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APICS logoWe reprised APICS writer David Turbide’s comments regarding the evolution of ERP from his recent APICS Magazine article in our first of this two-post series here.  Today we’ll see what he and APICS have to say about today’s systems and choices.

Turbide notes that topping the list of tools modern ERP suppliers now include in their product suites is enhanced analytics capability.  Dashboard indicators, business intelligence (BI) tools and deep drill-downs are becoming the norm today.  This encourages executives to have more interaction with their systems personally than in years past.  Data analysis tools – often involving Microsoft Excel at some point – are being enhanced with more powerful data visualization capabilities, a trend expected only to evolve further.  It makes decision makers more connected to the pulse of their organizations.

User interfaces (UIs) are likewise evolving.  We see this today in things like Microsoft Dynamics’ recent innovations in the area of the role-tailored client, which lets users focus only on what’s important to them, instead of seeing screens cluttered with other (and often irrelevant) menu options.  For a long time systems increasingly came to look like Microsoft Windows and in particular Office tools like Excel.  That’s still true, but it’s equally true now that they are starting to look more like websites.  Both design approaches serve the greater functionality of the user, with both built in to today’s UIs.

That UI is now moving into mobile as well.  (Here too, Microsoft recently announced availability for its Dynamics NAV product on tablets including iPad and Android devices, moving beyond pure Windows devices.)

And best of all, users will say, is the ability to search within an enterprise system for just about any piece of information they need, from just about any functional area or module.  Once again, UIs are delivering greater value to the user.

Turbide goes on to point out how today’s systems have evolved from a dozen or so modules to as many as 50 or 100 “apps” that can be stacked like blocks to form a tailored ERP solution for specific industries.  These (often third-party) adds-ins serve to further extend the functionality of today’s ERP offerings.  Meanwhile, the lines between ERP, supply chain and manufacturing execution systems (MES) are becoming fuzzy and less meaningful.  Overlaps occur between scheduling and quality as ERP encroaches into the MES domain by offering direct connection to machines and sensors.  Similarly, ERP has been gradually improving in other areas outside its traditional domain, like demand-planning ability, distribution and warehouse management bundled functionality.

In short, ERP continues to evolve, grow and spread its influence into more and more areas of the enterprise, encompassing an ever-greater share of the firm’s database of business intelligence.  That trend will only continue.  The benefit is that today’s buyer has greater choice in the tools and solutions available to them for managing the enterprise than ever before.  As Turbide concludes, “Today’s ERP is far and away more functional, flexible and capable than ever before.”  But if you look closely, you can still see the long heritage of providing the tools and automation that manufacturers need to run their business.  ERP evolves to keep pace with the changes in manufacturing that today’s global business demands.  Plus, as the article notes, there will always be the upstarts stoking the competitive fires as well.  All this bodes well for the continued innovation, integration and growth of business management and planning systems for the growing manufacturer.  And in so doing, will advance the entire industry.

 

 

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david turbideIn the current issue of APICS Magazine (Sep/Oct 2014) consultant and writer Dave Turbide (also an APICS state chapter president and CPIM master instructor, and pictured at left) has penned a few thoughts worth repeating on the evolution of ERP systems, their heritage and some of the challenges they face today.  We’ll devote our last two posts this month to Dave’s thoughts.

As Turbide points out, ERP planning is not what it was ten years ago, or even two years ago.  In fact, it’s merely “the current incarnation of a long line of offerings that date back to inventory management and bill of material software programs” first developed over 50 years ago.  Material requirements planning (MRP) begat manufacturing resource planning, eventually evolving into today’s Enterprise (ERP) systems.

Companies that adopted these systems in the 70s and 80s still use them today in many cases, but utilize new versions with added functionality and modules added along the way.  Occasionally, a major update occurs which can run from full code rewrites to new data tools, interfaces and connectivity options.  Today, new deployment methods are evolving, like cloud and proliferation of the new mobile technologies.

Software is typically released with enough functionality to distinguish it from competitive offerings, notes Turbide.  Eventually, the “feature-function rivalries” begin.  This quest to stay ahead is always good news for users, as ERP gets broader and deeper.

