response to competition in a global economy

Manufacturers who are unable or unwilling to address these drivers are unlikely to survive in the long term. Fundamentally, these are information problems, not equipment or people or process issues. The solutions must integrate with existing manufacturing and enterprise business systems not replace or ignore them for these are the primary sources of the data that ultimately drive the solutions.

Environmental Awareness

These are not manufacturing problems. They are, in fact, manufacturing information problems.

The first driver is greater awareness of global environment change and the fact that manufacturers themselves are a major instigator of the problem, more so even than the automobile. In the aggregate, global manufacturing consumes more than 60 percent of the worlds energy, produces 75-80 percent of the worlds emissions (not counting automobiles) and creates more than 90 percent of the worlds hazardous materials. The high costs of energy, global warming and waste are issues manufacturers can no longer ignore. They must change the way they do business because the world is now watching. Customers, shareholders and regulatory agencies are all taking active positions on these topics, forcing business to show evidence of legitimate action to resolve them. They must use less energy and minimize the emissions and waste they generate. Above all, they must show they are actively getting better, not worse. While these are all issues affecting manufacturers, they are not manufacturing problems. They are, in fact, manufacturing information problems. Major manufacturers are now naming senior executives to manage efficiency, energy or clean tech chief sustainability officers, for example, whose responsibilities are to address these issues company-wide.

Agility
Agility is at first glance a supply chain issue, driven by mounting consumer expectations for rapid turnaround of product with custom features a make-to-order product demand. For a manufacturer to be agile requires information transparency throughout the organization,

Three Global Manufacturing Imperatives

end-to-end and top-to-bottom, with a commitment to employee empowerment and a bias for action, all based on an increasing appetite for better, timelier information. So where does this information come from? Interestingly enough, the requisite information is a hidden asset buried among the data accumulating along the dynamic supply chain, including the many systems in manufacturing and at the business level. These data are in systems that account for all aspects and states of inventories, including those managed by the various vendors supplying the manufacturing operation. They are in order processing systems; in asset utilization, production control and quality assessment; in energy management, including predictive algorithms and historical behavior of plants and equipment; in the coherent and timely analyses of production schedules and capacities of plants and facilities around the world. And so many more literally hundreds of disparate systems in a large global manufacturer. One can only imagine what it would be like to gather data from all of these systems, to integrate and correlate it, to overlay specific business context, and to extract timely, meaningful information from it. In the future, the extent to which a company is able do this will determine the degree of agility that company can achieve. And the future is now.

Enhancing Competitiveness

The value of continuous improvement is enormous.

How do you win the global competition? Easy. Be a smarter manufacturer. Commit to a process of continuous improvement on all fronts. Be more responsive to customer demand and quicker to market with a more creative and flexible design. Reduce manufacturing lot sizes and customize to specific customer requirements. Make products more costeffectively. Be more adaptive in leveraging production automation. Eliminate production waste and turn inventories five-to-ten times faster. Consistently produce higher quality products, with higher yields. Maximize asset utilization. Overcome high transportation costs by optimizing sources of supply and manufacture specific products as close to the customer as possible. Easy right? In the end, the value of singular improvement in any one of these areas is marginal. But the value of continuous improvement across all of them is enormous. As with the previous two imperatives, this is an information problem. In this sense, real competitiveness is the ability to optimize across business and production processes. It is a matter of providing timely business intelligence for the entire company, not just the IT department, and not just in the form of end-of-period reporting. By resolving these information issues using todays service-oriented architectures (SOA) to overlay business intelligence (BI) on manufacturing or whats now becoming known as enterprise manufacturing intelligence (EMI) producers can respond far more effectively to these and any new business drivers.

