December 1996 € Volume 6 € Number 12

Agile Software for Agile Manufacturing

By Dan Norrish

Many companies in the past approached enterprise resource planning (ERP) software as a means of streamlining production, linking man ufacturing processes and shortening the time between customer order placement and product delivery. The reality today is that most companies have already accomplished those things and look to their ERP systems as a natural complement for agile manufacturing, whose needs differ from general production.


Agile Manufacturing for Complex Industries
Companies manufacturing complex, or "highly engineered products" (HEP) in industries such as aerospace, defense, medical equipment and telecommunications, usually customize their output for each project or customer. For example, a business aircraft manufacturer has to customize each order. One customer may want a significantly different interior from another, although both have purchased the same airframe. Exterior paint and designs will also vary according to customer preference. To meet these customization requirements, assembly procedures require moving the plane every 10 days to a new work center, and parts must arrive at the proper time. When they don't, production costs rise and delivery schedules can fall behind.

Because such products are customized, complex and often require long lead times to produce, engineering changes are a fact of life, hence the increasing need for agility. Product management can involve midcourse design changes, revision of production or project plans and, for contracts involving multiple units, tracking which units carry what revisions. If the products have long life spans, manufacturers can retain an ERP record of the "as-built" configuration to facilitate future repairs or overhauls on products that may have been modified in the course of their use.

Manufacturability considerations also lead to changes. Typical scenarios include the discovery that assembled parts have dimensions that cause interference problems, that a new material proves too hard or brittle for existing machinery, or that parts made of different metals cause dielectric corrosion. These or countless other unforeseen circumstances eventually affect design decisions, process routings, product lead times and manufacturer outsourcing decisions. With ERP software, users can achieve increased engineering functionality for product definition, process definition, engineering change control and full lifecycle management.


Challenges in Contract Bidding
The more complex the product, the more complicated quick, accurate product configuration and proposal/quote generation becomes. What if a client wants you to give a price for an item with significant upgrades from the last time they ordered from you years ago? What if they want it immediately? What kind of discounts are available for volume orders? These questions are challenging, but typical, for a broad spectrum of manufacturers. For aerospace/defense and other HEP manufacturers, who often must submit a bid, finding the right answers can be an expensive, time-consuming process.

The numbers confirm it. Last year Benchmark Research Limited conducted a survey of English manufacturers of highly engineered products in the make-to-order market. Telephone pollsters conducted 180 interviews. The survey excluded sites with fewer than 50 employees, judging that their bidding departments would not be large enough to justify using a dedicated bidding software.

Findings confirmed that almost 12 percent of an entire contract's value is consumed in the bidding process. For the mechanical engineering sector, it climbs to nearly 17 percent. These bids took two to three months to complete and required from five to nine employees.

While half of the sites used software packages to assist in the bidding process, in most cases it was no more than a basic spreadsheet program. So, considering the labor-intensive nature of the bidding process, why not automate it? The simple answer is lack of awareness that such products even exist. The most frequently named company in the survey had only 2 percent spontaneous awareness. Of the individuals who were using a sales automation product, less than a third new its expected payback period. And only 20 percent are aware of the actual payback period.

Automating the process also helps users learn from mistakes in the past and plan for more efficient operations in the future. According to the survey, just under 40 percent of proposals submitted in the last 12 months were successful. Feedback from the RFP issuer plus some query time on a good sales automation tool will help agile manufacturers fine-tune their proposals and increase their hit rates.


Configuring the Product
With sales configuration software, a sales representative easily captures into a laptop computer the product requirements desired by the customer. The initial query of the product configuration database determines if anything similar has been built before. If the answer is yes, the previous configuration can be edited, or adapted, for new customer requirements. Based on knowledge rules defined by your experts initially, the system determines if the product, as requested, can be built, and at what price. In turn, the configurator links features to real part numbers and components.

Through the same knowledge-based rules, the system indicates which parts, components and services are mandatory or optional, which parts have dependent relationships and which parts or components cannot be assembled. The system again should determine cost factors to refine the project estimate, and can help devise process plans by specifying which classes of parts should be fabricated on which machines.

These configurators aid the agile manufacturing process by providing quick answers regarding what can be built, how much it will cost and when the finished product can be delivered. Because the project is carried out based on a common product configuration database using a consistent set of rules, everyone from sales to engineering and production can be assured that they are operating with accurate information. This functional-ity is referred to in the industry as "corporate knowledge," or in the case of the salesperson on the road, the "virtual office."


