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Integrated manufacturing: developing your strategy
Integrated manufacturing: developing your strategy IAN P WILLIAMSON
Abstract: This paper argues the need for flexibility, in the form of integrated manufacturing (IM), in order to compete effectively in today's highly volatile business environment. It seeks to clarify a definition of IM and reviews the benefits gained, the obstacle encountered and explains how to develop an IM strategy by adopting a structured planning process. The key issues are consolidated by reviewing the use of IM planning in two very different companies. Keywords: integrated manufacturing, strategy, information, flexibility.
i
f a company is to grow then it must have competi-
tive advantage; it must perform better than its competitors in some aspect important to its potential customers. Competition, whether domestic or foreign, is driving the factors of customer satisfaction in opposite directions. Competition is driving prices down whilst requiring that we provide customers with increased quality and levels of service, and to compound an already complex situation, product life cycles are being dramatically reduced. Competing in this kind of environment is obviously very difficult. Every company is undertaking efficiency programmes of some kind to try to compete more effectively. It is, however, often possible to distil this review into three basic tasks which have to be performed in order to compete more effectively: • reduce the time required to get information and material to the right place in the organization; • increase the accuracy of the information passed between the various parts of an organization and reduce the number of errors that may occur; and • reduce the time required to perform each individual process.
NCR Europe Ltd, International House, 7 High Street, Ealing, London W5 5DB, UK Paper received: 11 July 1990
The emphasis is switching to managing time and not just costs, ideally what is needed is a mechanism for attacking all three targets.
Simultaneous engineering of product and process As a first step in this mammoth task tomorrows successful companies are now reassessing the entire manufacturing organization and are focusing great attention on every stage in the manufacturing process from marketing through distribution. They are asking 'are these functions flexible, or is the functional hierarchy building a series of "Chinese Walls" between departments?' The search is beginning for solutions to these issues. Product development lead times are usually compressed by involving all those that contribute to the product development, manufacturing and selling activities right from the start. The basic problem is that design and manufacturing engineers do not communicate well with each other. This must be eradicated. This is partly a technical problem, but more significantly it is a deep-seated cultural issue. For too long the manufacturing philosophy of 'if they can design it then we can make it' has held sway. There is no magic solution in the simultaneous engineering approach. The work input is the same. The important issue is that everybody is working together, aiming towards the same goals right from day one. In practice, a large number of companies have actually adopted the simultaneous engineering approach without actually realizing it. They have had to. The product design is often late and production engineers have started to determine the manufacturing process in order that production can start on the promised dates. The problem is that these activities are de-coupled. If we are to collapse design and develop lead times we need much more cross functional working. We do this by breaking down the traditional functional walls. Today's successful organizations have discovered that once the process starts, a momentum develops which can become a way of life. Product designers start working with focused manufacturing cells on the shopfloor to engineer quality into the product; procurement engineers actually get asked if they could
0951-5240/91/020091-07 © 1991 Butterworth-Heinemann Ltd Vol 4 No 2 May 1991
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obtain the bits to the right specification in time for the product launch and the development department move on to the shopfloor rather than sitting five miles away in splendid isolation! We must recognize that project team working which is what it is all about - is a different way of working than line management. It does not necessarily come naturally, as too many people are rewarded by success in their own limited functional discipline. But if we match reward to performance on a project as well as in running the day to day business then there is a chance that people would work together, talk together and share decisions. In many cases it is actually worth taking people out from line roles and putting them full time onto 'design to manufacturing' projects which they will then see as their main role in the firm. This is a tough decision to take, as the people we want on projects are the best prople and there aren't always enough high flyers to go around. So we need to build structures that recognize that team working requires commitment and openness and not necessarily just technical brilliance and a do-it-yourself mentality.
Human integration The human factors are often under estimated, but it is only with effective cross-functional working can we achieve managerial integration, and without managerial integration we cannot expect significant technological integration. IM is both of these, the two essential ingredients of successful integration. Many manufacturers, from the automotive giants downwards, have selectively invested in technologies such as CAD/CAM and MRPII. Although they usually provide some benefit, using these technologies in isolation is not the ultimate goal. The real goal must be the potential to integrate the many separate business and manufacturing functions.
What is IM? IM is an area of great confusion. Many different interpretations of IM exist and there are few exemplars to study and to learn from. One view is that: "IM is about the integrated application of computers, information and technological resources with people in such a manner that allows an organization to meet its current and future business objectives whilst providing the flexibility to change course". There are several key words in this definition, including integration, information and fexibility. IM is built around the integration of human capabilities and technological resources within an organization. It is this integration that makes IM difficult, different and important. Information is at the heart of integration. Increased amounts and accuracy of information are crucial to healthy organization. Flexibility is the formula whereby companies are building competitive
92
advantage because of their ability to react to the needs of the customer. IM is not just about automation, computers and software. Automation can provide many benefits and should be a part of IM, but, by itself, it is not IM. Similarly, computers are not IM. They are an instrument to facilitate the benefits of IM and the same is true for software. IM is not the same for every company and it is not transferable. Integrated manufacturing is a philosophy for making a factory more profitable. When the pace of innovation is slow, the best way to compete is to reduce costs using economies of scale. Manufacturers love to produce standard products in large quantities. Henry Ford got away with it for years, exploiting the experience curve as optimized in his famous phrase 'any colour you want, so long as it's black'. Dedicated lines of 'hard automation' equipment needed to be justified against long production runs which demanded long product-life cycles and stable markets. Such a stance in today's trading environment is likely to cause major problems and almost bankrupted Henry Ford! Hard automation produces rigidity in product design and often dampens the creative, entrepreneurial spirit. Products are designed in a normal way so they can be manufactured in the normal way. IM, however, provides competitive advantages other than cost, and lets a company compete using a different approach. IM delivers 'flexible' or 'soft' automation. It still generates many of the benefits of 'volume production' (even reduced unit labour costs) but, much more importantly, the company remains flexible enough to cope with frequent product changes and enhancements. IM will not necessarily enable an organization to manufacture a product at lower cost. What it does mean is that IM has the potential to help a company become more competitive in its market place. This new approach is often referred to as 'economies of scope'. With changing fashions compressing product life cycles, any company that can change with its customers and suppliers can gain great advantage over its competitors.