Changing View of Business Intelligence

Business intelligence is not a new concept, but it has evolved to a new form in the last five years. Classical BI was originally an IT tool designed to perform heavy-duty data analysis based on results stored in business systems. It facilitated high value business decisions that affected the long-term business strategy. It was initially aimed at macro level decisionmaking, to collect the data, extract it, purge it, and then slice and dice it in multiple ways for
3

Three Global Manufacturing Imperatives

use by the right people. Users would debate the answer and finally implement the solution. The principles and tools embodied in BI solutions were designed for and only applicable to enterprise-level systems. Today's enterprise manufacturing intelligence is aimed at micro level decision-making, at or near real-time speeds. To quote Bill Gates it is business at the speed of the internet. Its designed for use with plant operations in a business context provided by enterprise systems and therefore deals with small, incremental changes that affect todays work right now, as it occurs. The intent is that, over time, effectively made smaller decisions will roll up and yield big results. This presents a very different scenario of common wisdom in the manufacturing world. The key components of business intelligence for manufacturing/EMI are: Ability to connect to virtually any data source in the enterprise Plant floor production systems for automation and control Enterprise business applications that provide business context

Having the business information readily available empowers people to make optimal decisions in real time.

Capability to aggregate data from those multiple disparate systems Put data into proper context for individual users (to transform data into information) Provide analysis tools to trend, aggregate, correlate and report that information

Ability to web publish information for use by others View key performance indicators (KPIs) and dashboards, trends and reports through company-wide portals, using ordinary web browsers Use familiar tools for interacting with data (such as Microsoft Excel)

A Practical Example
If an important piece of equipment breaks down or shows signs that it is on the verge of a breakdown, what happens? Typically the organization falls back on its collective experience and views the production cost of the equipment being down in terms of dollars per hour. This experience tells production that it must react quickly because it is costing tens or hundreds of thousands of dollars an hour while the equipment is offline. This approach is invariably based on the assumption that having machinery and equipment down is a bad thing, and that getting it back up and running as soon as possible is a good thing, no matter what the cost. However, if there were time and appropriate tools for analysis of a multiplicity of details, the situation may indicate another reality. If the equipment was nearing the end of a full production cycle or was due for routine maintenance anyway, and if staff and spare parts were known to be at hand, it might in fact be lower cost and more efficient to proceed with the repairs. However, if there is timely access to the appropriate data there may be other factors that could and should be considered. What is the current level of inventory vs. short-term demand for the product made on the machinery, calculated by the hour or shift? What is the real revenue impact of
4

Three Global Manufacturing Imperatives

not getting the equipment back up immediately? Is there another production line running at less than full capacity that can pick up the slack and allow for service to the equipment? Is there another plant producing, or capable of producing, the product to meet the demand and what is the cost of temporarily transferring production there, including shipping? Are the appropriate resources (parts and maintenance staff) available to perform the required service, or would parts need to be ordered and/or staff need to be paid overtime? Typically, these questions are never asked because there is never time or resources at hand to gather the data and do the analysis, so organizations resort to the book that says to get the equipment back on line immediately. Having the business information readily available to answer these and more questions empowers people to make optimal decisions in real time. Enterprise manufacturing intelligence provides management and line personnel access to this data and the tools with which to analyze the current situation when problems occur. It enables users to drill into production and maintenance data, in the context of the current business situation, to quantify relative costs of alternative response scenarios. It provides these tools on-site via thin client Internet or intranet access. It does not require that lots of data be collected and taken back to the office for analysis by the experts the work is done where the problems manifest and people are empowered to make profitable decisions in real time. Lets consider some real-world examples. EMI Increases Productivity in the Paint Industry The worlds oldest paint company uses EMI to significantly increase productivity to the point where it now makes more paint in two shifts per day than it had previously made in three. Using the FactoryTalk VantagePoint (previously named IncuityEMI) software, they have been able to drill into their processes to examine differences in cleaning cycle times for different batches of products, then adjust the production schedules to optimize multiple cycle operations. They now run more similar products before switching to others, effectively creating longer, less costly production cycles in place of short, higher cost production cycles. This had not been taken into account before even though the data was readily available they simply didnt have the wherewithal to see it in the business context. Now these production decisions are made in real time because the information is readily available through web-based dashboards and KPIs. They also now do a much better job of coordinating the end-to-end production process, including coordinating paint batches with can filling lines to better schedule filling operations and eliminate wait times for new products. This enables more efficient changeovers of products and categories and they now have increased production by more than 30 percent which amounts to a savings of $500,000 per year. Now as demand grows they have the capacity to grow with it, with the potential further savings of delaying the need to deploy new plant and equipment by adding back a third shift. EMI in Pharmaceuticals A pharmaceutical company uses EMI to improve energy cost assignment to actual production. Sophisticated production equipment (extruders, rollers, strippers, packagers) consumed high volumes of electrical power, but energy costs were allocated to the various
5

