01 November 2004
Connecting the dots
True integration of plant and enterprise results in tangible benefits.
By Caitlin Smith
How often is a plant asked by corporate supply chain planning to execute to a plan that is clearly not achievable given current operating conditions?
How often does supply chain planning have inadequate visibility into the current costs and capabilities of its plants, and only discovers the impact of these limitations on the broader supply chain after the fact?
Creating a dynamic connection between the plant and the enterprise is essential to ensuring that a manufacturing enterprise can reliably and effectively execute to plan given the variability of a manufacturing environment and the volatility of the markets it serves.
Here, let's focus on the integrated business processes and information systems that connect the plant and the enterprise. We will identify common limitations and breakdowns in these processes, the reasons they occur, and the value lost.
We will discuss how to convert corporate plans into dynamic schedules of executable activities. We will also present a vision on how to harness and leverage the wealth of information in plant information systems to support these processes.
There are tangible benefits from true integration of the plant and the enterprise.
Critical touch point between
The production scheduling process is the critical touch point between enterprise planning and manufacturing execution. Production scheduling must translate the production requirements of the enterprise plan into schedules of executable activities for manufacturing operations to follow. It must dynamically adjust to operational variability to stay on plan.
To accomplish this task the scheduling process needs accurate, timely, and complete information from both enterprise planning and plant manufacturing operations. Even though many manufacturing enterprises have made considerable investments in both enterprise- and plant-level systems, most do not leverage the wealth of information made available in these systems to support the scheduling process. To take advantage of this wealth of information, an enterprise must look holistically at its manufacturing operations and consider them in the context of the broader supply chain. By focusing on process and system integration, a business can begin to construct with its existing plant and enterprise investments a single coherent framework for operations management that connects the enterprise and the plant.
Plant in supply chain context
In many ways a company's supply chain is analogous to a football team's offense. A football team has a common goal to move the ball forward and score. The plays are the carefully planned movements and actions of each player. The quarterback continuously evaluates the game situation, chooses a play, and communicates it to the team. When the ball snaps to the quarterback, each player works to successfully execute his role. If each player succeeds, the play will work. If commu-nication breaks down, or if players are unaware of or unable to execute their roles, the play will fail. Finally, conditions during a game are continually changing, and a team's ability to recognize these changes, and adapt quickly at both a team and an individual level, leads to their overall success.
For a manufacturing enterprise the common goal is to maximize profitability while meeting business-wide objectives and customer commitments. To achieve this, it too must carefully plan and execute activities across a broad array of players in its supply chain. This team includes players in sales, distribution, manufacturing operations, transportation, and procurement who have roles to buy, make, move, store, and sell product. The enterprise's supply chain planning group defines and communicates the plan of coordinated and optimized supply chain activities to the team. Each supply chain player must execute his role successfully for the plan to generate the desired level of profitability and customer commitments. Volatility in the market and variability in supply require that the enterprise also be able to recognize and rapidly adapt to changes.
In a manufacturing enterprise the production scheduler is a key player on the supply chain team. He connects the plant and the enterprise. Like the running back who during a play adapts to defenders he sees downfield, a production scheduler must have a high degree of visibility into manufacturing operations and be capable of agilely and effectively adapting to operational variability in almost real time so that the plant can stay on plan. By working to make sure that the plant stays on plan, the production scheduler does his part in ensuring that the supply chain meets its common goal.
Common goal, competing needs
The supply chain and the plant share the common enterprise-wide goal to maximize profitability while meeting business-wide objectives and customer commitments. However, the levers they can manipulate to influence and improve on that common goal actually compete at times. The enterprise planners are looking at overall efficiency and profitability across the entire supply chain. They must consider the best trade-offs in product mix, manufacturing, distribution, and purchasing to maximize profitability and achieve targeted services levels. The plants, on the other hand, can only influence more local outcomes. To contribute to overall profitability, the plant focuses on reducing manufacturing costs by enhancing production efficiency, and increasing revenue opportunity by improving throughput of first-quality product. The plant also is only concerned about meeting shipment dates of product from the plant.
The plant's focus on operational efficiency and the supply chain's broader needs can conflict. For example, on the plant side, if the plant tries to contribute to the overall margin by reducing manufacturing costs, it will lean toward longer production runs to reduce the quality degradation and time lost transitioning from one product to another. Doing this would indeed allow one to make more first-quality product, but it would also drive up inventory levels, and thus holding costs, needed to support demands. It would also diminish the responsiveness of the plant to fluctuations in demand.
On the enterprise supply chain side, the planners desire to improve the profitability of the entire supply chain. To do this they put a higher cost burden on any given plant, to drive down greater costs elsewhere in the supply chain. The supply chain planners are looking at total costs and revenue achieved by the entire supply chain. They may also decrease operational efficiency to capture more revenue opportunity. Further, they may want to be more responsive to a volatile market and adjust supply to meet opportunistic high margin demand. This means that the plant has to be more responsive and make shorter production runs.
