April 1, 2010
The concepts of cloud computing, or software as a service (SaaS), show their mettle at one automotive metal stamper. The stamper is in the middle of a growth spurt, and is proof that companies can find success in the changing automotive market.
Businesses may need to climb over some hurdles when looking to invest in enterprise resource planning (ERP) software, manufacturing execution system (MES, or shop floor control) software, or related packages. They may need to hire IT personnel or add servers. For some, this can be arduous. A manufacturer's forte is making and selling parts and products, not server maintenance and software upgrades.
At least that was the thinking of tech entrepreneurs who launched companies offering what's known as software as a service, or SaaS. One of the best known in the front-office side is Salesforce.com®, an online customer relationship management, or CRM, system. (The tech industry loves acronyms.) Cloud computing is another name for it, and it's something the consumer world has embraced for a while. Anyone with a Microsoft Hotmail or Google Gmail account is using "the cloud." So is anyone using Google Docs™ or similar online services. Instead of being stored on your hard drive, information sits within giant server farms—highly secured warehouses filled with computer hardware. The information also may be backed up, often many times over, at other server farms hundreds of miles away.
"The idea of software as a service was to centralize everything, to have one infrastructure where you could serve lots of different customers," said Mark Symonds, president and CEO of Plex Systems Inc., an SaaS company in Auburn Hills, Mich. "But that infrastructure can be more powerful and sophisticated than any one company could afford."
A few large businesses have adopted some level of SaaS. Dell, Siemens, and Starbucks have used CRM services based in the cloud, for instance. But Symonds added that SaaS also makes sense for small firms that don't necessarily have a good career track for IT professionals. "A small manufacturer would need to hire and retain IT talent, when they might not have a good career path for them, and don't have a means of keeping them fresh on the technology."
Add to that the servers, operating systems, databases, and backup equipment, and the challenge becomes greater. Manufacturing entails some complex operations for software to handle, operations that require IT people to have specialized skill sets, "and it's really hard to find that skill set in three or four individuals," Symonds said. Considering this, SaaS begins to make sense.
At least to a point. Several issues have clouded the concept of cloud computing, such as security and access. If consumers have privacy concerns about placing so much personal information online, just imagine a business putting all its mission-critical data online and off-site. Also, Internet infrastructure isn't infallible. What if service goes down?
Symonds countered that on-site, company-maintained data centers are not only expensive to maintain, but they're actually more susceptible to security breaches. "Security is actually a positive for software as a service, because end users aren't as well-protected as a good SaaS provider," he said, adding that "most data theft comes from within a company. A sales rep may take a customer list, or an engineer may take a drawing to his next company. But if a disinterested third party manages the infrastructure, the likelihood of that breach is much lower."
Most of the security fears, he explained, stem from the thinking that cloud computing equates to data just being "out there" on the Internet, when in fact it's not. Any reputable SaaS provider keeps data at secure server farms, the IT equivalent of being under lock and key.
Regarding Internet access, companies can set up redundant Internet connections, be it an ISDN, wireless, cable, or T1 line, using different Internet providers. Paying for this redundancy, he added, is far cheaper than hiring an IT staff and maintaining a data server.
Still, fear of security breach remains, particularly as high-profile companies like Google, IBM, and others announce plans to ramp up their SaaS business. In early 2009 David Bradshaw, a research analyst from IDC, told Computer Weekly, "The richer the pot of data, the more cloud service providers need to do to protect it."
After the growth of SaaS in recent years, at least some feel that the benefits outweigh the risks, and this includes business management software. SaaS ERP and MES include all the benefits of their non-cloud-based counterparts: inventory management, procurement, CRM, shop floor control, quoting, traceability, production scheduling, engineering, and the rest. It's just that SaaS takes server and software maintenance out of the user's hands. Software upgrades and other functions happen automatically, off-site. The user accesses everything through a secure Web site.
Integrated to their fullest extent, SaaS ERP and MES platforms can digitize most information in a business, just without the in-house hardware. And at least some in metal manufacturing say they are realizing the benefits.
