How can a network services provider improve corporate visibility, better connect engineers on multiple sites and identify cost savings and new business opportunities for manufacturers?
At a sponsored dinner in March, representatives from global telecoms group BT, and IT and manufacturing professionals from Britvic Soft Drinks, Rolls-Royce, Saint-Gobain and Solaglas, discussed the need for more holistic visibility of the business needs of multi-site companies, how network service providers can improve supply chain management, the role of outsourcing and Cloud computing, and whether manufacturing is behind the IT technology curve compared with the service sector.
The participants were:
Dr Tony Amorelli Lead Technologist – HVM, Technology Strategy Board
Mike Halloran Technical Architecture Manager, Britvic Soft Drinks
Dr Matthias Holweg Reader in Operations Management, Cambridge Judge Business School, University of Cambridge
Paul Marchant-Smith Technical Services Manager, Solaglas, a division of Saint-Gobain
Duncan Morris Manufacturing Manager, Saint-Gobain Glass UK
Ged O’Neill Senior Marketing Director, Manufacturing, BT Global Services
David Ray IT Service Management Director, Rolls-Royce Aviation and Aerospace
Sarah Strang IT Manager, Solaglas
Neil Woolerton Director of Global Manufacturing, BT Global Services
Henry Anson and Will Stirling The Manufacturer
(The roundtable debate that follows is abridged).
BT presented their understanding of what innovation looks like in a manufacturing company.
IT and network services in the Supply Chain
A large supply chain has many diverse players – raw materials providers, departments within the home company like manufacturing and packaging, and occasionally competitors need to be involved.
Often top secret information is being exchanged in collaborative environments to improve the efficiency of supply chains.
Different parties in the supply chain have different methods and metrics – the systems they use will rarely give them visibility of the goals and metrics their supply chain partners use. Not only are they not synchronised, they may be in flat out conflict with each. These conflicts of interests can persist for years.
Example: The packaging department of a manufacturer decides to reduce the amount of packaging it uses, because it frees up space and working capital. But if that initiative means it increases the time to pack goods and distribute goods, it might compromise the ability of the logistics department to hit on-time delivery targets.
This is based on a real case study. Left to their own devices there is every incentive for each of these parties to focus on their own goals and objectives at the expense of the other parties, often because they don’t even realise their goals are in conflict.
The role of a network service provider is to:
1) provide a data network over which all this information can be exchanged but also
2) provide audio and video conferencing that overcome the problems of the disparate IT systems in their supply chain that don’t allow them to visualise end-to-end, rather just their own component.
The complexity of large companies’ IT systems, where different sites run different operating systems and ERP, makes clear communication essential. In the order-to-cash cycle for one of our consumer goods customers, there were at least 36 instances of SAP supporting the company globally.
The CEO was concerned that it took the company 40% longer than its competitors to process orderto- cash. A leading strategy consultant helped identify the root cause of the problem. There were blind spots in the CFO’s visibility because some of the production sites were running their own ‘rogue’ applications outside the range of the central applications.
BT’s analysis found out how many applications there were, what they all did and how they talked to one another. The customer worked with the consultant to reveal inefficiencies in the way information was being exchanged between sites, which was causing the order-to-cash cycle to go slow. The exercise revealed that activities being carried out serially could have been done in parallel, and dead-ends in the system were identified. This sped up the order-to-cash cycle.
Making a commercial case for IT solutions
How do we make it clear how it benefits a company commercially? BT does a billing presentation for aerospace company EADS, it’s a great way to demonstrate the tangible benefits to a company. BT can also help to manage your supply chain billing, the commercial contracts and potentially the people management as well.
Holweg, Judge Business School: We’ve done similar work in automotive – mapping from the final customer back to the first tier supplier. We ran into the same problems in showing the financial benefits of changing it – it’s not something you can easily simulate, and the greatest impediments to changing this situation, common in most companies is showing what will happen.
In any organisation, understanding data is vital. You might have only one, two or three people who fully understand the end-to-end data flow. At Saint-Gobain we understand the need to visualise the whole supply chain, but within individual businesses we don’t necessarily understand it. Solaglas is a bespoke manufacturing business, so we have to respond to the demands of our customers every day, we’re not manufacturing for stock. It’s an extremely difficult business to run efficiently because you’ve not only got difficult product to order and manoeuvre, but also wildly changing demand flow – we’re making-to-order the whole time. We have multiple sites but they are independent profit centres. From a management point of view it’s difficult.
