Defining leaDership

MANUFACTURING EXECUTIVE
JUlY / aUgUsT 2009

HEALTHY GROwTH Page

8
Technology drives collaboration,
efficiency, and innovation at the
data-intensive biotech giant Roche.

“ In the end, there’s no point

in having a lot of data if you
can’t turn it into information,
knowledge, and wisdom.“
Jennifer Allerton
CIO of Roche’s Pharma Group

POwER PLEA
Siemens Cites Computing Limitations
in Slow March to Digital Factory
w w w. ma n uf act ur in g -ex ecuti v e.com

The Art of
SOCIAL
NETwORkING
GETTING MORE MILEAGE
Out of Aging Automation Platforms
 Advertisement
product profile
Many companies now face the challenge of having to produce
better products faster at a lower cost, ideally with “zero” defects.
At the same time, increasingly differentiated customer demands
and more product variants make it necessary to make both
technologies and business processes more flexible, often across
company boundaries. In this struggle for competitive advantage,
plant and machine automation has proved to be one of the most
effective levers for improving productivity. There is limited room for
further efficiency improvement in this area as many plants are
progressively automated.
More productivity through transparency
One area where there is still significant untapped potential for
productivity enhancement is optimisation of operations by means
of real-time communication and company-wide information
management. The key here is the establishment of both
seamlessly integrated automation systems and a smooth flow of
information throughout the entire process chain. Comprehensive,
real-time data from production is critical: It provides a solid
foundation for informed decisions and the optimisation of all
operations, from receiving the order to production planning to the
finished product. Data on the availability of materials and machines
must also be made fully transparent and directly accessible at all
times, just like the current production status.
Getting up-to-date information on the current production status is
the main reason companies invest in manufacturing execution
systems (MES). Working on the process level, production control
systems record a wide range of data for fine tuned planning and
control and also provide links to the company management level
(Enterprise Resource Planning, ERP). Today, information
technology (IT) must provide the best possible support not only for
production but also for the associated business processes, which
are an equally key component of corporate activities.
Obstacles to improved efficiency
One of the weak points of many systems is the inadequate IT
integration between the production and company management
levels. In many companies data is still entered manually and
information is passed on directly from one employee to another.
The error potential involved here is naturally quite high: In addition
to the possibility of data loss this approach can easily cause delays
in the information flow and often the entire production process as
well. Other manually executed tasks, for example in quality control,
also often hinder faster throughput and delivery times and accurate
production planning.
Even in companies where most of the data is already transmitted
electronically, poorly integrated or overly complex IT systems often
also create barriers to efficient communication. Conventional
information management systems generally first transfer
production data level to a computer in the production facility,
where it must be preprocessed and converted before it can be
transferred on to the central database via the corporate network.
This shop floor computer acts as a gateway between the different
communications networks, which all use different protocols. In
addition to the cost of the hardware, this indirect data route via a
gateway computer also involves significant software engineering
overheads. Over the years, company planning departments
develop heterogeneous IT parks with a large number of highly
specialised business applications and interfaces, becoming
increasingly rigid and inflexible as a result. The negative
consequences of this are considerable: It is difficult to adapt these
established IT structures to the everfaster changes in the market,
hindering the implementation of flexible, market oriented
business strategies.
MES Interface Module with support for the Enterprise Service Bus
Making meaningful production data available throughout the entire
corporate structure requires integrated technologies for both
horizontal and vertical real-time communication. This is also the
basic idea behind Mitsubishi Electric’s e-F@ctory concept which is
to close the gap between the control systems on the automation
level and the tools used in the corporate and production planning
departments. Mitsubishi offers several MES solutions for
connecting the production level to higher-level management
systems, completely eliminating the need for expensive and failure-
prone gateway computers and their programming overheads.
These solutions communicate directly with all major current
database systems, bi-directionally and in real time via a
standardised interface. Selected process and manufacturing
data can be transmitted directly to the higher level systems for
processing and the results can then be transmitted straight back
to the shop floor.
One example is the brand new MES IT Interface Module, which
has been developed specifically for complex IT systems. It
provides trouble-free data communications via the Enterprise
Service Bus (ESB), supporting a service oriented architecture
(SOA) geared to the characteristic needs of business processes.
This microprocessor module for the recently launched iQ
Automation Platform is plugged directly into the controller
backplane, just like other CPU modules. It uses the common
high-speed backplane bus to communicate with the controllers
and regular Ethernet TCP/IP (Transmission Control
Protocol/Internet Protocol) for communication with third-party
controllers and the higher-level management systems.
Flexible IT solutions geared to business processes
The SOA facilitates communication between different software
applications and has a modular design: Instead of a rigid and
monolithic program the company receives a solution comprising a
package of individual software modules or services. These modules
can then be combined to configure individual application
environments. Open standards like XML (eXtensible Markup
Language), Web Services and the Java Messaging Service ensure
that the modules all interoperate smoothly. The Enterprise Service
Bus, which has now become the defacto standard for the
integration of complex architectures, ensures reliable access to data
and services in all the connected systems. Communication between
the systems is performed by means of “messages” – a core ESB
concept that enables asynchronous communication between the
company’s applications. This makes it possible for the MES IT
Interface Module to dispense with the roundabout route through a
database and transmit the data directly to higher-level systems for
further processing, for example for energy management.
Transparent production: conventional manufacturing systems connect to higher-level
management systems via gateway computers and software. The MES IT Interface module
offers a faster and more efficient direct connection.
A key component of a service-oriented architecture is the ability to link in to the
Enterprise Service Bus.
Simple configuration instead of complex programming
A user-friendly configuration tool helps the user to choose the data
items needed to control all production and business processes.
With a simple menu-based interface, the configuration program
requires no special database programming skills so you don’t need
a PC programmer for the task. Access to all configuration and data
options is controlled by a flexible, password protected security
system that can be configured to respond dynamically in the event
of malfunctions. A data buffer in the module protects reliably
against data loss in the event of failure of the network or the
higher-level information system.
Close collaboration with IBM and ILS Technology
The new MES IT Interface Module for the iQ Automation Platform
is the result of a close collaboration with IBM and ILS Technology.
IBM’s Integration Services and SOA Foundation are key elements
of this project; ILS Technology contributed their device-WISE
platform. The software is implemented in the module and fully
integrated in Mitsubishi Electric’s e-F@ctory product portfolio.
Transparent manufacturing boosts productivity
A pilot project in North America has already provided an
impressive demonstration of the capabilities of the new MES IT
Interface Module in combination with the latest generation of
Mitsubishi Electric controllers. The manufacturer is now saving
€250,000 of maintenance costs per year for the gateway
computers that are no longer needed in production. In addition to
this, the seamless, comprehensive flow of information across all
levels from management to machines is enabling the company to
introduce more and more flexibility into their business processes
through their application systems.
Mitsubishi Electric has also implemented the e-F@ctory concept
for integrated automation solutions at its own servo motor
production facility at the Nagoya Works in Japan. The results of the
new transparent factory system are impressive: Productivity has
increased by 80 percent compared to conventional manufacturing
facilities and delivery times have become shorter. Today producing
a servo motor only takes half as long as it used to in a zero defects
factory without expensive wastage and rework. In addition to
this the company has also reduced normal development costs by
65 percent.
Mitsubishi Electric Europe B.V.
Factory Automation European Business Group
Gothaer Str. 8 40880 Ratingen, Germany
www.mitsubishi-automation.de /// Tel: +49 (0)2102 486-6130
 EXECUTIVE
M ANUFACTURING
JUL./AUG. 2009
VOL. 2 NO.4

8 DIALOGUE B Y PA U L TAT E 12/READERS’ CHOICE POLL

/BY JEFF MOAD
ROCHE BOOSTS IT VITALITY The Ballots Are in and Counted …
European manufacturing
thought leader Jennifer D8EL=8:KLI@E> < O < : L K @ M <
NOW HEAR THIS!
ME/MA readers weigh in
DEFINING LEADERSHI
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1 6 / A U T O M AT I O N /BY STEPHANIE NEIL 5 EDITOR'S LETTER

WHAT’S THE RIGHT BLEND? Manufacturers don’t B Y PA U L TAT E

Finally, there are signs that the global
have the time or money to overhaul antiquated automation systems in recession may have hit the bottom. By
pursuit of 21st century control platforms. So they are turning to data sharing, reaching out for new ideas, you may be
common applications, and, yes, standards to boost their efficiency. better prepared for the upturn when it
comes.
22/GREEN/BY MARK HALPER 11 OPINION

THE GREEN RETURN

BY LISA BODELL
It can be difficult to focus on innovation
A new study finds that European manufacturers are now during uncertain times, but a little bit
treating environmental initiatives as a profit strategy. of foresight can set you up for future
success.

24/WEB 2.0/BY CHRIS CHIAPPINELLI 42 OPINION

BY PIERFRANCESCO MANENTI
SOCIAL NETWORKING CLOCKS IN Manufacturers’ survival strategies in-
clude exploiting their existing assets as a
Time was, a business leader could dictate which technologies
way to improve operational excellence.
employees could use. The ubiquity of Web 2.0 tools might just change
that rule, and it’s time to consider how you can reap the benefits. 41 ROAD TRIP

BY M A R K H A L P E R
At the Hannover
3 0 / PRICE M A N A G E M E N T/ B Y J E F F M O A D Messe industrial

HITTING YOUR NUMBERS trade fair in Germany,

South Korea’s prime
Implementing profitable-to-promise processes and technologies minister touted technology integration.
makes a lot of sense. So why aren’t more manufacturers doing it?
6 S TA R T E R S

- How to Not Run Out of Ketchup

- Saab’s Military Power Hour
34/ D I G I T A L F A C T O R Y/ 3 6 / D E M A N D M A N A G E M E N T/
BY MARK HALPER BY STEPHANIE NEIL
- Airbus Sees Key PLM Role for 350
- ‘Supply Chain Lacks Strategic Focus,’
More Shaping Demand Study Says
Processing Demand management is
more than just forecast-
Power, Please ing and planning for
In a wide-ranging con- future sales. In today’s
versation at Hannover Messe, Siemens Industry economy, it requires tools and organizational
CEO Heinrich Hiesinger discusses what’s hold- processes, guided by a corporate strategy, to
ing up PLM deployments and the digital factory. actually shape demand. COVER PHOTO: Courtesy Roche

MANUFACTURING EXECUTIVE magazine is published six times a year by Thomas Publishing Company, LLC. 5 Penn Plaza, New York, NY 10001. J.E. Andrade, Chmn. of theBoard; C.T. Holst-Knudsen,
Pres.; R.J. Anderson, V.P., Planning.; E.V. Dillon, V.P., Mkg.; M. Peipert, V.P., Finance; I.J. Molofsky, V.P., Human Resources. Executive Office: 5 Penn Plaza, New York, NY 10001. Tel: 212-695-0500. Canadian
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4 Manufacturing
Executive JUL/AUG-09
 MANUFACTURING

O
EXECUTIVE

PUBLISHER
HEATHER L. HOLST-KNUDSEN
K, so the downturn’s not over yet. But how long can you wait before you do +1 212-290-8724
hholstknudsen@thomaspublishing.com
something expansive to prepare the business for the future? There’s only so much
you can cut, and assets need building as well as protecting. Maybe, if you reach out EDITOR-IN-CHIEF
DAVID R. BROUSELL
to the right people, right now, there’s a better chance you’ll still be here when the +1 212-629-1510
dbrousell@thomaspublishing.com
recovery happens and better prepared to exploit new opportunities.
If European manufacturers are to emerge from the recessionary crisis as strong Editorial
global competitors, they need to foster greater collaboration at all levels — internally EXECUTIVE EDITORS
between different parts of the company, externally among partners and suppliers, and MARK HALPER
+44 (0) 1934-863-815
across multiple industry sectors and geographies. Even joining forces with past enemies may mhalper@thomaspublishing.com
turn out to be the best way ahead for some industries. Look at the auto business.
PAUL TATE
Economic and manufacturing indicators finally seem to be posting signs of slowing +44 (0) 7973 510-458
ptate@thomaspublishing.com
decline after the last devastating couple of years. Some are even twitching upward again
this summer. Perhaps now’s the time for ambitious companies to reach out for recovery. It MANAGING EDITOR
EMILY-SUE SLOANE
won’t be easy, of course. The World Bank still predicts global economic shrinkage of around +1 212-629-1540
esloane@thomaspublishing.com
3% this year. That’s worse than expected.Yet, the bank also sees some revival in 2010, at
least in the more advanced economies. Aftershocks and a few false dawns are inevitable SENIOR WEB EDITORS
CONSTANZE SCHMITZ
and a bunch of failures, mergers, and job cuts are probably still waiting to happen. +32 (0)15 45 86 66
c.schmitz@tim-europe.com
The urgency of introspection in hard times has inevitably driven executive focus onto
internal cost savings, operational efficiencies, stripped down supply chains, and stream- Columnists
lined processes. This is all vital for survival, of course, so don’t stop now. The trouble is, an PIERFRANCESCO MANENTI
overwhelmingly internal focus can leave the business more mean than lean. And valuable IDC Manufacturing Insights
Milan, Italy
opportunities could easily pass you by in the economically challenged breeze.
Many leading manufacturers have already taken the collaborative plunge. Nestlé, Shell, LISA BODELL
futurethink
Roche, Daimler Benz, and others have recognised that they cannot expect all the innovations New York, NY
that may drive their future business to come from their internal R&D departments. They have
each backed collaborative partnerships or external networks to harness innovation wherever Design & Production

it may happen — among partners, universities, suppliers, joint ventures, and even competitors. DESIGN DIRECTOR
BEST & CO.
Collaboration, of course, is not just a strategy; it’s a matter of corporate culture. Effective rbest@thomaspublishing.com

collaboration and an open approach to innovation have to bridge people, processes, technolo- ADVERTISING
gies, and partners, so they must be top-down and corporate-wide.Technology can help. In fact, PRODUCTION DIRECTOR
REGGIE RIOS
it will be essential to make any collaborative venture successful. But it’s that corporate willing- +1 212-629-1520
rrios@thomaspublishing.com
ness to embrace new ideas from any source that will drive a company’s progress.
So if you want to help your company be better prepared for recovery when it comes, reach PRODUCTION
TECHNOLOGY MANAGER
out now. There’s a wealth of business-boosting ideas out there waiting to be discovered. ME BRIAN GALLOF
+1 212-629-1503
Paul Tate is Executive Editor of Manufacturing Executive. bgallof@thomaspublishing.com

WEB DESIGNER
PAUL POLICARPIO
+1 212-629-1511
ppolicarpio@thomaspublishing.com
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 STARTERS
Reported and written by Mark Halper and Paul Tate

S O F T WA R E

HOW TO NOT RUN OUT OF KETCHUP

Consumer goods giant Unilever invests in demand forecasting technology.

