Reduced labor and material costs in other geographies continue to chip away at the profitability and significance of local U.S. manufacturing despite the configure-to-order and engineer to-order nature of, and the high price points associated with, industrial equipment. As manufacturers are all too aware, some of the most complex heavy machinery can now be acquired faster and less expensively from a worldwide network of competitors. According to a recent Industrial Maintenance & Plant Operation (IMPO) magazine interview with Randy Schwartz, Center Director and Chief Executive Officer of the non-profit Dakota Manufacturing Extension Partnership (Dakota MEP) , “The biggest challenge facing (U.S.) manufacturers is globalization. The business models that allowed manufacturing to be successful after World War II no longer hold up today. Trying to maintain competitiveness is harder than it’s ever been.”
Viable alternatives to the lower pricing offered by international suppliers are best realized when U.S. manufacturers shorten their production window—with additional value derived from combining brand trust and quality with faster delivery. According to Geoffrey Lewis, Regional Manager for I.B.I.S. , a Norcross, GA-based Microsoft® consultancy specializing in the implementation of business productivity software for the manufacturing industry, “Improving throughput to match global competition in meeting today’s high-volume consumer demand has, to-date, been an enigma for most complex manufacturers. Speeding per-time-unit production is crippled by the increased labor, management, and machinery burdens, and the high cost of rushed material purchasing and shipping to achieve it. This means lost profit.” Randy Schwarz makes a similar point in the IMPO interview, “Because of globalization and technology hurdles, manufacturers in this country haven’t been able to increase prices. If you take a look at what goes on in the U.S. economy, business and industry prices have been increasing, while manufacturing prices have been leveling off.”
Schwarz says that, “Globalization is one of the reasons we focus so much on encouraging companies to become Lean enterprises.” However, in Geoff Lewis’s opinion, “Lean requires a comprehensive view of an enterprise.” To create a vision that, “…shifts the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers,” according to the Lean Enterprise Institute . Unfortunately, manufacturers typically do not have the systems in place to give them such a view. Lewis says that, “Midsized manufacturers that are forced to grow their resources to match global competition are unable to grow visually without these systems. Monitoring and managing of all of the pillars – sales, vendor/supplier relationships, production, shipping, etc. – are almost impossible for them. Considering the deep and disparate bill of services, materials, and facilities required to construct complex equipment, when a manufacturer is rushing to produce, many things fall between the cracks.” For example, Schwarz states in the interview, “In some cases they’re making business decisions based on finding the lowest-cost place to operate in the U.S. (and it) may not always be the lowest cost place to operate.”
Lewis asserts that, “Being six weeks out on a quote can kill a manufacturer. The disparate systems – sometimes legacy software-based and sometimes manual – that control sales, production, purchasing, and delivery, inhibit speed and efficiency in the race to beat global competition. However, with a centralized management system in place, manufacturers would be able to make decisions quickly and intelligently, and not learn the downside weeks, months, or even years, later.” Lewis says that, “Enterprise Resource Planning software can significantly improve manufacturer vision. ERP systems provide 360-degree views into the manufacturing process that were not possible in the past.” According to Microsoft, with the use of ERP software “any size company can boost operational efficiency and effectively manage production, including production orders, bills of material, supply planning, and capacity requirements planning.”
For manufacturers in the U.S., controls have to go down to the smallest detail. Lewis says that, “One miscalculation can mean major cost overruns in manufacturing the product. Slowing of the process may result in the loss of a major contract or an ongoing business relationship. With centralized productivity software, the manufacturer improves visibility and controls and reduces excess.” Because of the pillars and the archetypal growth patterns for midsized industrial equipment manufacturers, the adoption of enterprise software across the company is typically slow. “The problem,” says Lewis, is that, “The very different nature of each of their departments, and the auxiliary engagement of outside contractors, makes it hard for many manufacturers to envisage one software package that can give them visibility and ease of adoption across their enterprise.” He cites the advantages in this regard of the Microsoft® Dynamics® AX enterprise solution, “Microsoft’s solutions provide the controls and the lens to view all parts of the manufacturing cycle within the context of software that is familiar to all parts of the organization. Instead of requiring a new learning curve, Microsoft Dynamics puts a far more robust system behind tools – Microsoft Word, Excel (a favorite on shop floors), Outlook, and Project – that are commonly used in every manufacturing pillar. This lets the manufacturer focus on the increased productivity that can be gained from having one centralized management and accounting solution instead of focusing on retraining internal staff and external contractors on the use of entirely new systems.”
In terms of increased throughput for manufacturers, Lewis says that, “Dynamics gives complete visibility to the lifecycle, including the customer, products, quotes,, manufacturing and materials—the latter including ordering new supplies or tracking and managing existing inventory. Microsoft® Dynamics AX is built based on specific roles, with a dashboard view of role centers to drive alerts through AX or Outlook for improved productivy. The role-based portals and dashboards let each division of the company manage by exception, which eliminates waste, and have a cradle to grave view of product and customer information.” The fear of many manufacturers is whether software is built with native intelligence for their real-world business processes.” Microsoft says about Dynamics that it, “delivers a rich industry foundation on which partners build packaged vertical applications to help you improve your ability to cope with individual market dynamics.” Lewis says that, “Dynamics AX comes with predefined cubes for management, operations, manufacturing, and sales and helps with the decision-making process for each unit.”
“When, for example, material costs can be very tightly controlled,” says Lewis, “improvements in margin can be achieved. If material costs for a manufacturer are $40M, driving that cost down by even 1% is a dramatic gain.” He goes on to say that, “There are two immediate work process enhancements which can be found in Microsoft’s suite that improve throughput. The first is electronic workflow, which enables information to be shared and collaborated on between different parts of the organization in real-time, and provides alerts when processes are stalled or when overspend could occur. These are immediately viewable on custom dashboards built by role, but also through email, smartphones, and more. This lets the manufacturer respond very quickly to business issues. The second is the productivity gained through the reduced learning curve for the software because it is Microsoft, which lets the entire organization work more productively, to grow without more headcount and do more with the same resources. These improvements not only speed the entire delivery cycle which provides a better, faster, cheaper response to consumers in today’s challenging economy, but they also let manufacturing executives focus on their ‘end game,’ namely, meeting and exceeding business goals.”
1 “IMPO Insider: Q&A With Randy Schwartz, Dakota Manufacturing Extension Partnership.” Copyright © 2010 IMPO, Advantage Business Media. All rights reserved. http://www.impomag.com/scripts/ShowPR~RID~9567.asp.
2 I.B.I.S., Inc. is a multidisciplinary Microsoft® solution provider twice honored as Microsoft U.S. Partner of the Year, and in 2007 as Worldwide Microsoft Partner of the Year (for Microsoft® Dynamics® GP).
4 Copyright © 2009 Lean Enterprise Institute, Inc. All rights reserved.
Copyright © 2010 The Nurture Institute™. All Rights Reserved. Unless otherwise noted, all materials contained in this document are copyrighted and may not be used except as provided in these terms and conditions or in the copyright notice or other proprietary notice provided with the relevant materials.
Tags: Industrial Equipment Manufacturing, Lower Costs, Microsoft Dynamics AX, Reduce Lead Times
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