Meanwhile, the history of the ERP market itself is one of acquisitions.  Startups emerge and eventually get consumed by larger companies.   (Our own reselling firm has seen this in dramatic sweeps – only one product we sell today (out of four) is conveyed by its original publisher; large publishers like Infor, Sage and Microsoft predominate in the SMB space today, proffering products invented long ago, by others.)  Sometimes products are combined; sometimes features are borrowed; sometimes a “super ERP” becomes a logical upgrade path from many or all of the acquired products.  In the end, this evolution has led ERP to become the “preferred information management backbone for companies worldwide,” Turbide points out.

The article notes the adoption of software-as-a-service or cloud computing as yet another stage in ERP evolution, whereby technology resources like computers and servers are outsourced, since these aren’t typically within a manufacturer’s core competency.  The licensing method reduces up-front capital costs and the hardware can be scaled quickly to user requirements.

However, manufacturing as a whole has been reluctant to adopt cloud services.  That’s because many manufacturers already have IT infrastructure in place, and the “unwillingness among risk-averse executives” to trust the firm’s vital information to “a remote custodian and long-distance telecommunications link.”  Thus, Turbide notes that only about one-fourth of companies looking at a system purchase opt for that approach.

In our next post, we’ll take a look at what APICS’s Dave Turbide has to say about tools, technology and building a system.  Stay tuned…

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OLYMPUS DIGITAL CAMERAAn excellent article in the Sep/Oct 2014 issue of APICS Magazine points out how companies using a “purchased-parts supermarket” for master inventory control (often known in the field as kanban) can help cut overall safety stock nearly in half.  This can translate into a considerable inventory cost savings.  In this article, we’ll try to present the article’s key points as simply as possible (still, it gets a bit geeky).  For the full rendering you have to go straight to the source (APICS), which requires APICS membership (a most worthwhile investment, we might add).

In the article, entitled “Portion Control” by Chris Harris (an Assoc. Prof. of Supply Chain Mgmt. at the Univ. of Indianapolis School of Business, pictured at left) and Thomas Parker, the authors remind us that “controlling the quantity and availability of inventory within a production system is one of the greatest challenges faced by supply chain and operations professionals.”  They go on to point out that a centralized storage location for manufacturing components (the ‘supermarket’) is effective in releasing material to the production area in just in time fashion, minimizing production floor space for raw materials without jeopardizing manufacturing.

The idea is to set a maximum inventory level for each component, and then effectively communicate via an “informational loop” when material should be withdrawn and replenished.  These max levels are based on things like frequency of supplier deliveries, component use and safety stock required to avoid outages.  One of the “information loops” regulates the flow of material from supplier to your market, while the other controls material flow from your market to the floor – thus, kanban.  The pull signals must be right-sized to ensure adequate quantities of material and components are available to the floor.

The key, note the article’s authors, is to determine the number of supplier-to-market pull (or kanban) signals.  So, here’s where it gets geeky, although the formula is really pretty simple:

No. of Signals = ADU x (PTR + TT + RP + PPB) divided by PQ

Where:

ADU = average daily use

PTR = partner’s time to replenish

TT = transit time

RP = reorder period

PPB = purchased parts buffer

PQ = pull quantity

As the article states: “The equation allows a manufacturer to determine the size of the pull loop between the purchased-parts supermarket and the suppler.”  For example: with an average daily use of 200, partner’s time to replenish of 1, transit time of 1, reorder period of 1, purchased-parts buffer of 1 and pull quantity of 200, the result is a need for 4 pull signals per component:

200 x (1 + 1 + 1 + 1)

                200                         =  4 Signals

Thus, on an average day, this production environment would experience one pull signal at the supplier, one in transit, one in the purchased-parts supermarket, and one from production control.  These signals move regularly between the supplier and the customer to ensure that the purchased-parts supermarket is stocked with the appropriate level of inventory.

Our space is too limited here to parse out the remaining details, but the article ultimately describes the idea of ‘risk pooling’ across various locations, and how firms can reduce safety stock with this methodology by up to 46% compared to traditional methods.

To learn more about this and many more ideas for improving inventory control, look into APICS here for yourself or your team.  Every manufacturing company would benefit from their knowledge.  To see the full text of this article and a library of this and other APICS articles from current and past issues, become a member, then start here.

 

 

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key to accurate inventoryA recent article in APICS Magazine (Jul/Aug 2014) reminds us that it is generally accepted that inventory records should be at least 95-98% accurate “in order to enable successful ERP planning and provide good customer service.”