Benefits of IM The benefits of IM will vary greatly between companies; each company will have its own goals and seek to establish its own areas of competitive advantage. The IM approach may enable manufacturing to be transformed from a cost centre and a drag on competitive strategy to becoming a valuable competitive tool. Figure 1 shows a summary of some of the results found by the National Academy of Sciences Manufacturing studies. However, the improvements from any IM project will depend upon the goals established and how well IM is planned and implemented. To gain these benefits is not easy. There are a number of major hurdles which need to be overcome.
Computer-Integrated Manufacturing Systems
IM planning methodology 30-60% Reduce overall lead time (Yield) 200-500% Increase product quality 15-30% Reduce engineering design cost 300-3500% Increase engineering analysis capability Increase production facility output 40-70% 200-300% Increase capital equipment uptime 30-60% Reduce work-in-progress 5-20% Reduce personnel costs
~ Competitiveenvironment evaluation
IMarchitecturedefinition )
Implementationplan )
I
Figure 1. Benefits of lM quantified
Figure 2. Six stages of lM planning
There is a high level of investment involved and it is extremely difficult, in many cases, to justify that level of expenditure (and degree of risk) using traditional methods. There is a level of uncertainty about exactly what the benefits are going to be and about how the organization is going to react to such change. The very long time scales associated with IM projects also introduce a degree of uncertainty. Often it will be necessary to deal with an incomplete picture, involving the consideration of developing technologies. Not all the elements required for an IM environment will be available off the shelf. Technologies are changing so rapidly that it may be necessary to plan to use technologies that have not been proven in the field. One misconception is that IM is only for major companies because only they have the resources to develop and implement state-of-the-art technologies. This is clearly nonsense. There are potential benefits to many companies regardless of size; £5M turnover and growing at 20% IM must at least be on the boardroom agenda!
Two of the reasons why many companies hesitate when considering IM are the complex technologies involved and the shortage of the skills necessary to undertake the project successfully. IM requires both a broad business orientated knowledge and technical expertise. It is crucial that these skills are combined if the planning phase is to be executed properly. The consequences of making wrong decisions during an IM project may be so great, as to permanently damage a company's competitive position. It may, therefore, be right to hesitate!
The six phases in IM planning The approach to IM planning shown in Figure 2 has proved successful. The first stage is the development of an IM strategy, that is, the conversion of a company's competitive information and competitive environment analysis into a strategy for an IM organization. The second stage is the conversion of these requirements into specific architectures, project plans and implementation schedules.
Designing and implementing an IM strategy Because success in the market-place is determined by customers, in order to reap the benefit of IM the plan must be customer driven. The process must be top-down, not bottom-up. Technology specialists alone should not be the people who decide how an organization is going to support and respond to the needs of its customers. A primary consideration must be the existing operation. What's there now? What capabilities does it have? What are the current plans for new equipment? This is a very important step in shaping an IM plan. It is important also to consider the capabilities of new technologies that may be used. What can the latest CAD systems do? What can a modern CNC machine do? What's just over the horizon? All these things must be considered. We have to be able to convert the factors which are important to being competitive (whether that's service, quality, delivery time, or whatever) into a new architecture for an organization. This new design must be something that can be realistically implemented. It has to use technologies that are available and which have worked in practice.
Vol 4 No 2 May 1991
Phase 1. Competitive environment evaluation (see Figure3) The start of the planning process centres around the evaluation of the company's competitive environment, starting with a review of the company's business plan. This plan must be well defined before IM planning can begin. It is necessary to examine not only the characteristics of the market in which the company operates now, but to explore also the potential new markets IM may open. What does a customer need and desire? What are competitors like? How much influence do they have in the marketplace? Who are phase
Competitiveenvironment~ _(~ evaluation
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Figure 3. Phase 1: competitive environment evaluation
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your suppliers and your competitors' suppliers? What pressures can they exert? All of these things need to be evaluated and understood before an effective IM plan can be developed. The business and marketing plans will be reviewed in order to gain an understanding of the goals and manufacturing's role in achieving corporate objectives. Past experience has shown that it is important for these plans to be well defined before IM planning begins. This review is best conducted through structured interviews with senior executives and reviews of relevant documentation. The analysis should identify key strategy components, identify the manufacturing implications of the business and marketing objectives and assess the compatibility of strategies and market characteristics. This competitive environment evaluation should identify and prioritize existing and potential customers' needs and desires, generate a portfolio of competitors and their influence in the marketplace. The outcome of this is a prioritized set of order winning criteria for each main product/market grouping, which influences the customer's buying decisions. These may include cost, functionality, delivery lead time, reliability, quality, etc. It is these factors which the customer considers to be important when making his purchasing decisions and thus it is in these areas where you have 'leverage' on your customer.
