Iyno Advisors

Information Flow for Agility, Compliance
and Performance in Project Manufacturing
By Jeffrey Hill and Julie...
Information flow for Agility, Compliance and Performance in Project Manufacturing

Executive Summary
Prolonged weak econom...
Information flow for Agility, Compliance and Performance in Project Manufacturing

Project Manufacturing Challenges
Projec...
Information flow for Agility, Compliance and Performance in Project Manufacturing

implementing software. Business and man...
Information flow for Agility, Compliance and Performance in Project Manufacturing

Product
Lifecycle

Time to market

pivo...
Information flow for Agility, Compliance and Performance in Project Manufacturing

MES can also move data bidirectionally ...
Information flow for Agility, Compliance and Performance in Project Manufacturing

production for each project. Figure 6 i...
Information flow for Agility, Compliance and Performance in Project Manufacturing





Time to make
changeovers or
trans...
Information flow for Agility, Compliance and Performance in Project Manufacturing

About Iyno Advisors
Iyno Advisors is an...
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Info flow project mfg paper

  1. 1. Iyno Advisors Information Flow for Agility, Compliance and Performance in Project Manufacturing By Jeffrey Hill and Julie Fraser Iyno Advisors Sponsored by Deltek Q4 2012
  2. 2. Information flow for Agility, Compliance and Performance in Project Manufacturing Executive Summary Prolonged weak economies around the world mean that governments and some commercial businesses have been cutting budgets. For many projectbased manufacturers, this presents a challenge. Companies cannot continue to operate as they have in the past and expect to perform as well. Project manufacturing has never been easy, but in these conditions, the pressure is on to become more agile and streamline operations to improve financial performance. Project manufacturers do not have the luxury of riding up an experience curve for high volume product offerings year after year. Instead, they must learn from similar projects, and then extrapolate, as they often build complex product offerings from “scratch”, or modify and improve designs with low volumes at each stage of the learning curve. Many of these products are built under government contracts, which impose regulatory requirements and oversight which differ substantially from high-volume manufacturing. Business and manufacturing software applications designed for volume manufacturers don’t fit the requirements of project manufacturing, so many companies resort to using manual systems to manage planning, production, and reporting. Using manual methods to manage projects only increases the management burden and can increase the chances of production delays and errors. Companies that integrate plant information into the enterprise information flows can overcome these challenges and show drastic improvements in overall manufacturing performance and financial results. The main way companies do that is by implementing plant-wide manufacturing execution systems (MES) and integrating them to ERP. Figure 1 shows data from a study of all types of manufacturing companies, comparing those who use MES to others’ ability to improve in key financial performance areas. 60% 50% 40% 30% 20% 10% 0% Increased ROA/RONA 3% or more Increased Net Operating Profit 3% or more MES provides data to those in the plant, and provides status updates on progress Source: Pursuit of Performance Excellence, © 2012 MESA International and Cambashi Inc. to managers. This timely and integrated information flow allows companies not only to streamline regulatory reporting and compliance, but also to focus on metrics, efficiency, and improvement. MES/MOM Users © 2012 Iyno Advisors Others 1
  3. 3. Information flow for Agility, Compliance and Performance in Project Manufacturing Project Manufacturing Challenges Project manufacturing is characterized by variety, in both manufacturing processes and tasks. Even products that have been manufactured in the past are likely to be subject to revisions and improvements. For example, airframes are built to order, but usually have a production life of many decades. A new order for a particular model needs to incorporate design changes, improved materials, more efficient assembly practices – all of the accumulated progress since the last time the model was produced. Project manufacturers have highly specialized needs:     Tracking labor time and materials – whether contractual or simply to quote accurately on future projects and protect profitability Readiness for regular and stringent audits designed to ensure all contract terms are met Traceability requirements that extend to every item produced and every component in each item Compliance with government regulations such as FAR, CAS, and DFARS If that’s not challenge enough, contracts are different for every project, and several contracts may cover different parts of the same project. Projects are often grouped into programs. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Project management in this kind of environment requires a painstaking level of detail, whether the customer is a government or commercial enterprise. Unlike volume manufacturing, project manufacturing can be chaotic, a mix of unfamiliar Planning processes and tasks that are to buy in next 1-2 unique to each project. This years means that project manufacturers Some need to be adept at transitioning use or pilot from one project to another, or running multiple discrete projects Widely in that may have no relationship to use one another. ERP MES / MOM Source: Pursuit of Performance Excellence, © 2012 MESA International and Cambashi Inc. Figure 2: Fewer than half of manufacturing companies have MES in wide use now, compared to the majority with wide use of ERP. © 2012 Iyno Advisors 2 Software can help, but Figure 2 shows that only about a third of all manufacturers use plant floor manufacturing execution systems (MES) widely in their enterprises, considerably less than report using ERP. It’s not as easy as just
