The following is the first installment in a two-part IFS survey series that details how and why the manufacturing industry has evolved into a project-driven business. The first installment of the survey series, which includes information gathered from MBT readers, will provide some background and context, touch on the importance of project management, and outline the common methods for project management applications. The second installment will appear next week on Manufacturing Business Technology.
Manufacturers’ initiatives for 2010 are dedicated to increasing optimization of their resources, improving process efficiencies, minimizing risks and maintaining practices that lead to greater profitability. To help attain these objectives, businesses are compelled to redefine their manufacturing and operations procedures to handle the growing complexities of production work.
In repetitive manufacturing operations, rapidly changing technology is shortening product lifecycles, increasing emphasis on the episodic, one-off disciplines of engineering, design, testing, and product lifecycle management. And increased outsourcing is forcing manufacturers to manage a team of vendors much the way a general contractor would manage a team of subcontractors.
Companies in more traditionally project-intensive industries, like capital equipment manufacturing, are also finding that they need to exercise increased control over project cost and other variables in order to remain competitive.
Manufacturing projects of all types now require greater flexibility and involve significant resources, creating a need for more robust enterprise software technology. Project-based manufacturing strategies and project management applications are helping companies to better manage costs, regulate their workforce, and control inventory and business assets.
According to a study recently completed among manufacturing engineering professionals by RBInteractive on behalf of IFS North America, a leading provider of enterprise applications used to optimize manufacturing, maintenance, projects and related supply chains, the role of projects as a key component in overall business models will increase over the next five years. This is true not only for manufacturers typically reliant on projects, like capital equipment manufacturers, but those involved in more repetitive manufacturing as well.
Despite the growing importance of projects, survey respondents report poorly- to moderately -developed integration between project management tools and their enterprise software solutions. This suggests that manufacturers who close this functional gap by adopting project-based solutions (PBS) as their enterprise system of record will be better prepared to compete in the years ahead.
IMPORTANCE OF PROJECT MANAGEMENT
According to survey results, the manufacturers are highly dependent on project-based manufacturing and related management applications. When PBS was defined as a separate class of enterprise software by analysts and software vendors including IFS, that definition outlined several different categories of companies, ranked by the degree to which their enterprise requires project management disciplines.• Project Critical businesses face regulatory mandates to track all resources consumed, their origins, their qualities and performance criteria for each customer contract. Examples include nuclear power plant construction or the manufacture of passenger jets and their subsequent through-life service and maintenance.
• Project Centric businesses use projects extensively to manage their business, but there are fewer regulatory requirements. These businesses still, however, need to track all resources by contract or project, and are involved in engineering or design work and therefore have no complete specification prior to beginning work. An example might be companies that build commercial container ships, engineer-to-order manufacturers and most industrial machinery manufacturers.
• Project Enabled businesses use projects in some parts of their business, but certain products, customers or geographies are managed more effectively using projects.
• Project Potential businesses may benefit from controlling certain activities, such as the design and manufacture of a new prototype or the launch of a new product using a PBS application.
• Project Never businesses will obtain no business benefit from running any part of their enterprise using a PBS application.
Level of Dependence on Project-based Manufacturing
One-half of the firms including in this survey said they consider their company to be in one of the top two categories -- “project-centric” and “project-critical.” These companies are manufacturing large, complex and expensive products that demand comprehensive and efficient project management systems. Another 27% of respondents said they were “project enabled”, indicating that their business processes – like engineer to order manufacturing -- are made possible by project management. An additional 18% placed itself in a category that indicates that new manufacturing efficiencies could be best achieved through the use of project management applications. Only a small percentage (5%) is not running project management disciplines and expressed disinterest in doing so.
COMMON METHODS FOR PROJECT MANAGEMENT APPLICATIONS
The majority of these manufacturers use either enterprise software tools such as Primavera or Microsoft Project, or spreadsheets, for their project management applications. One out of four (24%) rely on a solution running off their ERP platform.
While nearly one out of three (29%) operate a project management solution that is partially or totally integrated with their ERP platform, the majority operate project management software fully independent of their ERP system and financial software application.
Integration of Project-Management Solution
Among companies whose project management and ERP applications are integrated, most are able to attain project cost analysis data (86%) using their financial system. Other common applications for integrated systems include visibility into supply and demand information shared between departments or with partners (45%) and tracking and moving inventory across projects (34%).
However, the integration process, for some companies, came with challenges. Challenges with understanding and gaining full utilization of system capabilities, training as well as user and management acceptance, cost and resource allocation, and project data integrity surfaced during implementation, respondents said.
In general, the majority seem satisfied (59%) with their ability to effectively manage large projects through their ERP system. However, an alarming percentage is less than contented.
Look for the second installment in the two-part IFS survey series about the evolution of the manufacturing industry into a project-driven business next week. Part II will touch on risk management, how enterprise software relates to the recovering economy, the benefits of project-based solutions, and the future dependence on project-based manufacturing.
