Tuesday, December 16, 2008

Going Green – Efficient use of machines

vicinity software
As a conscientious member of this environment I felt it was appropriate for me to share some ideas on how companies can "Go Green" and still make a buck.
As I prepare my thoughts I find that this topic is broader than a single blog supports. So I am going to break my thoughts into three different topics.
  • Efficient use of machines – lower carbon footprint
  • Increase yields to consume less raw material per finished good
  • Identify and replace current components with eco-friendly alternatives
So watch over the next few days as I release more on these topics. For now let's start with scheduling.
Efficient use of machines – lower carbon footprint
One of the key advantages formula manufacturers have over assembly manufacturers is our ability to fulfill multiple finished good requirements with one batch. We can make different packaged items from the exact same formula. These finished goods may be in different sizes or the labeling may be different. The common element is the formula.
Therefore there is an opportunity to consolidate production and make multiple finished goods from the same batch or compound.
So why is this "Green"?
One of the key initiatives of "Going Green" is to utilize all our resources wisely. By consolidating our production where ever possible we are reducing our overall energy consumption. This reduction can have a significant positive impact on the carbon footprint of the manufacturing facility.
So how can you accomplish this today? And why am I not already doing it?
The key is to group all finished goods by formula and then schedule at the formula level. Not all manufacturing tools support this scheduling model. Your tool may only schedule by finished good SKU. Without a scheduling tool written specifically for formula manufacturing this goal may be tough.
Fortunately there are some manufacturing applications that do in fact address this challenge. Vicinity by Vicinity Manufacturing has formula based scheduling at its core. A user can view the schedule by facility and then by formula. Within a formula the finished goods are scheduled. This view of the production allows your scheduler the opportunity to perform needed consolidations and fill the production gaps with products that family well with a proposed schedule. You can make more products with fewer batches.
If every company could reduce the number of batches or change-overs by 10% we would see a profound impact on our utilization of energy.
Not only is scheduling by formula good for the environment it is also often times more profitable.
So take a look at your scheduling tools and see how you and your organization can do a better job of reducing the number of batches and fulfill more finished goods with single runs. The dividends will be seen beyond your bank account – our children's children will thank us.

Thursday, October 2, 2008

RFPs – Is that REALLY the right way to select an ERP solution for Formula Manufacturers?

vicinity software
It seems that once a month I get a very pleasant email from a well meaning consultant asking if I would like to respond to a Request for Proposal (RFP) or Request for Information (RFI). The first few years of being in practice I took a day or two to wade through pages upon pages of questions about features and forced to answer "yes", "no", "with customization" etc to questions that could have easily been asked of a doctor's office. Very few RPFs are written in such a way that the key business issues are highlighted. Instead they are VERY broad and limited in specificity.
So now I just say "no thank you" and move on with other projects.
You may ask why I do this and why would I walk away from an opportunity. In general companies that spend $20k with an outside consultant on an RFP for a $100-200k project have bigger issues to address than software.
My experience shows that for companies with sales volume of $5 million - $200 million there are 4-5 primary providers of software for the formula manufacturing sector. A subset of that group is typically in every opportunity that I see.
Here is a secret: each of these 4-5 applications do a fine job for their clients and have a full range of functionality from financials through distribution and manufacturing. So the key should be place on finding those industry specific applications and spending time differentiating the implementation firms and less time on RFPs.
Here is another secret. As a young consultant with Arthur Andersen and Deloitte & Touche I was engaged to generate many of these RFPs. A number of companies paid my firm big money for a list of 100-200 features to include on a check list. That did not make for a good RFP.
So how should a formula manufacturing company go about finding some of these qualified applications?
  • Ask your suppliers and customers – those happy with their system are willing to tell you what they use
  • Attend trade shows or have your attendees look for applications while they are touring the expo
  • Take a look at the industry publications and web sites
  • Search the internet for key words to your industry (chemical, food manufacturing, batch processing software, MSDS, COA)
  • Look for formula manufacturing add-ons to the more popular ERP solutions (Microsoft Dynamics, Sage, SAP etc)
  • Contact a consultant with industry background. If they cannot name 4 software applications without hesitation then move on to someone who does
Once you have a list of names then run them through an acid test and shorten your list
  • Look at their web site – does their product focus specifically on formula manufacturing or do they treat all manufacturers as the same? – see the Vicinity Manufacturing web site at http://www.vicinitymanufacturing.com/ for a good example of this
  • Have a 15 minute phone call with a representative – if they don't use industry terms then move on
  • Obtain a high level web demo of the best solutions using demonstration data – no more than 1 hour
When this is complete you should have a good idea of what applications have the best chance of meeting your objectives. The next phase is to communicate your primary business issues and your vision on how to address the issues. Once the vendors understand your needs they will be in a position to provide a comprehensive presentation.
During your process it is fair to assume that all the applications perform accounting functions well. They all cut checks and print invoices. Instead focus your attention on business issues such as reducing inventory levels, identifying and addressing batch yields and generating compliance documents such as MSDS and COAs. This will focus both you and the vendor on topics that will result in positive results for your company.
So in the end the process of selecting software is not as difficult as it might seem – if you are working with someone that knows your business. In today's software environment there are plenty of good industry solutions available – the trick is finding them. Once you find them the difference will be obvious.
Resist the temptation to pay a consultant for them to learn what you need only to communicate to other companies in the form of a features checklist. Take it from a software supplier – they really are not helpful, cost you a lot of money and in many cases turns off potentially viable applications from consideration.
Good luck on your search and remember that there are a number of good companies out there waiting to help you address your business challenges.

