Today's manufacturers are poised to profoundly transform the way they do business -- a transformation that will be based on emerging technology.

According to a recent report by the National Association of Manufacturing, overall production increased by a mere 0.5%, which represents the slowest initial 16-month recovery since the United States Federal Reserve began tracking monthly production in 1919.

But the manufacturing industry has experienced several radical transformations in the last 50 years: In the 1970s, manufacturers were focused on mass production, using Statistical Process Control techniques, for which the mainframe was the key tool. Throughout the 1980s, manufacturing resource planning (MRP) -- based in large part on "Total Quality Management" techniques -- enjoyed widespread popularity. The 1990s saw the explosive growth of large-scale enterprise resource planning (ERP) implementations as companies sought to streamline both functional processes and information across the company.

But the current shift that is underway is unlike any seen before. Today, the information revolution is meeting the industrial revolution, providing companies with unprecedented opportunities for productivity, collaboration, and commerce.

Speed and agility are the determining factors for success in today's marketplace. Companies must contend with continuing economic challenges, political uncertainty, and an aging workforce. Today's customers are more demanding. They want products quicker, with improved quality, and at very competitive prices. They also want to be able to configure or package these products based on specific needs and requirements. All these demands result in additional complexity for manufacturing operations.

However, with the new opportunities that result from new technology come some challenges: While, in order to save costs, some companies have chosen to lower their priority on innovation -- opting instead to "do more with less" -- the leaders in manufacturing are taking a more aggressive approach. By focusing attention on supply chain strategies capabilities, these companies are achieving significant results. These companies are looking to:

Improve financial health and profitability, which requires:

• Visibility across the entire extended enterprise


• Real-time visibility into cost structures


• Minimized business costs through self-service tools.

Streamline R & D and product development processes to reduce cost, reduce time to market, and increase innovation, which requires:

• The integration of collaborative partners into development and manufacturing process


• Improved visibility and forecast accuracy across the enterprise, providing visibility to actual source demand


• The open sharing of information with supply chain business partners, so supply and demand needs can be matched.

Improve profitability and revenue growth through deeper customer intimacy and improved sales/channel effectiveness, which requires:

• Reduced lead times and optimized production schedules


• Empowered dealer and company sales forces through personalized portals


• Lowered support and operational costs


• The creation of new revenue opportunities through new service offerings.

While these companies have continued in initiatives such as ERP, lean manufacturing, and "Six Sigma" management techniques to make these improvements, most are still struggling to achieve execution across their supply chain by taking advantage of their "islands of automation." Manufacturers continue to work on the following challenges:

• How do we achieve value, growth, and a price premium from improved product development while still lowering our product life-cycle cost?


• How do we improve our asset utilization and productivity without increasing capital investment?


• How, in times of significant cost cutting, do we still remain innovative?


• How can we optimize product distribution for plants spread across multiple geographies?


• How do we ensure consistent and timely orders and quality data across our plants and partners?


• How can we compare and make the most of performance and quality practices for the same product made in different plants?


• How can we synchronize multiple plants to meet demand in an environment of unforeseen and uncontrollable world events?

In today's environment, companies need to know what's happening at any moment in time, what's possible based upon impending events, and then be able to coordinate their supply chain activities without affecting customers. They need highly responsive processes and systems to help ensure they meet these challenges continually.

The ultimate vision is to tie the plant floor to the executive offices. Doing so holds the promise of truly optimizing the supply chain -- enabling innovative and efficient product development. However, few manufacturers have successfully linked plant operations to the rest of the supply chain. For instance, according to reports by several research firms, only 39% of manufacturers have connected their shop floors to their enterprise systems. Surprisingly, some manufacturers are currently managing as many as 25 separate networks within their manufacturing plants, with multiple incompatible protocols and standards.

E-manufacturing is an approach that looks at the entire life cycle of the product, including integrating automation in the supply chain with that in plants and facilities. However, according to Gartner, only 1% of U.S. companies currently have accomplished full e-manufacturing implementations. Why such a small percentage, given the highly publicized benefits and opportunities? The challenges, and issues, are multifaceted, requiring strategies and actions across technology, process design, governance, and organization readiness. However, success can be achieved with a clear e-manufacturing strategy and roadmap that incorporates each of these areas.

The Opportunity

E-manufacturing is a key step in becoming a Networked Virtual Organization (NVO). An NVO is an enterprise that competes by using real-time information to progressively remove delays to the management and execution of its critical business processes.

NVOs possess three essential characteristics: (1) a culture and enabling infrastructure that focuses on dramatically improving the customer's experience, (2) a core mission and competencies that are realized by relying on partners to execute tasks that aren't mission critical more quickly and cost effectively, and (3) standardization in operations, applications, and communications that results in more efficient operations, both internally and externally. For manufacturing operations, this means:

• Competence in rapid design (e.g., new products launched on time and executed cost effectively)


• Collaboration with extended supply chain partners


• Optimized asset productivity


• Predictive maintenance through improved equipment performance


• Linking IT on the factory with broader enterprise systems and processes.

By the end of 2003, more than 20% of Global 2000 enterprise CIOs will cite the "real-time enterprise" as one of their top-five investment areas. (Gartner, March 2003). The reason? Significant financial impact and competitive advantage. According to Cap Gemini Ernst & Young, the benefits of adaptive manufacturing are certainly nothing to ignore as evidence from the following predictions:

• 30-50% inventory reduction


• 50-70% reduction in production cycle time


• 5-7% revenue increase


• 10-15% reduction in costs.