H
ow much ketchup will Russia buy next reducing inventories and transportation costs.
month? Anglo-Dutch consumer pack- “If we can more accurately predict who’s go-
aged goods giant Unilever might one ing to buy, we can have the product in the right
day have the answer. The company that place,” Sloan said.
agreed in April to buy the sauces busi- The Terra software will benefit Unilever’s
ness from Russia’s Baltimor Holding ZAO is more “stable” product lines, such as its Ragu
getting serious about demand forecasting. sauces, more than it will “our very highly
Unilever, the €40.5 billion maker of Dove, promoted businesses,” like Axe deodorant,
Vaseline, Ben & Jerry’s, Lipton, Bertolini, he said. To fully glean the benefit, Unilever is
Hellmann’s, Knorr, and other household name integrating the Terra software into its JDA de-
brands, plans in August to deploy software that mand software and SAP ERP. Sloan described
can help spot near-term demand trends by algo- that process as an “easy bolt-on.”
rithmically combining historical data, existing Unilever is using Terra first in the United
forecasts, order information, and other variables. States only. But the software could come to
“Forecasting is really the bane of many organisations,” said Russia and Europe by next year, as the company’s Euro-
Doug Sloan, New Jersey-based director of supply chain opera- pean, Asian, and other geographical operations are watching
tions support for Unilever’s U.S. operations. Unilever CEO Paul closely. “We’ll share results with the rest of our business
Polman probably wouldn’t dispute that statement. Earlier this globally,” Sloan said.
year, in announcing financial results, Polman declined to look Get ready to place your Russian ketchup bets.
outward. “Given the current
CONTRACTS
economic uncertainty, I believe
it would be inappropriate at
this stage to provide an outlook
SAAB’S MILITARY POWER HOUR
specifically for 2009 or to reaf- The “power by the hour” concept popularised build an airplane on spec to the military, deliver it,
by iconic engine maker Rolls Royce got a boost this and the military operates and maintains it,” Glenn
firm 2010 targets,” he said.
spring, when Sweden’s Saab Aerotech enlisted ERP Arnesen, managing director of IFS Scandinavia, told
The demand forecasting software provider IFS to help maintain planes for the ME. “Saab now is getting into a new business model.
software, from Norwalk, Swedish Air Force. They have the obligation to maintain and support it.
CT-based Terra Technology, Power by the hour is a maintenance programme Their pay depends on performance.”
won’t provide a big-picture that assures a customer of a product’s uptime. The The deal marks the first joint win in the new
user pays based on how often it uses the asset, in this Saab-IFS alliance. “We are examining several other
rescue. Sloan said Unilever
case, a plane. Such contracts, also known as perfor- possibilities, with both military and civil authorities,
will use it for more “tactical” mance-based logistics (PBL), give the manufacturer a and have set up an organisation in collaboration with
forecasting of up to a month huge incentive to keep the product alive and well. IFS for combined marketing activities, sales, and
out. It will help Unilever Saab is deploying IFS’ ERP software and asset development,” said Göran Kristoffersson, business
decide where and when to in- management system to track aircraft performance, development manager at Saab Aerotech. “In our
maintenance schedules, spare parts, and the like. assessment, the market for this type of service and
crease or decrease production
Saab is supporting 65 SK 60 training planes that it products within system support for maintenance
and shipments, said Sloan, previously sold to the Armed and spare parts logistics is worth SKr
who’s counting on improving Forces, which now will pay Saab 1.6 billion to SKr 3 billion over the next
forecast accuracy by 25%. a fixed price per flight hour in a 10 years.”
Although he declined to contract valued at SKr 900 million Watch for more IT companies to
through mid-2017. partner on maintenance deals, as power
quantify anticipated savings,
“The traditional model was to by the hour powers up.
he expects to save a bundle by

6 Manufacturing
Executive JUL/AUG-09
 S U S TA I N A B I L I T Y

AIRBUS SEES KEY PLM ROLE FOR NEW 350

Oil price hikes and recession-
ary rethinks have taught us one
thing: The world’s transport
systems need to get a lot greener
to drive growth. Greener cars
are on the way. Now it’s the air
industry’s turn.
With a little bit of help from
PLM technology, Europe’s Airbus
reckons it can beat the flock to
the greenest airliner ever with the
Airbus 350 XWB, due for delivery
in 2013.
Collaborative PLM is a key part
of the 350’s development. At the
Paris Air Show in June, Airbus
announced an extended deal with
France’s Dassault Systèmes
to help it apply the latest
collaborative green-sky
thinking to the design and
production of its most eco-
efficient plane so far.
With over half the
airframe built out of com-
posite, lightweight materi-
als, the Airbus 350 is using
Dassault’s collaborative ENOVIA
VPM system to create a virtual 3D
digital mock-up of the new plane
that supports innovative engineer-
ing changes from thousands of
designers at Airbus and its sup-
pliers around the world. The 3D
system will also connect directly
into Dassault’s DELMIA manufac-
turing engineering package to help
optimise the final manufacturing
process.
This collaborative PLM ap-
proach aims to create a ground-
breaking aircraft with significantly
reduced emissions, lower noise
levels, and improved fuel efficiency
of up to 30% less fuel per seat.
Even the 350 XWB’s new
production facility, now being built
in Toulouse, France, will be one
of the company’s most efficient
and eco-friendly assembly plants,
with 55% of its energy generated
onsite by 22,000 square metres of
solar panels.
And with 483 orders already
on the books, Airbus President
and CEO Tom Enders reckons
the A350’s green credentials have
helped make it the fastest selling
aircraft of all time.
Perhaps green sky technology
can pay off after all.

C O L L A B O R AT I O N
A MEMO TO THE CEO Could an Annual Technology
Report close the gap between IT and the business?
business, what it’s worth, and where it’s
going. This is how they suggest the sections
Annua be structured:
Technololg Supporting Agility: How technology
y would have risen to the top of their
Repor t actively supports business improvement and
agility, including an “anatomical chart” that
maps out its role as supporter and/or driver
across marketing, sales, R&D, and manufac-
turing, listing key technology assets for each
function.
Business Alignment: Hard metrics and
real life stories about how technology creates
business value matched against key corporate
goals, like increasing sales, improving innova-
tion, or reducing costs, and quantifying each
MANAGEMENT
‘Supply Chain
Lacks Strategic
Focus,’ Study Says
As manufacturing execu-
tives claw their way through the
prolonged recession, you’d think
that supply chain management
strategic agendas. The enormous
savings and competitive advantage
they could realise by ordering parts
and materials on a just-in-time,
demand-driven basis — by slashing
inventories, minimising transport
machinations, and assuring supply
from sustainable, innovative, and
collaborative partners — should
have convinced the C-suite to
overhaul supply chain practices.
Not so, according to a report,
“Global Supply Chain Planning Study

T
he Annual Report keeps investors happy.
The new, recyclable Sustainability
Report shows off your environmental
credentials. So how come you don’t have
an Annual Technology Report, too? After
all, technology is now critical to every aspect of
business performance and value.
McKinsey consultants Driek Desmet in
Amsterdam and Tor Mesøy in Oslo think you
need one — especially if you want technol-
ogy teams and business units to work together
more effectively.
In a recent open “Memo to the CEO,” the
European duo claim the biggest problem any
company has with the effective use of technol-
ogy is still a “lack of shared understanding.”
Photo: Courtesy Airbus
direct business result.
Technology Capability: Measuring the
improvement (or deterioration) in technol-
ogy capability over the year against industry
benchmarks and how it helps the company
make a competitive difference.
Technology Balance Sheet: What’s it all
worth? A quantitative market valuation of
the entire technology portfolio, from tangible
assets such as hardware and data centres to
intangible assets like patents and R&D.
The Way Ahead: Mapping out the technol-
ogy programme for the coming year with key
performance measures that connect a corpo-
rate vision, such as customer-centric processes
or operational simplicity, with innovative new
ways technology can help.
2009,” by Capgemini Consulting.
Many companies say they value in-
novative supply chain management,
but most lag in implementing it, the
report notes. Capgemini surveyed
120 supply chain executives from
manufacturing, life sciences, and
consumer goods companies.
“Although viewed positively as a
source of competitive advantage by
some organisations, supply chain
planning is not yet universally seen
as a strategic, critical decision-
making activity,” the report states.
Most respondents said they have
no formal process to collaborate
with suppliers and that they don’t
share critical information such as
stock levels, gross demand, and pro-
duction plans. The respondents also

Closing that gap demands a new approach, Too much of a mission? Not if it works. The noted deficiencies in risk assessment
captured in a single, comprehensive docu- McKinsey boys believe it will help the whole and integrating sales and operations
ment that spells out each year the company’s company see “the big technology picture.” All into supply chain planning.
technology performance, how it helps the you’ve got to do is write it!

Manufacturing
JUL/AUG-09 Executive
7
 DIALOGUE 07-09
Jennifer Allerton talks to Paul Tate

ROCHE BOOSTS I.T. VITALITY

In our latest Dialogue with a thought leader in European manufacturing,
Jennifer Allerton, CIO of Roche’s Pharma group, talks about a strategy to consolidate
IT and manufacturing platforms to support improved collaboration and innovation.

F
ounded in 1896 by Swiss pharmacist Fritz Hoff- Q: Will the current economic slowdown have
mann-La Roche, the Roche Group still pursues his an impact on the business?
original goal of developing innovative drugs of A: The challenge in the current economic climate is the
uniform quality and distributing them internation- pressure on governments. The money that’s gone in to bail
ally. Now Europe’s leading healthcare company out banks will have to come from somewhere. Inevitably,
over time, I think education and healthcare are two of the
and the world’s largest biotech business, Roche
areas where governments just can’t afford to continue to in-
maintains a passion for innovation and corporate vest at the same levels, so there will continue to be pressure
vitality that drives its business in more than 150 on the pharmaceutical industry. There’s always a conflict
countries around the world. between the demand for healthcare and the ability to pay
In our latest Dialogue with a European industry leader, and afford that healthcare.
Jennifer Allerton, CIO of Roche’s Pharma group, tells Q: How does technology help Roche respond to
Manufacturing Executive’s executive editor, Paul Tate, how these challenges?
its global programme of consolidation across both IT and A: Information is the lifeblood of any pharmaceutical busi-
manufacturing platforms is fostering greater innovation, ness. Take the development process. Drugs go through three
efficiency, and collaboration. phases of clinical trials in their development. Phase 1 is
where you give the drug for the first time to a small group
Q: What drives Roche’s business in today’s global markets? just to understand the mechanism in action and the side
effects. Phase 2 is when you broaden the trial and you’re
A: The big challenge for the pharmaceutical business is to con-
tinue to innovate, to bring clinically differentiated medicines to
patients and really make a difference in patients’ lives.
For us, that means supporting more personalised health-
care in the future because everybody is different. The dis-
ease that somebody gets is very often specific to them. The
old way of treating people was to give everybody the same
medication. The new way is to understand the actual DNA
of the person and how they’re going to react and respond.
So, that means understanding the science that allows you to
differentiate who will respond to a drug and who won’t, and
it’s something that’s clearly supported by IT. We believe
this is our core competence: the application of technology
to enable differentiation of medicines for individual people.

Q: What does it take to develop such a new approach?

A: You have to have deep pockets. It costs something over
$1 billion to bring a new drug to market and it takes 10 to
12 years. It involves a lot of researchers and a lot of work
with doctors in hospitals and with patients in clinical trials.
That means you have to make long-term investments and
long-term bets, and you have to follow the science to make
sure that you’ve got good drugs, which can really make a
difference and are clinically effective.