The APICS body of knowledge emphasizes that cycle counting is the key to accurate inventory.  “By counting items regularly and using the cycle count process to identify and correct the sources of errors, companies can quickly raise accuracy levels beyond 90 percent and maintain a continuous improvement posture that maintains a high level of performance,” according to Dave Turbide, CPIM, a consultant and APICS instructor.

But as Turbide points out, just as important as cycle counting is the follow-through necessary to identify and correct the source of errors.  Only then can improvement be attained; cycle counting alone is not quite enough.

While correcting an inaccurate balance may treat the symptom, it ignores the disease, Turbide notes.  You need to figure out how to prevent the errors in the first place – and that requires identifying and remedying the source of those errors.

What’s the secret?  No secret at all actually… The only way to achieve and maintain a high level of inventory accuracy is through a solid and reliable transaction reporting process.  We didn’t say it would be fun or glamorous – but it is necessary.

Transactions, as Turbide points out, are created by people or machines – machines being the more reliable.  Thus, any transaction that can be automated should be.  The hierarchy of transaction accuracy looks about like this:

  • Direct connected sensors, like PLCs for recording inventory movement and usage; after that come computer-validated entries, like…
  • RFID – radio frequency identifications – though signal interference and bad scans can affect results
  • Bar codes – similar issues to RFID, but computers and a good WMS system can help validate scans
  • Validated manual entries – systems usually can validate at least some of the data entered by humans
  • Manual entry – the least accurate.  Systems often cannot validate unexpected transactions like adjustments, certain scrap or unplanned issues.

In the end, cycle counting helps – a lot.  But it’s not enough to achieve the premium (95%+) levels of accuracy required to maintain strong controls and customer service.  To achieve these goals, companies need to make the best use of automation, ERP and error correction.

 

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forecastingOur friends at APICS recently pointed out some thoughtful considerations for those companies who find that their forecasting performance for inventory, sales or production are not as accurate or stable as they would like.  In the Mar/Apr 2014 issue of APICS Magazine, research director Jonathan Thatcher writes about the key issues companies must consider.  We’ll reprise a few of his key suggestions today.

First, notes Thatcher, “Don’t schedule production based on the greater of the forecast or sales orders.  Instead, make sure orders consume the forecast as they come in.  Ideally, your ERP system should display figures for forecast, customer orders and requirements summary.”

So for example, when the forecast calls for 100 units and customer orders equal 25 for a given period, this leaves a remainder of 75 forecast units.  Production does not care whether the units are ordered or forecast – they’re just “units” to them.  Through Sales & Operation Planning then, your team can consider the ideal forecast to project, based on sales trends as well as how well production is meeting demand while avoiding adding unnecessary inventory.

A second issue Thatcher notes is what’s called the MRP demand time fence (DTF).  Set the DTF equal to production lead time, and make sure your MRP system shows forecasts to zero within the demand time fence.  If it takes one week to manufacture a unit, then the DTF would be one week.  As the article posits: “Forecasts made inside the DTF should be ignored as it is too late to produce them, and those forecasts will overstate demand.”

And of course, don’t forget to flag extraordinary or non-repeating (“odd”) orders.  Don’t make these outliers part of history on which regular forecasting is based.

Finally, make sure that your weekly forecasting period matches the periods used by sales.  Sales rarely occur evenly week over week.  Aggregate numbers, Thatcher points out, “are your friends” insofar as “data based on long histories is easier to forecast than daily or weekly data” with less variability.

By definition, APICS notes, “no forecast is completely correct.  But we can get a little closer to perfectin with a stronger forecasting practice.”

For more information on this topic, try starting at the APICS Magazine site here.  (Note: there is generally a lag-time between the appearance of an article in print form and its appearance at their site.  The article excerpted above came from the “Ask APICS” section of the Mar/Apr issue.)

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abe APICSOur friends at APICS, via their weekly newsletter written by President Abe Eshkenazi, made a couple interesting observations worth sharing about the current state of manufacturing, and where it’s headed.

He references two articles, one originally published at CNNMoney titled “Are You Paying More than Your Parents” about advances in manufacturing and supply chains enabling cheaper manufactured goods, and the other from the Economist, entitled “Factory of the Future” detailing manufacturing’s shift from production to a suite of activities.