  4. 4. Information flow for Agility, Compliance and Performance in Project Manufacturing implementing software. Business and manufacturing applications for highvolume manufacturing companies don’t fit the project model of production, so planning, production, plants, and reporting are often managed piecemeal or with manual systems. Many companies resort to using Excel spreadsheets to manage projects through production. Applications like Excel don’t have built-in revision control, which is necessary to ensure that project documents are up to date, or a mechanism for sharing project information between design, production planning and the shop floor. So, many companies use manual means to manage production information, often using paper documents. Manual workflows can introduce problems into the production process in several areas:      Delays in communicating essential information between production management and the shop floor Handoffs between various parts of production can be slowed or stall while the paperwork “catches up” The wrong paperwork can hit the floor, with incorrect specifications or standard work, resulting in at least paper re-work and sometimes production re-work as well Cumbersome processes to check production status and materials status and materials location Time-consuming reporting processes that require additional labor As a result, manufacturing has little visibility or control over production outcomes. This, in turn, can hurt overall production schedules and outputs. Information Flow from Plant to Enterprise Information is the key to managing production effectively, but information needs to flow in all directions, so that all of the parts of manufacturing can be informed. For example, production scheduling needs timely information from the plant floor on the status of current tasks so that production management can build accurate schedules for future production. The same information needs to be available to purchasing so that materials or components that are needed for production will be available when they are needed. Production is © 2012 Iyno Advisors 3
  5. 5. Information flow for Agility, Compliance and Performance in Project Manufacturing Product Lifecycle Time to market pivotal to maintaining the product lifecycle and supply chain, as Figure 3 illustrates. Market and product planning Product development Manufacturing engineering Ramp to volume Supply Chain Sales Planning Procurement Time to Customer Production Planning Production In-service market and product development Delivery / Service Successful companies recognize the value of the management maxim: “you can’t manage what you don’t measure.” For any organization, developing metrics to assess progress and measure performance is a critical part of process improvement, but it is especially important in manufacturing. Some of the reasons metrics are essential in manufacturing include:  Measuring production processes allows companies to understand the relative efficiency and effectiveness of those actual processes when measured against baselines or work standards. Metrics can be invaluable in identifying the root cause of production bottlenecks which can affect both profitability and on-time performance. Along with profit and loss variables, manufacturing metrics can be used when pursuing new business opportunities. Metrics enable organizations and their customers to compare performance with industry averages as well as competitors’ performance. Figure 3: Production sits in a critical point of both the product lifecycle and the supply chain.    Managers should consider carefully which metrics best represent production processes, especially if results are going to be used for sales or comparison purposes. Manufacturing Execution Systems (MES) present an effective alternative to manually managing projects because MES systems can support manufacturing with the information to make better decisions in all of parts of the production process. MES systems can provide tools for document management, revision control, operator guidance and consistent collection of the data needed to support both reporting and performance metrics. © 2012 Iyno Advisors 4
  6. 6. Information flow for Agility, Compliance and Performance in Project Manufacturing MES can also move data bidirectionally into and out of enterprise resource planning PROJECT (ERP) systems. Figure 4 illustrates DATA ACCOUNTING COLLECTION some of the major processes and information flows in which MES can play a major role. This REVISION PROCESS CONTROL & PLANNING/ means, for example, that a MES/MOM ENGINEERING ASSEMBLY CHANGES project’s current progress is available to all of the stakeholders in the enterprise. Information PARTS & SUBQUALITY ASSEMBLY from the MES system can be used CONTROL INVENTORY in such areas as project accounting, costing, purchasing, PLANNING & SCHEDULING and customer service. When MES is coupled to ERP, the business Figure 4: MES provides critical information in a number of can benefit even further. This business processes, informing both information flow between the plant and enterprise decisions. plants and the enterprise ACCOUNTING & FINANCE presents an CONTROL PROJECT INVENTORY MANAGEMENT integrated Full Traceability approach to managing areas MATERIALS PRODUCTION MANAGEMENT such as business INTEGRATED ENTERPRISE INFORMATION SYSTEMS development, ASSET & Plant/MES Business/ERP materials PROJECT MAINTENANCE MANAGEMENT MANAGEMENT management, project Comprehensive, timely business views management, and QUALITY DELIVERY MANAGEMENT BUSINESS financial tasks, as RECEIVING DEVELOPMENT Figure 5 shows. COMPLIANCE & DOCUMENT MGMT Figure 5: Having accurate and timely plant and enterprise information flowing in an integrated system feeds every aspect of the business. Performance Payoff from MES MES systems provide the right set of tools to manage all aspects of production in the highly variable manufacturing environment that is common to project manufacturing. MES solves many of the issues that are characteristic of project manufacturing:  © 2012 Iyno Advisors Project variety. MES systems are designed to manage multiple projects at the same time while maintaining effective control over 5