8 Manufacturing
Executive JUL/AUG-09
 looking at effectiveness and further eval- which is made up of the 12 people who
uating safety. That would be hundreds of Personal Profile actually run the Pharma business. My role
people. Phase 3 are the very big clinical Jennifer Margaret Allerton, director, is not just to defend IT and make sure
trials where you involve thousands of Pharma CIO, and head of IT infrastructure, we’ve got the right programs in place. It’s
people worldwide to measure effective- Roche Group, F. Hoffmann-La Roche Ltd. also to help drive the Pharma business
Nationality: English
ness compared with standard therapy or itself, and that really means that I under-
Based: Basel, Switzerland
other available treatments and monitor Education: Mathematics degree, Imperial stand the business issues.
further side effects before you’re actu- College London; masters degree in Theoreti- IT is treated as an investment just like
ally allowed to bring the drug to market. cal Physics, University of Manitoba, Canada any other part of the business. Deciding
Each of those is potentially a multi-year Languages: English, German, French, on a new system is the same as investing
study with many thousands of patients in Spanish, Italian, Portuguese in a new plant or investing in other assets
many hundreds of hospitals and clinics Professional roles: around the world. You need to think of it
around the world. So, information tech- CIO, Unilever, Brazil in business terms aligned with the business
nology to support and track the progress Head of IT, Unilever, Asia Pacific strategy and make sure you’ve got a clear
Director of IT & HR, UniChips, Milan
of those patients is one of the clear areas Director of Business Solutions,
link between the business strategy and the
where technology supports the business. Cable & Wireless, UK work that you’re doing.
CIO, BOC Gases (now part of Linde), UK
Q: Does Roche regard IT as both a COO, Servicenet (Accenture/GTE), US Q: So you feel you really have a seat at
business enabler and an efficiency Technical Director, Barclaycard, UK the business table?
play? She is also a Chartered Engineer and a A: I think this is as good as it gets. I can’t
Freeman of the City of London.
A: I think the role of IT is on a number think of a better way to do it.
of levels. First of all, you’ve just got to
make sure that the infrastructure is there to support what the Q: How are you developing such an information-inten-
business needs. IT is there to expand the brain. If you want sive technology strategy at Roche?
to send an e-mail, it’s easy. If you want to send an instant A: We have major data centres that we’re in the process
message, it’s there. If you need to do a videoconference, it’s of consolidating into three key data centres worldwide.
there. If you want to exchange data with a colleague in a dif- This is part of a major process of global consolidation we
ferent country, it’s there. You don’t have to think about it. It began six years ago. We still have more than 5,800 servers
allows you to build on the collective knowledge and purpose around the world, mostly Hewlett-Packard, and we want to
of the organisation to make things happen. In a sense, it’s get down to three large logical data centres — in the U.S.,
collaboration, but it’s on many different levels. Germany, and Switzerland. We’ll also continue to main-
The other aspect is to drive for cost efficiencies. You tain tactical data centres in the Far East and in Sao Paolo,
want to make sure that you’re running your supply chain ef- Brazil. Obviously, as telecommunications get better, that
ficiently and effectively. But we also have some life-saving landscape will evolve. When you look at process consolida-
drugs, like CellCept, which is to stop the rejection of organs tion, we still have work to do, but we are well on track with
that have been transplanted. Once you start taking those that, too.
kinds of drugs, you need to continue to take them. So, for But it’s never one standard technology platform. It’s got
Roche, it’s absolutely not an option ever to be out of stock. many moving parts, and those parts are evolving, hope-
Also, when you look at the information that we’re trying to fully in synchronisation as you deploy different versions
provide to doctors and hospitals around the world on the ef- of new products and they interact with each other and
ficacy of clinical trials, we need to make sure that the right connect with each other.
information is at their fingertips, when they want it. So,
information has to be pervasive, but it also has to be afford- Q: Is this consolidation helping to drive the business
able. That’s the trick, to get those two parts of the equation in new ways?
working in harmony. A: We’ve been trying to leverage the scale of the company,
but also to give us flexibility in areas that give us competi-
Q: That sounds like a lot of information.
tive advantage. For example, we’ve been reducing the
A: It’s a huge amount. We’ve got about 2 petabytes of data number of instances of SAP that we have. We have already
under active management today [a petabyte is 1,024 tera- cut the number of SAP versions down from 18 to just six
bytes] and it’s growing at 60% per annum. That’s the scary and are now focusing on SAP’s Business Suite 7. Part of
bit — the rate of growth. that was a program called Forward, which we ran across
For example, submissions for new drugs are enormous Western Europe, where we have harmonised business pro-
documents. I think the average is 35 CDs in electronic cesses in Europe and use one underlying SAP instance to
format that are submitted in support of any one drug. It’s a support them. That’s allowed us to do business in the same
huge amount of information that needs to be pulled together way across a large part of Western Europe and keep our
for those submissions. costs down in terms of maintenance and support by remov-
ing redundant systems.
Photo courtesy: Roche

Q: So your role as CIO is clearly pivotal to the business? In a similar way, we use Oracle Clinical systems to
A: Absolutely. I think it’s fundamental. One of my roles support the collection of data from our patients around the
as CIO is that I sit on the Pharma Executive Committee, world on clinical trials, and we use Microsoft on our desk-

Manufacturing
JUL/AUG-09 Executive
9
 DIALOGUE 07-09
Jennifer Allerton talks to Paul Tate

tops to support personal productivity. For our scientists to issue. We need highly automated factories and we’re starting
be able to exchange knowledge, we need to make sure that to move them forward, too.
they’re all calling a molecule a molecule in the same way. We have two kinds of plants. First, the biotechnology
So, standardisation for communication and collaboration plants. More than half of our products are biological prod-
across geographies and continents has been a major part of ucts, and they’re very complex, big molecules with very
the program. complex manufacturing processes. The automation of those
processes and the support that technology brings is key. We
Q: How long do you think it will take before you’ve have a Siemens SIMATIC solution. Two of our four plants
got the Roche world all looking at a single instance? use that, and the other two use older MES systems that we
Do you think that’s ever going to happen? will move over time to standardise on Siemens.
A: I don’t think that will ever happen, simply because you For the galenical plants, which are also packaging plants,
also need to make sure that you’ve got strong business we’re standardising on Rockwell Pro Pack PMX. Again, we
endorsement and change control on it as well. You want to have developed what we call our manufacturing execution
make sure that you continue to have one system and that system core, and we’re now in the process of rolling that out
each country then doesn’t develop their own tweaks, bells, to our other galenical plants around the world.
and whistles to it over time. That’s easy to do across a single
geography or across a region, and that’s what we’re cur- Q: So by consolidating the technology platforms you
rently doing across Western, Central, and Eastern Europe. It’s are helping to drive innovation both at the enterprise
harder to see how we could do that across the world and get and the manufacturing levels?
down to one instance. But we’ve made significant progress. A: I think innovation is absolutely at the heart of everything
We’re getting down to a reduced number of instances. That’s we do. You can never stop. We’ve gone through a lot of
good. change over the last five or six years as an organisation —
in our products and in our manufacturing capability. Some-
Q: What’s the benefit of moving to the times people will say, “We’ve done a lot of change. Can we
Business Suite 7 platform? stop now, please, and have a bit of a break?” The answer,
A: For me, it’s the ability to bring in extra functionality of course, is absolutely not. The world doesn’t stop. The
without having to do a major systems upgrade. With six business environment doesn’t stop. We have to continue to
different instances of SAP around the world, we’ve always change and to innovate, and that’s an important mind-set to
got a team doing an upgrade somewhere, all the time. But have. Keep innovating, keep changing, and keep reinvent-
technical upgrades don’t necessarily bring any business ing yourself. It’s the only way forward.
benefits. I want to be able to concentrate on bringing in
business benefit. With Business Suite 7, you’ve got a lot Q: Where do you see the next challenges for Roche in IT?
more flexibility and you can bring in those bits of function- A: Do I see another killer app on the horizon? Not yet. But
ality that you want without having to do a major technical there are new opportunities that Web 2.0 brings us in terms
upgrade of the whole thing. of sourcing solutions to particular issues and problems, such
as different ways to go to market. A big area of focus for us
Q: What are the key benefits you’ve gained for the at the moment is on different ways to harness the imagination
business so far? and the innovation of the world. We’re not arrogant. We don’t
A: First of all, the ability to share believe we own all the good ideas internally
information at a distance. We believe Fact File: F. Hoffman-La Roche Ltd. within Roche. So, it’s that ability to harness
that innovation happens in small Headquarters: Basel, Switzerland the power, the intellect, the passion, and the
groups. You want to be able to share the Business sector: Pharmaceuticals & creativity of others in flexible collaborative
knowledge, the tools, and the techniques Biotechnology arrangements. That, for us, is the next area.
that are allowing people to discover * Financial Times Europe 500: Being able to do searches, for example,
and understand the science across the
Ranked No. 7 across literature, in Chinese or in English,
** 2008 Revenue: €CHF 45.6 billion
world. That way, you get the economies ** 2008 Profit: €CHF 13.9 billion (up 4%)
and across images as well as text. How do
of scale. So, using the right technology, you do that in an affordable way? Those are
small research groups are able to share
Key brands: Tamiflu, Valium, Avastin, some of the new challenges that we see.
Boniva, Tarceva, Pegasys, Herceptin, Xe-
and discuss the science using collabora- loda, NeoRecormon, MabThera/Rituxan,
And, of course, we generate massive
tive tools and common systems. For Actemra/RoActemra, CellCept. amounts of data, so how do we keep that
me, that’s the area where you can really Employees: 80,080 manageable as it continues to grow and
make a difference. Presence: 150 countries to expand? In the end, there’s no point in
Production: 16 factories having a lot of data if you can’t turn it into
Q: Have you also been pushing to Enterprise platforms: SAP, Oracle, HP, information, knowledge, and wisdom.
standardise at the manufacturing Microsoft
Manufacturing platforms: Siemens,
automation level? Rockwell Q: Wisdom would be nice.
A: We have. The manufacture of final * Financial Times’ ranking of Europe’s Top 500 Companies, 2008 A: Wisdom would be wonderful. But wis-
products is clearly a big technology
** Exchange rate at end April 2009: 1 CHF = €0.27
dom always takes a little longer. ME

10 Manufacturing
Executive JUL/AUG-09
P
erhaps the most difficult aspect of innova-
tion today is dealing with uncertainty. Exper-
imentation and risk, two necessary pieces of
the innovation puzzle, are much harder to
negotiate when resources are strained and
the future is uncertain. But uncertainty
makes the case for foresight and innovation
that much stronger. Organizations that plan
ahead set themselves up for success regard-
less of how things unfold.
Over the past few months, we’ve inter-
viewed innovation leaders across a variety
of industries and organizations. Each person we spoke to
voiced a similar imperative when it comes to innovation: It’s
not just about solving problems and coming up with new ideas;
it’s about solving the right problems and coming up with the
right ideas. Foresight, or the practice of scanning new and off-
beat resources with the goal of identifying important trends
and ideas for your organization, comprises three phases:
1. Scanning, Synthesizing, & Analyzing: Conduct wide-
reaching research to uncover “weak signals”
and possible opportunities.
2. Scenario Planning & Opportunity
Recognition: Explore insights from re-
“ The goal is to avoid being surprised by what hap-
pens outside your organization and to play a more
search and scanning and translate them into
active role in the change that happens within.
dynamic “stories” of possible, probable, and
preferable futures.
3. Visualization & Communication: Publish scenarios to a
wide audience so that they may serve as a platform for idea
generation and innovation.
By building a robust foresight practice, you ensure that your
innovation efforts are less haphazard and risky. While this takes
time and resources, there are many simple, inexpensive things
you can start doing today to improve your organization’s ability
to negotiate the uncertain future. For example:
● Scan during downtime. No matter how busy we are, we
inevitably get a few minutes’ break each day between meetings.
Use this time to do a quick scan of the marketplace. Set up a
Google Reader (reader.google.com) and add 10 or 15 off-
beat blogs to it. Bookmark your reader, and you’ll
have one-click access to hundreds of tidbits
each week that have the potential to fuel new
ll
IO
No d e
B
I Ni s a
P L
NG
I
O t im e s ,
PT
ADA
o foc
ic u lt t
d if f
It can
be
yo u up f
ht c an set
f o r e s ig
ideas and shape your vision for the future.
● Build out plan B. Most of us have what futurists call a “pre-
ferred future.” It’s our plan A — what we expect to happen,
and it’s the vision upon which we act daily. But what about plan
B? Forward-thinking organizations always have an alternate fu-
ture in mind when making strategic decisions. What does this
look like for your organization? Map it out with your team.
Who are the customers and competitors? What’s the primary
business model? In addition to stretching your thinking, this ex-
ercise will help your team recognize new opportunities.
● Start planning. Once you have some ideas for what the fu-
ture might look like (backed up by research and “weak signals”
from your scanning efforts), set up regular meetings with your
team to share new information and discuss its meaning for
your business. You most certainly do this already to some de-
gree — when a competitor launches a new offering, you react
to that news. But you should get in the habit of tracking and re-
acting to news and information from outside your normal
radar. For instance, identify a few startup companies that are
doing something new and different. How might they change
“
your competitive landscape in 10 years’ time? Creating an open
channel of communication about the future will keep you and
your team active in core foresight activities, helping you better
manage change and anticipate the future.
By adding these activities to your routine, you can begin
practicing foresight without committing too many resources.
Over time, your efforts will help you build a vivid picture of
multiple possible scenarios for the future. These scenarios
Executive JULY/AUG-09
should help you navigate a rapidly changing global business
environment with relative ease. The goal is to avoid being
Manufacturing
surprised by what happens outside your organization and to
play a more active role in the change and innovation that hap-
pens within. Here’s to the future. ME
Lisa Bodell is chief executive officer of futurethink, which offers
innovation research and tools.
11
F U T URE
I N
C E R TA
TO AN UN
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of
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 The b
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REALLY GET MANUFACTURING, Wi l l AND
WHICH PROVIDERS THEY WOULD
RECOMMEND TO PEERS.
By Jeff Moad

12 Manufacturing
Executive JULY/AUG-09
 T
here was a time when many manu-
facturers were satisfied with generic
technology products from vendors
that may or may not have had deep
expertise in the core processes that
were critical to specific vertical
industries. In those days, generic
was good enough because many manufac-
turers were just beginning to automate their
businesses, starting with financial processes
that weren’t necessarily expected to deliver
significant competitive advantage.
Today, the opposite is true. As manufactur-
ers automate more and more of the business,
reaching down into the unique, core processes
that define and differentiate them, generic is
no longer good enough. Now, more than ever,
manufacturers are demanding systems that
conform to their specific industry require-
ments, whether than means tracking the
ingredients in food products from the source to
the retailer’s shelf or orchestrating the supply
of the hundreds of thousands of parts required
to produce an airplane.
And that means manufacturers need to
find technology vendors that understand their
businesses and offer products and services that
deliver value in the context of specific vertical
industries.
But who are those leading vendors? Re-
cently, we at Manufacturing Executive and
Managing Automation set out to answer that
question. We decided to ask our manufacturing
readers which technology vendors in a wide
range of categories best understand their busi-
nesses, which vendor relationships they most
value, and which technology providers they
would recommend to their peers.
We trust the results will provide insight into
which technology vendors today truly under-
stand the increasingly complex and specific
requirements of manufacturers today.
Photo: Copyright Iistockphoto.com/morgan

Manufacturing
JULY/AUG-09 Executive
13
 A
t Amcor PET Packaging, the
multinational manufacturer of
drink containers, concerns over
bottlenecks in bottle making rose
from engineering to the execu-
tive office after line inefficiencies
turned costly.
A few years ago, the maker
of polyethylene terephthalate (PET) bottles
for the food and beverage industry faced
escalating electric bills, a direct result of
wasteful workflows that soaked up exces-
sive energy during production. Suddenly,
power conservation became a boardroom
conversation.
Saving energy in the factory, however, is
not as simple as flicking off a light switch.
It requires a multipronged approach that
begins with finding the energy-eating
source — which very often is an ineffective
16 Manufacturing
Executive JULY/AUG-09
automation process — and ends with an
equipment upgrade of some sort.
Investing in new assets, however,
requires lots of cash, which, in this budget-
crunching economy, is a four-letter word. IT
and plant managers alike know better than
to ask for it.
That put Amcor PET’s North American
operations, which includes 23 facilities with
a mixed bag of vintage Rockwell Automa-
tion and Siemens programmable logic con-
trollers (PLCs), some of which are 20 years
old, in a precarious position. No control
architecture overhaul was about to happen
anytime soon.
And so it goes. Amcor, like many other
manufacturers, must figure out how to
drive more efficiency out of the automation
platforms already in place. It’s not an easy
task for companies that have spent the past
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Illustration by: PixAchi-Fotolia

