Category: ERP Blog

What is the value of your data?

What is the value of your data?

Having been in manufacturing for most of my career, it seems as though the recurring topics of interest tend to fall into the same categories: Machines, Materials, and Labor. Even today, while there are now top level positions for information systems, little attention is paid to the value of the information a company needs to operate. Sure, everyone recognizes the need to have good data (CRM, engineering, purchasing, planning, etc.), however; integrating all that data, so that it is quickly available when needed, is often a lower priority.

Data (information of all kinds) supports every activity. Incorrect data (size, material, CNC program) is a recognized problem, but what about the importance of connecting all the systems to reduce mistakes, duplicate entry, delays…?

value_of_dataFailure to connect data and manage it for ease of access, is a large and costly problem that many companies complain about but few really address. One reason is that the value or cost of integration is often misunderstood. Just last week I heard from one of my business associates, who explained how difficult it was simply to get good reporting for management decisions. Given the sorry state of his company’s information systems, custom reports have to be written. Due to the fragmented databases, such reporting takes a huge amount of time, which also translates into great cost. And, by the time the report is completed, management has forgotten why it was needed.

Modern integrated systems called ERP, offer fast and easy reporting solutions known as dashboards, which can be built in minutes and provide instant access to important data. The more fragmented the databases, the less likely the information will be used, leaving managers to operate without the full benefit of the data that has been collected.

Want to get the maximum return on a machinery investment? …better make sure that the data needed to run it will be accurate and quickly available. What good is a fast CNC, if the programming is a bottleneck? Want to keep material inventories lean? …make sure you have a handle on the exact quantities required as well as WHEN they will be needed. Want to produce your products with the lowest possible labor content? …have every detail checked and clearly documented, or expect idle time and mistakes, while employees look for construction details, materials, and setup instructions.

These common operating costs (waste in lean terms) are the result of failure to properly organize your company’s valuable data. With a well-integrated system, your investments in machines, materials, and labor will pay back large dividends.

Where is the best bang for investing your bucks?

This morning I read a re-post of an interview done a couple of years ago by Karl Forth (CabinetmakerFDM) with Jim Sherbert, CEO of Bush Industries, one of the few remaining RTA manufacturers in the US. The core topic of the interview was, “How did Bush survive the recession?”

Early in the interview, Mr. Sherbert was asked about the investments and productivity improvements that Bush made. The response was, “With the market depressed, there is little need to add capacity, and even enhanced productivity efforts have a limited payback. We have focused technology and software on improving customer and consumer services. This has made dealing with the various Bush business segments easier, quicker and more cost effective. New CRM systems and expanded supply chain support are among the advancements.”

Save or Invest in Your Business

It seems that many manufacturing companies are often focused on just the shop floor, and particularly machinery. However, as Mr. Sherbert’s experience points out, sometimes much higher payback can be had from investments in other processes that improve customer service or the supply chain. Even lean improvement methodologies often measure results based on bringing value to customers, not just productivity. Bush survived not only the US recession, but also foreign competition, which is especially tough in their market segment. Clearly their viewpoint was of the larger picture, which took into account the entire enterprise.

No doubt, incremental improvements in manufacturing throughput should always be worthy of consideration, but it is also important to consider the broader picture. As Eli Goldratt made so clear in his book The Goal, putting big bucks into new machinery is not always the best option, and in some cases can actually be counterproductive.

In today’s economic environment, it is more important than ever to ensure your investments are put to the best possible use. The front office and all the non-production supporting processes are just as critical to your company’s success and your manufacturing equipment. Failure to improve those areas can hold your company back, just as seriously as low manufacturing productivity.

Chippendale’s Parametric Ordering System in 1754

Thomas Chippendale published The Gentleman and Cabinet Maker’s Director, becoming a well-known celebrity in the furniture and interior design world, by cataloguing an amazing range of styles which were considered the pinnacle of his art. However, in addition to Chippendale’s artistic skill, he was clearly a marketing genius. He pushed the state-of-the-art, using what we call today, parametrics. His book never shows only one version of anything; it offers options for almost every detail.

Options - Representing Parametric Ordering System

In present day make-to-order manufacturing, parametric systems are common. For example, CNC programs running on all kinds of automated machinery, can easily be modified using parameters controlling dimensions of the part being made. This is one of the simplest forms of parametrics. Chippendale was using the concept at the sales phase of the process, offering an almost limitless range of features and options, which were all easy to visualize from his excellent catalogue. Even with the huge variety, each option was actually pre-designed.

Today, manufacturers with such wide ranging options can leverage their marketing, at the same time as they improve the overall productivity of their entire workflow. Everything Chippendale’s company did was manual, from paper drawings to hand carving. Today we have the Web, with full-color, feature rich configurators to customize an order in minutes. Instant gratification, a pleasant ordering experience, and low-cost transactions from quote to cash.

But it takes more than a power coder, building an artistic Web commerce site to make all of this work smoothly. The key to success today is integration with the entire workflow process. ERP systems are the plumbing that connects all of the activities, seamlessly avoiding errors and duplicate entries. With such under underlying framework to ensure efficient throughput of information, your Web commerce front end provides the ultimate ROI.