Phase 2. Manufacturing diagnostic review (see Figure 4) Unless special circumstances are involved, it is unlikely that an organization will be starting from a green-field situation. It is important, therefore, that the existing technologies are reviewed to establish the potential for up-grading existing machines and the retrofit of ancillary equipment, e.g. new controllers, plcs. The first stage of the manufacturing diagnostic review is to examine the technologies in use. This technology review should be much more than a cataloguing of the existing machine tools. It should examine the way in which the technologies are used and their application. To be truly effective the review should focus not just on manufacturing, but embrace those functions that interfact directly with manufacturing, i.e. production engineering, process planning, jig and tool design, production control.
Phases
Tasks
Major dellvarabk~ tomorrows 'do wells'
The review should cover: • the number, size, age and capacities of existing facilities, • core and sensitive processes, • facilities layout and the overall use of space, • environmental restrictions, • flexibility to cope with variants, specials and spares, • set up times, • yields and scrap rates, and • existing automation and computer systems. The company should identify best practice and incorporate the experience of other industries. To achieve maximum benefit, a company should identify and concentrate on those activities within the organization which could potentially influence the purchasing decisions of a customer, often referred to as 'drivers' or 'do wells'. By using these 'do wells' it is possible to quantify the improvement potential. It is important that a holistic approach is used, IM must be planned as one task and must be justified as a whole. An indication of the types of techniques and technologies that could help improve a particular activity should also be generated. This phase identifies the opportunities for improvement throughout the organization, and undertakes a cost benefit analysis of the new solutions that have been identified. Opportunities for simplifying the complex area of manufacturing and control are often identified during this process. The manufacturing diagnostic review typically embraces many of the following areas: • productive capacity and utilization, • processes; including process methods and procedures, batch sizes, run times, materials and people, • infrastructure; including work structures, responsibilities and the degree of autonomy, • the systems in use, including both computer and manual based, • aspects of the human resources, including skills profile, labour availability and versatility and training, • quality assurance and control procedures including systems and responsibilities and vendor assessment, • the product portfolio, including customization, standardization, structures and materials selection, • existing performance indicators such as delivery performance and lead times, the number of stockouts, bottleneck effectiveness and material utilization, and • the use of space for non-value added activities.
Phase 3. IM strategy development (see Figure 5)
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f\_potential & technologies
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cost/benefit potential o1 new technolo$ies
order winning crlterla
Figure 4. Phase2: manufacturing diagnostic review
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Frequently, many opportunities for simplifying the complex area of manufacturing and control can be identified during this IM planning process. Such simplification can often generate many important
Computer-Integrated Manufacturing Systems
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Figure 5. Phase 3: IM strategy development benefits for little capital investment. Any opportunities for simplification should be discussed and implemented as appropriate. Simplifying the manufacturing process also dramatically improves the chances of achieving a successful IM implementation. Other short term confidence gaining projects undertaken under the IM umbrella may include: • • • •
reduction of work in progress, localized quality improvements, productivity improvements, and improvements in material handling techniques.
This phase of developing an IM strategy involves the conversion of individual opportunities into a cohesive strategy covering the entire organization. The findings developed in the manufacturing diagnostic review are prioritized in the light of the competitive environment analysis. The result is a company-wide strategy that states what a company wants to achieve and the methods it will use to achieve it. The improvement potential is quantified using an overall or holistic cost/benefit analysis. It is inappropriate to consider a piecemeal approach to expenditure as this does not realize the true potential benefits. For example, the real benefits from CADCAM far exceed those associated solely with drawing office productivity. This element draws upon all the previous elements of IM planning and converts the individual opportunities into a cohesive strategy covering the entire organization. The result is a company-wide IM strategy that states the company's desired achievements and the methods most likely to be used to achieve its objectives. The strategy will focus the company's manufacturing resources in those areas that will provide competitive advantage and improve operating effectiveness. The strategy will contain IM objectives, long-term approaches to IM and specific short-term 'tactics' to imporment these approaches. Short-term improvement opportunities used to part fund the IM programme and to overcome more immediate operational problems should also be highlighted. The strategy will focus on process improvement, productivity improvement, material flow and information flow, and, in particular: • outline of technology investments, • automation (FMS/FMC), • integration between functions, e.g. design and manufacturing, • inventory policies (e.g. MRP-II and JIT), • workflows and material handling techniques,
Vol 4 No 2 May 1991
Figure 6: Phase 4: IM architecture definition • modifications to the organizational infrastructure, • information systems requirements, and • skills and implementation resources needed. The formulation of the IM strategy completes the first stage of the IM planning process.
Phase 4. IM architecture definition (see Figure 6) Converting this outline plan into a workable, detailed plan specifying the necessary IM architecture is at the heart of the fourth phase. Only at this stage is it necessary to define: a hardware architecture; the data path; and the communications architecture. Most importantly, it is necessary to define the organizational requirements for an IM environment.
Technology refinement: In this stage a detailed specification of the capabilities, costs and requirements of each technology is generated and a review of major vendors performed in order to present a clear understanding of the specific capabilitues currently available. Definition of facilities requirements: Any required changes in facilities must be defined. This should primarily include any proposed re-arrangement of machine tools and ancillary equipment necessary. If appropriate a block layout of the proposed factory layout should be generated. Definition of hardware and network architecture: In this element the general requirements for the computer hardware to be used should be defined. These requirements include type, size and quantity of hardware devices. This will examine corporate, departmental and shop floor requirements. Similarly the network architecture should be defined. Define organizational requirements: In this important task the changes in the corporate workforce are highlighted. Experience has shown that the people aspects are frequently underestimated in importance. IM will make major changes to the work content of many job descriptions; the scope of change is not limited only to shopfloor staff, many management jobs will change as well. Phase 5. IM pro}ect descriptions (see Figure 7) Individual project descriptions which detail the IM system characteristics and functions need to be
95
plmme
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Figure 8. Phase 6: implementation plan
provided. Specific projects might include preparing of bid specifications, development of detailed software specifications, etc. Each project needs to have its own technical, commercial and strategic objectives, but they should be under the IM umbrella.