The president of Ralco Industries, a metal stamper in Auburn Hills, Mich., doesn't sugarcoat reality. Jim Piper used "horrific" to describe business conditions in mid-2009. That situation, though, has changed—dramatically.
"Now we can't run enough hours," Piper said. "We're in a growth mode. We're getting new business, and for us it's all from automotive."
During the downturn, Ralco was one of the lucky few able to maintain its core customer base and sales. The metal former serves both the domestics and foreign car companies, and about 40 percent of Ralco's products are shipped overseas.
In 2004 Piper became co-owner of Ralco, purchasing the shop from his father-in-law. Together with Piper's brother-in-law, the two have transformed the business to become one of the most successful small stampers in Michigan. From the start they put into motion a business plan that, to put it mildly, would raise some eyebrows. They wanted to stay focused on automotive, but diversify outside the domestic market and focus on overseas sales.
"We thought we could be very competitive in this arena, and that's taken off big-big time for us so far," Piper said.
How did the stamper do it during one of the most dramatic downturns in the history of the automotive market? Piper attributed it to a combination of things, and the foundation of it all lies in a concept management promotes on the shop floor: Ralco doesn't employ machine operators; it employs technicians trained in quality assurance and lean principles. What isn't lean is an operator standing by a machine all day. What is lean is a technician checking various jobs to see if parts exceed requirements and, if they don't, solving the problem.
Company management also homes in on niche markets, such as steering column assemblies. "Really tight-tolerance, safety-related products have helped us weather the storm," Piper explained. "At a time everybody is dumping automotive and diversifying into other things, we're finding that we can survive, grow, and prosper in this market."
What helps makes this possible, he said, is software, at least in part. Tied to the cloud, the SaaS Piper uses connects quoting, engineering, scheduling, and so forth, and it's integrated all the way down to the machine control level.
In the 1990s Ralco used to run MRP systems in-house using software from a company that no longer exists. The management team wanted to run something that would integrate the front office—financials, purchasing, quoting—with the manufacturing side. The team developed a vision, "and that vision was pretty extensive," Piper explained. "We wanted to take the paperwork off the floor and make our equipment smart."
Ralco went with another ERP vendor, which (yet again) went out of business in a few years. So Ralco began the hunt again in the late 1990s. They visited numerous manufacturers that had installed ERP systems and asked a poignant question: Would you install the software again? Some of them said no—a testament to some of the challenges manufacturers face when integrating ERP.
Ultimately, Ralco made an interesting choice, considering the history. They went with an ERP and MES provided as a service over the Internet. Provided by Plex Systems, the software runs off-site (see Figures 1 and 2).
Piper ticked off a long list of capabilities. The company has a cost-accounting system that can break things down to the part level, knowing where that part has to go and how much it cost to put it through specific shop floor processes, essentially marrying the manufacturing side with the financial side. It automates the control plan requirements of the automotive business, reducing shop floor paperwork.
It helps management identify shop floor issues. For instance, the PLC on the presses already knows how many pieces were made, that is, how many times the press ram went up and down. "The operator shouldn't be counting parts," Piper said. "All the operator should need to record is how many bad parts there are. Then I can immediately see that, and we can all see what we need to do to make improvements in that area." Because the software essentially watches the press continuously, the system allows Ralco to record its downtime. "This allows me to attack 20 percent of the problems that were causing 80 percent of my downtime."
The software also streamlines die setting, which at Ralco previously tended to be an art. Every die setter had his own way of doing things. "We changed that to a science by creating what we call recipes," Piper explained. "It shows the settings for the motor speed, the shut height, the counterbalance, the feed speed, length, and pitch. We knew those specifics that were set every time the die went into the press. We made those standards in the manufacturing software. So every time we set a job, the software knows which job is in the queue." When the die setter is ready, he pushes a button, which downloads the information to the press and automatically makes adjustments—no more twisting dials or pressing buttons. "That took the variation out and made [die setting] a science," Piper explained.