In the move to becoming an NVO, manufacturers are turning to a wealth of network-based tools and applications, such as wireless, converged and intelligent networks, intelligent network devices, request-for-implementation-date (RFID) tagging, and a multitude of supply chain, performance-level modeling (PLM), and financial analysis applications.

There are several examples of global companies receiving real business benefits from adopting e-manufacturing and NVO principles. General Motors Saturn Assembly Plan in Delaware needed to streamline inspection of fuel tank assemblies. The company implemented an in-plant Ethernet network to connect four machine vision inspection systems. In addition, sensors were installed to enable visual inspection of parts to ensure proper assembly, with the images stored in a database. The result was a significant increase in productivity. Previously, inspections took almost two minutes to complete. Through technology, quality has increased and the time to complete inspections has been drastically reduced. The automated system now completes 30 inspections in less than 20 seconds.

To locate parts quickly in its plants and improve information exchange among plant workers, General Motors implemented a WLAN infrastructure throughout its 25 North American plants. This included fitting 75 to 100 forklift trucks in each plant with wireless terminals, to improve replenishment workflow. General Motors is expecting to see a return on its investment (ROI) in less than one year.

Western Digital is reaping US$150 million in annual savings and improved operational efficiencies through a web-based "digital nervous system," which provides real-time visibility over manufacturing operations.

Challenges

Most plants still operate using proprietary systems for plant control, which do not easily enable a free flow of information to and from the rest of the enterprise. Existing systems tend to capture real-time plant data and hide it in relational databases (AMR Research). One of the key challenges faced by plant managers involves troubleshooting problems in real time, or even ahead of when the problems may occur. IT has primarily been used within the confines of the factory walls to improve consistency and quality of finished goods and increase productivity of individual processes.

But the management of production assets (e.g., people, process, and technology) needs to be tied in with the broader supply chain, beginning with the flow of materials into the factory; managing and tracking inventory, including spare parts; maintenance; and delivery of finished goods. As a result, IT organizations should be addressing a set of critical areas, in alignment with their company's e-manufacturing plans. Specifically, these include:

• Standardizing on Ethernet and Internet Protocol to reduce the number of individual networks and enable real-time, two-way communications into and out of the shop floor


• Addressing limited interconnectivity between manufacturing execution, control, and ERP systems. ERP investment topped US$20 billion last year, yet 92% of companies are dissatisfied with results achieved to date from their ERP implementations. For most of these companies, no investment or too little investment was made for connecting their ERP systems to the factory floor. Manufacturing execution systems (MESs), on the other hand, are intended to increase efficiency and productivity in the plant, and have historically performed the role of capturing real-time production data (e.g., resource usage and status, material status and requirements, equipment performance, product tracking, scheduling, etc.). Control systems must work seamlessly with other enterprise-wide systems, everything from Microsoft operating systems to Ethernet networks.

Key Building Blocks

E-manufacturing is the next wave for manufacturers looking to achieve significant value, growth, and productivity for their operations. To be successful, several building blocks must be defined, adopted, and implemented.

A clear vision and roadmap, which should be defined and communicated with the company and with supply chain partners; ensure enablers are well defined and planned; and provide metrics to identify and assign appropriate accountability. The roadmap should be viewed as an ongoing evolution, allowing you to build momentum, achieve learnings, and to demonstrate to stakeholders what's possible.

Well-articulated success metrics, which should be defined in terms of a set of measures to ensure ongoing executive buy-in and support. At a minimum, these metrics should include improved return on assets, improved margins, and a shorter order-fulfillment cycle. Reduced cost of changes, improved cash flow, and a reduction in working capital should also be included.

A single, open network delivering capital and operational efficiencies, which should include security (e.g., encryption, authentication, and access control) and high reliability for around-the-clock access and continuity planning; scalability, flexibility, and simple configuration and maintenance.

Key advanced technologies such as wireless. A recent IDC survey on wireless adoption shows that 68% of auto and aerospace manufacturers are using wireless or are in the initial stages of rollout. In discrete manufacturing the figure is 42%, and in process manufacturing, the figure is 51%. Several factors will determine how quickly the adoption of wireless will continue to take place: (1) Clear understanding of the technology and how to implement, (2) Proven cost/benefit analysis, (3) Data security, and (4) Standardization of technology (e.g., 802.11g versus Bluetooth).

Application areas -- such as inspection, finished goods dispatch, dealer and site management, ticket and tag printing, quality inspection, production management, work-in-process inventory, inventory management, and asset maintenance -- are become more prevalent. These applications are presenting manufacturers with significant benefits, such as: flexible production and real-time information, remote information sharing, higher efficiency and productivity, and inventory and production control.

E-enabled applications that use the convergence of the factory floor with the enterprise network and systems:

• Plant applications: provide production scheduling and tracking, quality management, and asset optimization. This would also include information analytics to view real-time plant operations data, perform detailed business analytics, and to send and receive critical alarms and notifications.


• Product Lifecycle Management (PLM) tools and applications: PLM technology allows manufacturers to create a holistic view of the manufacturing process, linking procurement, financial/pricing analysis, product data, supply chain, marketing and sales. Collaboration is a key because between 60-80% of production costs are accrued in the design phase (ARC Advisory Group).


• Collaboration applications integrating disparate applications and devices.

Sources:

1. "PLM Schizophrenia: Making Sense of the Madness," PTC White Paper.
2. "The Virtual Factory: Managing Distributed Manufacturing in a Connected Economy," Camstar White Paper.
3. "Making Sense of e-Manufacturing: A Roadmap for UK Industry," Rockwell Automation White Paper.
4. "Beyond the Assembly Line," by Howard Baldwin, Cisco IQ Magazine (July/August 2003).
5. Cisco IBSG research and analysis.