Three Global Manufacturing Imperatives

aspects of production within their ERP system, not their production systems. This meant there was no incentive for production managers to use power more efficiently. The data existed in various systems in production, but the time and effort to extract the consumption details and analyze it in order to empower managers and production workers to conserve seemed out of reach. The production lines in question therefore were not profitable and they suspected that energy was a major contributor, but did not realize the magnitude or any concept of how to address it. They were considering closing down the business unit. Adding the capabilities of FactoryTalk VantagePoint business intelligence software meant they could drill into production control systems to gather real-time energy usage data in the context of specific production runs and specific equipment, then analyze it and upload the result back into the ERP system. True cost allocation has driven a savings of nearly $200,000 a month, and the production line changed from being a significant loss generator to a smoothly functioning profit center, preventing the potential closure of the business unit in question. EMI in Specialty Chemicals

This provides a value-added currency for each step of a companys operations so that every worker knows the true cost impact for each business decision.

Another example is a specialty chemicals producer that used EMI to optimize processes by eliminating idle time in batch production. The plant was making an intermediate chemical product, orders for which exceeded their ability to produce. As a sold-out product, if they could make more, they could sell more. Everything seemed to be running right, but intuitively they knew they could do a better job. There was a solution buried in the data, but they were unable to ferret out any meaningful solution. It turned out that batches were running properly but there were wide variations in idle times for making different batches of the same product on multiple production lines. Using FactoryTalk VantagePoint dashboards and web-based analytics, staff personnel were able to drill into operating detail and discovered anomalies that caused the variations. In one example of many, a manual vent-down step varied widely when operators were busy, so the entire process idled while they finished other tasks. With real data, workers were able to do a true cost-benefit analysis of replacing that manual valve with an automated one, so the process no longer waited for operators. Output increased, as did sales. As another example, some of the batch heat phases took longer to complete than others did, but they could not determine why. Using FactoryTalk VantagePoint, they correlated disparate production line data with data on steam temperatures in their utilities department and discovered a wide variation in the actual steam temperature supplied to production lines. At times, the steam simply was not hot enough, so they put the appropriate controls in place and ordered super-heated steam from the utilities department. This considerably shortening the batch heat times and the result was improved output on the initial production line by approximately 5 percent. They now are instituting similar projects on other lines and at other plants.

Three Global Manufacturing Imperatives

Creating KPI Currency Enterprise manufacturing intelligence offers companies a powerful new weapon in the battle to manage the core business drivers for industry. The ultimate use of EMI is to access the data buried in various systems in operations, apply a business context to it and roll it up into a single common denominator financial impact. It allows management and informed workers at all levels of a company to view real-time KPIs and dashboards and, when problems occur, to drill down into the root causes and resolve them before they manifest negative financial results. EMI allows companies to similarly aggregate information across multiple production lines and plants and provide a global financial perspective when problems arise, empowering people to prioritize and address the ones that produce the greatest return. This provides a value-added currency for each step of a companys operations so that every worker knows the true cost impact for each business decision, at the time the decision needs to be made, every step of the way. This underscores the major difference between EMI and traditional BI tools: EMI is a powerful, dynamic, in-process decision support tool. BI is a static tool that reports on results, after the fact. This new context provides a holistic view of operations, empowering continuous performance improvement over time. EMI drives the alignment of operations with current business goals, empowering informed line personnel and management with the tools they need to determine the cost impact and profitability of every decision.

For more information on FactoryTalk VantagePoint, visit discover.rockwellautomation.com to view a brief video on FactoryTalk VantagePoint and to view other information that describes how this software can improve your companys bottom line.

Publication FTALK-WP015A-EN-E March 2009

Copyright 2009 Rockwell Automation, Inc. All Rights Reserved.