Manufacturing
JULY/AUG-09 Executive
17
 20 years investing in a
cornucopia of control,
including PLCs, com-
puter numerical controls
(CNCs), or a distributed
control system (DCS), on
top of which they’ve built
out a complex network
of I/O communication modules, sensors, and software
from historians to human machine interfaces (HMI). Now
they want to move manufacturing into the 21st century for
sustainability or competitive reasons, but they can’t afford to
bulldoze what’s already in place.
In today’s economy, where capital investments are at
a standstill, manufacturers are opting for an automation
face-lift, a refreshed version of an aging architecture, so to
speak. Companies are looking for ways to layer new ap-
plications over old controllers in order to extract and share
information. In addition, they want to unify the disconnected
backdrop of proprietary control.
“The equipment has been islands of information that oper-
ators and plant floor supervisors had [access to], and now we
want to share that with the management level and across the
Strategy
SPLIT DECISION ON AUTOMATION STAND-
ARDISATION, MAINLY DUE TO BUDGETS
Q: Has your company stan- Yes
dardised, or is it considering 45%
standardisation, on strategic No
automation/control platforms
throughout the company?
Q: If no, why not?
Too expensive
58.8%
No executive backing
29.4%
Having a heterogeneous control platform
works fine for now
23.5%
Too complex
11.8%
All manufacturing is outsourced
5.9%
Q: If yes, across
All plants
what facilities
57.6%
and where? One plant
36.4%
Two or three plants in the same region
6.1%
In the U.S. only
69.7%
Around the world
30.3%
Source: MA/MEreader poll Note: Percentages may have been rounded and may not equal 100%.
18 Manufacturing
Executive JULY/AUG-09
enterprise,” says Robert Cooper, corporate controls engineer-
ing manager for Amcor PET’s North American operations.
The sensor-to-boardroom link is a common theme in
many corporations. The problem, industry experts say, is that
sometimes archaic automation technology, built to be real-
time, repeatable, and reliable in the control of a particular
process, cannot easily integrate with business systems that
are built on databases that accommodate transactional (near
real-time) data flows.
“It is decades and decades of a reality, and now the dif-
ferent worlds are colliding,” says Mike Yost, global markets
development leader for GE Fanuc Intelligent Platforms’
operations management software business.
Vendors are responding with add-on applications and
programs for existing control platforms with the goal of ex-
tracting and flowing information between disparate systems.
To do this, they’ve turned to services-oriented architectures
(SOA) and Web technology as a way to integrate applica-
tions in a more open format. In addition, they have added
object-oriented programming techniques and are creating
data models that contextualise manufacturing data to more
easily share plant floor information with business systems.
Meeting Standards
The most important advancement in control, however, is an
adherence to standards. But standards come in many modes.
There are industry standards that the manufacturing and
vendor communities both rally around. ISA-95, for example,
provides common definitions for passing data between fac-
tory floor and business systems. OLE for Process Control
(OPC), recently redefined as OPen Connectivity through
55% open standards, from the OPC Foundation, enables the ex-
change of information between factory floor devices.
Then there is standardisation at a particular level of the
factory floor, an approach that manufacturers are exploring
as a way to reduce complexity and lower cost from opera-
tions. Specifically, within the Purdue Model of Industrial
Systems there are six defined levels, ranging from basic
process and control to plant-wide operations and then up
into the enterprise. Many manufacturers are driving stan-
dardisation at a particular level of the plant, such as at the
manufacturing execution system (MES) layer.
A good example is Linde AG, a Germany-based interna-
tional supplier of industrial gas, which recently announced
it would spend more than $1 million to deploy GE Fanuc’s
Proficy Historian and Operations Management software
suite across 350 sites worldwide.
“Linde Operations runs many of the 350 plants from
remote control centers, and it is vital for the operator to get
consistent information from the plants,” says Lars Wallstén,
head of performance systems for Linde’s Gas & Engineering
division in Munich. “In order to know if our plants are ef-
ficient, we use plant models that connect online. It will give
the operator suggestions for optimum running points, and
they will secure that we run the plants efficiently.”
To that end, because electricity is the main utility, Linde,
A typical master
control room, this
one at Kansas City
Power & Light
like Amcor, is looking at this particular standardisation effort
as a way to decrease energy costs.
So the move, while pricey in the near term, will pay
off in the long run by creating an energy-efficient produc-
tion environment that is more manageable. That’s because
the Proficy solution is the basis of a Plant Line Informa-
tion Management System that Linde is creating, which
consists of a centralised historical database for collecting,
archiving, and distributing large volumes of real-time
plant floor information. There are 400,000 or more device
tags populating the company’s control systems, and this
provides a consistent way of viewing activity, as well as
ensuring reliable alarm and event analysis.
Standardising on plant floor applications has another
major benefit related to licensing fees. “With several systems
you build up knowledge around that software and working
processes for that solution,” Wallstén says. “But as soon
as you want to have one set of definitions, several systems
become more complicated. There is also an annual fee ad-
vantage to having one system [from one vendor].”
Indeed, there are advantages to sticking with one sup-
plier’s solution. In addition to lower licensing fees, there
is “one throat to choke” when something goes awry. This
is something vendors don’t want manufacturers to forget.
That’s why automation suppliers are chiming in with their
own standardisation incantation, which hails the value of
the turnkey solution from one supplier.
Vendors would like nothing more than for manufactur-
Photo courtesy: Wonderware
ers to buy only their products because, they say, systems
work much better that way. “Vendors will pay lip service
to the unification of [all brands of] products in order to
be seen playing the game. But, in practice, they want
everybody to buy their product,” says John Morse, a
senior market analyst for Wellingborough, England-based
research firm IMS Research.
Case in point: When Invensys CEO Ulf Henriksson
touted the company’s “open architecture” in a mid-May
presentation to analysts, he also expressed the objective
that Invensys’ regrouping of several divisions into the new
Invensys Operations Management unit will lead to more
combined sales of Invensys-branded hardware. He showed
a slide stating that the new operation will bring “revenue
potential from selling [the] entire range of offerings to
each customer.”
Nevertheless, Invensys and others realise they are a long
way from being a one-stop shop to manufacturers. That’s
why open development platforms, such as ArchestrA,
“ Everyone
knows how important
standards are. They are so
important that some people
“
create their own! Mike Yost
Global markets development leader, GE Fanuc Intelligent Platforms’
operations management software business
offered by Invensys’ Wonderware business unit, are being
adopted faster than Invensys’ next-generation enterprise
control system, called InFusion. While ArchestrA serves as
the foundation for InFusion, manufacturers are turning to
this object-oriented infrastructure as a way to extend the life
of legacy systems by leveraging a Web-based SOA.
JULY/AUG-09
Manufacturing
Executive
19
 For example, Arches- heterogeneous environment is already costing them a huge
trA moves away from amount of money in programming time and efficiency. Since
the rigor of hard-coding CFOs aren’t readily sinking money into new automation
and enables management platforms, it means manufacturers aren’t upgrading as fast,
of component objects or as much, as plant managers would like.
(motors, pumps, valves),
Too Pricey to Be a Priority
network objects (PLCs,
fieldbus devices, smart In a recent Managing Automation/Manufacturing Execu-
instruments), process objects (defined manufacturing steps), tive reader poll, the majority of respondents said they are
and more by “assembling” objects, rather than programming. not standardised on strategic automation control platforms
Applications built upon this architecture are backward- throughout their companies due to the expense of upgrading
compatible so that manufacturers need not abandon prior and the lack of executive backing. And, of the 45% of survey
investments in automation systems, production processes, or respondents who have taken the standardisation step, it has
intellectual property, Invensys says. been at either the basic control level (57% said they are focus-
ABB, GE Fanuc, Rockwell Automation, Schneider ing on PLC standardisation) or the plant management level
Electric, and Siemens have similar approaches in the form of (48% are adopting a common MES application architecture).
SOAs, or easy-to-use objects. (See charts this page and p. 18.)
ABB’s Aspects and Objects, for example, is a software Amcor, for example, is implementing an MES applica-
shell that corresponds instructions, drawings, and configura- tion from Apriso in all of its 23 factories. In addition, Amcor
tion tools (aspects) with sensors, motors, transformers, and is using Wonderware’s ArchestrA together with Kepware’s
robots (objects), providing a consistent view of information OPC server to interconnect disparate PLCs.
across different manufacturing facilities. The new school of thought that comes with the ArchestrA
And, for its part, Rockwell last year acquired manufactur- architecture does make a difference, Amcor’s Cooper says.
ing intelligence software purveyor Incuity. The company “The old school required picking through PLCs to figure
integrated the Incuity application with its FactoryTalk SOA- out all of the tags for every piece of equipment” across
enabled architecture. As a result, Rockwell recently released every plant, Cooper says. Now, Amcor codes an object and
FactoryTalk VantagePoint, which “allows you to keep legacy defines the IP address of where data is coming from. “What
systems on the plant floor by exposing all data, no matter used to take weeks of getting data formatted, creating tags
where it comes from,” says Bob Honor, Rockwell’s vice for machines, and getting everything communicating now
president of Information Solutions. takes about 30 seconds,” he says.
While solutions are touted as “open” and “easy-to-inte- The OPC server works within the factory floor, providing
grate,” what a supplier often neglects to say is that it won’t the communication drivers that allow a variety of control
guarantee anything outside of its own product portfolio. systems to share information as well as with the MES.
Take Schneider Electric. Late last Cooper says Amcor didn’t add new
year, in the gambling-heavy Principal- Technology’s Role controllers, but he hesitates to call
ity of Monaco, the French automation this a “modernisation effort” since
vendor placed a bet on the future of
PLCs, MEs, And HMI the PLCs don’t perform any better.
ArE tHE MAIn FoCUs
automation equipment. Amid the glitz The real issue is that the company
of the wealthy city-state, Schneider Q: What types of technology/applications has found a standard way to extract
unveiled a piece of software intended to are being considered for standardisation? and share data in order to manage the
help automation equipment of all sorts Programmable logic controller (PLC) equipment better.
— controllers, drivers, PLCs, robots, 57.1% “In a multi-plant environment, with-
HMIs, you name it — work in synchro- Manufacturing execution system (MES) out standards in place, you’re lost,”
nous harmony. 47.6% Cooper says.
By offering the new software, called Human machine interface (HMI) Andrew Hughes, a Brussels-based
SoMachine, Schneider’s intention is 42.9% analyst at Gartner Inc., says that
to let factory operators effectively turn Distributed control system (DCS) advancements in technology and net-
their different pieces of equipment into 38.1% working protocols have helped unify
one big, common machine that can tend Asset management automation significantly over the last
to any shop floor operation and combine 23.8% several years. He credits the OPC pro-
it with another, as needed. Historian tocol for helping to support interoper-
There was just one catch: as long as 23.8% ability of sensors, PLCs, HMIs, DCSs,
all the pieces come from Schneider. Robotics and other automation equipment.
CFOs hear this and they back away 23.8% But though Kepware’s OPC Server,
from what they feel will be an enormous Manufacturing intelligence (MI) for example, supports hundreds of
investment — despite the fact that a 19% different devices, many plants still

20 Manufacturing
Executive JULY/AUG-09
 run legacy systems that pre-date compliance with the OPC
standard. “There is still a lot of old equipment and plugs;
I know one automobile manufacturer that buys spares on
eBay,” Hughes quips.
Advances in the networking pipes known as “fieldbuses,”
such as Ethernet, have also helped different brands com-
municate. But here, too, vendors have developed their own
twist on Ethernet and other buses meant to be truly open.
Siemens offers an Ethernet variant called Profinet, while
Rockwell markets one called Ethernet/IP. And vendors also
continue to offer other fieldbuses as well, including Foun-
dation Fieldbus, Profibus, Sercos, CanOpen, DeviceNet,
ModBus, Firewire, and HART. Some of these industrial
variations are more open than others, but,
as Morse of IMS says, “Most of them
have some sort of allegiance to a particular
vendor and therein lies the problem. From a
“ What used to take weeks of getting data for-
matted, creating tags for machines, and
user’s point of view, it’s a bit of a pain.”
It’s a pain for others in the industry as
well. “Because OPC is our common de-
nominator for passing data back and forth,
we need to support the communication
protocols for the various pieces of equip-
ment out there,” says Roy Kok, Kepware’s vice president
of sales and marketing. “There is no standard emerging [in
device networking], so we
need to manage all of the independent protocols … There
are 150 that we currently support, and we are always add-
ing more.”
Fortunately for manufacturers, vendors such as Kepware
are taking on the burden of integrating data moving among
factory floor devices. Similarly, Cisco and Rockwell are col-
laborating on Ethernet — specifically, the unmodified Eth-
ernet TCP/IP stack — in order to ensure that transportation
media, such as an Ethernet switch, is not causing a break in
communication from the factory floor to the enterprise.
“We have a deep partnership with Rockwell, which is
important for interoperability [between] Ethernet and the
factory architecture,” says Chet Namboodri, Cisco’s director
for manufacturing industry solutions. “The basic framework
is built on industry guidelines and standards.”
Standards Galore
The old joke about standards, of course, is that the best
thing about them is that there are so many of them. And
this can lead to confusion. “Everyone knows how important
standards are. They are so important that some people create
their own,” jokes GE Fanuc’s Yost.
On the flip side, it’s not necessarily bad when a manufac-
turer applies a standard approach to processes, procedures,
and applications.
At Pratt & Whitney Rocketdyne Power Systems, “One
Power” is the name of an internal effort aimed at standardis-
Photo courtesy: Amcor
ing applications and workflows across the organisation.
The initiative came into being four years ago when Pratt &
Whitney, a United Technologies Corp. company, acquired
Rocketdyne, the maker of the high-performance propulsion
engines used in NASA’s Space Shuttle.
“As we merged into one corporation, we wanted the abil-
ity to transfer work [between facilities],” says Geoffrey Geh-
ring, IT manufacturing systems manager, noting the three
main Rocketdyne manufacturing sites in California, Florida,
and Mississippi. The company needed to move work
between factories without treating the transaction like a
among purchase order, he explains. Rocketdyne also needed
to move people around from one facility to another without
having to retrain them. The acquisition, however, resulted in
multiple manufacturing execution systems that made sharing
information and intellectual property nearly impossible.
getting everything communicating now
takes about 30 seconds. Robert Cooper “
Corporate controls engineering manager, Amcor PET
The only way around this hurdle was to standardise on
one MES. Three years ago, the company settled on software
from Intercim to use across all three sites, and it tapped an
existing electronic workflow instructions (EWI) program
built in-house in 1997 to automate factory floor procedures.
“We try to standardise the process so that when operators
come in, they click a couple of buttons and instructions [ap-
pear] based upon their sign-in,” Gehring says.
For Pratt & Whitney Rocketdyne, software and workflow
standardisation is not considered a shop floor modernisation
effort, as the existing distributed numerical controls (DNCs)
that run factory floor machinery (and probably date back to
the early days of NASA’s Apollo program) have not been re-
placed with shiny new controllers. Rather, this effort is about
driving more efficiency out of an old architecture.
And sometimes, focusing on processes — not technology
— is the best approach to standardisation.
When it comes to tightening up operations, “the large
majority of what you get into is business processes ver-
sus getting funky with bang technology,” says Nancy Braun,
a partner at consulting group Zone Manufacturing Technolo-
gies. She says the first step in any upgrade is to understand
the business problem, especially if someday the company
will actually invest in a modern automation platform.
“There’s no sense putting more automation in place if you
automate processes that are detrimental to your business.”
In Amcor PET’s case, the decision to standardise on
specific aspects of the control architecture was made as a
way to conserve power in its 23 factories. And it actually
paid off: Last year, only halfway through its standardisation
effort, the company reduced electricity consumption in the
North American facilities by more than 5%. — Mark Halper
contributed to this report.  ME 
Manufacturing
JULY/AUG-09 Executive
21
 “Companies are now mo