The key to the production scheduler's job is to keep his eye on the common goal shared by both the plant and the supply chain. He must work to fulfill his role in the chain by meeting the planned production targets from the enterprise's supply chain planners while managing the needs and constraints of manufacturing operations. While meeting planned production targets, the production scheduler needs to look at operational efficiencies and consider how to minimize local costs.
The scheduler's challenge
The production scheduling process is the point where the enterprise planning processes and the operations management processes intersect.
From the enterprise's supply chain plan the scheduler receives production or inventory targets to achieve. The high-level plan from the enterprise does not consider the detailed operational constraints. Typically, the supply chain plan looks at aggregate capacities and materials at a grade level, and issues targets by time bucket such as a week or month.
From the plant, the production scheduler requires a definition of the manufacturing process steps and the constraints on particular routings, materials, and equipment and labor resources. The plant also provides the plant scheduler with critical information on the actual state of plant operations such as tank levels, equipment shutdowns, and batches in progress. These all define the preexisting conditions that limit the options available to the scheduler as he develops a schedule and reacts to changes.
The scheduler must convert the high-level targets from the enterprise supply chain plan into detailed executable activity schedules that plant operations can follow to achieve the plan targets. The scheduling process considers the detailed operational costs and constraints and generates activity schedules with precise timing, coordination, and balanced utilization of plant resources. The process also considers sequencing requirements within a production stage and synchronization requirements between stages.
Finally, the production scheduler must manage this process with all the external volatility (demand, logistics) and internal variability (processing time, quality, equipment failures). The scheduler must be able to quickly recognize changing conditions that will affect the plant's ability to produce and dynamically respond in a manner that keeps the plant within the plan.
If a disruption in some way prevents the plant from completely fulfilling its role in the supply chain plan, then the scheduler must be able to communicate to the supply chain planner what the plant can achieve, so that the supply chain can reallocate the remaining requirements to another player in the supply chain, such as another plant or a toll manufacturer.
And lost opportunities
As a production scheduler tries to gather information and create or update the activity schedule to manage this critical process touch point between the enterprise and the plant, he typically encounters numerous problems. Among the most damaging to achieving the common goal, along with their causes and costs, are the following:
|Problem||Potential causes originating in the plant||Impact/cost|
|Scheduler consistently receives unachievable production targets from the enterprise level plan||Enterprise has bad (inaccurate, incomplete, or late) information from the plant on production or storage capabilities
Enterprise has bad information from the plant on the actual status of plant operations (inventory levels, equipment down, etc.)
|Diminished service levels, lost revenue
Expediting costs (if another supply source is sought)
Degraded response time
|Plant cannot execute to the scheduler's activity schedule||Scheduler has bad information on the plant's production or storage capabilities
Scheduler has bad information on the actual start of plant operations (inventory levels, equipment down, etc.)
|Diminished service levels, lost revenue
Lost operational efficiency
|Raw materials are not available||Actual consumption of materials does not match enterprise bill of materials||Expediting costs
|Excess inventory||Plant unable to adapt to changes in demand patterns
Plant focusing on operational efficiency only, and using inventory to allow long production runs
Plant focusing on high asset utilization despite weak demand for product
|Higher inventory-holding cost
Diminished ability to rapidly respond to changes
Unwanted and/or obsolete inventories
|Poorer margins than anticipated||Planning based on inaccurate historical costs rather than current manufacturing process||Less profitable
Bad information has ripple effect on other profit centers
|Low asset use while plant should be running at capacity||Poor synchronization and sequencing
Constrained resources wait idle because scheduler has inadequate information
|Lower revenues, due to less product produced|
|Production quality||Unnecessary grade transitions||Higher material costs
Lower throughput of first-quality (high margin) product
|Late shipments||Scheduler has inadequate visibility of orders in jeopardy
Scheduler has limited ability to respond to changes
|Low service levels
Managing the touch point
A key to effective management of the difficult touch point between the enterprise and the plants is taking an integrated, process-oriented view of operations management and integration of these processes with enterprise-level processes and systems. Implementing an integrated process for operations management will enable consistency, coordination, and integration of information, decision making, and response. It will enable automated information flows that accelerate to real-time visibility on information, status, plans, and performance.