Monday, September 22, 2008

Time to reflect - Lot Expiration

food manufacturing erp
Yesterday I celebrated by birthday. (insert noise makers here)
I had a GREAT day doing all the things I like to do best. That is what a birthday is about anyway – isn't it?
This blog the topic kept running through my head- "Lot Expiration" and "Shelf Life". I know it is a morbid thought but I just had to get it out of my brain and share it with my formula manufacturing friends.
Formula manufacturers – particularly in the food industries – are keenly aware of the issues associated with lot expiration and the financial impacts it can cause when a lot reaches the end of its prescribed useful life. What otherwise was once a perfectly suitable product has become as popular as the last kid picked on the recess kickball game. Not a fun site – trust me.
So how does a formula manufacturer address the ticking clock that is always running? Here are some ways.
  • Build a time machine go back to a time to address the issue. Not feasible but could be very effective.
  • Reduce the time to manufacture and progress toward a make-to-order model. This is very effective for the small batch manufactures with excess capacity in the manufacturing area. By holding inventory in raw materials you reduce the likelihood of finished good lot expiration – now you have to manage the raw material expiration but managing a fewer number of common raw materials is often easier than many finished goods.
  • Monitor lot production/expiration dates and notify appropriate users of lots reaching 50% of their useful life. This is pretty easy with today's technology. Imagine receiving an email from your system identifying the expiring lots with ample warning to take corrective action. As long as your ERP system data is hosted in an ODBC compliant database (such as MS SQL) then the task is pretty simple.
I feel pretty fortunate because tools are available in today's technology to deal with lot expiration. Vicinity by Vicinity Manufacturing is the primary application that I support on a daily basis. It helps my clients to reduce the time to production AND to notify user of aging finished goods lots. So 2 out of 3 is not bad. A little work with your IT group can make this issue a thing of the past leaving time to address bigger issues.
As a footnote: We are still working on the time machine concept – maybe by my next birthday we will have the perfected.
Until next time – take care and I look forward to talking with you soon

Wednesday, September 17, 2008

Scheduling by Formula – Why Bother?

production scheduling
I was at a client the other day and heard an interesting discussion.
The production scheduler was discussing an issue with the production manager about how the scheduler was scheduling production. The production manager was making the case that the scheduler was killing the production efficiency by changing products as often as he was. Production would like to run long runs of the same formula to avoid costly changeovers. Instead he was contending that the scheduler was requesting partial batches and forcing more clean ups than needed.
The scheduler was arguing that he was changing products to keep inventories low. His position was that low inventories was in the best interest of the company and the only way to accomplish that was to run short runs and for only the quantity needed.
So who was right?
My two cents is that a company needs to balance the needs of the customer (on time product often achieved by holding FG inventory) and reduction of working capital (keeping inventories as low as possible). But how can you do that in a formula based manufacturing facility?
The easiest way to achieve this balance is to look for opportunities to produce finished goods that share the same formula. In some facilities producing bulk formula is a possibility and then fill to order. From this bulk multiple finished goods can be produced off of the same blending/mixing batch of a formula. The result is to reduce the number of mixes of the formula which reduces the number of times a change over occurs in blending.
In other facilities multiple finished goods can be filled directly from the mixing tank without much bottling like changes.
It is important for a formula manufacturer's scheduling tool to be able to combine finished good SKU's by formula and then by filling line. This allows a scheduler to better see the opportunities to run like products at the same time. Thank goodness for me the application they are implementing (Vicinity) has this capability out of the box. This is not characteristic of products designed for assembly or discrete manufacturing.
So how did this end?
The scheduler looked out into the future at sales orders and forecasts and allowed the production manager to make some product that would be needed in upcoming weeks. At the same time the production manager grouped the formulas in a specific sequence to reduce his change over time.
Both came to me and asked that we move up the implementation of Vicinity scheduling. Not a bad day for me that is certain.