CFOs and CIOs say they’re not receiving this management information, because each individual business unit is managing their own business and are not able to consolidate that information on performance, on lead times or whatever. A simple example is a tool we run a on mobile phone expenditure. You would not believe how crucial that is to a CFO, “I could take 20% out of my business like that by taking that out.” It’s about presenting quality information to senior people for them to make decisions, to get better efficiencies and more from their business.
The inherent assumption when discussing supply chains is that all the companies want to work together but we always forget they are separate entities who are commercially independent. We must not forget there is a good reason why the ideas of supply chain management are not being adopted as fast as we want, because we’re all looking after ourselves. We need to find a mechanism to persuade people that as individual companies, that there is value in collaboration.
There are two means:
1) you have the commercial power, you’re Coca-Cola or P&G and you can dictate this will happen if you don’t do this you’re out of business with me or
2) commercial incentives, shared gains. Unless you have one or other of these two mechanisms, all what we’re talking about is nice ideas, it’s putting the cart before the horse.
Ironically, IT is often the last department to find out that some new supply chain initiative has been launched.
Even worse, by the time IT gets involved, all the IT systems for each of the companies has been decided, not as a group but individually. So at Saint-Gobain, you might have a systems provider and your suppliers will have a different one.
A boardroom issue
Part of the issue is where the IT sits. At S-G, it has always sat within finance, which is control, but it’s common for many to be outside of finance. When our parent company went international they shifted it to sit under business control. If you go to B&Q, for example, it’s certainly not in the finance department.
IT is not on the board at Britvic.
There is no part of our business that doesn’t have IT implications somewhere, in the broader sense not in the traditional, corporate sense. That’s what I’m trying to do, break out and bring some sort of realism to integrating IT throughout the company.
Retail, where we have great experience, is a great example of IT not being under the control of finance. IT here is about driving the business, cost effectiveness, getting more customers through the door, from manufacturing to point-of-sale more quickly.
We have two challenges:
1) changing the mindset as I see it, that IT can bring some visual value to a company, and
2) what BT can do to help.
Manufacturers have not realised the full potential of IT yet.
At Rolls-Royce we don’t have the same supply chain issues that have been discussed, we get “I’m building a new plane, it’ll be on the runway in three years time, this is the type of engine or gas turbine.” Our issue is not managing the supply chain but the costs within the supply chain.
We give a cost for something that we’ll manufacture in five years time; the costs of raw materials will rise in that time, sometimes we win, usually we lose – how do we manage the cost of the supply chain to a forward point in manufacturing, rather than cost of getting hold of the raw materials.
Are most companies trying to outsource IT now?
We are reasonably clear about what gets outsourced and what doesn’t. Our network is outsourced, it depends what we classify as IT.
The intellectual property rights, the skills – no. We outsource various bits of it, we have remote data centres, but a core of in-house IT skills will stay.
Some things commonly fit into outsourcing. From the acting directory exchange to the ‘big things’ – the hosted machines and managing hosted machines – the business-specific stuff needs to stay close to the business. The harder it is to change, or the longer it take to change, and you lose that competitive advantage in the market. When you try to centralise everything it just doesn’t work.
If there is something that is not core to what we do that is easy and sensible to package up and outsource we’ll do it, but not what’s core to us.
In the UK we have a mass of IT that we could actually outsource, but instead we use internal Saint-Gobain people to put that up into the Cloud, rather than outsource it to IBM or a third party.
We don’t use the Cloud for security reasons, but that may change. Saint-Gobain has a standard security throughout its manufacturing businesses — the same IT security policy is applied to Jewson as it is to us. The board / senior management recognised the differences in manufacturing a little later so we’re tidying up.
Regulation is also important. You can “cloud” some things but with others you’ve got to be quick to respond, you don’t want a long term rule on anything if you have to drag it back in at short notice if a new directive comes from Brussels.
On outsourcing, I disagree. Our exchange would be the last thing to outsource. I’d be more interested to outsource some of our business systems, but not the control systems. With the Boeing 787 Dreamliner, which partnered with Rolls-Royce initially, today the back of the engine is a completely different design, there’s now a wave shape. It’s a noise reduction feature as it cuts down vibration. That has been picked up by our gas turbines business from our marine business, because stabilisers on ships vibrate at a certain speed. Knowledge from one business has been put it into another – so our internal communications are critical and we’d maintain that in-house.
Aerospace is an IP-sensitive industry – do you have to use the same engineering systems as your partners, do you work virtually, how do you exchange files?
