Manufacturing is becoming increasingly more complex as product lifecycles shrink and product mix grows, adding to the challenges of effectively managing in a globally expanding and dynamic market. Without adequate visibility to end-user demands and the ability to drive supply chain events to shop floor execution systems in real-time, manufacturers risk costly downtime due to the wrong product mix, material shortages or obsolete finished goods inventory as customer demands change.

As more manufacturing shifts to low-cost regions, visibility to events occurring in the supply chain becomes increasingly critical to the performance of the enterprise. Manufacturers must have real-time access to global enterprise information to help make better decisions and the ability to implement those decisions on the shop floor.

Lack of Supply Chain VisibilityHow can a company make smart decisions about what to produce when there is inadequate visibility at the enterprise business application level about what product is moving through manufacturing?

Creating a manufacturing plan that reflects real-world market conditions is unlikely when the data used to create it (typically based on a forecast) is old or non-existent. It is impossible to be responsive to dynamic events, such as an unexpected quality failure at a subcontractor, without a consolidated, real-time view of the enterprise. World-class manufacturing companies recognize that the ability to share real-time information across their extended manufacturing and supply chain network provides significant competitive advantage in terms of fulfilling customer demands and increasing profitability and shareholder value.

As manufacturing shifts from forecast-based planning to demand-based planning, companies are being driven to rethink how their manufacturing applications connect with other enterprise applications such as enterprise resource planning (ERP) and supply chain planning (SCP) systems. If a large distributor signals a demand change for a particular product, manufacturing must be able to adapt and respond in real-time to change production schedules and product mix to meet the new requirement. Providing greater visibility of real-time demand signals directly to the shop floor allows business managers to make more informed decisions.

The Gaps in Supply Chain and ERP

Current SCP and ERP applications were designed to improve enterprise operational efficiency. Yet, after millions of dollars of investment and implementation of these systems, manufacturers are still asking the fundamental, overarching question: What should I make?

While planning and supply chain systems have improved a manufacturer's efficiency, many of these enterprise systems exist within their own silo of information, unable to share real-time data with other enterprise systems. Additionally, manufacturing has been missing within enterprise strategies with most of the focus going toward supply chain optimization of existing finished goods. Typical supply chain solutions optimize the flow of finished goods through the supply chain network to the end customer. They do a good job determining the most efficient way to coordinate with all the supply chain resources, such as transportation, distribution and warehousing, as the product moves through the channel.

These strategies worked when manufacturing forecasts were accurate enough to meet market demands and product mix was lower, production volumes were higher and product lifecycles were longer. But beginning in the late 1990s this was no longer the case. As product lifecycles began to shrink and more product mix started moving through manufacturing, forecast-based manufacturing plans were no longer a valid predictor that finished goods inventory would be in synch with customer orders and demand. Unless manufacturers can link all of their strategic initiatives together in real-time, including planning ERP, product lifecycle management (PLM), manufacturing (Six-Sigma, lean) and their extended supply chain, enterprise performance will not achieve the levels of efficiency and profitability needed to survive in today's dynamic market.

Extending the Value of SCP and ERP Systems

SCP and ERP applications promise to use all of the relevant information in the enterprise and produce plans that allow the company to run at its optimum level of performance. However, once real-world market demands and variability are introduced, the plans these systems create are quickly out of date. For example, because of the batch processing nature of these systems, their output can be days or even weeks behind actual market events. This creates a system that is incapable of catching up and is perpetually unable to produce a plan that allows manufacturing to make the exact products for exactly the right customers within the exact timeframe.

Today's enterprise planning systems collect and analyze information based on assuming a high degree of predictability. This approach makes real-time event visibility and execution virtually impossible. Consider a sub-contractor who has a yield problem with a specific product. The status of the supplier's product is collected on a daily basis, but by the time this information arrives back into the manufacturer's master planning system, it could be two days late, or longer.

To further complicate this hypothetical example, imagine that the manufacturer just committed a delivery date to one of its best customers based on the assumed availability of the faulty part from its subcontractor. Changes in manufacturing status can occur by the hour or even the minute. The lack of real-time visibility and the inability to react to these types of common events prevents enterprise planning systems from providing the kind of information manufacturers need to make better business decisions.

Source: Sdcexec