Saturday, March 8, 2008

Microsoft Dynamics™ and Formula Manufacturing

manufacturing ERP software
Ask most ERP analysts and they will agree that Microsoft has entered the ERP software space and they are now a player to stay and they are in it for the long run. With four applications with strong and broad installation bases of customers Microsoft is a key player in the ERP industry.
Formula manufacturers should know that Microsoft Dynamics has offerings to help make your company more profitable. I will spend a few moments bringing you up to speed on how Microsoft Dynamics can deliver for you.
Microsoft acquired the four applications from 2001 - 2003 and each had a strong track record in providing core financial and distribution functionality prior to the acquisitions. These products include
  • Microsoft Dynamics AX – Axapta
  • Microsoft Dynamics NAV – Navision
  • Microsoft Dynamics GP – Great Plains
  • Microsoft Dynamics SL – Solomon
Each product has been branded – along with Microsoft CRM – as Microsoft Dynamics. So when you are on the Microsoft web site and see the term Dynamics – this is the brand name for all four ERP solutions and CRM.
Each application has strengths and should be viewed independently. They have their own development groups but share core Microsoft technology that assist in rapid development. As time moves on the products are moving toward each other and share functionality written by developers working across the products – such as web services and sharepoint. Also realize that not all Microsoft Dynamics resellers (VARs) sell and support all the products – in fact most VARs only support one or two Dynamics applications. So when evaluating Microsoft Dynamics it is important to match a reseller with the specific product being offered.
Each of the products compete successfully against all other similarly priced solutions.
Microsoft Dynamics AX (Axapta) – Written for the larger organization. I would recommend it for companies over $150 million in annual sales. The implementation requires significant consulting resources and is best suited for companies with significant IT resources.
Microsoft Dynamics NAV (Navision) – Navision is a major player in Europe and is known for it customization capability. It fits well for those companies that need significant localization and customization to address unique business issues. Companies of $5 million - $150 million in sales should consider this product.
Microsoft Dynamics GL (Great Plains) – Great Plains has been a well known ERP application in North America for many years. It has consistently been the leader in the market for English speaking countries. It fits well for those companies that need only limited customization and are looking for strong out of the box functionality based on US business standards. Companies of $5 million - $150 million in sales should consider this product.
Microsoft Dynamics SL (Solomon) – Solomon is becoming the Microsoft Dynamics solution geared toward project accounting. It should known that Solomon is very strong in inventory control and order processing. So while this application is moving away from manufacturing it competes very well against all other inventory, distribution and financial applications in the market. Solomon has strong customization capability and a very loyal install base. Companies of $5 million - $150 million in sales should consider this product.
As a formula manufacturer if you review Microsoft Dynamics on your own - without the assistance of a VAR experienced in formula manufacturing -you may not see how these solutions can address your manufacturing needs. This is because Microsoft Dynamics evolved from a financial and distribution application with strong discrete/assembly manufacturing offerings. Out of the box Microsoft Dynamics is challenged by the unique requirement of formula manufacturers and are critical for you to run your business. Issues such as MSDS, scheduling by formula, QC tracking, variable yields by batch and weight/volume conversions are foreign to Microsoft Dynamics. But there are great resources in the Microsoft Dynamics family that address these challenges.
Microsoft has been very public in its position that it will provide deep core functionality for each of the ERP solutions. They have written the applications to fit well into certain key industries. They do realize there are unique requirements in various industries that they are not able to provide by themselves. Formula manufacturing is NOT one of those industries Microsoft targets directly.
While developing the applications Microsoft has allowed Independent Software Vendors (ISVs) to extend Microsoft Dynamics into various vertical industries – such as formula manufacturing. Because of this you are able to achieve tremendous economies of scale with Microsoft Dynamics and still maintain the industry focus written by industry experts with years of domain industry knowledge.
When Microsoft Dynamics is extended with an ISV solution (such as Vicinity – www.vicinitymanufacturing.com) the result is a feature reach, technology advanced and widely accepted ERP solution at an affordable price. Microsoft Dynamics delivers the most popular financial and distribution applications in North America and Europe and the ISV (Vicinity) provide business critical specific formula manufacturing functionality such as
  • Formula management
  • Compliance documentation (MSDS, COA, Country of Origin)
  • Lot control and tracking
  • QC results and analysis
  • Batch yield analysis
  • Scheduling by formula
  • And much more
So if you are in the market for an ERP solution you would do well to consider Microsoft Dynamics matched with an ISV solution like Vicinity.
Contact information:
Microsoft Dynamics – http://www.microsoft.com/dynamics
Vicinity – http://www.vicinitymanufacturing.com