We don’t tend to exchange files. A plane has been designed, the manufacturer says this is the type of engine I want, these capabilities, with this engine spec and this fuel consumption and you design to that specification. For IT, we have Rolls-Royce Supply Chain Management. We service the management, we do on-wing care, so a lot of planes are serviced at airports, where a Rolls-Royce mechanic goes out and services the engine. We monitor them in realtime in flight from Derby, so we know exactly what’s happening to all the engines in the air and we know exactly which parts might be needed.
Rolls-Royce’s example is a very good one in design engineering, in terms of the product you make being used, there are all sorts of IT parameters to draw on. Glazing is different – it depends on the end application. Here we’re talking about parts that are moving in a controlled environment – repeatability.
Woolerton: Companies will realise they can buy in to a percentage of a network, a percentage of time required to support their services, for companies with a common supply chain link. The pay-as-you-go approach.
We need to work on our flexibility to do this, rather than focus on five or 10-year contracts, we need to adapt to pay-as-you-go.
We have 13 different ERP systems from 13 different providers. The main one is SAP. We would like to consolidate, the main system was put in 3-4 years ago. They’re slowly retiring the other systems but it doesn’t happen quickly.
It’s economies of scale for us. We tried to move SAP, move it literally on the road, somebody said it wasn’t going to fit in our data centre. Why would I pay SAP 3-4 times as much for putting it in a bespoke data centre with an 84% SLA when I can leave it in Coventry? Get real.
If I could offer you the same package for SLAs, around the same capacity as your data centres, which is a big capex, you wouldn’t have the £5m or more constant servicing costs, but housed in the cloud – it is a risk, it’s not a completely secure solution, yet, but it does take a lot of the cost out of the business. What happens if one of your core data centres is damaged in a terrorist attack or other extreme event?
The opportunity for cloud computing isn’t there yet with the enterprise systems, but it will start with the low hanging fruit – Windows-based portals, intranet sites etc.
But they can’t control that at a local business level – so they have to be selective about what can be controlled at that level. There will be opportunities for cloud computing like Sharepoint and portals, it’s not corporate data, it’s a mechanism to sort and arrange it.
We need to demonstrate cloud computing works at the local business level with simple data transfer, it’s early days. Microsoft is putting a lot of money behind it, but it is catching up. BT has partnered with Microsoft, Google is offering the same. It’s about taking risk with a new technology, and knowing when to jump.
Jaguar Land Rover last year migrated its email exchange for 14,000 users to the Cloud, quite successfully. It is ‘low integration curve IT’ like email, e-commerce and HR that gets adopted for the cloud first.
Immersive video teleconferencing
A video teleconference with someone in Paris can be tedious – it’s a culture thing. Sometimes it’s better to put the message in an email. And time delays can make it frustrating.
I don’t see video conferencing getting into the mainstream. Voice conferencing we use all the time. Video conferencing needs a lot of physical effort.
It’s well-established at Britvic – as we add a site we just put it in and we do multi-pointing as well. It’s restricted by bandwidth but you can work around that.
When you get immersive video right, it’s wonderful. You hear stories using some systems where a pen would roll off a desk in Singapore and someone in London reaches out to catch it.
We have lots of small sites. To install videoconferencing and the required bandwidth is not cheap. We’re a low margin business – it’s OK to install this if you have major head offices, but not for local sites.
There is sometimes a need to get physical bodies around a table. Our management direction is to meet face-to-face every two months, you fly to the location and look them in the eye.
We are more green today, we travel less to the continent now and we do more WebEx meetings. We’ve cut face-to-face meetings to once a year now, that’s about half.
Our business support people at each site do that. It paid for itself within three months in reduced travel times, between the three key sites in Peterborough, Chelmsford and Solihull. In our IT transformation programme, the amount of people travelling between UK and Ireland has been phenomenal. As you get to know people better you can do this long distance communication more via video. I’m surprised that the others here don’t use it all the time. At Britvic it’s been commonplace for years. Every production facility has one. Chelmsford has three.
ROI is absolutely vital. Generalising, but perhaps manufacturing is still in a “buy” mentality where they’re geared up to examine ROI on the purchase. Going forward it has to change and that is a big deal for many companies.
The investment required to capitalise on these IT projects is high – cash is the problem in manufacturing.
When you present your case for IT innovation, is it often lost in translation to the people you present to?
Woolerton and O’Neil:
In retail and financial services, IT is board level and the ROI is more instantly recognised. In finance, it’s proportionate to what they earn from the technology – they invest eight times more on IT than manufacturers.