Chippendale differentiated himself from the many other fine cabinetmakers, by making it easier for his customers to order what they wanted. This isn’t rocket science, smart businessmen have been doing it for centuries. The technology available today, makes it cost effective to market your products and at the same time, streamline your ordering to manufacturing process.

Adding Employees or Technology

Most of us have seen shops that are very labor intensive and others, doing similar volume with far fewer employees, as a result of technology investments. Compare for example, the casework manufacturer with CNC, where high volumes of precision parts are made with only a few workers, as opposed to another company, cutting on table saws, and then boring and grooving using several other manual machines. The labor content, part quality, and overall throughput will be substantially different, making the CNC operation much more cost effective.

Costs VS Benefits - Technology

This comparison is well-known and often taken for granted in our industry. It has become “conventional wisdom” for companies to make these kinds of machinery investments, as a safe and effective way to improve productivity. Companies that take these steps will enjoy much higher output, better and more consistent quality, all with fewer employees. As a result, more work can be taken and higher profit margins will follow.

However, that same conventional wisdom is often forgotten when it comes to front office productivity. When companies need more estimating, more purchasing, more project management… an ad is placed for an additional employee. The cost for such skilled workers is high in terms of wages and benefits, plus there will be extensive training and acclimation before the new hire becomes productive. And in such specialized areas, there is a high risk that the new worker will not fit, wasting huge amounts of time and money as the search starts again.

Just as technology investments reap large returns in the factory, the same can be true in the front office. In fact, implementing an integrated ERP system properly, will almost always produce more measurable productivity gains and cost reductions, than comparable investments in machinery.

So why do companies still seem to favor adding staff over integration of software systems? it usually comes down to fear and lack of knowledge. Manufacturers are reasonably comfortable investing in machinery, but software is scary stuff, an unknown and risky investment, with no clear guidance to help with selection and implementation.

Keeping Up vs Catching Up

Keeping up vs Catching Up

One of the worst common adages we have all heard is, “If it ain’t broke, don’t fix it.” It’s hard to say where this would apply. Does it mean, don’t change the oil in your car until the engine seizes up? Don’t replace the bearings on a machine, even though they are squeaking, until they have welded to the shaft? In fact, it is really hard to come up with a good example where such false logic makes any sense. However, it is very common to see examples in practice, particularly when it comes to keeping software up to date. I have been involved with software systems from both a buyer’s and seller’s perspective over my career, witnessing the full range of thinking on this topic.

At the one extreme, some companies wait until every hardware and software component is so out of date that they might as well be working with typewriters and drawing with pencils. In those cases, work often comes to a complete stop when one of the weak links fails altogether. This can be catastrophic when production is dependent on output or stored data that has just become inaccessible. Or work may have slowed to such a crawl that even overtime and extra workers can no longer keep up with demand. That is when software vendors get the urgent calls, from workers in a state of panic, who are trying to keep things patched together because the boss has seen no value in upgrades over the years. And the cost of repair at that point is excessive.

At the other end of the spectrum are those companies that understand that their technology infrastructure is just as critical as the machinery on the factory floor. Those companies maintain everything they purchase, because they see the importance of keeping all of their investments in top working order. Sometimes that means maintenance and upgrades, whereas other times replacement with a newer model is the best way to stay current.

Then in the middle we find many companies that fully embrace that thinking when it comes to machinery, but apply a completely different set of logic to their software. That category understands the value in keeping up with the best machine technology, upgrading for higher output or better quality, while their software systems fall further behind. That group often wakes up one day, realizing that higher output in the factory has become constrained by low output in the office where the processing actually begins.

Lean thinking employs another adage, “If it ain’t broke, break it.” Which translates into always looking for improvement.

Understanding the Whole Picture: Monitoring Business Processes

This past week I noticed a post in one of the groups I follow on LinkedIn, which is about tracking jobs on the shop floor. This is a highly controversial topic, with pros and cons regarding a number of aspects of the issue. Of course every manufacturer wants to monitor the status of production, manage inventory, and collect cost data. However there is a price tag for everything, and many approaches actually run counter to the primary objective, which should be maximizing productivity.

contradictions_3D_image

Comments on this post highlight some of the contradictions. They talked about how difficult it is to get workers to correctly record their hours and other production metrics. That is itself is a reflection of a conflict that managers must take into account. On the one hand, workers understand that their main goal is production, so when they are asked to stop their work to record something, that in itself contradicts that main goal.

Several posts also mentioned the importance of continuous process improvement. Most facilities are always changing machinery, flow, and other aspects of the production process. Also in many make-to-order factories, the products and lot sizes are almost never the same. Therefore, detailed historical data is often out of synch with current production, so what is the point of trying to collect every detail? Simpler and lower cost tracking schemes monitor work center throughput and material usage, which is far less intrusive and results in more meaningful metrics.

Management is often too focused on direct labor in the first place, when in fact the overall throughput is the result of many other factors. For example, to keep work flowing smoothly requires perfect synchronization of materials, input from prior processes, available machine time, tooling, output space, and many other variables all timed to an accurate schedule. Any of these factors can delay the process, and most have nothing to do with the direct worker. Often the best place to start improving production throughput is in the front office, where the planning and support activities begin. If that work is not done well, then measuring direct labor is of little value.