Sunday, March 2, 2008

It is time to retool – managing a shrinking economy

manufacturing ERP software
It is no secret that the US economy is tightening and the months ahead may be leaner than the months that have passed. As I travel from one formula manufacturing facility to another and meet with owners, managers and line workers I have gained a few insights that I would like to share with you.
If you are over 40 years of age you have now experienced at least one economic pull back and at least one economic expansion in the manufacturing sector. If you are over 50 you have probably experienced more than one.
One fact remains true - The US economy will change and eventually it will be stronger than it is today. With this change we will be faced with different challenges then we have in front of us now. The key is to ride out the down times while preparing for the next wave. The most successful companies are able to manage down times while retooling for the expansions.
How do you do that?
The key to a down market is cash flow and liquid working capital. In other words find ways to increase the cash flow and increase working capital. But don't do that at the expense of your future. Don't get caught flat footed when the market begins to come back. Your competition is hoping you will do just that.
Below are some ways to squeeze out working capital while investing in the future. It is all centered on cash. If you can watch the cash and working capital you will find you have plenty to make it through the slow times and will be in a position to complete as the market comes back around.
Reduce the inventory part numbers – Examine inventory levels of raw materials, packaging, intermediates and finished goods. Look for ways to reduce the number of different inventory items you are carrying in inventory. The more items you carry the more you will need to invest in safety stocks or relationships that you need to manage. Are there raw materials or packaging that can be consolidated my adjusting the formulas slightly? Look at your top 20 raw materials by value – which of those are only used in a small number of finished goods or intermediates? Those items may be able to be consolidated or the formulas may be able to be reworked.
Identify domestic suppliers - Look for local suppliers of the items even if they may cost a bit more per unit. You may be surprised that the offset in transportation and carrying costs may out-pace the cost savings of supplying from a foreign supplier. Additionally during an economic slowdown in the US foreign products become more expensive due to the currency exchange rates. Take this time to help your neighbor. You may appreciate the same attention from one of your local customers.
Collaborate with suppliers around your schedule - By working with your suppliers you can commit to a schedule that they can expect and you can live with. The result is lower carrying cost for both of you and a lower price per product. Remember that if your customers could give you insight into the future sales you would be more willing to reduce prices. The same is true with your supplier. The better your schedule the lower the price you will pay.
Shrink safety stocks - Take this opportunity to reduce safety stocks to an appropriate level considering a slowdown in business. When you are running an operation at 25% more volume you may need more safety stock. When business demand decreases the requirement for this inventory is lowered. Take a realistic look at the inventory levels for each of your items. Start with the items you carry the most – sort in descending order by value of inventory.
Promote most profitable items – If the market is absorbing a shrinking amount of sales then make sure you are selling the products that bring you the most return. Don't promote those items with limited return. Instead invest in advertising of those items that have the highest chance of sale and greatest return. Look at each of your finished goods and compare average selling price to actual production costs. Start with the finished goods that you sell the most by quantity (not price). Are you selling the most of the items that you receive the least return?
Review formulas yields – Concentrate part of your R&D money on refining the products that you will continue to sell the highest quantity. Once these are identified look for ways to reduce the costs and increase the yields. This will provide more profit for the same sale. Only focus on those items that have a high likelihood of sales. You may be amazed at the cost savings by squeaking 1-2% more yield out of each batch. Slow times are the times it pay to be frugal.
Reinvest in systems – In a down market there are often incentives in interest rates or government programs to assist companies to reinvest in the future. Many states provide tax credits for retraining your employees on newer technologies. Additionally as a market slows down it is common for interest rates to lower. Take advantage of this time to wisely invest in your information systems. As the market comes back the companies that have re-tooled will be ready to win in the recovering market. If you wait for a better market you will be fighting growing demand with limited supply.
All of these items are very manageable. The key is to get started. The sooner you look into managing cash flow and working capital the easier any economic downturn will become. Additionally don't trade long term successes for short term benefits. This economy will be back stronger than ever. Many companies make it through slow times only to be crushes as the business returns.
If your existing systems are not delivering the data I outlined above you need to do the best with what you have and address your systems issues immediately. I can guarantee that having the right information will pay for itself many times over in a shrinking or a growing economy. Putting this data at your finger tips is not as expensive as you may be lead to believe.
The primary message is to get started today and if you need help ask for it. There are some real challenges ahead of you but each can be addressed with creative thinking and access to accurate data.