This direct link to the press control did require a PLC upgrade. Early in the process, Ralco engineers discovered they were using proprietary control systems. Engineers contacted the control company and asked representatives if they were willing to work with the company's software vendor. They said no. The engineers went to another company that provided Ralco with safety controls, and they too were unwilling to open up their control architecture. So Ralco contacted Kors Engineering, a firm in Waterford, Mich., that was able to leverage an open-architecture platform and allow Ralco to integrate new PLCs that could communicate directly with the ERP system (see Figures 3 and 4).
This control standardization had an added benefit. "It simplified training and added to the versatility of their work force," Symonds said. "And it made the software integration easier, with just one type of control."
So where did SaaS leave the company's IT staff? Being a small company, Ralco had only three IT staffers to begin with, and today it employs two. They now focus on specialized areas, such as PLCs and machine control projects related to streamlining production.
Much of Ralco's early research into SaaS happened not long after the dot-com crash, and it had just finished dealing with two ERP software companies that went belly up. Why then go the cloud-computing route, and send company data off-site? What if that SaaS provider were to shutter as well?
SaaS may not work for all companies, Piper conceded, but it has worked for his. It does take a certain amount of implicit faith in the SaaS provider. Still, he added that companies shouldn't leave much to faith alone. After their experience with previous software vendors, Ralco managers did some serious vetting. Along with heavily researching the SaaS provider's system security, they requested that they have access to a backup copy of the data, just in case.
"You always have rights to the data," Symonds added. "It's your data, and you can take it at any time."
Also, if the software provider did go out of business, Ralco managers made sure they would get nonexclusive global rights to the software, which could be installed on-site or be run by a third party.
SaaS, by its nature, is written with the Internet in mind. Everything is accessed through a Web browser on a secure site, so suppliers and customers can be given various levels of access. It also can store meeting minutes and other details, giving a record and paper trail, and can e-mail all participants a copy of the minutes, detailing what was discussed and how it was resolved.
Ralco's customers can log on to a secure site and see where exactly a part or tool is in the shop. Suppliers also access certain portions of the system as well. Each party is given only a certain level of access that Ralco determines. Work-in-process may be visible, but certain scheduling items or purchase orders may be left hidden.
Because Ralco automated much of the repetitive work of machine operation, managers invested in training programs in quality assurance and lean manufacturing. The cultural shift perhaps was one of the most challenging parts of the company's transformation.
"It did take a while for these concepts to stick," Piper recalled, "but in the end we were successful. And for our shop floor personnel, the job now is more enjoyable. They're not just standing there watching a press run. They're watching specific things, measuring certain things, analyzing how the equipment and the dies are running, and making suggestions for improvement."
This year Ralco plans to move to another, larger location. There, Piper hopes to integrate the SaaS platform with some of the new building's facility management systems, such as lock controls and even phone systems. Further down the road, he plans to integrate radio frequency identification (RFID) to assist with inventory control and give even more intelligence to the machines on the floor. An RFID tag on a die, for instance, could trigger the press to download specified programs to the PLC. All of this would streamline even more repetitive work on the floor.
Ralco is an early adopter. In the grand scheme of things, few use SaaS as a primary software platform for their businesses, and even fewer use the technology at the shop floor, machine-control level.
According to a 2008 report on the subject in The Economist, "Cloud computing has not yet moved much beyond the early-adopter phase, meaning that only a few of the bigger companies are using it, and then only for projects that do not critically affect their business."
SaaS's record isn't perfect. In February of last year, Google's Gmail service collapsed in Europe, while Salesforce.com succumbed to a phishing attack in 2007, according to a report in Computer Weekly.
Still, SaaS can be a viable option, sources said, as long as a company does its homework. What's the security record of the SaaS provider's data centers? What kind of power backup does the facility have? Does another center serve as a backup for data? Although SaaS benefits abound, it does require a level of trust in a software provider, and a lot of vetting.
Some may find it odd that Ralco, a company that has so much control over its processes, leaves server maintenance and security to an outside vendor. Piper responded first by saying that without the cultural shift on the shop floor, Ralco's software investment wouldn't have had such an impact. The issue really is about how much value each employee provides to the company's core competency—making quality parts, just in time.
Piper simply doesn't view business software maintenance as a core competency.
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