Intelligent business investments in uncertain economic times

July 29, 2008
By: Dave Lechleitner

When the going gets tough, businesses have a tendency to make broad, sweeping budget cuts, sometimes without taking into consideration the long-range effect of the proposed cuts. Key investments in certain areas can streamline processes, improve operations, and ultimately have a positive effect on the bottom line.

When the economy falters or even shows the first signs of slowing, businesses have a tendency to retrench. In an effort to lower costs and reduce overhead, they slash budgets across various departments. But what they don't realize is that the budgets that typically are cut first are areas in which businesses should continue making investments, or at least leverage existing ones, to ensure long-term success.

While the inclination to freeze new IT investments and get by with existing applications is understandable, it often is counterproductive. Rather, businesses need solutions to continue to gain efficiencies necessary for reducing costs and driving competitive advances.

This is particularly true in the manufacturing industry. Numerical controls, for example, are a necessity for driving efficiency on the plant floor. These tools monitor and measure the output of production data, such as job starts, machine hours, and part counts, without manual intervention, pulling data directly from the machines on the plant floor.

Integrating Processes

Numerical controls are capable of running on virtually any machine—from the simplest lathe to multifunction machines running the most advanced algorithms. The controls typically offer seamless integration with almost all applications and peripheral devices, including shop management systems, and interface with bar coders, feeders, robots, probes, and tool setters—helping to uncover and resolve bottlenecks in production. These metrics are a critical means for monitoring the health of the business. In doing so, they gain the necessary intelligence to streamline and improve processes across the shop floor.

However, the value of numerical controls goes only so far without full enterprise resource planning (ERP) integration on the back end to automate the collection of production data and enable communication with business and production systems on the shop floor. Production data should flow directly from machines into the ERP system, providing a level of accuracy unattainable through traditional data entry methods. By automating these data collection processes, shops can count on the most up-to-date metrics instead of relying on cumbersome and error-prone manual entry. Integration across the shop floor and back office enables management to better plan and schedule projects to keep the business running smoothly.

Applying these controls means breaking free of the old mindset that stymied growth by holding pockets of information in disparate systems. While early ERP systems gave businesses a way to organize customer data in ways that helped individual departments operate more efficiently and streamlined manufacturing operations, they failed to unify the enterprise as one smooth-running machine. Today extended ERP touches all facets of the value chain, revealing important interrelationships between departments. Having a holistic view—from the plant floor to the top floor—ensures the business is running and continues to run at optimum performance. For example, production data coming directly off machines can be integrated with an ERP system so that job shops gain better control over head count and associated costs.

Achieving Efficiency

Manufacturers can track and find ways to continually improve key performance indicators (KPI) that have an impact on operational efficiencies and the bottom line. Connecting all facets of the organization and utilizing work flow tools that optimize each business function help companies achieve a high level of visibility and efficiency within their organizations.

Linking traditional ERP with advanced job shop tools allows shops to see where processes intersect and how they affect one another, which then enables shops to identify changes that will garner the best result. Making the right changes enhances cost savings and operational efficiencies. For example, knowing exactly which jobs are in process, how much inventory is in stock, which products are in highest demand, and how much staff are needed at any given time completely transforms the decision-making process across the business—enabling the organization to capitalize on new opportunities and increase productivity.

Achieving high levels of productivity and efficiency is about making the right part at the right time in the right quantity for the right price. To that end, production attributes—fewer steps in the job process, real-time production change response, accurate planning, and production control capability from the desktop aid in providing management with visibility and control of the enterprise.

For example, a job shop recently extended the value of its ERP solution through an automation system linking Ncell and the Mitsubishi MSCII laser cutter. The ERP system sends information to Ncell, which determines the optimal cutting layout for production parts. Information from the software then is fed to the laser cutting machine, and data from this entire process is fed back into the ERP system for control purposes and business decision-making.

Another case in point: A major supplier of instrumentation and control products implemented an extended ERP system to differentiate itself from competitors in a commodity-based hardware business. With connected customer relationship management (CRM), human resource management (HRM), supply chain management, document management, and work flow tools, the company's suppliers and customers could share valuable information. More important, the firm gained a more comprehensive view of its customer account management cycle. Using business process tools, the firm mapped its sales cycle to a practical and efficient work flow, ensuring that each opportunity was continually maximized.

Improving Inventory Flow

Extended ERP also improves inventory management, making it easy to streamline manufacturing processes such as pick ticketing, traceability, and bill of materials. Improved inventory management can reduce the number of days inventory remains in stock and allow shops to make more accurate forecasts. This enables manufacturers who must adapt to unexpected ebbs and flows in product demand to turn orders around faster, satisfy customer needs, and plan raw material purchasing and shop floor staffing accordingly.

Taking Care of Customers

Interconnecting the front and back office goes a long way toward improving the customer experience as well. Customer service representatives often field calls about job status and anticipated ship dates. These questions often relate back to work being done on the plant floor and information managed on the top floor. Without integration, the representative either has to access multiple systems or ask another employee for the answer—meanwhile leaving the customer to cool his heels waiting for an answer. A better alternative is to have a single source of information that allows the representative to anticipate and respond to common customer queries.

Numerical controls are empowering organizations to obtain a level of efficiency their predecessors could only dream about. The key is seamless integration across the entire enterprise, which gives manufacturers confidence in the accuracy and timeliness of critical information for running the business. Particularly during tough economic times, manufacturers need a way to stay ahead. Ultimately, those with this 20/20 vision across the enterprise have a strong advantage over the competition.

Dave Lechleitner

Senior Manager, Product Marketing (Manufacturing)
Epicor Software Corp.
Phone: 952-417-5077
Epicor Software is a provider of business software solutions.

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