Profit motive run amuck – Foreign vs. Domestic

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.

10 reasons manufacturing software projects fail

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.

Bar coding – the misunderstood technology

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.

Scheduling – How low will you go?

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.

Software for formula manufacturing

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.

Will the real Batchmaster please stand up?

From 1985 through 2000 Batchmaster software ruled the roost when it came to batch manufacturing software – especially for the paint industry. So what happened? What happened to the product and where does Batchmaster stand today?

Batchmaster currently is offered in two flavors – Batchmaster Enterprise by eWorkplace and Batchmaster Platinum by Sage. But how did we get there and what is the difference and why two Batchmasters?

Well I will shed some light.

Batchmaster was originally written in the 1980's by a company called Pacific Micro Software Engineering (Pacific Micro) and was owned by Randy Peck out of Seal Beach, CA. The initial product was called Batchmaster Plus and was a simple but effective laboratory management application written primarily to track master formulas and perform laboratory calculations that are pretty simple based on today's standards.

In 1992 Pacific Micro released a modular application and dropped the Plus from its name simply calling it Batchmaster. At the same time they renamed the company Batchmaster Sofware Corp (Batchmaster). This product offered modules for Inventory, Production, MSDS, Costing and the like. It also expanded its reach by integrating the industry leading accounting package at the time - Platinum DOS. Batchmaster handled the Production, Inventory, Purchasing, Order Entry and Platinum handled financials. This combination did rather well for Batchmaster and Platinum.

This was the time Batchmaster really expanded outside the paint industry and began focusing more broadly on batch manufacturing in general. Some say it was the beginning of the end – at least that is the opinion of many paint chemists.

In the mid 1990's it became apparent to most that Platinum was falling significantly behind the market in releasing their Windows product. So far behind that Platinum quickly relinquished its role as the dominant ERP solution to products such as Solomon, Great Plains and MAS 90. Platinum finally released a version of a windows product in the late 1990's but most would agree it was too little too late. The market had moved on and Platinum for Windows never really caught up.

Batchmaster was caught in this strategic mistake. The growing company had invested its future in the Platinum architecture of Pervasive.SQL and the look and feel of Platinum for Windows. With the sale of the flagship product Platinum (Windows and DOS) from the now public and rebranded Epicor (formerly Platinum Software Corp) to Sage (formerly Best formerly Sage) the writing was on the wall. For Batchmaster to succeed it must diversify away from Platinum.

While keeping significant development efforts in place to support Batchmaster Platinum – Batchmaster hired an outside firm to write an interface to Solomon. This ended up being a huge mistake and cost Batchmaster and others a lot of money. In the end the focus of Batchmaster was truly lost never to be recovered.

In 2000 Randy Peck (majority stockholder of Batchmaster Software Corporation) sold the company to an offshore development company interested in expanding its existing SQL based manufacturing solution (Optipro) into the batch manufacturing arena. They purchased all the assets and marketing rights to Batchmaster and began work converting their discrete product Optipro into a batch manufacturing solution to replace Batchmaster.

After one year of development and little to show for its efforts eWorkplace sold the Batchmaster Platinum product to Best. This move finally put Batchmaster Platinum and its 3,000 users together with the ERP solution – Platinum for Windows.

The odd part of this transaction was that Best did not purchased the Batchmaster brand but only the windows product and the windows users. Best had a right to market under the Batchmaster name for a limited time. That time has since run out and eWorkplace maintains the marketing rights to a product they do not own – Batchmaster Platinum.

At the time of the sale of Batchmaster from eWorkplace to Sage eWorkplace did not have a product to take to market. They had experienced significant resistance from the market for a product that was written for an assembly company and morphed into a batch manufacturing product. That resistance continues to this day.

Through time eWorkplace released their Optipro product. Instead of branding the product Optipro they went to market calling this altered product Batchmaster Enterprise. To this day eWorkplace claims their Batchmaster Enterprise product is the Batchmaster product most users recall. Unfortunately that is not the case.

The true Batchmaster that has earned its name and following is actually owned by Sage software. Unfortunately for us in the batch manufacturing industry Sage relegated that product to virtual extinction and has not yielded much in the way of new features since they owned the product. In effect that product is now dead.

So there you have it. The story is told and you are left to decide which is the true Batchmaster. In the end it really does not matter. Neither product lives up their own hype nor to the core functionality Randy Peck put into the very first product – Batchmaster Plus.

I hope this help reveal the mystery behind the legendary Batchmaster.

Certificate of Origin

One of the most recent advances in formula manufacturing compliance has been the advent of the Certificate of Origin. While this document has been around for years - starting in 2007 this document has taken on even more importance.

As United States companies increase their dependence on foreign suppliers the reliance on quality standards from remote locations also increases. Some countries will pay more attention to quality standards than others.

The Certificate of Origin provides at least a basic understanding the source of all components used to produce a product. Typically this report identifies the country and often the component in the formula. Data is captured by raw material components and the approved suppliers.

While this document does not speak directly to the quality of the product manufactured it does provide a basic understanding of the countries involved in the supply chain.

As more countries earn a reputation of lacking quality this document will be used by more companies in restricting approved suppliers.

As of the date of this entry very few applications actually address this compliance requirement. As time passes this document will become as standard as a Certificate of Analysis and should become a standard feature in most software.

If you are considering new formula managment and batch manufacturing software for your organization make sure it addresses this document. Automating this process will save you signifiant effort in the long run.