Sunday, February 24, 2008

Profit motive run amuck – Foreign vs. Domestic

manufacturing erp software
This global economy is really hurting us in our own neighborhoods and few are willing to look at why. Formula manufacturing is often in the center of this firestorm.
As I travel from one formula based manufacturer to the next I sense a real turmoil over the profit driven decisions to import foreign packaging and materials versus employing people in our own local economies. "I can get it 25% cheaper from country X versus domestically."
Given: The profit motive drives all businesses to find the lowest cost alternatives to producing products given a similar quality. After all, the purpose of a corporation is to maximize the wealth of the stockholders.
I just don't buy the argument that because the component is cheaper per unit that it is the best decision for your formula based manufacturing company. There are many more factors that should be considered.
So let me share some insights that need to be taken into consideration in determining the decision to buy locally or import foreign.
  1. Scheduling – go to any procurement officer and ask them if everything was equal would they prefer to source their components 1,000 miles away or 10,000 miles away? Simply from a scheduling and logistics discussion – it is much easier to deal with a 1 week lead time vs. a 12 week lead time. These variables that the scheduler must address are not trivial. Because of this there is a strong argument that because your supply chain reaches across the ocean you are placing significantly more work on your procurement group. In the end that costs you productivity and money.
  2. Quality – as quality concerns continue to grow from imported products the testing requirements for those using these products also grows. By bringing an imported product into your supply chain you are subjecting the quality of your products to standards not customary for your market. In other words the quality standards expected in your market may be far higher than the quality standards normal in your trading partner's market. To keep quality to the appropriate level will require additional oversight, testing of inbound components and a more complicated recall process. Each of these will cost you time, efficiency and eventually money.
  3. Cost – when evaluating whether an imported component truly costs less than a domestically supplied component make sure to address the known and potential costs associated with that business relationship. How many trips overseas will it take to ensure a reasonable relationship? What is the cost of managing that relationship? What will it cost you when a shipment is delayed by natural or political reasons? Can you really absorb those costs? How much additional inventory are you going to carry to buffer the variation in foreign availability? What is in the political water related to tariffs and import fees? If there is a problem what will it cost for you to meet with someone in authority to address the problem?
  4. Customer – More and more of your customers will not take delivery of product that is produced from components sourced from certain countries. We are seeing a strong push toward Country of Origin disclosure. What will you do after you have chosen to source a material from one of these countries that your larger customers have banned? Will you source from multiple locations and what will it cost you to verify that you can track the source of each lot by country? Sourcing domestically addresses these concerns.
So in the end I am not convinced that the price per unit is the only consideration in determining the source of certain components. In addition to price per unit consider what changes will take place in logistics, quality assurance, hidden costs and the mind of your customer.
Sadly I am seeing many companies ignoring the additional data and they are changing their supply chains without considering all the facts.
If price is the only reason to source from a foreign market I think it is prudent to consider the factors above. Profit motive is important but it is not the sole consideration.
As a last point – is it possible that a current domestic customer yours could outsource your business because they can get it cheaper from a foreign source? If so you may want to give all of this a second thought before it happens to you as well.