Phase 6. Implementation plan (see Figure 8) The last phase of IM planning requires the development of an overall implementation plan which, together with individual plans, detail projects to be implemented, their timing, sequence and the human and financial resources required to successfully achieve IM. Contingency plans also need to be developed to counteract the effects of the technical and management problems likely to be encountered. Working through these six phases provides a logical approach to formulating a comprehensive IM strategy.
IM planning in action Many of the issues that we have raised can be demonstrated by the two examples of IM planning outlined below. The first example concerns a design lead, high technology organization currently employing some 300 people. It produces a small number of high value, highly customized, complex electro-mechanical machines. The first phase of its IM programme showed that the company's competitive environment had recently become very much more difficult as a result of changing demands from the electronics industry and an increase in the number and strength of competitors offering similar products. The company's business plan stated, however, that the company was to become the leader in the markets in which it competes. To achieve this goal the company needed to: • • • •
96
reduce the cost of manufacture of some machines, improve product quality and reliability, respond to last minute customization, achieve shorter delivery times and deliver on time, every time.
The directors felt that the company would suffer dramatically if something was not done to reverse the worsening situation. The second phase revealed that the company had introduced computers into a number of areas to address specific business problems; some modern manufacturing plant was also in use. The primary goals necessary to maintain a competitive edge were: to be able to 'assemble to order' within three weeks and to reduce overall lead times from six months to eight weeks. This meant that significant improvements in machine design were needed and production processes had to undergo radical changes. Many support activities also needed to be much more responsive. The technologies that we identified were, in order of perceived importance; sophisticated MRP II, 3D CAD and an integrated technical publication system (TP). The costs, benefits and the mandatory and desirable features of each technology were identified. Determining how these individual technologies could be exploited by every function throughout the organization was at the heart of the third phase. For example, the aspects of design included; design for efficient manufacture and assembly, customization, engineering change, product structures and modularity, part numbering and the generation of parts lists. The separate technologies and opportunities were brought together (in phase 4) and the appropriate computer systems determined. They included; a mini computer for the MRP II system, distributed workstations accessing a central designs database for the CAD system and high performance PCs for technical publications. All systems were able to exchange data; in particular graphical information between design and TP, and parts list and BOM data between all three systems. Communication was facilitated by a company wide network. The people aspects were very important and the most significant included: • greater involvement and commitment from sales, • greater involvement of design in assessing the impact of design changes and customization, and • the development of product orientated multidisciplinary design and manufacturing teams. During the penultimate phase the individual project descriptions were developed and in-depth feasibility and selection programmes undertaken. In the final phase the implementation priorities were identified and agreed, they included: • • • • •
creating a master production schedule, product focus in design and assembly, implementing MRP II, defining product structures, and implementing CAD and TP.
Although the programme is still underway, the company feels that it has already gained many
Computer-Integrated Manufacturing Systems
significant benefits from the increased communication that resulted from undertaking the IM planning. It expects many strategic benefits to be generated within the next twelve months. The second example shows IM planning in action in a very different environment. This company has only 60 employees and is designing hundreds of products a year which may be manufactured in hundreds of thousands. The company is profitable and has full order books but needs to control its rapid growth. An analysis of its competitive environment showed that it is highly regarded in a specialists area, but that if it was to penetrate the markets vital for strategic growth it would have to offer a 48 hour design and prototype lead time, generate quotations with great accuracy and manufacture right first time. The diagnostic review showed that the company had extensive design skills and considerable expertise in manufacturing, however, it was taking too long to generate standard designs and to produce working prototypes (either by hand or by using production machines). The flow of work through the factory needed to be improved dramatically. This phase showed that the company needed tools to: • automate the routine elements of design and release more time for creative design, • generate samples directly from design data, thus eliminating interruptions to production and the need for dies, • generate full size die layout drawings, thereby reducing sub-contract times and bringing activities in-house, • generate accurate estimating layouts and estimates, and • improve shopfloor planning and control. For the foreseeable future it was decided that the systems should not be fully integrated. However, design and estimating were integrated using a simple
Vol 4 No 2 May 1991
network to facilitate file transfer. The costs and potential benefits of fully integrating the systems are periodically under review. An overall implementation programme that embraced all three systems was developed. In this case it was decided that many strategic benefits could be generated from installing CAD and MRP II.
True potential for IM By using an integrated manufacturing approach a company can out manoeuvre its competitors by aiming for the goal of total customer satisfaction. It is important to start by addressing the corporate needs at a strategic level rather than by purchasing individual technologies to solve specific problems in an isolated manner. Planning for IM is no different from other strategic company projects. The scope for change is greater and many dramatic changes to traditional working methods are required. IM focuses not only on technology but places considerable emphasis on people. Planning must be top-down, with the full commitment of senior staff, and implemented bottom-up with the co-operation of all. Above all, management must understand that implementing IM is not simply about installing equipment, but involves all company functions in defining how systems, both manual and computer, will be exploited. The wide scope of IM and the close contact between different company functions will generate a truly multi-disciplinary working environment where staff with different primary skills will work as one. So far few companies have achieved IM, usually most are talking about integrating a few specific activities. This may represent a start towards true IM, but it is important to determine the corporate needs for IM by planning in an exacting and methodical way. The first, and the most crucial, step towards successful IM is comprehensive IM planning.
