Volume 1, Number 2

Dynamic Duo

Although customers will often pay a premium price for quick response, a company will not be able to meet customers' needs profitably without dramatically changing the way it operates.

By Robert Gumaer

Competing in today's markets can be compared to racing in the Tour de France: the team that completes the course in the least time wins. The same holds true in business: in order to win, a company must get the product to the customer in the least time. Ironically, most manufacturers operate as if this race were a scavenger hunt, with frantic, last minute accumulation of all the material, tooling, information, specifications and people needed for completion of the job. In fact, most organizations spend more effort getting ready to do a task than actually doing it.

Imagine an enterprise that derives its plans and schedules by maximizing throughput to meet customer demand. Such a plan would be driven by business objectives and constrained solely by the capacity of the resources on the critical path, a path comprised of only value-added activities. Schedules would drive the entire organization, not just production. The entire supply chain infrastructure would be synchronized to make sure that everything needed to support a schedule would be available when and where needed, and only in the amounts necessary.

The fundamental result, something SynQuest has named "supply chain synchronization," is the reduction of cycle time, a proven path to competitive advantage. Manufacturers using supply chain synchronization have reduced cycle times dramatically, typically by 50 percent or more, with concurrent and comparable reductions in work-in-process (WIP), raw materials and finished goods inventory. Variability in cycle time is also reduced, giving the customer consistent, achievable delivery dates. Typically, productivity of people and machines also goes up dramatically, impacting employee morale. Because everyone is working from the same schedule, and always knows what is happening, a strong teamwork mentality evolves. Motivated people are a powerful source of competitive advantage.

More and more companies are achieving competitive advantage by focusing on customer responsiveness. Strategies include the shrinking of order-cycle time and the shift to the concept of mass customization -- building exactly what customers want, where they want it, at the right price and faster than they can get it from the competition.

These days customers often ask, or even demand, that a manufacturer slash lead times in half or better. Even when seeking to cut lead times, customers will also expect the same, or improved, quality. A manufacturer's customers want it all. Although customers will often pay a premium price for quick response, a company will not be able to meet customers' needs profitably without dramatically changing the way it operates.


Optimized Planning, Synchronized Manufacturing
Success is not just a matter of focusing on execution and customer responsiveness, nor is it just a matter of better planning. In the typical manufacturing enterprise, nothing is more difficult from the standpoint of coordination complexity than shop-floor execution. Tens of thousands of combinations of materials, parts, products, orders, machines and tools, being worked on by hundreds of workers, make for a huge coordination challenge. Factor in the need to coordinate with customers, suppliers, third-party services and internal support personnel, and manufacturing's inherent complexity becomes apparent.

Planning in manufacturing can be just as difficult. Strategic, tactical and operational planning are inherently complex from a computational and analytical perspective. In planning, one must deal with detailed data, summary data, internal data, external data, subjective information and, sometimes, no information at all. Planning also requires tools for data mining and analysis, an ability to perform what-if simulations, and advanced mathematical techniques to supplement the decision-making process. In contrast with manufacturing execution, however, planning processes have normally had time on their side. Planning processes, particularly those dealing with more strategic and tactical decisions, have involved far fewer people and were more periodic in nature than execution.

As the pace of change in the business world has accelerated, however, these two dimensions of manufacturing management are merging. Decision-making no longer has the luxury of time on its side. Decisions that in the past could be made annually or quarterly now must be made weekly, daily or more often. For example, with the advent of outsourced manufacturing, warehousing and transportation, the world of the virtual enterprise is upon us. In our fast-paced world, the ability to allocate scarce and expensive business resources optimally is of utmost importance. Synchronization of all the resources necessary to execute the optimal plan is necessary in order to assure success.


The Challenge of Supply Chain Synchronization
An order must take many steps as it weaves through the organization on its way to the customer. Unfortunately, in most organizations, these steps tend to be done sequentially, with a great deal of queue time, missed deadlines, and lost or erroneous information along the way. Many opportunities exist within the enterprise to compress cycle time. Processes can be re-engineered or at least simplified. Support activities can be done in parallel rather than one after the other along the critical path. A manufacturer who manages time effectively is aware of the types of activities that directly create value for the customer versus the ones that either indirectly support the creation of value or that do not add any value whatsoever.

In a synchronized environment, the activities that directly create value for the customer serve as the focus for the entire organization. Value-adding activities produce the products that customers want at a price they are willing to pay. These activities must be performed with the utmost efficiency and timeliness, constrained only by the capacity of the assigned resources and optimized to meet business objectives. All other activities are synchronized to support value-adding activities, making sure that anything needed to create value is available when and where needed. The resulting decrease in inventory and lead time does not allow much margin for error, so timely and accurate monitoring of status is critical. Proactive, event-driven messages and processes must be in place to correct the course of the business as changes occur.

Traditional manufacturing management systems have a departmental focus and do not support the notion of real-time process synchronization, let alone the idea of enterprise-wide optimization. When time is the primary asset or source of competitive advantage, synchronization is particularly important. The cornerstone of supply chain synchronization is a realistic schedule for manufacturing and logistics operations, the primary places where customer value is created. This business process, generally called order fulfillment or demand fulfillment, encompasses the complete flow from customer order creation, through manufacturing, to customer delivery.

Traditional manufacturing systems separate the activities that comprise demand fulfillment into four discrete categories: planning, scheduling, execution and control. With the traditional approach, planning represents the periodic activities to approximate the best schedule for materials and machines. Scheduling is the generation of an executable plan considering capacity constraints. Execution represents the tracking of work and other factors of production and logistics. Control is the application of computer technology to manage the operation of equipment used in the actual manufacturing process. These four types of systems have generally been provided by four different sets of software vendors, contributing to the difficulty of integration.

