Extending Supply Chain Execution in Production to Improve Fulfillment

As market conditions continue to change, manufacturers are looking for any extra advantage against their competitors. Could a manufacturing execution system be the solution?

Manufacturing is becoming increasingly more complex as product lifecycles shrink and product mix grows, adding to the challenges of effectively managing in a globally expanding and dynamic market. Without adequate visibility to end-user demands and the ability to drive supply chain events to shop floor execution systems in real-time, manufacturers risk costly downtime due to the wrong product mix, material shortages or obsolete finished goods inventory as customer demands change.

As more manufacturing shifts to low-cost regions, visibility to events occurring in the supply chain becomes increasingly critical to the performance of the enterprise. Manufacturers must have real-time access to global enterprise information to help make better decisions and the ability to implement those decisions on the shop floor.

Lack of Supply Chain Visibility

How can a company make smart decisions about what to produce when there is inadequate visibility at the enterprise business application level about what product is moving through manufacturing?

Creating a manufacturing plan that reflects real-world market conditions is unlikely when the data used to create it (typically based on a forecast) is old or non-existent. It is impossible to be responsive to dynamic events, such as an unexpected quality failure at a subcontractor, without a consolidated, real-time view of the enterprise. World-class manufacturing companies recognize that the ability to share real-time information across their extended manufacturing and supply chain network provides significant competitive advantage in terms of fulfilling customer demands and increasing profitability and shareholder value.

As manufacturing shifts from forecast-based planning to demand-based planning, companies are being driven to rethink how their manufacturing applications connect with other enterprise applications such as enterprise resource planning (ERP) and supply chain planning (SCP) systems. If a large distributor signals a demand change for a particular product, manufacturing must be able to adapt and respond in real-time to change production schedules and product mix to meet the new requirement. Providing greater visibility of real-time demand signals directly to the shop floor allows business managers to make more informed decisions.

The Gaps in Supply Chain and ERP

Current SCP and ERP applications were designed to improve enterprise operational efficiency. Yet, after millions of dollars of investment and implementation of these systems, manufacturers are still asking the fundamental, overarching question: What should I make?

While planning and supply chain systems have improved a manufacturer's efficiency, many of these enterprise systems exist within their own silo of information, unable to share real-time data with other enterprise systems. Additionally, manufacturing has been missing within enterprise strategies with most of the focus going toward supply chain optimization of existing finished goods. Typical supply chain solutions optimize the flow of finished goods through the supply chain network to the end customer. They do a good job determining the most efficient way to coordinate with all the supply chain resources, such as transportation, distribution and warehousing, as the product moves through the channel.

These strategies worked when manufacturing forecasts were accurate enough to meet market demands and product mix was lower, production volumes were higher and product lifecycles were longer. But beginning in the late 1990s this was no longer the case. As product lifecycles began to shrink and more product mix started moving through manufacturing, forecast-based manufacturing plans were no longer a valid predictor that finished goods inventory would be in synch with customer orders and demand. Unless manufacturers can link all of their strategic initiatives together in real-time, including planning ERP, product lifecycle management (PLM), manufacturing (Six-Sigma, lean) and their extended supply chain, enterprise performance will not achieve the levels of efficiency and profitability needed to survive in today's dynamic market.

Extending the Value of SCP and ERP Systems

SCP and ERP applications promise to use all of the relevant information in the enterprise and produce plans that allow the company to run at its optimum level of performance. However, once real-world market demands and variability are introduced, the plans these systems create are quickly out of date. For example, because of the batch processing nature of these systems, their output can be days or even weeks behind actual market events. This creates a system that is incapable of catching up and is perpetually unable to produce a plan that allows manufacturing to make the exact products for exactly the right customers within the exact timeframe.

Today's enterprise planning systems collect and analyze information based on assuming a high degree of predictability. This approach makes real-time event visibility and execution virtually impossible. Consider a sub-contractor who has a yield problem with a specific product. The status of the supplier's product is collected on a daily basis, but by the time this information arrives back into the manufacturer's master planning system, it could be two days late, or longer.

To further complicate this hypothetical example, imagine that the manufacturer just committed a delivery date to one of its best customers based on the assumed availability of the faulty part from its subcontractor. Changes in manufacturing status can occur by the hour or even the minute. The lack of real-time visibility and the inability to react to these types of common events prevents enterprise planning systems from providing the kind of information manufacturers need to make better business decisions.

Manufacturing's Role in Improving Supply Chain Effectiveness

Companies must have flexible and adaptive supply chains capable of reacting in real-time to changing market dynamics. To truly optimize supply chain performance, applications must be able to see within the four walls of the factory in order to provide manufacturing managers with visibility to supply chain key performance indicators (KPIs). If the channel has too much of product A it makes no sense for manufacturing to continue making more of it, even if directed to do so by the master plan. Without the ability to share real-time market information, a company's lean manufacturing and supply chain initiatives cannot improve overall enterprise performance.