97
Abstract: This paper argues the need for flexibility, in the form of integrated manufacturing (IM), in order to compete effectively in today's highly volatile business environment. It seeks to clarify a definition of IM and reviews the benefits gained, the obstacle encountered and explains how to develop an IM strategy by adopting a structured planning process. The key issues are consolidated by reviewing the use of IM planning in two very different companies. Keywords: integrated manufacturing, strategy, information, flexibility.
i
f a company is to grow then it must have competi-
tive advantage; it must perform better than its competitors in some aspect important to its potential customers. Competition, whether domestic or foreign, is driving the factors of customer satisfaction in opposite directions. Competition is driving prices down whilst requiring that we provide customers with increased quality and levels of service, and to compound an already complex situation, product life cycles are being dramatically reduced. Competing in this kind of environment is obviously very difficult. Every company is undertaking efficiency programmes of some kind to try to compete more effectively. It is, however, often possible to distil this review into three basic tasks which have to be performed in order to compete more effectively: • reduce the time required to get information and material to the right place in the organization; • increase the accuracy of the information passed between the various parts of an organization and reduce the number of errors that may occur; and • reduce the time required to perform each individual process.
NCR Europe Ltd, International House, 7 High Street, Ealing, London W5 5DB, UK Paper received: 11 July 1990
The emphasis is switching to managing time and not just costs, ideally what is needed is a mechanism for attacking all three targets.
Simultaneous engineering of product and process As a first step in this mammoth task tomorrows successful companies are now reassessing the entire manufacturing organization and are focusing great attention on every stage in the manufacturing process from marketing through distribution. They are asking 'are these functions flexible, or is the functional hierarchy building a series of "Chinese Walls" between departments?' The search is beginning for solutions to these issues. Product development lead times are usually compressed by involving all those that contribute to the product development, manufacturing and selling activities right from the start. The basic problem is that design and manufacturing engineers do not communicate well with each other. This must be eradicated. This is partly a technical problem, but more significantly it is a deep-seated cultural issue. For too long the manufacturing philosophy of 'if they can design it then we can make it' has held sway. There is no magic solution in the simultaneous engineering approach. The work input is the same. The important issue is that everybody is working together, aiming towards the same goals right from day one. In practice, a large number of companies have actually adopted the simultaneous engineering approach without actually realizing it. They have had to. The product design is often late and production engineers have started to determine the manufacturing process in order that production can start on the promised dates. The problem is that these activities are de-coupled. If we are to collapse design and develop lead times we need much more cross functional working. We do this by breaking down the traditional functional walls. Today's successful organizations have discovered that once the process starts, a momentum develops which can become a way of life. Product designers start working with focused manufacturing cells on the shopfloor to engineer quality into the product; procurement engineers actually get asked if they could
0951-5240/91/020091-07 © 1991 Butterworth-Heinemann Ltd Vol 4 No 2 May 1991
91
obtain the bits to the right specification in time for the product launch and the development department move on to the shopfloor rather than sitting five miles away in splendid isolation! We must recognize that project team working which is what it is all about - is a different way of working than line management. It does not necessarily come naturally, as too many people are rewarded by success in their own limited functional discipline. But if we match reward to performance on a project as well as in running the day to day business then there is a chance that people would work together, talk together and share decisions. In many cases it is actually worth taking people out from line roles and putting them full time onto 'design to manufacturing' projects which they will then see as their main role in the firm. This is a tough decision to take, as the people we want on projects are the best prople and there aren't always enough high flyers to go around. So we need to build structures that recognize that team working requires commitment and openness and not necessarily just technical brilliance and a do-it-yourself mentality.
Human integration The human factors are often under estimated, but it is only with effective cross-functional working can we achieve managerial integration, and without managerial integration we cannot expect significant technological integration. IM is both of these, the two essential ingredients of successful integration. Many manufacturers, from the automotive giants downwards, have selectively invested in technologies such as CAD/CAM and MRPII. Although they usually provide some benefit, using these technologies in isolation is not the ultimate goal. The real goal must be the potential to integrate the many separate business and manufacturing functions.
What is IM? IM is an area of great confusion. Many different interpretations of IM exist and there are few exemplars to study and to learn from. One view is that: "IM is about the integrated application of computers, information and technological resources with people in such a manner that allows an organization to meet its current and future business objectives whilst providing the flexibility to change course". There are several key words in this definition, including integration, information and fexibility. IM is built around the integration of human capabilities and technological resources within an organization. It is this integration that makes IM difficult, different and important. Information is at the heart of integration. Increased amounts and accuracy of information are crucial to healthy organization. Flexibility is the formula whereby companies are building competitive
92
advantage because of their ability to react to the needs of the customer. IM is not just about automation, computers and software. Automation can provide many benefits and should be a part of IM, but, by itself, it is not IM. Similarly, computers are not IM. They are an instrument to facilitate the benefits of IM and the same is true for software. IM is not the same for every company and it is not transferable. Integrated manufacturing is a philosophy for making a factory more profitable. When the pace of innovation is slow, the best way to compete is to reduce costs using economies of scale. Manufacturers love to produce standard products in large quantities. Henry Ford got away with it for years, exploiting the experience curve as optimized in his famous phrase 'any colour you want, so long as it's black'. Dedicated lines of 'hard automation' equipment needed to be justified against long production runs which demanded long product-life cycles and stable markets. Such a stance in today's trading environment is likely to cause major problems and almost bankrupted Henry Ford! Hard automation produces rigidity in product design and often dampens the creative, entrepreneurial spirit. Products are designed in a normal way so they can be manufactured in the normal way. IM, however, provides competitive advantages other than cost, and lets a company compete using a different approach. IM delivers 'flexible' or 'soft' automation. It still generates many of the benefits of 'volume production' (even reduced unit labour costs) but, much more importantly, the company remains flexible enough to cope with frequent product changes and enhancements. IM will not necessarily enable an organization to manufacture a product at lower cost. What it does mean is that IM has the potential to help a company become more competitive in its market place. This new approach is often referred to as 'economies of scope'. With changing fashions compressing product life cycles, any company that can change with its customers and suppliers can gain great advantage over its competitors.