Agile Manufacturers Using ERP Software

Navistar

Navistar International Trans portation, the largest truck manufacturer in America, implemented an ERP system two years ago. One of the key issues driving the company's decision to implement ERP software was the need to improve manufacturing process flow.

 

The company has priority, or "hot" parts, which must be produced first. With its old system, Navistar could not recognize which parts were hot, so it would run less-important parts when it should have been producing a hot part. Navistar now uses ERP software to print dispatch lists that indicate shipment dates. The result is far less expediting and, in turn, lower overtime.

 

On a broader note, the software keeps all involved in production abreast of the latest changes in order requirements. "We wanted the ability to see pegged orders so everyone within the plant could see changes for specific assemblies reflected more quickly," said Ed Lilly, the company's material systems coordinator. "Requirements would come in on a certain day, but it could be as much as a month before people could see those requirements. This caused us to build wrong parts, since people weren't working with up-to-date information."

 

The changes Navistar's new ERP system brought about included a 40 percent reduction in inventory. "People get scared when they see inventory down," said Lilly. "In reality, we are producing 15 percent more product than we did with our high inventory levels." The savings have paid for the cost of introducing an entire new materials system.

 

On-time delivery is also up. Prior to ERP, the company maintained a 93 percent to 95 percent order fulfillment rate. Now it's up to 99 percent.

 

Lucas Aerospace

Winner of numerous quality awards from demanding customers like Boeing and the Defense Department, Lucas Aerospace supplies the major airlines and aircraft manufacturers with spare parts for AOGs (aircraft on the ground) and POAs (purchase on assembly). It produces weapons delivery systems for military aircraft, and its cargo handling systems go directly to Boeing's assembly line. In short, Lucas Aerospace has been a successful company. And as the 1990s dawned, it realized it would have to change drastically for that success to continue.

 

"In the past, the practice was for the aircraft manufacturer to give the airline a list of the spare parts the airline would need to stock and in what quantities," said Gary Weinberger, product control manager at Lucas Aerospace. "But in today's economy, the airlines can't afford to carry that inventory, and neither can aircraft man-ufacturers like Boeing. They also can't afford to have a $150 million plane sitting on the ground for any length of time because of a lack of spare parts. Since they can't afford to carry the inventory, they ask us to get the parts out the door to them as fast as we possibly can."

 

To streamline its processes, Lucas Aerospace devised a two-pronged strategy that consisted of moving out of the traditional job-shop mode and into Just-in-Time pro duction, while integrating its disparate manufacturing and business systems so that they could share information in a timely and cost-effective manner.

 

Lucas Aerospace uses the repetitive manufacturing capabilities of its ERP system to automatically release orders to the shop and automatically reschedule existing shop orders, if necessary. Weinberger is impressed with the results. "Some of our flow processes that used to take two to three months we can now do in two weeks, and for some products in two to three hours," he said. This example clearly demonstrates the value of agile software for agile manufacturing.

 

ARGOSystems Inc.

ARGOSystems Inc., a wholly owned subsidiary of The Boeing Company, is a world leader in the design and production of integrated state-of-the-art electronic warfare systems, electronic intelligence and calibration equipment. Its customers, including the military and Boeing, have similar requirements: on-time delivery, accurate specifications and costs within budget.

 

ARGO had used a homegrown ERP system installed in the late 1980s and highly modified over the years. As the company's director of information systems, Bill Ashmore, put it, "Instead of modifying our company processes to match the product, we kept our processes the same and modified the system. That was a big mistake." He went on to describe the old system as "labor-intensive and unreliable. People didn't trust the data coming out of it."

 

The company's goal is to reduce flow time, from concept through product delivery, by more than 50 percent. It's already taken the steps to begin the process. After training and implementation, 200 ARGO employees will begin using a newly selected ERP system specified in large part through end-user input.

Different manufacturers, different demands
Manufacturers of highly engineered products have unique requirements that are not well-served by most manufacturing solutions, which have been geared toward large-scale production of simple or moderately complex products. Manufacturers of complex products on a contract basis often have had to develop their own solutions or customize generic ones. Further, they have had to rely on stand-alone tools, if any, when it comes to the front-end process of winning new contracts.

Fortunately, advanced new ERP software systems exist that take into account the entire business cycle, from business acquisition, through manufacturing and on to final product delivery. These systems seamlessly deliver information throughout the enterprise so that all people involved in a contract's success can access the tools they need. The result is faster product turnaround, lower inventory and more efficient personnel management.