Antony Bourne, industry director for manufacturing at software developer IFS, examines agility in the supply chain.
Managing a supply chain in an unpredictable economy is anything but straightforward. Fluctuations in commodity prices, changeable consumer and business spending patterns, and ever changing demands on inventory and stock control all merge to produce a volatile business environment.
For many manufacturers today, reliance on a lean production model is vital to competitiveness; but in order to keep up with the constant flux of the external environment, manufacturers also need to be able to implement flexible supply chain management.
Flexibility is a key factor to survival in the modern climate. To illustrate, the automotive industry is no stranger to product recalls, and agility has been paramount in responding to these demanding scenarios. The Vehicle and Operator Services Agency (VOSA) recorded a staggering 492 recalls in 2010, with Nissan notably recalling over 2.1 million vehicles worldwide in October, when it discovered a fault that could cause the engine to stall while running.
For manufacturers to cope with unpredictable pressures such as this, they must ensure that they can produce the amount of parts required, plus coordinate their shipment worldwide, process faulty product returns and manage the associated costs of logistics, fitting and marketing. As such, a flexible IT infrastructure can enable a manufacturer to both execute responses to changing demands and monitor the effectiveness of these reactions. Enterprise resource planning (ERP) systems can span the breadth of a supply chain, thus enabling end-to-end visibility and providing the opportunity to implement changes efficiently across the business.
In a recent independent research study, IFS found that over one in three (35%) UK IT decision-makers cite greater flexibility as the top improvement they would make to their existing ERP systems. This is closely followed by higher standards of customer service, with 29% seeking improved relations. Additionally, 15% couldn’t express confidence that their current ERP system is flexible enough to work efficiently alongside other tools and business systems. Considering the volatility of the market, these desired improvements are reasonable, and interestingly they even come before clearer visibility of return on investment (4%), despite the current focus on cost efficiency.
This industry insight reveals that many CIOs and IT managers are tired of enterprise applications and ERP providers that fail to deliver on the promise of meeting changing business needs and improving business agility. Furthermore, it shows that across the board, industries including manufacturing are waking up to the potential benefits of enterprise applications that have flexibility and agility built into their architecture.
But don’t just take our word for it; the importance of a flexible IT infrastructure has been acknowledged by Frost & Sullivan too. Sille Gavnholt Jygert, consultant at the analyst firm, recently summed up this very issue: “The emphasis on ERP delivery is changing from cost focus to effectiveness; it is more about doing the right things, and in the right way. This often means that more flexibility has to be built into how ERP is delivered and used.”
A major bottleneck to improving supply chain flexibility and efficiency is the disconnect between internal scheduling processes and external suppliers. A modern ERP system can provide a portal enabling suppliers to look into production plans and prepare their own schedule accordingly. This removes all manual intervention and administrative delays, and allows vendors to manage their own inventories according to anticipated demand and in response to unexpected changes. As this means you are, by default, operating in a multisite environment, you should ensure your ERP system provides for operations at multiple sites regardless of how many sites you manufacture at.
Another area in which ERP systems can improve flexibility is by enabling multiple manufacturing modes. As part of a lean approach, it is important to delay, as much as possible, the commitment to manufacture to a point where demand is visible or certain. Few manufacturers have the luxury of flat demand, and this is why virtually any manufacturer operating in a make-to-stock (MTS) mode should run in multiple modes. A parallel make-to-order (MTO) system will avoid the stockpiling of a large number of items that are more effectively handled in MTO mode, freeing up both capital and production capacity for other products, all without sacrificing responsiveness or customer service. It also enables you to scale production up or down quickly and responsively, ensuring your activities are in sync with the latest market data or changes in customer demand. By providing an umbrella over the whole supply and demand picture and taking into account other players such as designers and engineers, taking this project-based approach to manufacturing modes eliminates the need for manual updating across the system, instead feeding updated information through the supply chain immediately. So, to maximise efficiency, ensure that your ERP system supports multiple modes, including MTO, MTS and others.
Essentially, the challenge manufacturers face is a timeless one: to ensure that individual components are in the right place, at the right time, and in the right quantities. With the support of intuitive IT systems, the headache of extensive manual management can be minimised, helping businesses to stay afloat in today’s competitive and volatile marketplace.