THE

GREENRETURN
A NEW STUDY FINDS THAT EUROPEAN MANUFACTURERS ARE NOW
TREATING ENVIRONMENTAL INITIATIVES AS A PROFIT STRATEGY.
By Mark Halper

22 Manufacturing
Executive JULY/AUG-09
 B
eing green is good for manufacturers’ profits,
claims a new report featuring case studies from
European manufacturers Saint Gobain, Volvo,
Philips, Rhodia, Inditex, and others.
The report, “The Business Case for Envi-
ronmental Excellence is Real,” finds that in the
five-year period from 2002 to 2007, the profit
margins of global companies in the Dow Jones
Sustainability Index outperformed those of 850
other publicly traded companies.
The joint publishers of the report — consulting and research
firms Atos Origin and IDC —conclude that, increasingly,
companies are launching green initiatives as a way to improve
financial results. Although the chief reason for green projects
remains compliance with government regulations, manufactur-
ing executives are starting to achieve cost savings and customer
loyalty through their environmental efforts, the report claims.
“Most companies are anchored in a state of responding to
external requirements, such as regulatory compliance,” the
report states. “However, the result of this study clearly shows
that leading companies are now moving from reactive ap-
proaches to proactive environmental excellence strategies.
ving from reactive approaches to proactive environmental excellence strategies.
While the primary driver in European companies is still
compliance, 46% are running or plan to run environmental
projects aimed at cost reduction.”
IDC and Atos surveyed executives at 165 manufacturers
and conducted face-to-face interviews with executives at nine
manufacturing and retail companies — French chemicals
company Rhodia, Volvo Trucks Europa, Ford of Europe, Saint-
Gobain Glass UK, Philips Lighting, Fairchild Semiconductor,
and retailers Carrerofour, Inditex, and Conforama. Executives
at the nine companies said that the deepening recession had not
caused them to de-emphasize green initiatives in favor of other
projects that would generate more immediate cash savings.
“On the contrary, they universally stated that they will not
divert from this path [of environmental sustainability]. In
fact, the difficult economic situation places an even greater
importance on operating efficiency through the reduction
of operating costs and the lowering of energy and resource
consumption that can be achieved through these efforts. The
difficult economic situation places an even greater impor-
tance on operating efficiency,” the report states.
IDC and Atos singled out exemplary efforts at a number of
companies:
➜ The U.K. arm of French construction materials maker
Saint Gobain has started to pay customers to return glass that
has arrived broken. Saint Gobain UK recycles the returns into
new glass, and now makes 28% of its glass from recycling.
Customers return the rejects on trucks “that were already
Photos: k-experience-Fotolia
going back to the factory anyway,” said report co-author
Pierfrancesco Manenti, an analyst at IDC Manufacturing
Insights, in an interview with Manufacturing Executive.
According to the report, Saint Gobain has saved 43,200
tonnes of sand and other raw materials a year, and each tonne
reduces CO2 emissions by 300 to 500 kilograms.
➜ A Volvo Europa Truck plant in Ghent, Belgium, achieved
a 20% cost reduction by bringing an outsourced part of
manufacturing back in-house. Previously, it had subcontracted
the fitting of tires onto wheels to a French company, which,
in turn, subcontracted the procedure to a third party in Hol-
land. “The resulting supply chain was particularly wasteful,
with tires, rims, and fitted tires moving back and forth across
Europe unnecessarily,” the report notes.
➜ Volvo also cut energy — and environmental — costs
significantly by installing three wind turbines to power 50%
of its plants needs. And it built a biomass boiler to meet 70%
of the plant’s heating needs.
➜ French chemicals company Rhodia has made €200 mil-
lion selling CO2 emission rights that it gained after implement-
ing energy saving projects at plants in Brazil and Korea. The
company has even created a new revenue generating company
called Rhodia Energy, a joint venture with Societie Generale.
Still, the Atos IDC report concluded, most companies
have a long way to go before they obtain what Atos and IDC
consider to be a mature state of green operations.
For instance, while Saint Gobain cuts environmental
“
impact by increasing its recycling, it also fires up furnaces
at 1,400 degrees C, emitting greenhouse gases. And while
Philips Lighting continues to shift manufacturing to energy
saving bulbs for which consumers are willing to pay more,
those bulbs contain mercury, an environmental toxin.
“You cannot become environmentally excellent in a day,”
co-author Manenti said in the interview.
The report maps out a five-phase progression toward envi-
ronmental soundness, with phase one consisting of “initial mo-
tivations” and phase five “optimized strategy.” Atos and IDC
estimate that 75% of companies “are still between the first and
second phase” and that only about 20% have reached phase
three, in which they have a “defined strategy” for green. Very
few companies have advanced any further, the report says.
“Over 70% of survey respondents believe information tech-
nology will play a role in reducing their environmental impact,
especially in the areas of supply network modeling and optimi-
zation, procurement and supplier relationship management, and
product lifecycle management,” the report adds. It recommends
that manufacturers use MES systems to advance green perfor-
mance, although survey respondents did not rate MES highly
in this regard. MES, the authors say, can help set and measure
environmental metrics, performance, and compliance.
IT is an integral part of a bigger picture that represents an
extension of classic lean principles, the report says. “Green is
also the engine for increased productivity,” Manenti told ME.
The green ethos of reduce, reuse, and recycle, he says, “is
absolutely a lean approach. It absolutely goes hand-in-hand
with more efficient procedures. Green is the new paradigm
for operational excellence.” ME
Manufacturing
JULY/AUG-09 Executive
23
Illustration: Mikhail Tolstoy

24 Manufacturing
Executive JULY/AUG-09
 T
he working world created by “Web
2.0” tools will challenge manufactur-
ing leaders as few technology shifts
before it have. It will change how
they manage their employees and
force them to distinguish between
technology that distracts and that
which enables. And it will dredge
up generational differences, data
security concerns, and questions about the role
of manufacturing workers within the enterprise.
A powerful impact, no doubt. But far from
drowning under this new wave, manufacturers
seem bent on taming it, imposing their rules on
a collection of free-wheeling tools.
The toolkit answers to various names, includ-
ing Web 2.0, Enterprise 2.0, and Collaboration
2.0. It includes technologies that “connect
people to other people’s information in a way
that ... is easy, lightweight, and fast,” says Mark
Levitt, program vice president for collaboration
and enterprise 2.0 strategies at analyst firm IDC.
The cast includes wikis, blogs, instant
messaging services, social and professional
networking sites, audio and video podcasts,
content syndication (RSS), and other platforms
for interaction and collaboration. The Internet is
littered with blogs, Wikipedia-like collaborative
sites, and social networks, such as Facebook
and LinkedIn, but that doesn’t mean business
networks should be, too. In that vein, employers
will have their hands full in the next few years
as they try to discourage the use of this software

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 for non-work-related purposes. But the greater challenge, ex-
perts say, is to define how these technologies can help human
resources and line-of-business leaders manage employees and
improve the workforce.
“I think we’re still in the education phase of the technology,”
says Jason Cordello, vice president at the center of excellence
at Knowledge Infusion, a consultancy focused on human capi-
tal management strategies.
Conversations with numerous vendors of human capital man-
agement (HCM) software support his view. HCM software can
help a company manage activities from recruiting and succes-
sion planning to performance management and skills training.
A few pioneering HCM vendors are already building out these
capabilities based on Web 2.0 techniques. Yet, many more are in
the same boat as the manufacturers they serve: trying to coax an
advantage out of consumer technologies that are essentially free
agents, loyal to neither the employer nor the employee.
Ryan Leary, social media strategist at Kenexa, an HCM ven-
dor that specializes in recruiting, says some manufacturers he
has worked with have used the term “just in time information,”
or JITI, to describe the new wave of IT tools. Before a meeting,
for example, a worker can jump on microblogging site Twitter
and broadcast a quick request for information or consult an
internal wiki for help. Still, Leary says, despite the synergy,
many managers harbor reservations about the technology: “Is
my guy going to be on Facebook all day? Does he really need
to chat with people online — what benefit is that?”
Bob Clement, senior director of HCM product management
at enterprise software purveyor Infor, says he is excited about
the coming intersection of Web 2.0 and HCM. But with the
“
The toolkit includes technologies that
connect people to other people’s informa-
tion in a way that is easy, light-
weight and fast. “ Mark Levitt
Vice president, IDC
economy in the tank, he says, manufacturers are focused on
more fundamental problems. “Web 2.0 is probably not one of
the burning issues right now,” he says.
In the business world, views are mixed. An October 2008
IDC survey that crossed all North American industries found
that among line-of-business workers, 50% disagreed or strongly
disagreed with the statement: “Our organization is effectively
using Web 2.0 technologies (wikis, blogs, social networking).”
In the HCM software space, some of the biggest names are
still kicking the tires on Web 2.0.
Oracle is a good example. While its forthcoming Fusion suite
promises Web 2.0 functions, “at this time we don’t have any 2.0
capabilities within HCM,” a spokeswoman for the giant enter-
prise software company says. Rival SAP, meanwhile, is in the
planning stages of incorporating Web 2.0, according to David
26 Manufacturing
Executive JULY/AUG-09
Ludlow, SAP’s vice president of HCM Solution Management.
The enterprise software leader is contemplating tying recruit-
ment software to social networks such as LinkedIn and Face-
book, while also weighing the idea of using richer employee
profiles to facilitate work processes and using other Web 2.0
tools to enable better collaboration and learning. “I think it will
represent a fundamental shift,” Ludlow says. “I think the trend
is there, and I think we’ll see more of this going forward.”
Others, including Kronos, Kenexa, Lawson Software, IFS,
and Infor, are mostly milling around the pool, dipping an oc-
casional toe in the water, calculating their dives.
Those already in the water include some startups and lesser-
known software vendors, which may end up influencing the
future releases of their larger competitors. Even the early mov-
ers, however, know that the path to strong business cases runs
through a forest of bluster and confusion.
“I think [there’s] so much hype and buzz and inflated ideas
[around Web 2.0] that we’ll have to go through that phase to
get out to the other side,” says Charles Coy, director of product
marketing at Cornerstone OnDemand, a SaaS-only provider
of HCM software. On the “other side,” Coy says, are explicit
business cases for this new crop of tools, and, for Cornerstone
and others, the avenues of exploration are diverse.
Mapping the Offerings
For a glimpse at what’s to come, it’s best to look at how soft-
ware companies have approached collaboration technologies
so far. In a number of areas within the HCM suite, experts say,
Cornerstone OnDemand is setting the pace, enlisting the new
generation of collaboration enablers to augment what to date
have been relatively staid workplace practices. Saba Software
may be the next closest competitor; its Saba Social suite, which
relies heavily on Web 2.0 tools, will debut later this year.
While not all HCM providers offer recruiting tools, the
process itself is an integral part of any company’s workforce
planning, and a prime area for vendors and manufacturers to
cherry-pick some Web 2.0 functionality.
Since filling jobs depends on making the right connec-
tions in a highly connected but poorly mapped world, social
networking tools are a natural fit here. Jobvite, a SaaS vendor
focused on helping companies find talent, has integrated its
recruiting software with networking sites LinkedIn, Facebook,
and Twitter, allowing companies and their employees to “target
job opportunities to qualified people in their networks — and
spread the word virally,” according to the company. Kenexa’s
software developers are building similar bridges to LinkedIn,
Facebook, and MySpace to broaden the reach of job postings,
an effort that will show up in the new release of its software.
Lawson, meanwhile, created the “Come Work with Me” wid-
get for Facebook, which lets an employee place her company’s
job listings on her Facebook page; respondents are routed right
to the company’s Lawson Talent Management application.
During the process of bringing a new employee on-board,
Photo courtesy: IDC
Cornerstone’s Coy says, managers tend to focus on hammering
home policies and procedures, but neglect the social aspect of
joining a company. He suggests launching newcomers into an
 online “new hire” network that gives them access to veteran
employees, blogs, discussion forums, and other communication
links that might make them feel at home.
At the other end of the spectrum are the employees who
are leaving the company due to retirement, new jobs, or even
layoffs. In recent years, companies have begun to invest in
the future value of these departing employees by creating
alumni networks, many based on or enabled through Linke-
dIn-style tools. “We think that’s a pretty good way for certain
types of companies to get their feet wet in this area,” Coy says.
“You can build out a community — it’s not terribly expensive
to do so — and try to get your alumni engaged.” Specialist
vendors such as Conenza and Mzinga also offer software for
this purpose. Thus, a company compelled to lay off workers in
a down economy can maintain important connections that may
help it when the time comes to rehire.
Succession planning is another area of interest among
manufacturers and HCM vendors alike. Although capabilities
are still somewhat limited, a number of HCM providers spoke
of someday mining a company’s social network to discern the
intangibles that help determine who should progress through
the ranks or fill important positions.
In the core HCM areas — performance management, shift
scheduling, and on-the-job training — Web 2.0 is front-of-
mind for many HCM purveyors.
When it comes to training, experts often cite the adage
that 20% of learning happens in formal teaching environ-
ments while 80% occurs through informal channels such as
conversations around the proverbial water cooler. The new
wisdom says move the water cooler online, leveraging social
networks, wikis, etc., to create communities of practice. In
Saba’s Community tool, part of its Saba Connection module,
communities of practice and simple
discussion boards bring together em-
ployees of like interests.
WHAT IS YOUR NETWORK WORTH?
studying the business impact of blogs, wikis, and podcasts,
offers an alternate, Web 2.0-enabled scenario. “We have three
shifts of employees and we have to talk about a new standard
operating procedure for how to use press number 4. Rather
than have a training class about it, we can record a 15-minute
lecturete and push that out through whatever means are avail-
able,” including e-mail, a smart phone, or an iPod. “It really
becomes a very portable, mobile learning device,” Berta says.
In manufacturing circles, the question of learning brings to
mind the challenge of knowledge transfer. “The experienced
people are ... getting older every day, and we’re losing a lot of
this experience and ideas and ability to manage,” says Gregg
Gordon, global practice leader for manufacturing at HCM pro-
“ Socialcertain
networking tends to require a
level of participation from
users to make it valuable. “ Charles
Coy
Charles Coy
Director of product marketing, Cornerstone OnDemand
vider Kronos. “The way to get these two groups together and
not lose all this baby boomer knowledge is to provide them an
easy interface where they can get this stuff out,” he says, which
can mean building a wiki or a similar online knowledge base.
Knowledge Infusion’s Cordello says baby boomers are
becoming more comfortable with social media tools, and just
in time, given their imminent exit from the workforce. “For
manufacturers, the important piece is being able to capture that
knowledge through the links of these tools,” he says.
Kronos, for its part, has turned to collaborative technologies