Weakly coordinated decision-making processes, poor visibility, delayed signals, bad information, and slow response time all degrade the plant scheduler's ability to adapt and stay on plan. Imagine a blindfolded man walking down a hall following the instructions of a second man. The blindfolded man has inadequate information; there is a delay between when the second man recognizes a problem, decides on a new instruction, and communicates it to the blindfolded man; the blindfolded man interprets the instruction and responds. The blindfolded man walks slowly, he collides with objects in his path that he cannot see, and he is slow to respond. Now take the blindfold off. The man walking down the hall has a wealth of visual information immediately, the process of navigating objects is streamlined, and direct integration of his eyes and brain enables him to walk swiftly and without incident.
What does it take to free the production scheduler from his blindfold? Implement integrated manufacturing execution processes and automation of the information flows that support them. These processes include production scheduling, production dispatching, production data collection, production execution, and performance analysis. The maturing ISA S95 standard defines a standard that supports improved operational performance by defining a clear set of manufacturing functional activities and work flows, and by establishing a common format for the exchange of information between the plant and business systems, like enterprise resource planning (ERP) systems. This enables real-time management and optimization of the operations based on a consistent set of key performance indicators (KPIs) and messages as defined by the standard.
Dynamic scheduling limits
With integrated operations management processes, standardized data and messaging definitions, and automated information flows, the plant scheduler can harness and leverage the wealth of information from plant information systems to support the production scheduling processes.
The information feeding up from the plant is now far more timely, accurate, and rich in detail. This information can be broken down into these categories:
Current state of plant operation. This is status information such as tank levels, batch status, and machine downtime. This gives the scheduler an up-to-date view on which activities in the activity schedule are over, what is under way, and what remains. It communicates material availability and highlights any production disruptions.
Definition of the manufacturing process. This is a detailed and current definition of the manufacturing process (routings, process times, transition times, tanks-to-material compatibility, current costs, recipes). This information, combined with the current state of plant operations, dynamically defines for the plant scheduler what the real cost and constraints on manufacturing operations are at a detailed level.
Performance analysis metrics. These are KPIs that roll up and summarize plant performance executing to schedule and meeting the plan targets. They help the production scheduler quickly identify and drill down into areas of jeopardy or poor past performance. Performance analysis helps the plant scheduler manage and understand large amounts of data that define the operational situation so that he can adapt and stay on the overall plan.
The definition of integrated business process is only the first step to managing the link between the plant and the enterprise. The second step is enabling the process with technology applications that allow the production scheduler to use the wealth of information available in decision making, communication, and execution process steps. Enablers also automate and integrate process steps and information flows. The number of information sources, the sheer volume of information, and the multitude of options for the scheduler to consider are not manageable without enabling technology, specifically the following:
Dynamic detailed finite scheduling systems. This is dynamic optimization of production schedule to optimize material flow, sequence, batch size, finite capacity, resource usage, timing, and by-shift by-hour and associated costs in order to meet demand and order-due dates. This system dynamically connects to ERP systems and manufacturing execution systems (MES) to continuously monitor the environment and optimize responses in near real time.
Integrated manufacturing execution system for operations management. This system defines, manages, executes, tracks, and reports on manufacturing operations.
Role-based portals. These applications allow a process- and role-based view into information from the integrated MES and ERP systems.
Performance monitoring. This system allows individuals at various levels to monitor performance by tracking relevant KPIs, isolating performance problems, and drilling down to root causes. Performance monitoring gives the production scheduler real-time visibility of operational status.
A supply chain and the markets that drive it are very dynamic. The plant itself contributes a fair amount of variability. To be able to successfully fulfill his role on the supply chain team, a production scheduler must be able to rapidly recognize, evaluate, and adapt to changes in the plant or the external supply chain to stay on planned production targets. He must communicate immediately when the plant is no longer capable of meeting the planned production targets.
The production scheduling process is the critical touch point between enterprise planning and manufacturing execution. Creating a dynamic connection between the plant and the enterprise is necessary to ensure that business as a whole can reliably and effectively execute to plan given the variability of a manufacturing environment and the volatility of the markets it serves.
The dynamic link comes to life by defining and implementing three major areas:
- Processes—Integrating processes within the plant, and integration of plant-level processes with enterprise planning processes.
- Enabling Technologies—Providing the systems that improve visibility and use the wealth of information from operations in decision and execution processes.
- Integration—The integration of supporting applications and automation of data flows.
The benefits of transforming the production scheduling process are as follows:
- improved ability to execute to planned production targets
- increased responsiveness to market/customer demands
- improved visibility into manufacturing operations and performance
- improved ability to rapidly isolate problems, determine root causes, and respond to them
All of the above contribute to achievement of the supply chain team's common goal—to maximize profitability while meeting business-wide objectives and customer commitments.
Behind the byline
Caitlin Smith (Caitlin.email@example.com) is a business consultant in the area of supply chain management at Aspen Technology (www.aspentech.com) in Cambridge, Mass. She presented a paper on this topic at ISA Automation West this past spring.
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