Making the network

Posted on 19 Feb 2008 by The Manufacturer

Effective management of information across time zones, supply chains and activities is the ‘next big thing’ in IT – and some companies are already getting to grips with it. Ruari McCallion reports

n his book The Global Economy and the Nation-State, published in 1997, the ‘guru of business gurus’, Peter F Drucker, said: “In a transnational company there is only one economic unit, the world.” That’s where the company sells, gets its supplies, undertakes planning and financing. Management is conducted in a world market and, while governments set the legislative framework, national considerations come towards the lower end of the corporate agenda. In a similar vein (and around the same time) professor Martin Christopher of Cranfield University said that “the future of business is different from the past: competition is between supply chains, not between companies.” Trade in manufacturing accounts for 81 per cent of total world trade, and that is based upon knowledge – where materials are, how much they cost, the cost of transportation, when they’re going to arrive, and so on and so forth. Professor Dan Jones and other leading consultants consistently urge business to connect with its whole value chains, like Toyota does. Capturing all of that information is a huge challenge but it’s one that companies manfully struggle to achieve and do, to an extent. The questions are: how well? How much better could they be at it? And what are the benefits of being better? Panasonic Electric Works Europe has representation in most of the countries of western Europe and is responsible for planning, development, technical services, central marketing, material management, IT and worldwide co-ordination. It manages the company’s central European warehouse and production facilities, employing approximately 2,500 people who generated sales of around £610 million in 2006 to 2007. It has made a point of focusing on improved processes to drive customer satisfaction and market share.

“A great deal of time has been spent developing standardised business processes that were ultimately implemented through use of the Oracle eBusiness suite. The underlying communications infrastructure was equally important, as it had to meet very demanding requirements for availability, security, and performance,” said Peter Ehrl, director of information systems. It’s a data-intensive business model, which is necessary for the company to deliver an effective supply chain that bears down on costs and waste, ensures order accuracy and helps it to differentiate itself in a very competitive and price-sensitive marketplace. The intensiveness of the data across the business means that the communications infrastructure has to be robust, and Panasonic has adopted a global version of the
Oracle environment at its data centre in Munich, so network availability and performance is paramount.

What Panasonic has done to ensure that all the communications ducks are in a row is to adopt a managed approach to its entire infrastructure. It includes an MPLS- (multi-packet labelling service) based IP virtual private network (VPN) that provides any-to-any connectivity, with prioritisation of time-critical traffic. Remote access is permitted to the VPN from anywhere in the world; voice communication is carried globally on a single network, as is internet access; remote dial-in uses and internet protocol (IP) VPN. If a company uses public communications lines, it’s going to attract a lot of unwanted traffic – spam, in short. Up to 80 per cent of its 100,000 emails a day are junk, which is filtered by firewall, anti-virus and spam filter. Voice communications have been provided through VoIP (voice over internet protocol) since mid-2007, both fixed-line and mobile, which covers over 50 sites on three continents. It almost goes without saying that web servers and email platforms are part of the deal as well.

Since it was installed, earlier this decade, Panasonic has seen record growth, improved profitability and – crucially for the important American market – it has been able to complete internal and external auditing, including Sarbanes-Oxley anti-fraud compliance, quickly and accurately. The single, integrated network is provided and managed by a single vendor – BT – and is viewed by the company as critical to
its operations.

“The network has all the information the business needs. The challenge is to make it accessible,” said Ged O’Neill, BT’s marketing manager global service, at The Manufacturer Live in October 2007. He wasn’t referring to Panasonic in isolation. Information on purchasing, logistics, production, inventory, design, planning and everything else flows across the cables of the world.

“A lot of companies have services in different parts of the world. They’ve consolidated suppliers, but those suppliers become global themselves,” said Phil Coackley, global technology, automotive & international manufacturing, BT Global Services. “There are fractures throughout the supply chain – companies don’t connect with different suppliers at different points.” The network, as O’Neill said, has the information the business needs – if it is joined up and if it’s being managed effectively. Those are two big ifs.

The network is made up of seven layers in the classic ISO7 model. At the base is the physical infrastructure, which covers the cable dimensions, the switching points, and its capacity for handling information. Above it is the protocol for transporting bits of information; level 3 deals with what is done with the bits and packets of info; and so on up to level 7, which is the applications. So a network is built up, piece by piece and component by component, in the same way as any manufactured goods. How it is built up depends on the ultimate use to which it’s being put.

“There are six quality of service levels. They range from time-critical functions, like voice and video, to non time-critical, like email, perhaps. In a manufacturing context it doesn’t matter if an email takes two minutes or 20 milliseconds. But in a [currency] trading business, on the other hand, an email can be time-critical,” Coackley said. Prioritisation is important because any IT infrastructure is faced with physical limitations, and one of those is the speed of light, which the electrons carrying information cannot exceed. It matters because of the way communications networks are structured. If information is routed through a satellite, it will take longer to get to its destination than something using cables on the Earth’s surface; it has to travel further and the different routes may have different ‘pipe widths’ – capacity. The business has to decide which is more important – emails, voice over IP, ERP, production management, or whatever. And which part of whichever application.

“Just to order, say, one M6 nut through the ERP can generate hundreds of individual process transactions,” he continued. “If multiple ERP and business systems are running through a satellite, it can grind to a halt. MPLS allows prioritisation of applications.” The analogy is with picking up people from the airport. Without MPLS, you don’t know how many there are, where they’re coming from or exactly when they’re going to arrive. If you send a four-seater car and there are 40 people waiting, it will take time to ferry them all to their destination. Meanwhile, the system is still sending more passengers, and the queue is getting bigger. Eventually, it fails. MPLS checks how many there are waiting and what their importance is, and sends limousines (time-critical) or buses (capacity) as appropriate.

“Any application can be prioritised, in the same way that buses in managed traffic systems can set traffic lights to let them through. It could be the ERP in manufacturing, or trading in an investment bank,” said Coackley. “A clever system can see every application by transaction, and that enables a much better understanding of its data flow. The company can use the network to understand what’s going on and to rationalise its transactions – as Panasonic has done.”

Many companies have networks in place so there should be no fundamental problem with implementing structured management. But how and by whom it’s managed, and how the users interact, is fundamental. Typically, the IT system is managed by the IT department – which is logical – but when a new business process is put in place, it’s the people operating and using the process who do the implementation, not
necessarily IT, which complicates matters.

“For example, if a company puts in video conferencing, it uses bandwidth – then they find the ERP doesn’t work because all the bandwidth is being used up,” said Coackley. The planning should extend to the broader supply chain, too. “The distributed nature of the manufacturing supply chain emphasises the need to interface through access systems. Then you need to look at shared systems or open system architecture. EDI is still present but XML is becoming widespread.”

Precise technical details will vary from company to company. What is clear is that an organisation wouldn’t dream of allowing supplies to arrive or move in an unmanaged way. The chaotic and unplanned flow of data has been tolerated because the technology to manage it didn’t exist. Now it does and the businesses that harness the information effectively will be those that gain competitive advantage.