1 June 2005

Staying In Sync

Know your automation plan because one size does not fit all.

By Gerhard Greeff

Pressure to be more agile often occurs in build-to-order environments; but even where a company is in a build-to-stock environment, pressure exists to reduce stocks to a minimum while keeping a wider range of products on the shelves. This requires detailed process, business, and logistics management, and any issues that reduce the efficiency of the overall business become important.

For any enterprise to succeed in this changing global business environment, it needs to execute processes effectively and efficiently and adapt and implement changes at an ever increasing rate. Being able to change to respond to new/competitive market demands requires quick adjustment from the strategic level downward for every industry, ranging from large corporations to small businesses.

Business processes are the activities performed within the business during which the state of the business resources change, describing "how work is done." Physical processes are where people or equipment interact with materials to bring about transformation. It is possible to define manufacturing processes as business and physical processes that transform physical resources.

In order to stay competitive, or "ahead of the game," the only constant is change. The same processes used two years ago may not be adequate today, as new ways of producing the desired outcome are under continuous development. Existing processes also improve continuously, increasing their effectiveness or efficiency. Whether it is a physical or business process, improvement brings change.

Changing one process on paper is easy; but looking at the various business and physical processes of any enterprise and their interaction is a lot more complex.

Performance metrics

At the macro level, each organization has a set of strategic business drivers.

At Audi, technology drives the company. The employees identify useful technology, figure out how to apply it, and implement that into Audi products (e.g.: They were the first to implement ABS systems.). Honda, on the other hand, makes engines. Its drive is to make the best affordable engines in the market. Honda engines find their way into lawn mowers, motorcycles, and cars. Toyota focuses on its chosen market. Its drive is to have a competitive product in all motor vehicle market segments. BMW produces "high performance driving machines." BMW sells a "lifestyle" image, focusing on customer comfort, and you can choose your car and all the extras online without visiting a dealer.

All four companies make cars, but their strategies differ. Each has a competitive advantage in its chosen focus-area of the business. To ensure they maintain this advantage, they have implemented processes and measurements that make them the best in those areas. These processes ensure they meet the strategic and operational objectives. They do not neglect the other processes and areas of the business. If they did, they would not be in business anymore. They do, however, maintain focus through unique measurement methodologies and systems.

Performance metrics can prevent change and improvement, especially at the micro level. In one mining company, the cost budget was historically the primary focus of each department. There was no culture of recognizing good performance, and the manager knew that even if the company saved money for 11 months of the year, for the one month it overspent, it would result in a slight to severe whipping. The mining company also knew if it spent less this year, the budget for the next year would go down, and so it managed to spend the full budgeted cost each month and overspent when it was unavoidable. When the overspending was inevitable, the company tried to overspend as much as possible in order to try and get bigger budgets for the next year.

This company then started to implement cost-cutting initiatives. The aim was to reduce the operating cost to below $250 per ounce of gold. It communicated the need, informed everyone, and implemented new procedures. Unfortunately, the performance measurement system remained unchanged. The company did not change the measurement system or the budget, did not add new measurements to shift the focus, and did nothing to change the measurement culture. The effect was managers still spent money on unnecessary equipment and consumables, although they had enough maintenance spares for the next 10 years. They lost opportunities for bottom-line savings.

Metrics help hold together the various processes, ensuring they all drive toward a common goal.

Where the main drivers (and therefore measurements) on a macro level normally remain stable, micro metrics should be adaptable, flexible, and in sync with other changes in the company. This does not mean measurements need to be different all the time, but rather the attention they get should change on a constant basis, depending on the company priorities and the status of the company and market. When evaluating the impact of proposed changes on the metrics, not only the metrics themselves, but also the priority and focus on the metrics need to undergo evaluation to ensure alignment with the company's long and short term strategic goals.

The number of metrics reports can also get completely out of hand in a constantly changing environment. In one company, the production metrics report generated on a weekly basis was 26 pages. The production manager was only interested in the first page (developed by himself) and two other pages with more detail should he require it. These three pages enabled him to make the required decisions of his position. The other 23 pages had metrics developed by his predecessors. He did not want to discard them, in case they needed them in the future.

Too many measurement points or metrics leads to confusion and a loss of focus. Metrics need review for applicability and usefulness on a frequent basis, preferably each time process changes take place.

System perspective

The major objective of any automated system is to support or control some process. A system is not an objective in itself. Performance metrics still need development outside the systems to provide the drive and focus of the company, but they can develop a system to automate and ease reporting.

Organizations and individuals sometimes lose sight of system objectives and implement systems because they like the way the system works or the reports they can generate from it. In these cases, little thought goes into the impact on current processes. When this happens, processes inevitably change, potentially affecting large parts of the company.

Most companies have systems that support processes and measure process performance. In the current business environment, this means systems need to be flexible to adapt to changing processes. Inflexible systems can prevent change or actual improvements, leading to "the tail that wags the dog" system-business relationship. If a system does not change to reflect the process it is supposed to support, no one will use the system. In the cases where workers actually use the system, parallel manual systems (e.g. spreadsheet based) will start to infiltrate and eventually take over most system responsibilities, consequently leading to even a greater degree of system data separation (as opposed to integration). Alternatively, they will use the system but will not adopt the new process. People do not like duplicating work and keeping two parallel processes running at the same time. Eventually, either the system or the process will survive.