Tuesday, February 12, 2008

10 reasons manufacturing software projects fail

manufacturing erp software
Every project, no matter the size, has a certain level of risk - the bigger the project the bigger the risk.
The best way to manage project risk is to understand the causes of project failure.
In the 1990's I read an article that resulted from a study commissioned by APICS. The article spoke about how often manufacturing software projects fail and the top 10 reasons these projects fail. This study interviewed manufacturing companies that had recently implemented a new manufacturing information system and attempted to quantify success or failure. The results were worse than the author expected.
That study indicated that 1 in 8 projects was deemed a success by management – 7 in 8 were deemed a failure.
That is a very low number and seems a bit worse than I would believe. The article did go on to provide some insight that I really agree with and would like to share with you. The author followed up with the 7 in 8 companies that deemed their project as a failure and identified the common themes across these companies.
Below is a list of these common characteristics:
  1. Lack of management commitment
  2. Part-time or no internal project leader
  3. Limited input from various departments in the organization
  4. Lack of project focus or goal of the new system
  5. Project seen as an IT project and not a business project
  6. Lack of training on new system
  7. Limited feedback on project status
  8. Selected the wrong software to address the business issues
  9. Inadequate outside resources
  10. Financial resources inadequate to achieve results
So after 20 years of performing implementations I have to agree with the above list. The projects with the greatest challenges have often had one or more of the above items. The good news is that most of these items are completely in your control. So let's focus on addressing the items you can influence.
To reduce the risks in manufacturing software projects here are some items to consider.
  • Is this the most important project on your company's agenda for the next 6-12 months and can management articulate that fact?
  • Do you have a near full time project leader that understands most parts of your business? How long has this person worked for your company?
  • Do you have a cross-functional team that can support the project leader?
  • Does this team universally know the purpose and focus of this project? If you ask each member why we are doing this project, do you get the exact same answer from every team member?
  • Is the focus something other than IT? Is there real business benefit that everyone can rally around?
  • Have you considered how different people learn? Some require one-on-one, other require manuals and others repetition – does the plan account for each learning style?
  • How organized is the project leader and can that person report the status of the project in a clear and concise manner? If so, can the organization change course if needed?
  • Have you talked to other users that are using the exact system you are implementing? Did these companies have similar business issues before they started and have the issues been addressed by adding the new system?
  • Does the outside firm supplying training, support and programming have a clear understanding and experience in your industry?
  • Can you really afford the upfront costs to achieve your desired results?
Most companies are not able to address every issue on this list prior to their project. The key is to limit the number of them and manage the risks of the ones you can't. But based on my experience if you do not have management commitment, a near full-time project leader, a cross-functional project team and a clear and concise project goal – you should not continue.
Aside from that - keeping an open dialogue before, during and after the project with your team (including outside consultants) will take you a long way to reducing risks.
Best of luck on your project and I hope these insights provide a certain level of clarity.

Sunday, February 3, 2008

Bar coding – the misunderstood technology

manufacturing erp software
I spend a lot of my day talking with formula based manufacturing companies about their business issues. About 50% of these conversations involve the request for bar coding. When asked about what business issues they are trying to solve with bar coding I typically get some of the following expectations:
  • Increase physical inventory accuracy
  • Reduce effort to identify inventory location – Bin tracking
  • Reduce lot expiration
  • Increase accuracy of usage/yield reporting
  • Provide real-time access to usage and production
  • Support lot tracking from material usage through shipping
Each company believes they have real issues around inventory control and solving these issues may yield tremendous results.
The problem is see is often in the definition of bar coding. Bar coding by itself does not solve any of these issues. Bar coding as a technology needs help from other applications and processes. What they are describing is a Warehouse Management System (WMS). The simple act of scanning a bar coded item is nothing more than a data collection exercise – what you do with that data is the key to solve the issues.
Well designed and implemented WMS systems can assist a formula manufacturer gain a better understanding of inventory levels, rotate lots prior to expiration by directed picking and improve the inventory accuracy through faster cycle counts. They do this by setting best practices for inventory movement and assist users to follow the business processes. Every time a person touches inventory the user must notify the system and that inventory must be tracked from the time it arrives on a truck to the time it leaves to a customer.
In my experience the key challenge is to ensure timely and proper application of the bar code label. Once that is done much of the remaining work is in execution and discipline when inventory is touched.
As soon as a company introduces flawed business practices the WMS system falls apart. A formula manufacturer must be able to perform all its processes to a high level of excellence prior to expecting positive results from the WMS system. Unfortunately few companies really understand this.
So for my clients we implement in this order: Financials, distribution, production, compliance, scheduling and then WMS. Only until the business processes are clearly understood and implemented will a WMS solution truly yield the results they expect.
I once heard a mentor of mine once say – "Bar coding (WMS) is great. It can screw you up at the speed of light". Do yourself a favor and get your processes under control prior to introducing WMS.
When you are ready - there are some terrific WMS systems to assist you achieve your desired results. While picking an ERP solution you should make sure there is a solid WMS solution as part of the deliverable. If you already have an ERP solution make sure your systems are well under control before adding WMS. Failure to do either of these may cost you dearly in the future.