Under such a scenario, an employee
at one plant might sign up through an
HCM application to “follow” the post-
ings and communities of a fellow plant
manager, hoping to exchange informal
best practices, says A.G. Lambert, vice
president of marketing at Saba.
“What Web 2.0 unleashes is a
grass-roots, bottom-up ability to drive
this informal learning and teaming
around interests,” says David Karel,
vice president of product marketing at
Photos courtesy: Cornerstone OnDemand, Steinwall Inc.
C
onsider two divergent takes on the business case for Web 2.0. Idea #1: Profitable innovations lie
dormant because manufacturers don’t use the right capture methods, including blogs and social
networks. Idea #2: Blogs and social networks are just megaphones for attention-starved hacks.
Somewhere between idea #1 (the “wisdom of the crowd” model) and idea #2 (the
“opinionated hordes” theory), manufacturing leaders must decide how they see their
employees. Is the next great idea for a hot-selling product, for instance, frozen somewhere
in the amber of your workforce?
Rob Cross, a business process consultant and associate professor at the
University of Virginia, believes Web 2.0-based technology, applied responsibly,
can produce impressive results. In his 2009 book, Driving Results through
Social Networks, he cites the success of Mars Candy, which sowed the seeds
of collaboration among its manufacturing and R&D workers to harvest its high-
margin, customized M&Ms.

SuccessFactors, another SaaS-based
HCM provider.
Manufacturers in particular might
warm to the concept of on-demand
training. In a traditional scenario, a
manager charged with training em-
ployees on a new procedure must bring
them together for a briefing.
Mike Berta, a doctoral candidate
“They got the right sets of collaborations that enabled them to ... capitalize
on a really cool innovation opportunity,” Cross says.
Maureen Steinwall cautions that giving employees a digital soapbox may
Maureen Steinwall
not produce the best information. The president of custom injection molder
Steinwall Inc. applauds manufacturers for looking to empower their workers, but warns, “I don’t think
you do it by speeding up the exchange of opinion.” While Web 2.0 tools can facilitate simple brain-
storming, she says, “my fear is that you get this kind of group think ... taking off on something that is
opinion and not rooted in any kind of validation process.”
For a manufacturing leader, the challenge is finding where in the middle you fit.

Manufacturing
JULY/AUG-09 Executive
27
 to enable shift swapping for manufacturers. The company’s
Scheduling Assistant uses an algorithm that sifts workers’ skills,
availability, and work preferences to identify the top 10 candi-
dates for an open shift, and then notifies them via text alert or
other messaging channel. When the first respondent clicks the
accept button, the software locks the worker into the shift.
In the area of performance management, SuccessFactors,
which was founded in 2001 and claims 2,300 customers, takes
a novel approach. Employees using SuccessFactors’ software
can exchange virtual merit badges that recognize any number of
achievements. Start-ups such as Rypple offer similar tools for
informal feedback. Some experts speculate that such feedback
may someday become part of the formal review process. “It
becomes very important capital,” says SuccessFactors’ Karel.
Amid the hoopla surrounding Web 2.0, it’s easy to see the
manufacturing workforce split into two camps, with “carpeted”
workers engaging these new tools and “concrete” workers
alienated from them. “Social networking tends to require a
certain level of participation from users to make it valuable,”
says Cornerstone’s Coy. On a manufacturing floor, where work-
ers might not be connected to computers all day, it represents a
unique situation. “I can see the challenges there,” he admits.
Tight Control
Kronos’ Gordon sees operations as a tightly controlled world
where productivity metrics drive every decision. Even in the
production environments where Kronos has deployed self-ser-
vice kiosks, he says, managers want tight control over how and
when an employee can use the system. “To say to a manufac-
turer [worker], ‘Hey, if you’re looking for an answer to this
thing, go and scan the internal Facebook’— I think there might
be resistance to that.”
Doug Gutridge, vice president in charge of human resources
at Kirby Risk Corp., a Lafayette, IN-based manufacturer and
wholesaler of electrical equipment, may just be the prototypi-
cal manufacturing HR leader. A self-professed “old guy” who
deliberately leaves his cell phone in his car, Gutridge says
“Web 2.0” isn’t part of his vocabulary. Kirby Risk recently
implemented SuccessFactors’ software to create an automated
system for goal planning, performance evaluation, succession
planning, compensation management, and performance im-
provement management. The system has inspired a beneficial
shift, Gutridge says, as performance reviews now follow a set
schedule that is enforced by the software itself.
With the SuccessFactors tools in hand, managers “see the
value of getting good information, [getting] feedback to their
employees and feedback from their employees,” he says. Still,
direct interaction with the system is limited to employees who
use a computer, forcing Kirby to create a manual workaround
for the manufacturing floor workers.
While Gutridge likes the discipline SuccessFactors has
brought to the company’s managers and employees, his enthusi-
asm doesn’t extend to the general use of Web 2.0 tools. Kirby’s
enterprise system recently began to slow because employees
were downloading online videos. Kirby, he says, maintains a
fairly restrictive policy on which technologies can be used in
28 Manufacturing
Executive JULY/AUG-09
the workplace. “It burns a lot of time,” Gutridge says.
The temptation may be to imagine that manufacturing work-
ers have no interest in Facebook, wikis, and blogs. They’re
less tapped into technology than front-office workers, some
would say. But consider that the split may be generational, not
cultural. The young workforce of tomorrow will be filled with
people who grew up in a more connected, socially networked
world, across all roles in the manufacturing enterprise.
Larry Dunivan, senior vice president of global human capital
management products at Lawson, says the difference between a
60-year-old line worker and a 28-year-old line worker is stark.
“The way in which they’re willing to, expected to, need to inter-
act is very different,” he says. “If you’re a high-school-educated
person, you don’t need much more than that to be spending a
great deal of your life through those [Web 2.0] mechanisms.”
Age will play a significant role in Web 2.0’s ascendancy,
agrees David Gartside, managing director of Accenture’s
Talent & Organization Performance practice. “As the net gen,
or millennials, come into the workforce, there’s going to be a
greater push for this in more and more organizations,” he says.
“Companies will only be able to resist that demand for so long
before they start losing people because people just say, ‘Look,
it’s just not cool to work here.’ ” The weak economy may delay
this tipping point somewhat, but he thinks it’s inevitable.
The new networked world will not dawn without input from
manufacturers, of course, and most business leaders intend to
mold collaboration tools to company policies.
Risk and Reward
Gartside sees constriction on the near horizon. “I think what
you’re going to see over the next two to three years is a clamp-
ing down, where [CIOs] are saying, ‘OK, I’m happy for you
guys to do this, but I want to put a fence around it. And I want
to have some sense of security around what’s going on. We’re
not having all of our company secrets suddenly flying across
the firewall.’ ”
IDC’s Levitt agrees. “There’s a recognition that we don’t
want to stop people from using these tools to create and
share information, but we need to begin to at least protect
that information in a way that we expect to do for all kinds of
corporate information.”
Rob Cross, a business process consultant, University of
Virginia professor, and author of The Hidden Power of Social
Networks and other books, says workplace-based networks
and other collaboration tools will flourish. “As vehicles to see
how things are happening, and to help other employees see
how things are getting done and get their work done, they’ve
got to be in place,” Cross says, “because you can’t design for
the future the way we used to 30 years ago.”
As for those who will develop and sell the applications,
SAP’s Ludlow sums up their task succinctly: “Always, in
software product management, you have to balance the art of
the possible with the reality of the use.”
As they contemplate the potential of Web 2.0 in workforce
management, manufacturers will need to find that balance
themselves. ME
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Manufacturing
JULY/AUGUST-09 Executive
29
30 Manufacturing
Executive JULY/AUG-09
 I
n the current recession, it’s tempting to
believe that any order is a good order.
But that’s not necessarily the case.
The fact is, particularly in today’s
highly outsourced, globally dispersed
manufacturing environment, some
orders are much more profitable than
others. Say, for example, that you
receive two orders for the same quantity
of product at the same price. While Order
A specifies a standard two-week lead time
and can be fulfilled from finished goods in a
nearby distribution center, Order B requires
one-week turnaround and can’t be filled from
the nearest center. Clearly, filling Order B
will generate more transportation and supply
chain costs. And it may very well also mean
costly production scheduling changes and
even impact other customers’ orders, increas-
ing the risk of financial penalties.
Wouldn’t it be best if, at the time you ac-
cept or confirm both orders, you understood
the associated costs and profit potential of
each one, giving you the option of adjusting
pricing or even rejecting a clearly unprofit-
able transaction?
Unfortunately, most manufacturers
today don’t have that kind of real-time
visibility into the cost and profitability as-
sociated with specific orders. While some
companies have invested in processes
and technologies such as available-to-

N G YOU
T T I
HI BERS R

NU M L E M
IN
E
G
F
E
I TA

ENT PROC ES A L RE
K
IMP ROMIS IES MA EN’T MO ?
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PRO SSES A T OF
O

TO- NOLOG HY AR OING IT

H W
TEC E. SO RERS D
S
SEN UFACTU
MAN D
A
EF F MO
BY J
Illustration: Sean Gladwell

