Many manufacturing companies believe they are doing all they can to adapt to the changing tides they are facing, such as new manufacturing regulations, and have implemented measures to stay ahead of the information curve. They use legacy transaction systems such as Enterprise Resource Planning (ERP) software, which should give a holistic view of resources and processes across the organization. They have also supplied employees with smartphones and laptops or let employees “Bring Your Own Device” (BYOD), embracing the BYOD trend that is supposed to ensure fast communications and improve access to key business intelligences.
What often isn’t realized until too late is that ERP solutions reach plateaus in the unpredictable and ever changing nature of the manufacturing industry. While there is some merit in the BYOD approach — who wouldn’t want their employees more connected and able to share data quickly — too much reliance is put on ERP software to guide critical systems. ERP systems only enable companies to look backwards, which is not enough for manufacturing companies that want to maximize delivery efficiency and improve production and process.
Manufacturing regulatory costs have increased an average of about 8 percent per year since 1998, according to a report from NERA Economic Consulting, as commissioned by the Manufacturers Alliance for Productivity and Innovation (MAPI). Adhering to the complex nature of the regulations, which dictate how companies are run, is a time consuming process and littered with times when infractions are impossible to avoid without a robust planning platform to guide the way. This is where flexibility can be crucial. Having software that takes into account regulations when creating business operating rules can be invaluable as it eliminates risk and all but guarantees compliance. Having software that is flexible also allows adaptability to changing rules and regulations
Optimization technology allows manufacturing companies to become more flexible and to more efficiently manage their supply chains by accounting for real life constraints and business rules. They can review “what-if” analyses of various scenarios, tied to key performance indicators that measure success on an ongoing basis. They can generate near optimal plans from the virtually infinite number of possible options. And with a clear set of future-oriented KPIs they can measure tomorrow’s performance before it happens.
In order to optimize, a supply chain planning and optimization solution is required that is configured to account for the specific environment — machine capabilities and alternatives per product, production sequence including sequence-dependent changeovers, specific site constraints, inventory limitations, replenishment options, and so on. And it must be able to respond to changes in real time. The wrong answers can mean longer lead times, excess inventory, loss of business and lower profit.
Keeping in mind that the aim of a business is to drive profit, executives have to ask where they can drive profit outside of their business’ primary function, and how they can improve their supply chain processes through optimization of the planning process.
There is a new way to approach supply chain planning and optimization, which I like to call “the missing piece of the profit economy”. The approach focuses on where companies can improve their supply chain processes through optimization of the planning process.
The profit economy tactic examines the many intricate aspects of the manufacturing industry that can be refined and applies an optimization approach, tackling the challenges and leading to lower costs, more options, and ultimately, a better business and higher profits. For example, a manufacturer trying to schedule delivery of its products may use a diverse number of transportation methods, which may include rail, boat, road and air. This increases the complexity of on-time delivery and means the transportation scheduling team has to select the best possible mixture of modes accounting for total costs, delivery time and mileage.
Selecting just one possible solution isn’t good enough, and using ERP software for an insight into the historical solution isn’t going to help. And that’s just for delivery of a final product. Throw into the equation transporting raw materials between plants and scheduling the number of hours delivery teams can legally work, and you have a logistical headache that is costing companies millions of dollars every year. So why don’t the schedule planners have access to optimization solutions that offer more options?
Workforce planning is yet another area that’s ripe for optimization for manufacturing companies. Whether a company is overseeing, buyers of raw materials, workers on the production line, or delivery drivers, it needs to tie staffing to the busiest periods of activity, align skills to needs and account for constraints — be they legal, union or employee preferences. Many organizations, however, are unable to match labor supply with demand. They lack the forward-looking view that is crucial to eliminating every bit of waste from their operations.
Supply chain planning and optimization calls for a platform that embraces the end–to-end supply chain. To be sure, suppliers need to get products to customers on time — but they ought to be able to meet that goal with maximum efficiency at every step. For the manufacturing industry’s profit economy, “good enough” isn’t good enough. Businesses have become accustomed to a certain amount of inefficiency, but even a few percentage points of waste carry a price tag that few can afford. The algorithms and technology that make up a modern-day optimization solution can help to close that significant gap.
As CMO of Quintiq, a market leader in supply chain planning and optimization, Jeff Vail oversees all aspects of marketing globally, including strategy, product positioning, communications, digital marketing, demand generation, brand management, and social media. Vail previously served as Senior Vice President of Global Corporate Marketing for Siemens Enterprise Communications (now Unify). Previous to Siemens, Jeff managed Enterprise marketing for SAP North America and served as General Manager of Unisys Corporation's Real-Time Infrastructure Business Unit.