Sunday, January 20, 2008

Scheduling – How low will you go?

manufacturing erp software
Every formula manufacturer performs some level of scheduling. Without a schedule or a plan no plant could function for very long and based on my experience most of the schedules are manual in nature. As a company grows past the $10 million in sales mark the manual processes may become burdensome and become a drag on the manufacturing process.
Unfortunately few small formula based manufacturing firms have the resources or knowledge about their scheduling options. I will try to provide a basic primer to begin the education.
Generally you can break the scheduling process into two primary components
  • Production Schedule
  • Shop Floor schedule

The production schedule identifies what products we will be making, the qty to be made and the start and end dates for the scheduled item. It does not attempt to assign resources such as machines or people. It is typically the result of ensuring capacity and material availability. Think of it as the overview of what a company will be making and when it will be completed and will often show data 1-2 weeks out from today.

The shop floor schedule is much more detailed and identifies what resources we will be using, the precise order the items will be made and dependencies required in running this item. It is very detailed and is often more detailed than users outside production need to review. This is the document that the shift supervisor works from and directs the line supervisors and is often limited to 1-5 days out from today.

Both are required to get the raw materials converted to finished goods in an orderly fashion. Additionally most (if not all) companies perform these tasks. The questions to consider are

  • How efficient is your schedule?
  • Could you produce more with the same resources?
  • How much time are you spending to prepare the schedule?
To a very large degree scheduling for a significant number of small to mid-sized formula manufacturers ($1-100 million in sales) is done in Microsoft Excel or similar tool. The data for the schedule is manually obtained from printed or electronic sales orders, inventory counts and best guesses of future orders based on history or a best guess. That manual process is the norm and not the exception.
Is that a bad thing? No.
It depends on the complexity of your business and how efficiently you are trying to run.
If you always make the same products, at the same quantity and in the same order – that is not a big issue. But as lot sizes continue to shrink, breadth of products offered continues to widen and lead times are reduced then a non-integrated "back of an envelope" approach may not work anymore.
When you decide to introduce electronic tools for scheduling you need to be very careful in selecting the tool. I my experience the tool should read open sales orders, forecasts, and quantity on hand. This data can be read periodically in a batch process if needed. There needs to be a greater relationship with the production system. For formula manufacturers you need your scheduling tool to understand the formula and required resources (machines, people and tools). This data is often more detailed than the ERP data and therefore more difficult to integrate.
With that information I would suggest discussing scheduling tools with your manufacturing application. If they do not have integrations to scheduling systems your options become limited but not impossible. At this stage you may choose a custom integration or considering a new production system. If this is your case the cost of adding an integrated schedule becomes pretty expensive.
If your production system does have integrations to one or more scheduling tools then pick the one that best integrates to your ERP system and is not too complex for your personnel to use.
One thing to remember – every scheduling implementation is unique to your own business. There is no such thing as a plug and play implementation of scheduling. It will take time and effort by your company. Therefore you should be certain that there is a high level of benefit before adding this tool. Electronic scheduling is not cheap. Often times integrated scheduling tools can equal or exceed the cost of your production system.
If the benefits are real and you have the rest of your production and ERP system under control then adding electronic scheduling tools may be the right next step for you. But whatever you do – keep your manual system as the primary system until the new system has made the manual one obsolete. After all – the manual system has gotten you to this point.