Manufacturing
JULY/AUG-09 Executive
31
 promise (ATP) and capable-to-
promise (CTP) that allow them
to determine, at the time an order
is placed, when it can be ful-
filled from inventory or planned
production, few have invested
in profitable-to-promise (PTP)
processes and technologies that
can also tell them whether filling HITTING THE NUMBERS
a prospective order will be profit-
able. And, experts say, there’s little current rush to
implement PTP processes and technologies.
“Profitable-to-promise is a great concept. It
sounds like a really good idea,” says Lora Cecere,
a vice president at AMR Research. “But very few
industries have actually deployed because it takes
a good deal of maturity around processes and data,
and most companies simply haven’t had the disci-
pline to do it.”
Indeed, Cecere says, most manufacturers today are
still struggling to implement ATP and CTP. According
to a recent AMR survey, only 23% of consumer goods
manufacturers have ATP processes and technologies
in place, and only 12% do capable-to-promise,
taking manufacturing capacity into account when
promising fulfillment.
In many ways, although fairly sophisticated soft-
ware tools are available to support PTP, implementing
profitable-to-promise presents significant change
management, organisational alignment, and data stan-
“Using standard costs to make sup-
ply chain decisions might end
up discouraging you from a
lot of deals. “ Bill Green
Vice president of solutions, Adexa
dardisation challenges, experts say.
Perhaps not surprisingly, then, even many manufactur-
ers that have successfully implemented available-to-prom-
ise processes and technologies haven’t yet tackled PTP.
Semiconductor maker Analog Devices Inc., for
example, five years ago implemented available-to-
promise processes, supported by the integration of
SAP’s R/3 ERP system and Precision ATP, a software
tool from Adexa Inc. The software pulls order, finished
goods inventory, manufacturing scheduling, and
future supply data from SAP and calculates customer
delivery dates to which Analog Devices can commit.
The process, says Supply Chain Logistics Manager
Elizabeth Derwin, lets Analog Devices improve cus-
tomer satisfaction by providing reliable delivery dates,
and it lets the company quickly offer new dates should
supply or other variables change.
32 Manufacturing
Executive JULY/AUG-09
But, while Analog Devices’ ATP
process gives preference to some
of the company’s larger, more
profitable customers, the company
has not yet taken the next step of
calculating the profitability of an
order at execution time.
“We haven’t really explored
that yet,” Derwin says. “Right
now, we’re able to identify our
best customers, build to their forecasts, and give
them senior position in the backlog. We’re focusing
on guaranteeing their supply.”
The PTP Promise
The basic concept behind PTP is straightforward. Much
as ATP systems consolidate finished goods inven-
tory, logistics, manufacturing schedule, and other data
to determine product availability, PTP systems and
processes pull together data from a variety of sources to
tell manufacturers, as they accept a customer order, how
profitable the order will be, how profitable the overall
customer relationship is, and how meeting a given
customer’s order will affect other previously commit-
ted orders. PTP systems and processes generally pull
together data from financial, CRM, supply chain, and
ERP systems.
And though the concept and the technology aren’t
that complicated, actually implementing PTP processes
can be challenging because it requires significant cross-
functional collaboration. It also requires a baseline of
mature chain planning processes, experts say.
Perhaps most daunting is the challenge of properly
defining and assembling all of the data necessary to sup-
port a robust PTP process. Because most manufacturers
outsource a good deal of their production, logistics, and
other operations, simply getting access to up-to-date cost,
inventory, and other data required to do PTP in real time
is often a challenge, AMR’s Cecere says.
But it can be equally difficult to come up with
useful cost data from sources inside the enterprise,
experts say. Although finance organisations inside most
manufacturing companies keep close tabs on mate-
rial, manufacturing, logistics, and other costs, the way
finance departments calculate these costs is often not
a good fit for profitable-to-promise processes. Finan-
cial cost accounting used for budgeting, for example,
usually deals in standard costs that bundle fixed costs
and other overhead costs with material and other actual
costs. That often doesn’t work in a PTP context where,
for example, producing 100 more widgets for a given
customer represents only an incremental cost on top of
existing activities.
Photo courtesy: Adexa
“Using standard costs to make supply chain deci-
sions might end up discouraging you from a lot of
deals because you would have to include all the
 overhead,” says Bill Green, vice president of solutions transportation methods used. The tool can then calculate
at Adexa. “You have to be able to express these as profitability, taking into account purchase volumes and
activity-based incremental costs.” discount rates. Oracle’s sales and operations and supply
But, experts say, getting accountants, supply chain chain planning also allow manufacturers to segment their
managers, and manufacturing managers to agree on a customer base, adding those priorities to the profit picture
definition of incremental, activity-based costs associated presented through Global Order Promising, Syed says.
with specific production processes requires cross- SAP customers can use that company’s corporate
functional collaboration at a level of detail that is often performance management tools to analyse the relative
difficult to come by. cost of sourcing, shipping, and other execution options
At the same time, if PTP is going to work, experts when receiving an order. And, later this year, the company
say, manufacturers need to already have mature and ac- plans to roll out an integrated logistics and fulfillment tool
curate supply chain planning processes in place. Unless that will give manufacturers more real-time insight into
manufacturers have a good handle on things like current the profitability of specific orders, says Richard Howells,
and future demand, customer segmentation, and visibility
into finished goods and materials inventories, they won’t
be able to accurately assess costs when taking orders or
easily come up with better alternatives for fulfilling a
“ If they haven’t launched a profitable-to-
promise initiative already, they’re unlikely to
customer’s order.
“Unless you have done your upstream planning work
and done things such as positioning your inventory cor-
right now because they don’t have
rectly and have your customer allocation rules in place,
doing profitable-to-promise may mean you just end up
with a series of poor choices, and you’re picking the
the headcount or the time. “
Craig Giffi
Vice chairman, Deloitte
best of the lot,” says Nadeem Syed, group vice presi-
dent for advanced planning products at Oracle. senior director of supply chain marketing for SAP.
And software from price management vendor
The Tools Are There
Vendavo calculates production, transportation, cost-to-
While the prerequisites and cross-functional collabo- serve, and other cost data, and presents it to salespeople
ration requirements make PTP a tough nut to crack, at deal negotiation time.
vendors have done a relatively good job of rolling out At the same time, many vendors offer analytical tools
tools that can support the process, experts say. Supply that allow manufacturers to understand the profitability
chain management and execution software vendors of transactions after the fact. The analytical tools that
such as Adexa and enterprise software suite suppli- come with Lawson Software’s M3 ERP system, for
ers such as SAP and Oracle have delivered tools that example, let manufacturers drill into and analyse cost
integrate tightly with ERP and other applications and data generated by orders and other transactions.
support the PTP basics. Clearly, a lack of software is not the primary rea-
Adexa’s Precision ATP, for son many manufacturers have let
example, calculates order costs the profitable-to-promise band-
based on where and how it is
sourced, whether it is in inven-
INSIDE LOOK wagon pass by. Instead, what’s
holding many back, experts say,
tory, and other parameters. The unfulfilled promise are the plentiful change man-
tool uses activity-based costing Manufacturers have been slow to embrace ATP, agement challenges involved as
to come up with cost estimates. relying more often on limited data collection to well as a disinclination during
The tool then compares those determine their order fulfillment capabilities. these difficult economic times to
costs with the price being paid ● Don’t have ATP signal or use ATP technolo- scrutinise orders too closely.
by the customer and with the gies: 42% “Manufacturers feel like they
profit forecast, usually created ● Consider finished goods inventory in the ware- need to find customers of any kind,”
as part of the manufacturer’s house for order promising: 23% says Craig Giffi, vice chairman and
sales and operations planning ● Consider finished goods inventory in the ware- leader of Deloitte’s consumer and
process. house plus inbound shipments for order industrial practice. “If they haven’t
promising: 18%
Similarly, Oracle’s Global launched a profitable-to-promise
Order Promising system is able ● Consider what’s capable to promise, including
initiative already, they’re unlikely
manufacturing capabilities: 12%
to access from Oracle’s ERP and to right now because they don’t
Photo courtesy: Deloitte

supply chain planning systems ● Consider manufacturing capabilities to fulfill

bills of material and costs associ-
ated with different sourcing and
have the headcount or the time, and
specific orders: 5%
they feel like any revenue is good
Source: AMR Research survey of 120 consumer product manufacturers
revenue.” ME

Manufacturing
JULY/AUG-09 Executive
33
 O R E
MPROCE WER, SE
S S I N G
O
P PLE A
IN A WIDE-RANGING CONVERSATION AT HANNOVER
MESSE, SIEMENS INDUSTRY CEO HEINRICH HIESINGER
DISCUSSES WHAT’S HOLDING UP PLM DEPLOYMENTS
AND THE DIGITAL FACTORY.
By Mark Halper

34 Manufacturing
Executive JULY/AUG-09
 P
HANNOVER, GERMANY
LM’s potential has been hindered by the
lack of affordable processing power that
can handle the terabytes of data that manu-
facturers amass in their 3D design initiatives,
the CEO of Siemens Industry sector, Heinrich
Hiesinger, told Manufacturing Executive.
Executive
In a wide-ranging interview at the Hannover Fair
last spring, Hiesinger also faulted banks for overheated
investing and hinted that ERP vendors and manufactur-
ing software providers could eventually clash in their
pursuit of the valued factory floor applications middle
ground — a battle that many industry analysts already
see forming but which vendors tend to downplay.
As for the challenges of tying product
design and manufacturing simulation into
the enterprise and shop floor, Hiesinger
said that most of today’s computer systems
are still not up to the task, at least not at a
reasonable price. That holds especially true
as manufacturers try to bring suppliers and
other outsiders into the design process.
“You get into a new world of data min-
ing; you go into terabytes [of information].
That means we need the computers that are able to
handle it,” Hiesinger said. “Today, you still face limita-
tions. You need computers and connections that are able
to move from gigabytes to terabytes. We need it as our
standard, at affordable prices.”
Hiesinger’s remarks echoed a recent call by Masaki
Nakaoka, CEO of Canon Inc.’s copier division, for more
powerful supercomputers to help Canon’s PLM programs.
Photos: Ben Keith, PixAchi - Fotalia.com; courtesy Siemens Industry
Meanwhile, Hiesinger also repeated a Siemens asser-
tion that the utopian vision of the “digital factory” — in
which a manufacturer continually refines operations by
integrating enterprise IT, such as ERP, with shop floor
IT, such as MES, and product development IT, such as
PLM — remains a thing of the future.
“From a greenfield approach, we could build such a
system,” Hiesinger said, meaning that if Siemens were
to build a factory from scratch with all Siemens auto-
“ You get into a new world of data mining; you go
into terabytes [of information]. That means we need
the computers that are able to handle it.“
mation gear and PLM and MES software like Teamcen-
ter and Simatic IT, it could come closer to tight integra-
tion. But, he said, “We know the world is never ideal.
We have real customers with real expectations. In an
economic situation like now, they will never jump on
ordering from us a ‘digital factory.’ They will always
start optimizing step by step and begin at the weakest
spot of their existing systems.”
Manufacturers also face considerable cultural and
process challenges as they try to integrate across divi-
sions and geographies, he said.
Asked whether the organizational challenge of absorb-
ing acquired software companies such as UGS, Innotech,
and Elan was diverting Siemens’ attention from customer
integration projects, Hiesinger said the work
is on track.
As the company builds its stable of PLM
and MES software and ties it increasingly
into the enterprise, Hiesinger did not deny
that Siemens might at some point start com-
peting against ERP vendors such as Oracle
and SAP, which are also going after the
valued shop floor. As those ERP vendors vie
to integrate ERP, MES, and PLM, analysts
anticipate a slugfest against traditional automation ven-
dors such as Siemens, Rockwell, Mitsubishi, and GE
Fanuc Intelligent Solutions.
“There is a kind of meeting, and how the world will
change is not decided so far,” Hiesinger said.
On the broader economic scene, Hiesinger com-
mented, “It will probably take quite a while until we
[again] see the demand of 2008.” He described last
year’s demand as largely “overheated” and “artificial,”
based on capital that banks made available purely for
investment reasons.
“The financial system has lost billions. The market
will recover, but it will recover on substance, not on
overheating,” Hiesinger told ME. “In many segments,
the market size we’ll see will be below the previous
peaks for a while.” He declined to predict when demand
might return to peak levels. ME
Heinrich Hiesinger
CEO, Siemens Industry
 Demand
Management
is more than...

and
Just Planning for
Forecasting Future Sales

It requires In today's
Tools Economy

and
Organizational
Photograpgh: Brian Jackson-Fotolia

Processes...

36 Manufacturing
Executive JULY/AUG-09
 F
or many manufacturers, it’s the
shape of things to come that mat-

to Actually ters most.

Identifying and acting upon the

SHAPE DEMAND!
next big idea that turns into the
next big-selling product is top of
mind, especially in high-tech and
consumer product goods indus-
BY STEPHANIE NEIL tries, where product lifecycles are short and
supply lead times can be long. Finding the
perfect — and profitable — balance be-
tween these two conditions is of the utmost
importance because making and selling too
much of the wrong type of product isn’t
good for business.
Take Kodak, for example. Several years
ago, when it was trying to transition its
business from a chemical company that
makes film to a consumer electronics
company, it heavily promoted an inexpen-
sive digital camera with docking station for
printing. As a result of its marketing effort,
the cameras were flying off the shelves. It
looked like a success, but Kodak started
running low on cameras. And, the chipsets
it used in the cameras needed to be ordered
several months in advance. Suddenly, sales
were at a standstill.
“They found that they didn’t have their
sales and marketing promotion strategy
aligned with the production plan,” says
John Bermudez, senior director of plan-
ning product strategy at Oracle Corp., who
worked with Kodak to ensure that it didn’t
guided by a repeat this problem.

corporate strategy Using Oracle’s Demantra demand

management software, Kodak now can
track sales at a granular level and shift
marketing tactics to pull back on products
that “sell themselves” while focusing on
areas that require more promotion — such
as a more expensive camera — in order to
move it off the shelf. This process is what
experts call demand shaping, and it is one
of the most important aspects of a holistic
demand management strategy.
Like Kodak, many manufacturers realise
they need to align supply and demand better.
And, in some cases, they need to create
demand in order to match existing supply.
That could mean promoting a product
in a two-for-one sale because there
is excess inventory or creating