Manufacturing managers are beginning to realize that they must link real-time manufacturing applications that support the dynamically changing engineering bill of materials (eBOM), manufacturing bill of materials (mBOM), product mix, option content and shorter product lifecycles into supply chain execution strategies to improve manufacturing effectiveness. Making supply chain decisions based on real-time information from the shop-floor, and conversely changing product mix based on real-time information from the supply chain, can dramatically improve overall enterprise performance.

Bi-directional Contact with the Manufacturing Floor

Greater visibility to manufacturing data is a critical step toward providing manufacturers with the information needed to make more informed business decisions. But to enable a real-time enterprise, the applications must support bi-directional communication with other enterprise systems and the shop floor. Because this effort is not always straightforward or easy, traditional supply chain applications have historically excluded the manufacturing floor. For example, if the supply chain execution system decides that the priority of a product in manufacturing must change, it needs to pass this change to the manufacturing execution system (MES) to ensure that the operations are being managed in real-time.

Multi-site Collaborative Manufacturing

Improving enterprise performance begins by ensuring that all nodes in the enterprise are able to share critical information in real-time, such as tool setup data, tracking data, quality information, order information, lot history and BOM, regardless of the shop floor or manufacturing system used at each site. Multiple sites must operate as a single entity, ensuring the optimal use of all resources across all the sites. This becomes particularly important as more manufacturing moves offshore and supply chains become intricately complex with a worldwide web of suppliers and contract manufacturers.

Product Lifecycles and Quality

Everything that happens on the factory floor, both good and bad, will quickly affect other nodes throughout the enterprise. World-class manufacturing companies that understand these issues are implementing systems that share quality and PLM information just as readily as they share other manufacturing data. This helps prevent scrapped and stale inventory as the result of poor quality or poorly planned products. For highly regulated industries such as medical device manufacturing, having real-time access to supply chain information and connecting it to the manufacturing floor is key to meeting the compliance audits now mandated by government regulations.

Summary

As market conditions continue to change, manufacturers are looking for any extra advantage against their competitors. World-class organizations are spending considerable effort and money to connect, in real-time, their manufacturing with the rest of their supply network to gain strategic advantage and make their manufacturing truly demand driven.

A number of leading MES providers have begun working with ERP suppliers to begin bridging the historical gap between ERP systems and the shop floor. Based on an evolving set of industry standards such as SOAP, JMS, XML, NetWeaver, ISA95 and others, applications are being developed that will allow ERP and MES to share information in real-time. As these applications begin to enter the market, manufacturers will have the ability to be more adaptive to shifts in customer buying patterns, supplier issues, and other supply chain issues; all of which contribute to a company's ability to develop loyal customers and grow shareholder value.

Sidebar Case Study: Adaptive Inc.
Increasing Return on Investment (ROI): Supply Chain Visibility

Adaptive Inc. has multiple suppliers, customers and manufacturing sites for its products. Figure 2 shows the company;s distribution chain: two manufacturing sites running different manufacturing execution systems (MES) and a third-party supplier that is also using a different MES system. Prior to implementing a real-time SCE solution, Adaptive struggled with getting a consolidated view of its entire operations.

Real-time adapters provide a continuous stream of current information out of their various enterprise systems, which is aggregated into a common data model and used for compiling real-time reports to a Web-based dashboard. Adaptive also uses the dashboard to provide alerts should any of the real-time data indicate an exception has occurred. Adaptive is now able to recognize problems immediately and has instant access to the most current enterprise information obtained through consolidated reports, allowing for quick analysis and resolution.

What to Make Next? Multi-site Decision Execution

Using the real-time data from its supply chain, Adaptive can now use more advanced logic to make challenging product routing decision between sites as shown in Figure 3. For example, if the third-party supplier falls behind on a certain part because of an unexpected machine outage, the system sees this exception as it occurs and begins to take action. The system can be configured to automatically act on a decision (to prevent any delays from occurring) or to present the options and wait for confirmation before execution. The execution commands are then sent directly out to the different manufacturing systems for immediate problem resolution in minutes or even seconds. Now Adaptive is reducing its work-in-process (WIP) and, as a result, driving a shorter lead-time.

The Last Frontier: Collaborative Manufacturing

Now Adaptive's manufacturing and assembly sites adjust priorities and product based on demand-driven changes in the market. The real-time manufacturing applications let all of Adaptive's sites share tool setup data, tracking data, quality information, order information, lot history and bill of materials (BOM), regardless of the shop floor or manufacturing system used at each site. Multiple sites can operate as a single entity, thus ensuring the optimal use of all resources in the sites. Adaptive's global manufacturing environment is fully collaborative, both internally and with its extended supply chain of suppliers and customers, providing efficiency and the ability to react in real-time to changes in the demand and the supply chain.

About the Author: Joe Bellini is the executive vice president and general manager of Brooks Software, a provider of real-time applications for enterprises with complex manufacturing operations, using RFID systems. www.brookssoftware.com.

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