Thursday, January 3, 2008

Software for formula manufacturing

manufacturing erp software
One of the greatest misconceptions in the software industry is that manufacturing software is manufacturing software and that there are no differences in manufacturing products on the market. That is not true – let me share my perspective on the landscape.
I typically break the market into a couple sectors – much like Gartner and the like will do. I keep my categories simple – Big, Medium and Small. Big > $750 million in sales, Medium $150-750 million in sales and small $5 – 150 million in sales.
In the Big and Medium camp you have the typical very good and very expensive applications such as SAP, Oracle, Infor (many options), Ross and the like. These companies typically need outside independent consultants to assist them in the selection and it is worth every penny.
The real confusion comes in the Small sized company - $5 – 150 million in sales. While I do not have statistics to back this up I think this is the largest part of our market – at least in the US – and they have the least resources. They tend to be forced to rely on software vendors to assist in the selection process. As such there is much misinformation being spun to this group of users.
I will attempt to put some applications into groupings and give my perspective on what to look for in each grouping. To keep it simple I have limited the groups to three.
  • Assembly posing as formula/batch
  • All-in-one
  • Everything but financials
  • Extension to larger standard ERP solution
Assembly posing as formula/batch -First let me get the assembly applications out of the way first. This is a group of applications that have found very stiff competition in the assembly/discrete world and have moved over to batch/formula manufacturing where they see more potential market share. Typically they are easy to point out and are often eliminated by the trained eye. Here are a couple signs. Does their web site spend as much time talking as much time about BOMs, routings and subassemplies as they do recipes, compliance documents and intermediates? Do you see MSDS or Nutritional Analysis prominently displayed on the site? If not move on – you will spend more time customizing an assembly application than you will gaining benefit. Today there are plenty good vertical applications that do exactly what you need. Some examples include Macola, MAS90 and Dynamics Manufacturing – each are well suited for assemblers but not necessarily formula/batch manufacturing.
All-in-One – Through the 1980's and 1990's this model really was the standard. This is an application that was written specifically for an industry and hand tailiored to that industry. It will look and feel like your industry and will be feature rich and very deep in functionality. For the first couple years of usage you will feel great. The primary drawback of this approach is that it does not talk to any other application and they are the only ones doing the development for your solution. Sure you can export data to excel and manipulate it into other applications but that is a bit different than being able to pick from a myriad of solutions to solve unique challenges. Additionally these applications are typically written to fill as specific need such as Lab Analysis, MSDS, Scheduling or Formula Management. They will be strong is certain areas and very weak in others – such as financial analysis or business intelligence. This is largely caused by limited resources and the resources they do have know the technical aspects of the industry and not the broader ever-changing business issues impacting your business. The risk of this solution is in the unknown. How will they handle electronic payment of payables (common in the EU)? How will they handle web orders if you choose to go there? How will they broaden their sales order processing to handle export orders and all the paperwork associated with that business. Some examples include Deacom (although really assembly but have made a reasonable attempt at batch), ProcessPro and Syspro. Biggest benefit – it is a one stop shop for software. Biggest drawback – if the store does not have what you want after purchase – tough.
Everything but financials – This group amazes me. These are applications written specifically for the industry and have stopped short of being an All-in-One by attaching themselves to the core financials of many ERP systems. This model has tightly integrated data within their own functionality such as formula management, inventory control and compliance. When it comes to integrating with financials (GL, AP and AR) the integration is relatively weak. Normally there simple transactions sent to AP to pay the inventory invoices or transactions to AR to track outstanding receivables. All this is great until you want to perform analysis on costs from the GL and flow back into production. Because the transaction is foreign to the financial system (GP, AP, AR) it will not be able to make the jump to the source document (sales order, purchase order or batch ticket). This is often frustrating for users. Like All-in-One there are no other resources developing for this implementation. So if EDI becomes an issue for you after purchase you really only have one option with this group. As well if your financial application changes you are dependent on this group to keep up to speed with the changes. Now the part that amazes me is this. These applications tend to work with any and every financial solution on the market and claim to be tightly integrated with each. Logic tells you that can't be the truth. It is the old saying – "If you say it loud enough and often enough it becomes the truth". Not so. The prime application doing this today is Batchmaster (the one owned by eWorkplace). Biggest benefit – most of the software is written by one company. Biggest drawback – that one company may be trying to service far too many markets.
Extension to larger standard ERP solution – This is where the trend seems to be today. It is similar to the Everything but financials group with more reliance on the ERP solution for core business processes. In this model the application handles only the parts of your business that is truly unique – MSDS, scheduling by formula, formula management. It is not trying to handle order entry, purchasing, inventory or financials. The groups doing this are highly focused on the formula manufacturing parts of the solution and leave the routine transactions to the standard ERP solution. The reason this is a new development is that ERP solutions have gotten to a place in technology where they can accept third party applications into their suite of offerings. This was a huge technology change that began in the late 1990s and really picked up speed in the early 2000s . Now it is common place for software developers to leverage the work done by very large ERP developers and focus on what they do best. Some examples include Vicinity (Dynamics GP, SL and NAV), O2/EscapeVelocity (MAS500), JustFoodERP (Dynamics NAV), and Fullscope (Dynamics AX). Biggest benefit – significant resources are in both standard ERP and vertical requirements. Biggest drawback – upgrades need to be coordinated by your local reseller.
In 1,500 words or less I have attempted to group the software solutions for you. Each has merits to consider. Each has legacy to look into. For my money I would look for the solution that addresses your needs today, is easy to use and has the ability to change as your business changes around the corner.
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