However, on today's business environment, these four phases occur more concurrently and with blurred lines of distinction between each phase. The constant focus is on adding value and reducing cycle time. This shift to synchronization is analogous to the changes that are occurring in information systems development. The old approach, which has been described as the "waterfall" method, was based on a rigid, sequential, one-way set of deliverables leading eventually to a finished system. Usually by the time the system was finished, the requirements had changed. Compounding the problem, the original requirements were often misunderstood. Newer systems development methodologies are based on rapid, concurrent prototyping with frequent feedback to validate the requirements. This approach allows planning to be broken down into manageable chunks and distributed to the appropriate people for execution, with timely feedback to enable the appropriate degree and frequency of adjustment.

While operating a manufacturing enterprise in a synchronous flow environment has obvious benefits, most manufacturers still use the traditional approach. A fundamental reason is that the information systems technologies to support this new model have not been previously available. Such a parallel, coordinated manner of operating is extremely information, computation and communication intensive. Large amounts of data have to be processed quickly and properly in order for the systems to mirror the dynamics of the typical manufacturer. Departmental and political turf battles have also slowed the transition to synchronized management. The balancing of intensive coordination and communication with sophisticated analytical and optimization technologies has been impractical until now.


The Next Generation Solution
Many industry experts now believe that it's time for manufacturers to regain control of their destiny through supply chain synchronization that combines the real-time execution approach of MES with optimized planning technologies. Supply chain synchronization is complementary to enterprise resource planning (ERP) and supply chain management. Optimized planning technology supports a broad range of business issues, such as total supply chain modeling, mixed-model production scheduling, line balancing, and the optimization of specific manufacturing operations. This technology is suitable for flow-type manufacturing, job shop-oriented operations, and most situations between these two extremes of discrete, batch process or hybrid manufacturing. For companies looking to establish a flow manufacturing environment, but who find that a true physical flow layout of the manufacturing process is impractical or impossible, optimized planning enables a virtual flow process.

With supply chain synchronization, one can anticipate dramatically improved customer responsiveness. Imagine being able to tell customers the exact status of their orders, initiated either by an alarm signal from the system, a customer-initiated call to customer service, or direct access via the Internet. Manufacturers will know with confidence and accuracy exactly where the order is in the process, which operation or activity is next, whether or not any problems exist, and how much time the remaining order fulfillment steps will take. Customers will know with confidence exactly when their orders will be completed and delivered.

Supply chain synchronization solutions should help manufacturers overcome the constraints that they face. To achieve success, a supply chain synchronization solution requires:

1. The entire organization execute a shared plan, optimized to meet a balanced set of business and customer objectives.
2. Plan revisions or problems with execution must immediately be identified, analyzed and communicated throughout the organization.
3. Material and other resources must be managed by a real-time pull to actual activities rather than the traditional periodic push to infinite capacity-based schedules.

Supply chain synchronization closes the loop between supply and demand. It does so dynamically, in real-time, and in a way that matches how a business operates. It is based on reality, not on gross, rough-cut numbers. At a recent Gartner Group conference on supply chain management, the industry analyst firm reported: "Average companies work with information averages. Winning companies work with information details, finding business value in the margins."

Now, manufacturers can plan, schedule and manage the flow of work through the entire order fulfillment cycle rather than via sequential hand-offs between departments. Supply chain synchronization provides a proper balance between optimal planning and synchronized execution. Planning is based on shared objectives that optimally balance demand against available resources. Execution is tightly integrated with the plan and provides instant feedback to enable optimal response to changing conditions. The planning engine incorporates learning technology, so the more the engine is used, the faster and better the results. The software enables companies to evaluate multiple scenarios so they can better anticipate responses to real world volatility.

Synchronized systems represent the next level of performance beyond integrated systems. Synchronized systems share common data, in real time, using exception-driven event triggers to initiate action dynamically. In other words, synchronized systems could be defined as dynamic integration. These systems combine what-if simulation with advanced mathematical methods, such as genetic algorithms, to quickly and effectively assure that the best possible course of action is identified. With the evolution of technology, synchronized and optimized information systems are now both feasible and affordable. Supply chain synchronization is a real-time navigational aid that empowers companies to see in the dark. The system is analogous to a missile guidance system, with real-time feedback providing the information needed for mid-course correction. The feedback loop is one of the most important elements of the system design. A so-called optimal plan with infrequent feedback and schedule recalculations cannot meet the challenge of constantly changing conditions.


Conclusion
Time compression is the best way for manufacturers to achieve competitive advantage in today's competitive environment, helping companies to dramatically impact revenue potential, while concurrently reducing costs, working capital, and investment in plant and equipment. These improvements lead to an order-of-magnitude impact on return on investment and corporate valuation. Time compression is the only way to achieve the responsiveness needed for today's demanding customer.

In order to implement a time-compression strategy, a new type of manufacturing management system and methodology is needed. The old MRPII model, based on a departmental structure and separate planning and execution activities, is not appropriate in a world of rapid change and mass customization. The new model, supply chain synchronization, provides planning simulation and optimization incorporated with real-time execution management. Supply chain synchronization provides the flexibility, responsiveness, ease of use and implementation speed demanded by today's manufacturers. Quick implementation means a faster time-to-benefit and a more significant competitive advantage.