Benefits of IM The benefits of IM will vary greatly between companies; each company will have its own goals and seek to establish its own areas of competitive advantage. The IM approach may enable manufacturing to be transformed from a cost centre and a drag on competitive strategy to becoming a valuable competitive tool. Figure 1 shows a summary of some of the results found by the National Academy of Sciences Manufacturing studies. However, the improvements from any IM project will depend upon the goals established and how well IM is planned and implemented. To gain these benefits is not easy. There are a number of major hurdles which need to be overcome.
Computer-Integrated Manufacturing Systems
IM planning methodology 30-60% Reduce overall lead time (Yield) 200-500% Increase product quality 15-30% Reduce engineering design cost 300-3500% Increase engineering analysis capability Increase production facility output 40-70% 200-300% Increase capital equipment uptime 30-60% Reduce work-in-progress 5-20% Reduce personnel costs
~ Competitiveenvironment evaluation
IMarchitecturedefinition )
Implementationplan )
I
Figure 1. Benefits of lM quantified
Figure 2. Six stages of lM planning
There is a high level of investment involved and it is extremely difficult, in many cases, to justify that level of expenditure (and degree of risk) using traditional methods. There is a level of uncertainty about exactly what the benefits are going to be and about how the organization is going to react to such change. The very long time scales associated with IM projects also introduce a degree of uncertainty. Often it will be necessary to deal with an incomplete picture, involving the consideration of developing technologies. Not all the elements required for an IM environment will be available off the shelf. Technologies are changing so rapidly that it may be necessary to plan to use technologies that have not been proven in the field. One misconception is that IM is only for major companies because only they have the resources to develop and implement state-of-the-art technologies. This is clearly nonsense. There are potential benefits to many companies regardless of size; £5M turnover and growing at 20% IM must at least be on the boardroom agenda!
Two of the reasons why many companies hesitate when considering IM are the complex technologies involved and the shortage of the skills necessary to undertake the project successfully. IM requires both a broad business orientated knowledge and technical expertise. It is crucial that these skills are combined if the planning phase is to be executed properly. The consequences of making wrong decisions during an IM project may be so great, as to permanently damage a company's competitive position. It may, therefore, be right to hesitate!
The six phases in IM planning The approach to IM planning shown in Figure 2 has proved successful. The first stage is the development of an IM strategy, that is, the conversion of a company's competitive information and competitive environment analysis into a strategy for an IM organization. The second stage is the conversion of these requirements into specific architectures, project plans and implementation schedules.
Designing and implementing an IM strategy Because success in the market-place is determined by customers, in order to reap the benefit of IM the plan must be customer driven. The process must be top-down, not bottom-up. Technology specialists alone should not be the people who decide how an organization is going to support and respond to the needs of its customers. A primary consideration must be the existing operation. What's there now? What capabilities does it have? What are the current plans for new equipment? This is a very important step in shaping an IM plan. It is important also to consider the capabilities of new technologies that may be used. What can the latest CAD systems do? What can a modern CNC machine do? What's just over the horizon? All these things must be considered. We have to be able to convert the factors which are important to being competitive (whether that's service, quality, delivery time, or whatever) into a new architecture for an organization. This new design must be something that can be realistically implemented. It has to use technologies that are available and which have worked in practice.
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Phase 1. Competitive environment evaluation (see Figure3) The start of the planning process centres around the evaluation of the company's competitive environment, starting with a review of the company's business plan. This plan must be well defined before IM planning can begin. It is necessary to examine not only the characteristics of the market in which the company operates now, but to explore also the potential new markets IM may open. What does a customer need and desire? What are competitors like? How much influence do they have in the marketplace? Who are phase
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your suppliers and your competitors' suppliers? What pressures can they exert? All of these things need to be evaluated and understood before an effective IM plan can be developed. The business and marketing plans will be reviewed in order to gain an understanding of the goals and manufacturing's role in achieving corporate objectives. Past experience has shown that it is important for these plans to be well defined before IM planning begins. This review is best conducted through structured interviews with senior executives and reviews of relevant documentation. The analysis should identify key strategy components, identify the manufacturing implications of the business and marketing objectives and assess the compatibility of strategies and market characteristics. This competitive environment evaluation should identify and prioritize existing and potential customers' needs and desires, generate a portfolio of competitors and their influence in the marketplace. The outcome of this is a prioritized set of order winning criteria for each main product/market grouping, which influences the customer's buying decisions. These may include cost, functionality, delivery lead time, reliability, quality, etc. It is these factors which the customer considers to be important when making his purchasing decisions and thus it is in these areas where you have 'leverage' on your customer.
