Spring 1996 € Volume 1 € Number 1
Made to Order
Order-driven business control systems for the manufacturing enterprise
yield new insights.
By Ken Cooper
In manufacturing, what gets measured gets managed. A regular program of
measurement -- bids, inventory levels, lead time, work in progress, payables,
receivables and so on -- leads to the creation of an information base.
Efficient tools for analyzing the information lead to rationalized decision
making and better control. Plentiful, well organized, easily accessed and
presented information is the key strategic asset in the conduct of virtually
any manufacturing enterprise.
Complexity and nuance
Manufacturers, aware of the complexity of making things and the constant
introduction of the unexpected, tend to be cynical with regard to business
control systems. There is good cause for this, in large part because we
often view the complexity of our operations as not truly subject to analysis,
at least by computer systems vendors. Try to program what we do and what
we think, and in making it systematic we'll fall prey to the strait-jacket
of limited options and diminished capabilities.
Twin assumptions
If only we could forecast and schedule better, reduce inventory, shrink
order fulfillment time, enhance capacity and achieve customer delight! Why
can't someone make us a business control system that easily accomplishes
all this, one that truly integrates the whole enterprise and comes at a
good price, too?
Consider the unique circumstances that surround the way you manufacture,
and how you and your colleagues handle "order types" using the
internal and external interfaces you've developed for handling them. Do
they lead to better communication, heightened interaction and tighter integration
within your enterprise and in your relationships with suppliers and customers?
An "order-driven" approach
For a moment, suspend your thinking about the way you manage information.
Imagine your overall manufacturing process in terms of order acquisition
and its impact on your total manufacturing resources. When considered from
such a perspective, an "order driven" approach can be a useful
means of focusing and disciplining manufacturing.
In the following list of particulars, an argument is developed for just
such a system. Manufacturers of packaged and consumer goods are probably
well familiar with the notion of "order-driven manufacturing,"
a system of production planning and execution that draws its main impulse
from real-world order volume, generated from point-of-sale terminals or
direct order links with established customers.
Producers of parts and equipment working in make-to-order operations may
be less familiar with order-driven systems. Nevertheless, consider the following
as a list of particulars useful in rationalizing the business control process:
1) Order capture and promising. Open a sale correctly, get
all the customer input available and write up the order "fully specified"
and your ability to bill, produce and profit on the sale is sharply increased.
But what does it really mean to "open correctly"? With laptop
micros as commonplace as the briefcases that carry them these days, "remote
electronic order capture" begins to address that issue. But consider
these questions, as well:
- Are there significant amounts of pre-production engineering inherent
in your order cycle?
- What is the volume of the business you expect; big repetitive schedules
of small unit value or high-cost, one-off capital goods engineered to order?
- Are you selling spares, and are installation or field services a significant
issue?
- Will you invoice all-at-once, or in progress payments?
In response to such concerns, some innovative manufacturers are turning
to rules-based configurators as a tool for defining the complexities of
order specification. The combination of a graphical user interface (GUI)
and "artificial intelligence" routines written directly into the
system allows for an unprecedented level of precision and flexibility in
capturing the specifics of an order.
The payoff? As Linton Moulding, vice president of Instron, a large instrumentation
manufacturer with operations in the United Kingdom, puts it, "A pound
saved at the front end (of the ordering process) is worth a hundred on the
shipping dock (when mis-configured equipment is returned)." Moulding
has dealt with this issue by ensuring that his worldwide field sales force
is equipped with lap-top configurators.
2) Order conversion. Here, a host of issues come into play,
with an absolute requirement that databased information be fully organized
and readily available. Consider:
- Is production scheduling finite or flexible?
- Are there sub requirements, such as the need for assembly and parts
traceability?
- How will we cost items with an eye toward profit?
- Are there pre-defined product lines which require final assembly,
or do we build from open stock?
- How does all of this impact back on order promising for work-in-process?
3) Order fulfillment. In a traditional MRP system, order conversion
planning lends structure and
organization to production planning, bringing together people, machines
and materials for efficient execution. But what are the "drivers"
built into our current operations? Are we working along such lines as ...
- World-class manufacturing, plus the thrust to drive inventory levels
to the lowest possible level?
- Kanban and JIT production, where production decision making is migrated
down to the shop floor?
- Total quality, with quality circles impacting both production style
and volume?
However you deal with lead times, cost control, capacity and accuracy (quality)
issues, your system will need to reflect your manufacturing style. It is
not so much that the system need mirror every detail of your operating style
-- far from it. Modularity can be coupled with sufficient options to ensure
a standardized software system offers virtually the same level of functionality
as a customized implementation.
4) Order delivery. A high level of "visibility"
is useful here as we move through conversion and fulfillment, particularly
if we're in the capital goods arena. Again, data must be accessible and
readily displayed, with immediate access to timely reports gathered from
all areas of the enterprise. With regard to particulars:
- Is there a phased installation or shipping schedule? If so, you'll
need shipping, installation and service tracking.
- Is multi-plant planning an issue? Do you assemble-to-order at one
site, or are distribution facilities utilized for final assembly?
- Given the prior case, how can we create links to accounts receivable
for progress billing, pre-payment and percentage splits?
- Are the links between your system and your distribution planning package
sufficiently strong to support precise execution of your logistics plan?
Again, the whole idea of an integrated business control system comes into
play. Information, integration and appropriate application are the key factors.
5) Order service. This is an area that will be most familiar
to capital goods producers, where service and repair, return materials authorizations,
sparing and disassembly routines are commonplace. Most importantly, such
requirements often represent a significant component of your profitability,
with such details as the ability to control service technicians impacting
directly on margins.
"Executive information"
Throughout this overview of order-driven manufacturing we have pointed again
and again to the crucial role of information in the enterprise. To be more
direct:
- Viewed from the perspective of the "order" both at the point-of-purchase
and as it moves through the plant, we can make graphical comparisons and
analyze trends based on the hard data that lead to "measurable and
manageable decisions."
- The compiled data of daily operations becomes an invaluable aide to
business process re-engineering. With the ability to "drill down"
through volumes of past transactions, the underpinnings of the enterprise
become visible and the thinking that supports strategic decision making
finds support in hard data.
The Real Rewards
Numerous manufacturers in a wide spectrum of industries have benefited directly
from such an approach as described above. For example:
- Instron Corporation (mentioned previously in this article): Manufacturers
of materials testing devices with a worldwide market, Instron's sales force
can now configure, quote and drive manufacturing directly from the point
of sale.
- Oxford Magnet Technology: Manufacturers of sophisticated magnets used
in medical full-body scanning machines, Oxford's high level of information
"capture" from the very onset of the ordering process ensures
enhanced control over cycle times.
- Wright Machinery: Manufacturers of engineered, make-to-order food
packaging and conveying machinery, Wright uses standards-based constraints
built into the quotation process to help limit over-specification, leading
to increased profitability.
A systematic means for capturing key product information at the very beginning
of the purchasing cycle, and then using it to "drive" the overall
production process can make sense for many manufacturers of discrete products.
With the "order" as the key event in the complex process of production,
information becomes more valuable and precise, yielding new insights useful
for both day-to-day operations and the important strategic decisions that
make for long-term success.
Ken Cooper is general manager in the United Kingdom of Interactive, a
company specializing in Enterprise Resource Planning software for make-to-order
and repetitive manufacturers.
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