Manufacturing
JULY/AUG-09 Executive
37
 incentives around products that are not moving. Companies use
technology tools such as demand forecasting, sales and operations
planning (S&OP), and supply chain management. But all of those
tools fall into the broader category called demand management,
which, according to industry experts, is a multi-faceted process.
“Demand management is the superset,” Bermudez says. “It
is different from planning and forecasting because manage-
ment has the extra dimension of manipulating demand for the
benefit of the company.”
According to AMR Research, while forecasting and planning
are important spokes in the demand management wheel, manu-
facturers should be concentrating on demand sensing, demand
shaping, and profitable response tactics to gain the visibility and
control required to manipulate downstream demand (see sidebar,
p. TK). And while technology in the form of applications like
Demantra from Oracle and software from Infor, IBM, Logility,
and others, is important, it is only 10% of the demand manage-
ment equation. Fifty percent of a demand management strategy
relates directly to collaboration within the organisation and with
the supply chain, and 40% is about managing the process.
“The technologies today are good,” says Jane Barrett, a
research director at AMR. Too often, however, one business
leader invests in an application to solve a specific problem
associated with one business area. Manufacturers need to
adopt corporate-wide standards around the demand manage-
ment strategy in order to make it a sustainable process that is
entrenched within the culture of the company, she says.
Strategic Objective
What does that mean? Basically, demand management is be-
coming a strategic corporate objective that requires aligning
demand with the business plan to create profitable revenue.
It’s not a new concept, but it has become more important due
to the complexity of the supply chain, the weak economy,
“
With demand management, management has
the extra dimension of manipulating demand for
the benefit of the company. “
Senior director of planning
product strategy, Oracle
and global market dynamics, experts say.
“It’s a tough market out there right now,” says Paul Hoy,
IBM’s director of global manufacturing industries. “People are
fighting for market share, customer retention, and new busi-
ness, and there is a slowdown throughout the value chain as the
consumer slows down spending.”
What manufacturers need to do, Hoy says, is take advantage of
the existing demand — the things that are already in the pipeline
or have been forecasted — and work with customers to ensure
that specific demands are met. But this can’t be approached uni-
laterally with a focus only on the end point, or customer.
“To understand demand and do it effectively, you have to
be looking at the end-to-end supply chain,” Hoy says. From
there, manufacturers can shape demand and use it to directly
drive operations.
38 Manufacturing
Executive JULY/AUG-09
That may require rethinking the way the business is run and
breaking down invisible walls between functional areas and
departments. It also means a new mind-set for the person in
charge of demand management strategies.
“It requires a simple shift in attitude from the demand
manager as he or she [has to understand] that it’s not just
their job to improve the overall accuracy of demand; it’s also
their job to manage it, change it, and manipulate it so that
the demand they are receiving better aligns with the busi-
ness plan,” says Andrew Kinder, Infor’s director of solutions
marketing for supply chain management.
Crossing Lines
AMR’s Barrett says there is a lot of overlap in the types of appli-
cations available, which can be confusing for a company trying
to choose the right software to meet its needs. Perhaps then, the
biggest feature to consider when evaluating technology is the
ability to collaborate across the lines of business in order to peg
production to the true demand signal, she says.
Infor’s Supply Chain Management Demand Planning
products, for example, include a forecasting tool, which is a
“self-learning” statistical engine that lets the user model and
test different forecast scenarios to analyse the options through-
out the supply chain planning process. The software suite also
includes a Web-based collaboration tool that ensures that all
parties, including sales and demand planners, suppliers, and
even customers, can increase visibility into promotions, cam-
paigns, and delivery of materials.
How does all of this translate into value-add for the business?
Well, Infor says that a large container box company has seen
a 25% reduction in roll-stock inventory after implementing its
collaboration solution and developing a single view of demand
with input from more than 15 facilities and 150 or more people.
Similarly, Logility’s Voyager Solutions includes an auto-
mated collaborative calendar to opti-
mise daily activities between partners
based on the software suite’s ability to
forecast while providing visibility into
orders, shipments, and inventory. “We
John Bermudez
help a company determine where to
place inventory and how to replenish
inventory to meet the demand plan,”
says Ron Burnette, product director at Logility.
And in terms of gathering information from multiple sources,
IBM’s Performance Blueprints product manages data flowing in
from not only the supply chain and partners, but also customer
relationship management and ERP applications. The information
is cleansed, a process that removes inaccurate or redundant re-
cords, and can be used in areas such as S&OP to shape demand.
S&OP is an important aspect of demand as it is often re-
ferred to as the process behind the technology, Infor’s Kinder
says. And S&OP is quickly evolving into something called
“integrated business planning,” which, although the term is
Photo courtesy: Oracle Corp.
not widely known, is the transformational aspect of demand
planning, he says.
It’s about manipulating things to bring revenue back in
line, Kinder says. It’s not just the way you sell product, but
the way you supply it. An integrated
business plan “is the alignment of
demand and supply to maximise the
profitability of the business.”
Measure the Data
Before you can deliver on business
goals, however, you need to measure
the information you are collecting.
Much of the forecasting and sensing
relies on historical information and un-
derstanding past patterns to predict the
future. This includes such questions as:
Which products have been profitable?
Is there an affinity between products?
And, what can be done to create a more
favorable situation?
In the Kodak example, the company
uses Oracle’s Demantra to track product
demand down to the granular level.
Kodak will know how many and what
type of cameras were sold by Staples,
Best Buy, or Circuit City. And, since Cir-
cuit City is now out of business, Kodak
can shift the channel. “Kodak wants to
know how much demand came from Cir-
cuit City and what products [were sold]
because they’ll need to adjust demand
around that,” Oracle’s Bermudez says.
Demantra’s analytics engine enables
a company like Kodak to do that,
Bermudez says.
Similarly, IBM’s Performance
THREE KEY SKILLS
UNDERPIN DEMAND MANAGEMENT
E
ffective demand management strategies look outside the walls of the enterprise to collabo rate
with suppliers to manage downstream customer opportunities and risks. The ability to do this
requires a manufacturer to become proficient in three key areas:
DemanD SenSing: The organisational capability to sense and use demand information from the
channel, removing demand latency. Demand latency is the time it takes to sense demand triggers or levers
and then translate that information into a product or plan.
examples of how to sense demand:
● Using point of sale data from big stores such as Lowe’s or Home Depot
● Using the sales forecast and sales configuration output to understand market changes
● Implementing assumption-based forecasting to understand the pipeline
example: Toyota enters the small car and hybrid market in the United States by sensing the market shift
toward more fuel-efficient vehicles.
DemanD Shaping: Consists of processes or activities to increase what the customer wants to buy.
activities include:
● New products or features
● Pricing strategies
● Channel and sales incentives
● Marketing programs such as trade shows
example: Boeing orchestrates demand by deciding which orders to take on the 787.
profitable DemanD reSponSe: Most companies have a demand-side view of forecasts,
orders, and other demand signals. Their supply networks will also have a supply-side view of manufactur-
ing, logistics, and sourcing plans. Building a supply network that can respond to demand requires an adap-
tive translation of these different views at the strategic, tactical, and operational levels.
● Strategic: Unification of people and processes across demand, supply, and design networks
● tactical: Using sales and operations planning as the core process where cost-value trade-offs
can be made
● operational: End-to-end processes, such as order-to-cash and procure-to-pay

Blueprints product includes business example: A truck manufacturer consolidates and centralises all North American logistics and transpor-
intelligence to provide dashboards, tation functions across five plants and all suppliers. Results include lower transport costs, improved inven-
scorecards, and analysis. But it also tory management, and better supplier relationships.
includes planning tools that provide Source: AMR Research Inc.

modeling and simulation to proactively

adjust to market conditions.
Logility, for its part, has a planning engine that specifi-
cally targets new product introductions and product sunsets,
because “product behavior in the market won’t be the same
as the historical factor,” says Karin Bursa, Logility’s vice
president of marketing, who points to the influx of green
initiatives around products and packaging as a good example
of how market demands change.
And therein lies the trick to all of this: factoring in the
unforeseen.
ToolsGroup, a supply chain planning vendor, has come out
with a proprietary, scientific software model that factors “un-
certain behavior” into the end-to-end supply chain plan. The
tool covers, for example, lumpy demand, defined as periods
of time when there is no demand at all.
“In the past, you could plan once a month or once a week
to replenish [goods] and you always had some demand,”
says Joe Shamir, CEO of ToolsGroup. “Today, industries
must move to daily control frequencies ... [because] there
are more periods with no demand.”
To get a handle on the new market conditions, Shamir says,
manufacturers need to be less interested in what is
actually selling on a daily basis, and more concerned
about the probability of what will be ordered that day.
“Our secret sauce is our ability to take the demand and under-
stand the probabilistic structure it has. It is a new approach that
replaces the traditional approach of forecasting,” he says.
Indeed, new approaches are needed to make sure product
sales turn a profit. But it’s not as easy as flipping a switch on
new software. The entire model has to change — including
the organisational model.
“Even if you have the best technology, the biggest barriers
to becoming demand-driven are more organisational and
cultural,” AMR’s Barrett says. “Even if a company adopts
technology due to one forward-looking person, if the organi-
sation doesn’t have the culture, mentality, and mind-set to
think that this is the way it is to be done in the long term,
then it’s not sustainable.” ME

Manufacturing
JULY/AUG-09 Executive
39
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@ july-aug Info.indd 1 7/16/09 3:01:47 PM

 ROADTRIP
Mark Halper reports from Hannover
The Prime minisTer’s Challenge
The concept of enterprise integration is not one
that people readily associate with presidents
and prime ministers. National leaders pontifi-
cate on matters like society, justice, liberty,
equality, world affairs, economics, and the
environment. I hadn’t recalled ever hearing a
single one of them mutter the phrase, “integra-
tion technology.”
But that changed in April, when I traveled to Hannover,
Germany.
During a speech at the opening ceremonies of the Han-
nover Messe industrial trade fair, South Korea’s prime
minister, Han Seung-Soo, implored the manufacturing
world to integrate its information technology. “Make IT
work,” Han said, echoing the
slogan that Korea trumpeted as South Korean
the official partner country at Prime Minister
Hannover. “IT” is not just about Han Seung-Soo
“information technology,” he
proclaimed. It’s also about
“integration technology.”
Unofficially, I count this as
the first time that matters of
systems integration rose to the
level of prime minister in a
public setting.
OK, so this comes from
South Korea, a country where
a technology zeitgeist prevails,
where it’s conceivable that the government would subsi-
dize — heck, mandate — broadband to your shower. Korea
proudly displayed its technological obsession at its Han-
nover exhibit, trotting out a singing female android, named
EveR-3, outfitted in a traditional hanbok dress and billed as
the “world’s first robot actress.” (Predecessor EveR-2 could
sing, but not act, and the original EveR — “Eve” from the
bible, “R” for “robot” — could do neither.)
The point is, Prime Minister Han is correct about infor-
mation technology integration. In so many words, he was
touting the utopian vision in which enterprise systems, such
as ERP, continuously interact with shop floor and develop-
ment systems, like MES and PLM.
Sure, industry has impressive robots that are ready and
able to work. Any visitor to the automation halls at Han-
nover could see that. At one booth, a Kuka Technology KR
1000 Titan was throwing around a red VW Golf automobile
like it was a sack of potatoes, while across the aisle, a
Kawasaki machine was sorting tiny green and pink sweets.
At the Schmalz display, seven vacuum rods were manically
At the Hannover Messe
industrial trade fair in
Germany, South Korea’s
prime minister touted
technology integration.
shuffling metallic wafers in what could have been a high-
tech three-card monte game, punctuated with emphatic
sucking sounds.
The heavy lifting is impressive. But from cars, to
wafers, to candies, it is the integration of robots and
myriad systems that will hone manufacturing to the fine
“just in time” process of buying, making, and delivering
exactly what’s needed. Field information detects a surge
in demand for blue cars, threads that insight through ERP
to the shop floor, and diverts robotic activity from the red
line to the blue. The sweets sorter stops in mid-flow as the
batch room runs out of sugar, alerting buyers to find more
of the stuff, now.
Of course, this is all easier said than done, especially
as manufacturers attempt
to integrate their globally
dispersed plants and enter-
prises into common methods.
Humans, not EveR-3 and
other androids, populate the
manufacturing workforce. As
speakers at this magazine’s
Manufacturing Executive
Leadership Forum in Han-
nover said, manufacturers
must, therefore, address huge
cultural and process chal-
lenges when undertaking
integration projects.
Jaques Playe, CIO of French cosmetics maker L’Oréal,
summed it up well, quipping at the MELF conference that
he required a “bodyguard” to help him implement a global
integration of SAP ERP systems and Apriso MES shop
floor software. “The bigger part of the project wasn’t archi-
tecture or machinery; it was around change management,”
he said. “You have to fight with some plant managers, some
technical directors, some country directors.”
And PLM expert Martin Eigner, from Technische Uni-
versität in Kaiserslautern, Germany, said, “We really see
more problems ... based on human factors and process ori-
Map: Google Earth, Photo: Courtesy Hannover Messe
entation and not based on any technical base developments.
So we’re more oriented on how we can implement it, how
we can generate acceptance from the engineers.”
This theme that cultural readiness must precede technol-
ogy integration resonated at the MELF conference (see
related article, p. 34). Like technology integration, it makes
a lot of sense. Who knows, it could even help elect future
presidents and prime ministers. ME
— Mark Halper
Manufacturing
JULY/AUG-09 Executive
41
 A
s the economic downturn spreads, uncertainty is
overwhelming the worldwide markets, and “back
to basics” is becoming the new mantra. Industrial
enterprises are putting a renewed premium on pro-
duction knowledge and asset performance. How-
ever, manufacturers are unlikely to boldly invest
in new fixed assets; instead they will extend the
life of their existing equipment. The obvious
downsides are more breakdowns, lost production
due to maintenance downtime, and higher mainte-
nance bills. Therefore, manufacturers’ key chal-
lenge is to get the most out of existing assets. We
expect to see manufacturers use three approaches
to improve operational excellence during the downturn.
1. Operational effectiveness: First, manufacturers need to
decide where to aim. Establishing good KPIs, such as ex-
tending operating equipment effectiveness (OEE) metrics to
monitor the performance of entire plants —as opposed to in-
dividual machines — can bring good results. OEE is a hier-
archy of metrics comprising production performance, qual-
ity, and capacity availability. Applied across the
plant, OEE is a tough metric, and some manu-
facturers have cut yield losses by 30% or
“ MES orchestrates all shop floor-level processes,
Executive JULY/AUG-09
extremely high-value rotating machinery — for example,
power generation equipment — probably justifies predictive
maintenance. In this business climate, management should
review maintenance strategies for each piece of equipment.
They should move toward a reliability centred maintenance
(RCM) approach, as this defines the optimum maintenance
strategy for every piece of equipment. More can be done to
reduce maintenance costs. For instance, companies can re-
evaluate their stocks of spare parts for maintenance manage-
ment, as these are often too large, particularly in multi-plant
environments. Industries using similar equipment are often
clustered together, and if maintenance managers at compet-
ing manufacturers establish informal relationships, one
company can borrow spare parts from another in a crisis.
To pursue these strategies, IT is essential. Manufacturing
intelligence (MI) applications provide visibility into plant
performance metrics and sustainable/green manufacturing
achievements, and enterprise asset maintenance (EAM) solu-
tions ensure that manufacturers exploit their existing assets.
On top of that, however, manufacturers need to define an

improved productivity by more than 50% with- from production management to operational excel-
out major capital investment.

“
Manufacturing

2. Sustainable/green manufacturing: Manufac- lence metrics and asset management.

turers may regard this as a mandatory burden
and additional cost. But at the core of sustainable/green man-
ufacturing are strategies to reduce, reuse, and recycle energy,
raw materials, water, and emissions, thus supporting the goal
42
overall IT strategy for the shop floor. Companies should care-
fully consider standardization models, such as ISA-95 and
MESA, when designing their next-generation manufacturing

of improving operating efficiencies by reducing operating
costs and resource consumption. Manufacturing Insights’ re-
search indicates a strong connection between increased prof-
its and environmental excellence. Thus, embracing the green
cause could be not only a driver to build new business —
today, greener products ramp up faster — but also a new par-
adigm for reaching operational excellence.
3. Modern maintenance management: There is no single
maintenance strategy that is appropriate for all equipment.
While lighting is usually subject to corrective mainte-
nance, preventive maintenance would be appropriate
for infrequently used backup machines. And
execution systems (MES) implementation. The modern view
casts MES as the link between corporate-level IT applications,
such as ERP, SCM, and PLM, and physical production assets
located in each plant. In this view, MES orchestrates all shop
floor-level processes, from production management to opera-
tional excellence metrics and asset management.
For many manufacturers, effectively managing manufac-
turing assets had become something of a lost art, but given
the challenging economic environment, it can be a significant
competitive weapon. ME
Pierfrancesco Manenti is the EMEA research director for Manu-
facturing Insights, an IDC company.

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