Phase 2. Manufacturing diagnostic review (see Figure 4) Unless special circumstances are involved, it is unlikely that an organization will be starting from a green-field situation. It is important, therefore, that the existing technologies are reviewed to establish the potential for up-grading existing machines and the retrofit of ancillary equipment, e.g. new controllers, plcs. The first stage of the manufacturing diagnostic review is to examine the technologies in use. This technology review should be much more than a cataloguing of the existing machine tools. It should examine the way in which the technologies are used and their application. To be truly effective the review should focus not just on manufacturing, but embrace those functions that interfact directly with manufacturing, i.e. production engineering, process planning, jig and tool design, production control.
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The review should cover: • the number, size, age and capacities of existing facilities, • core and sensitive processes, • facilities layout and the overall use of space, • environmental restrictions, • flexibility to cope with variants, specials and spares, • set up times, • yields and scrap rates, and • existing automation and computer systems. The company should identify best practice and incorporate the experience of other industries. To achieve maximum benefit, a company should identify and concentrate on those activities within the organization which could potentially influence the purchasing decisions of a customer, often referred to as 'drivers' or 'do wells'. By using these 'do wells' it is possible to quantify the improvement potential. It is important that a holistic approach is used, IM must be planned as one task and must be justified as a whole. An indication of the types of techniques and technologies that could help improve a particular activity should also be generated. This phase identifies the opportunities for improvement throughout the organization, and undertakes a cost benefit analysis of the new solutions that have been identified. Opportunities for simplifying the complex area of manufacturing and control are often identified during this process. The manufacturing diagnostic review typically embraces many of the following areas: • productive capacity and utilization, • processes; including process methods and procedures, batch sizes, run times, materials and people, • infrastructure; including work structures, responsibilities and the degree of autonomy, • the systems in use, including both computer and manual based, • aspects of the human resources, including skills profile, labour availability and versatility and training, • quality assurance and control procedures including systems and responsibilities and vendor assessment, • the product portfolio, including customization, standardization, structures and materials selection, • existing performance indicators such as delivery performance and lead times, the number of stockouts, bottleneck effectiveness and material utilization, and • the use of space for non-value added activities.
Phase 3. IM strategy development (see Figure 5)
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Frequently, many opportunities for simplifying the complex area of manufacturing and control can be identified during this IM planning process. Such simplification can often generate many important
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Figure 5. Phase 3: IM strategy development benefits for little capital investment. Any opportunities for simplification should be discussed and implemented as appropriate. Simplifying the manufacturing process also dramatically improves the chances of achieving a successful IM implementation. Other short term confidence gaining projects undertaken under the IM umbrella may include: • • • •
reduction of work in progress, localized quality improvements, productivity improvements, and improvements in material handling techniques.
This phase of developing an IM strategy involves the conversion of individual opportunities into a cohesive strategy covering the entire organization. The findings developed in the manufacturing diagnostic review are prioritized in the light of the competitive environment analysis. The result is a company-wide strategy that states what a company wants to achieve and the methods it will use to achieve it. The improvement potential is quantified using an overall or holistic cost/benefit analysis. It is inappropriate to consider a piecemeal approach to expenditure as this does not realize the true potential benefits. For example, the real benefits from CADCAM far exceed those associated solely with drawing office productivity. This element draws upon all the previous elements of IM planning and converts the individual opportunities into a cohesive strategy covering the entire organization. The result is a company-wide IM strategy that states the company's desired achievements and the methods most likely to be used to achieve its objectives. The strategy will focus the company's manufacturing resources in those areas that will provide competitive advantage and improve operating effectiveness. The strategy will contain IM objectives, long-term approaches to IM and specific short-term 'tactics' to imporment these approaches. Short-term improvement opportunities used to part fund the IM programme and to overcome more immediate operational problems should also be highlighted. The strategy will focus on process improvement, productivity improvement, material flow and information flow, and, in particular: • outline of technology investments, • automation (FMS/FMC), • integration between functions, e.g. design and manufacturing, • inventory policies (e.g. MRP-II and JIT), • workflows and material handling techniques,
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Figure 6: Phase 4: IM architecture definition • modifications to the organizational infrastructure, • information systems requirements, and • skills and implementation resources needed. The formulation of the IM strategy completes the first stage of the IM planning process.
Phase 4. IM architecture definition (see Figure 6) Converting this outline plan into a workable, detailed plan specifying the necessary IM architecture is at the heart of the fourth phase. Only at this stage is it necessary to define: a hardware architecture; the data path; and the communications architecture. Most importantly, it is necessary to define the organizational requirements for an IM environment.
Technology refinement: In this stage a detailed specification of the capabilities, costs and requirements of each technology is generated and a review of major vendors performed in order to present a clear understanding of the specific capabilitues currently available. Definition of facilities requirements: Any required changes in facilities must be defined. This should primarily include any proposed re-arrangement of machine tools and ancillary equipment necessary. If appropriate a block layout of the proposed factory layout should be generated. Definition of hardware and network architecture: In this element the general requirements for the computer hardware to be used should be defined. These requirements include type, size and quantity of hardware devices. This will examine corporate, departmental and shop floor requirements. Similarly the network architecture should be defined. Define organizational requirements: In this important task the changes in the corporate workforce are highlighted. Experience has shown that the people aspects are frequently underestimated in importance. IM will make major changes to the work content of many job descriptions; the scope of change is not limited only to shopfloor staff, many management jobs will change as well. Phase 5. IM pro}ect descriptions (see Figure 7) Individual project descriptions which detail the IM system characteristics and functions need to be
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provided. Specific projects might include preparing of bid specifications, development of detailed software specifications, etc. Each project needs to have its own technical, commercial and strategic objectives, but they should be under the IM umbrella.