  7. 7. Information flow for Agility, Compliance and Performance in Project Manufacturing production for each project. Figure 6 illustrates that manufacturers using these systems are far more likely to be able to increase the variety of products through the plant. Their memories simply are not overtaxed by that as people and paper 80% systems are. 70%  Changes. Project Increased # manufacturing is characterized by 60% of variants / period 1.1%constant changes and revisions to 50% 3% product design and assembly. An MES 40% system enables manufacturing to keep 30% track of all of the variables for each Increased # 20% of variants / unique project, as well as for multiple period over 10% 3% projects. 0%  Traceability and MES/MOM Users Other accountability. Many products built by project manufacturers require Figure 6: A much larger portion of manufacturers accountability for costs and labor, as using MES were able to increase the variety of well as the requirement to trace products through their plants. components or parts from supplier through final assembly. This is true for most commercial as well as government contract project manufacturing.  Reporting. In manual project management, reports can be difficult and time-consuming to prepare, but MES systems can provide reports on nearly any facet of production. Reports can be tailored to specific roles within the organization, so that users get only the information they need.  Monitoring production anywhere. In response to the increasing business use of mobile devices, MES systems are incorporating the ability to monitor production processes at any time and place.  Consistency in processes. MES systems provide a consistent framework for defining and managing processes throughout manufacturing.  Product quality. MES enables quality improvements. Companies achieve tighter control over product 30% quality by ensuring that parts or components used in assembly have 25% the right revision level or certification. 20% The system can also ensure that 15% production personnel use the correct 10% revision of production drawings and 5% assembly procedures. Figure 7 shows 0% that these features have an impact on MES/MOM Users improved Others improved cost of cost of quality 10% or more quality 10% or more the cost of quality as well.  Efficiency. By reducing Figure 7: Manufacturers using MES were more likely paperwork and smoothing handoffs to make dramatic improvements in cost of quality. between the various areas of © 2012 Iyno Advisors 6
  8. 8. Information flow for Agility, Compliance and Performance in Project Manufacturing   Time to make changeovers or transitions improved >10% per year production, MES helps to increase overall production efficiency, as well as reducing production errors. Ability to manage growth. Companies who use manual systems to manage production will find it increasingly difficult to take on additional projects without threatening current projects. MES allows companies to manage multiple unique projects at multiple locations with a consistent, structured approach. Financial results. The use of MES to manage production leads to increased efficiency in all parts of manufacturing which will have a salutary effect on profitability. MES / Figure 8 shows examples of both MOM operational and financial benefits. User Other Average unit contribution margin improved >10% per year 0% 50% 100% 150% Average of Responses Figure 8: Those using plant-wide manufacturing execution systems (MES) were better able to improve operational and financial performance than others. The common element among these issues is the need to control costs, improve processes, and maintain or enhance quality to differentiate in a highly competitive environment. Companies need production information to thrive, and MES provides the most efficient way to manage project manufacturing. Flowing Information Feeds Competitiveness MES is proven to increase the overall efficiency of production operations, but when MES is used in project manufacturing, it can be a powerful tool for managing projects through all parts of the organization. The bi-directional flow of information between plant floor and ERP informs all of the enterprise about the current status of every project. With this increased visibility companies can to exert full control over every aspect of a project from design to manufacturing to the customer and through its lifecycle. MES provides a new level of accountability for production planning, scheduling, process control, and production and supplies the right information to eliminate production bottlenecks and manual systems. It can also support continuous process improvement even on very low volume products. By making information flow, MES enables companies to tame the chaos and complexity inherent in project manufacturing. Companies using MES integrated with ERP find that projects flow much more efficiently. The result is that customers gain a better view into the status of their projects and a higher level of confidence in the manufacturer. Thus, the manufacturer’s revenues and cash flow improve as well. In challenging times, this can be the key to not only surviving, but thriving. © 2012 Iyno Advisors 7
  9. 9. Information flow for Agility, Compliance and Performance in Project Manufacturing About Iyno Advisors Iyno Advisors is an independent advisor on how manufacturing and production companies can best benefit from software applications. Julie Fraser, the Principal, has 25 years of experience and passion in driving healthy understanding of opportunities that can drive added profitability and success. Associate Jeffrey Hill has a similar length of career in IT and as a writer and industry analyst. Our team is experienced enough to add significant value and insights to the projects we undertake. Contact Julie directly at Julie@iyno.com +1-508-362-3480 About the sponsor: Deltek Deltek is the leading global provider of enterprise software and information solutions for professional services firms and government contractors. For decades, we have delivered actionable insight that empowers our customers to unlock their business potential. 15,000 organizations and 2 million users in over 80 countries around the world rely on Deltek to research and identify opportunities, win new business, optimize resources, streamline operations, and deliver more profitable projects. Deltek – Know more. Do more.® www.deltek.com 800.456.2009 © 2012 Iyno Advisors 8

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