Technology and modeling standardization can realize the unification/integration of processes by making the integration of systems easier, as it reduces the complexity and sheer number of systems, interfaces, and data-exchange formats. During a business analysis exercise in one smelter plant, officials found the plant (consisting of three distinct areas) had five different SCADA systems and three different PLCs. For obvious reasons, maintaining this infrastructure and ensuring synchronized change was very resource intensive. Change to one of the processes affected the supporting system of at least four other systems, as data-exchange between the systems ensured efficient operation.

Trying to integrate upward into the operations management systems was also complex and not attempted by the company. Added to this complexity were the other three smelters and two mines within the organization, each with its own lack of standards.

The front line

The effectiveness of any process or system depends on the people operating and maintaining them. Company employees are therefore the final component holding together the synchronized improvement globe.

Improvement means change, and change means a different way of working. As processes and systems change, people need to change their way of doing things. This is difficult, as most people have natural resistance to change. In addition, system designers often try to replace humans in systems, limit their actions, or avoid areas where humans are inevitably involved. This tendency severely limits the effectiveness of the resulting systems and processes.

For this reason, it is natural to expect a reduction in productivity during a change period. The trick is to reduce the severity and duration of this loss in productivity. Often companies forget to take people into account during the implementation of systems or changes, and this leads to long periods of low productivity.

Dramatic and prolonged impact is normally the result of management reducing the effort put into the project as soon as they implement the new or changed system. They often figure the big work is complete, and they can sit back and see the new system working and solving all their previous problems. Unfortunately, this is seldom the case, as the big work actually needs to start at this point.

As people behave in line with their measurements, it is critical to plan in advance how to measure system usage or the correct behavior. This measurement will carry a high management priority, especially in the short term, until adopting the system or change. Training alone is often inadequate as a change agent. Without management effort accompanying the training, the system implementation will often fail and will prolong the duration to complete system adoption.

A big petroleum company decided to implement a bulk-liquid handling and logistics system. A huge effort went toward this project during the design and development phases, and during the implementation phase, all system users received training over a three-month period. The manager in charge of the specific logistics department moved on soon after implementation. Six months later, the system fell into disuse because the new manager did not understand the purpose and objectives of the system and did not measure its use.

Nine months after the initial implementation, a re-implementation started. This time the manager understood the business need and offered a change management exercise, including system usage measures. The manager monitored use and ensured the correct behavior required to drive the business processes captured in the system functionality. This system is still in use today, five years later.

All in perspective

The Collaborative Manufacturing Management model developed by Dedham, Mass.-based research company ARC Advisory Group goes further and also looks at the systems outside the organization that identifies the interface systems between customers and suppliers. In some cases, these take the form of exchanges, such as buy side exchanges, sell side exchanges, and logistics exchanges where potential customers and potential suppliers exhibit offers and requirements in a virtual marketplace. These exchanges can also be dedicated exchanges between a company and its suppliers or customers.

These processes and systems are even more difficult to synchronize because they have to operate between different companies.

Oftentimes, these systems undergo implementation before proper synchronization inside the company, focusing more on the external supply chain than the internal value chain, which is ultimately the most crucial component in the supply chain for any organization. This could be one of the major contributors to the 70% to 80% failure rate of these types of initiatives. The ultimate objective of synchronized automation system would be achieving synchronized supply chains from raw materials to final users.

Predictable patterns

As a company becomes more mature in its procedures for synchronizing improvement changes, the quality and supply of process outputs and products would be more predictable. Any breaks in the communication or coordination between processes can lead to quality problems, late delivery, excess stockholding, or process inefficiency. When processes and systems work toward the same goals, they guarantee predictability in the supply chain of a company.

In today's economic environment, it is difficult to maintain stable processes and systems indefinitely as the market requires flexibility and adaptability above everything else. It is therefore becoming increasingly difficult to maintain predictable supply processes. Companies with the most mature change processes that ensure synchronized systems, processes, metrics, and people will have the best chance of sustained predictability.

When it really comes down to it, it is clear it would be difficult for any company to implement synchronized improvement initiatives without a clear automation vision or strategy.

When embarking on the organization synchronization journey, it is important to know the end vision is an organization where all the systems, people, processes, and metrics support the business goals and drivers, and where methods are in place to coordinate and synchronize the change.

The correct engineering change procedures, taking into account all four critical components, can go a long way toward ensuring synchronized continuous improvement, as each of the components influence at least one or more of the other components.

Change approach

The approach ensures the different components go into account from the start of the improvement drive. The process starts with the company business and systems strategies and translates into a Master Systems Plan (MSP). Each of the business processes in the MSP undergo evaluation for improvement opportunity and prioritized based on potential returns. The improved process and related system then undergo design to enable solution development. Measurements that will indicate solution effectiveness go into the system based on the company strategy and solution objective.

A behavioral change process undergoes implementation in parallel with the system development phase to ensure early adoption and usage by employees. This ensures increased management effort and drives the appropriate behavior through measurement and auditing processes. An engineering change and configuration management process spans the entire implementation project to ensure all components of the synchronized automation globe go into account, evaluated for impact and synchronized to bring about maximum benefit from the improvement initiative. This process repeats with each business function automated (as identified in the MSP).

Behind the byline

Gerhard Greeff is a divisional manager consulting at Altech Informatics in Centurion, South Africa. He worked as a chemical engineer for 15 years and started in the nuclear industry focusing on metals purification and membrane extraction in a process metallurgy environment. He currently manages a group of engineers focused on designing e-manufacturing, MES, and SCM solutions. His e-mail is gerhardg@keops.altech.co.za.