Phase 6. Implementation plan (see Figure 8) The last phase of IM planning requires the development of an overall implementation plan which, together with individual plans, detail projects to be implemented, their timing, sequence and the human and financial resources required to successfully achieve IM. Contingency plans also need to be developed to counteract the effects of the technical and management problems likely to be encountered. Working through these six phases provides a logical approach to formulating a comprehensive IM strategy.
IM planning in action Many of the issues that we have raised can be demonstrated by the two examples of IM planning outlined below. The first example concerns a design lead, high technology organization currently employing some 300 people. It produces a small number of high value, highly customized, complex electro-mechanical machines. The first phase of its IM programme showed that the company's competitive environment had recently become very much more difficult as a result of changing demands from the electronics industry and an increase in the number and strength of competitors offering similar products. The company's business plan stated, however, that the company was to become the leader in the markets in which it competes. To achieve this goal the company needed to: • • • •
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reduce the cost of manufacture of some machines, improve product quality and reliability, respond to last minute customization, achieve shorter delivery times and deliver on time, every time.
The directors felt that the company would suffer dramatically if something was not done to reverse the worsening situation. The second phase revealed that the company had introduced computers into a number of areas to address specific business problems; some modern manufacturing plant was also in use. The primary goals necessary to maintain a competitive edge were: to be able to 'assemble to order' within three weeks and to reduce overall lead times from six months to eight weeks. This meant that significant improvements in machine design were needed and production processes had to undergo radical changes. Many support activities also needed to be much more responsive. The technologies that we identified were, in order of perceived importance; sophisticated MRP II, 3D CAD and an integrated technical publication system (TP). The costs, benefits and the mandatory and desirable features of each technology were identified. Determining how these individual technologies could be exploited by every function throughout the organization was at the heart of the third phase. For example, the aspects of design included; design for efficient manufacture and assembly, customization, engineering change, product structures and modularity, part numbering and the generation of parts lists. The separate technologies and opportunities were brought together (in phase 4) and the appropriate computer systems determined. They included; a mini computer for the MRP II system, distributed workstations accessing a central designs database for the CAD system and high performance PCs for technical publications. All systems were able to exchange data; in particular graphical information between design and TP, and parts list and BOM data between all three systems. Communication was facilitated by a company wide network. The people aspects were very important and the most significant included: • greater involvement and commitment from sales, • greater involvement of design in assessing the impact of design changes and customization, and • the development of product orientated multidisciplinary design and manufacturing teams. During the penultimate phase the individual project descriptions were developed and in-depth feasibility and selection programmes undertaken. In the final phase the implementation priorities were identified and agreed, they included: • • • • •
creating a master production schedule, product focus in design and assembly, implementing MRP II, defining product structures, and implementing CAD and TP.
Although the programme is still underway, the company feels that it has already gained many
Computer-Integrated Manufacturing Systems
significant benefits from the increased communication that resulted from undertaking the IM planning. It expects many strategic benefits to be generated within the next twelve months. The second example shows IM planning in action in a very different environment. This company has only 60 employees and is designing hundreds of products a year which may be manufactured in hundreds of thousands. The company is profitable and has full order books but needs to control its rapid growth. An analysis of its competitive environment showed that it is highly regarded in a specialists area, but that if it was to penetrate the markets vital for strategic growth it would have to offer a 48 hour design and prototype lead time, generate quotations with great accuracy and manufacture right first time. The diagnostic review showed that the company had extensive design skills and considerable expertise in manufacturing, however, it was taking too long to generate standard designs and to produce working prototypes (either by hand or by using production machines). The flow of work through the factory needed to be improved dramatically. This phase showed that the company needed tools to: • automate the routine elements of design and release more time for creative design, • generate samples directly from design data, thus eliminating interruptions to production and the need for dies, • generate full size die layout drawings, thereby reducing sub-contract times and bringing activities in-house, • generate accurate estimating layouts and estimates, and • improve shopfloor planning and control. For the foreseeable future it was decided that the systems should not be fully integrated. However, design and estimating were integrated using a simple
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network to facilitate file transfer. The costs and potential benefits of fully integrating the systems are periodically under review. An overall implementation programme that embraced all three systems was developed. In this case it was decided that many strategic benefits could be generated from installing CAD and MRP II.
True potential for IM By using an integrated manufacturing approach a company can out manoeuvre its competitors by aiming for the goal of total customer satisfaction. It is important to start by addressing the corporate needs at a strategic level rather than by purchasing individual technologies to solve specific problems in an isolated manner. Planning for IM is no different from other strategic company projects. The scope for change is greater and many dramatic changes to traditional working methods are required. IM focuses not only on technology but places considerable emphasis on people. Planning must be top-down, with the full commitment of senior staff, and implemented bottom-up with the co-operation of all. Above all, management must understand that implementing IM is not simply about installing equipment, but involves all company functions in defining how systems, both manual and computer, will be exploited. The wide scope of IM and the close contact between different company functions will generate a truly multi-disciplinary working environment where staff with different primary skills will work as one. So far few companies have achieved IM, usually most are talking about integrating a few specific activities. This may represent a start towards true IM, but it is important to determine the corporate needs for IM by planning in an exacting and methodical way. The first, and the most crucial, step towards successful IM is comprehensive IM planning.
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