In the first article, Mark Perry of the Univ. of Michigan points out the ‘miracle of manufacturing’ – how anything that is manufactured has become cheaper over time.  Supply chain management, of course, is one of the drivers of those cheaper prices.  Automation is the other.  And experts expect these trends to continue.

In the Economist article, the authors note that “ ‘Manufacturing is no longer just about production. Production is now the core of a much wider set of activities.’ Those activities encompass a wide range of services. For example, the article describes how Rolls-Royce now leases jet engines to airlines and ARM designs chips produced and used by smartphone manufacturers.”

The article authors also predict increased traction in remanufacturing, an industrial process that restores used products to like-new condition.  “In the future, companies will not be able to afford to throw things away,” says study leader Sir Richard Lapthorne, a British industrialist.

In the end, while manufacturing is likely to need fewer workers, a wider view of manufacturing and its related services is that it will eventually be an overall booster of employment.  Leaders in business, education and government all need to learn – and all have a stake – about these new and increasingly complex value chains built around the world of manufacturing.

As always, Eshkenazi ends on his common refrain: the importance of a well-trained workforce, and the education that an organization like APICS can provide to workers in today’s fast evolving manufacturing environment.

(We are long-time supporters of the work of APICS, and regularly put our own staff through APICS CPIM training in the long-held belief that a consultant who knows the business side of production, manufacturing and distribution – as well as the technical side expected of any IT consultant today – will be a consultant that holds far greater value to our clients, who we believe will also benefit accordingly.)

You can learn more about our local APICS chapters here.

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but weve always done it this way_2In our prior post we described by ludicrous example the concept of ‘procedure inertia’ wherein an arcane set of actually useless procedures balloons up around a misunderstanding about how a simple process within an ERP system actually works.  The resulting mayhem creates inertia of its own for continuing the complex procedure required to move a simple item from production to inventory, even after the users learn that the ERP system has a very simple procedure for automating the process.  But by this time, processes, spreadsheets, reports and entire functions have evolved over this essentially misunderstood procedure (all the while gobbling ups tons of labor hours, of course).  Read the first post, if you haven’t already, and then resume here.  [The entire story is an encapsulation of an article by Craig Schrotter, CPIM, in the July 2013 issue of APICS magazine.]

So what’s a company to do about the operational inertia that has reached a saturation point and is now embedded in far too many of the company’s operations to ever unwind it?

Procedural inertia, states Schrotter, is a lot more than just extra work: it saps a business’s ability to grow.  With a well-implemented ERP system a company’s ability to grow is usually only constrained by capacity and access to materials or resources.  But with the “trap” of procedural inertia, an artificial limit is placed on growth because as business increases, the ERP system is not the vehicle by which the company moves information – the (now very strained and sclerotic) procedures are!

Worse, while ERP can handle increased input to an almost unlimited level, manual procedures become quickly saturated.  Unnecessary procedures are a bottleneck, just like happens on the shop floor.

All too often, the entire team of office personnel have been working mightily and expending all kinds of extra hours handling the procedures, and backing up the process.  (We see this often!)  Management blithely ignores the problem, figuring “Hey, we’re getting our reports… all’s well.”  Except it’s not.

Signals aren’t reaching management.  While staffers are overworked, what’s worse is that with the saturation point has been reached and things are grinding to a halt.  Growth is not even an option.  Procedural bottlenecks rule the day.

To overcome all this, the first step is to recognize, as always, that a problem exists.  You have to look for the signs, but they’re there.  The folks who work late, work through lunch, work extra days… stacks of paper lying everywhere… reports that are cumbersome and late.  The signs are there if you look.

Then, as Schrotter states, you have to “subvert these convoluted systems before they establish a death grip.”  Ask why people do the things they do.  Have them explain those spreadsheets.  (In our experience, the key is to ask “Why” over and over again, until you get to root causes.)

Finally, take the time to learn how your ERP system works.  What are the expected inputs?  How do procedures match up with your processes?  What features are there you didn’t know about?

Schrotter concludes with the same advice we always give current and prospective clients: “Do an in-depth workflow evaluation to determine what features are being underused and where procedures can be streamlined.”

And of course, “throttle anyone who says ‘But that’s the way we’ve always done it.’!”

 

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