by February 1, 2008 0 comments

The jump from a single digit growth in economy to double digit is not
happening for the past few years. Causes could vary from a global economic
slowdown to manufacturing work being outsourced to cheaper destinations,
competition from global giants and so on. While you’ll have to live with a
majority of them, the rest could be alleviated to some extent by inducing IT in
manufacturing processes. A lot is already happening in this vertical. Let’s take
a look

Nothing impacts our lifestyle more than the quality of goods we consume. From
clothes, automobiles, consumer electronics, food and beverages and so on. The
consumer demands change each year as people crave for the latest and the best
and it’s up to the industry to keep up with the latest trends. And this
constitutes the biggest challenge that the manufacturing industry faces. If we
sieve through the annals of history and analyze how civilizations have evolved,
we’ll find a common phenomenon across all regions and ages-change. No matter how
well humans have evolved through various ages, the quest for making good better,
and better, best would never end. Making a great product isn’t enough anymore.
What matters eventually is not only how well we stave off competition but how we
maintain an edge over it.

To satiate this appetite and to attain world-class standards, companies need
to look at their processes from scratch. They face labor problems, rising raw
material procurement costs, a large variety and volumes to generate, numerous
suppliers to negotiate with, extensive inventories to track and transport, a
high quality of standards to adhere to and so on. And this is just the inside
part of the story. Outside, they have an ever-increasing need to acquire,
satisfy and retain additional customers to remain profitable. So, to keep the
machinery well-oiled and running, it is imperative that all pegs in the supply
chain are managed efficiently.

From the period just after independence till the late 1980s, the
manufacturing industry in India was state-controlled. In the absence of
competition, companies were unwilling to innovate or go for aggressive brand
building. Thankfully, post economic liberalization in the 1990s, computerization
of legacy manufacturing processes took off in a big way.

Initially, IT was restricted to core applications- sales order processing,
finance, stock control, warehouse management and production scheduling, using
in-house software or customized packages. After the initial automation in
departmental processes, came the next hurrah! Integration of silos of
information segregated across different branches, spawning not just cities or
regions or countries but across the globe. In came the next big wave in terms of
enterprise wide task management modules, popularly known as Enterprise Resource
Planning (ERP) systems. Toward the end of the 90s, most companies had adopted
one ERP package or the other.

A leaf out of Henkel’s book
Henkel CAC is in the flexible
laminating adhesives business and has offered solvent-based adhesives since
1985 and solvent-free adhesives since 2002. According to Manikkam
Subramaniam, AGM-IT, formidable challenges await tomorrow’s manufacturing
industry. He feels next generation factories must be able to manufacture
many different products in small quantities, customize them according to
strict client requirements or market demands, and deliver them quickly-all
without major factory reconfigurations. Looking at what Henkel has done, he
recalled, ‘Earlier solvent adhesives were manufactured wherein the water
increases along with adhesives. Presently, we manufacture solvent-less
adhesives, which are used for lamination packaging industry. This has
reduced the drying process from the eight to ten hours previously. Now the
product can be used immediately. Similarly, we manufacture lot of products,
which suit customer requirement. The challenge lies in fulfilling novel
ideas of customers and delivering them quality products.’

Manikkam Subramaniam,
AGM-IT, Henkel

How does one counter such challenges? Henkel
CAC is exploring new ways of organizing factories. For one, they use
distributed layouts, where they create products of different quality and
quantity at dispersed manufacturing workstations, and link those
manufacturing cells. Each cell manufactures a specific brand and when
production ends, leaves the workstations free to join new or existing cells.
This model promotes an efficient flow of materials, regardless of the
product manufacturing sequence. The company is also looking at ways to make
the process quick and economical.

Deploying ERP was a challenge during the initial periods when new
implementation setups disrupted production lines, warehouses and supply chains.
Today ERP systems are not only cheaper and quicker to implement, but the latest
implementation methodologies ensure that large scale IT projects in future don’t
suffer from the same notoriety as their preceding legacy systems. So, you have
an ERP module for just about any process you can name. Let’s look at the key
processes and resources in large manufacturing setups and see how IT solutions

Beware: This resource is precious
What good is machinery that does not get the right feed at the right time?
For overall efficiency, it is imperative that your raw material procurement,
handling and processing is taken care of in as efficient a manner as possible. A
large enterprise typically has multiple sources of raw materials and components.
Therefore, timely and safe deliveries of the same go a long way in maintaining
efficiency at later stages. Gone are days when raw material was stored in
warehouses for months or even days. Automation at all stages has brought this
down to a few hours or even minutes.

BMW-Simulating the assembly line
Rubbing shoulders with Jakarta,
Kuala Lampur, Cairo and Kalingrad is BMW’s only assembly plant facility in
the country-in Chennai. Churning out top- class BMW series X5, X3, Z4, Mini
and Rolls Royce models for a cream clientele that demands personalization
and class.
Using 3 D simulations and computer modeling of a virtual factory, BMW
engineers successfully simulate the entire flow of production and present
production conditions ‘very close to subsequent reality.’ BMW admits that
80% of all the processes are currently verified and confirmed through this
in-house virtual reality set-up, long before the first production procedures
even begin.

In order to enable the
company to respond flexibly and effectively to fluctuations in the market
and individual customer needs, a virtual production network is used to
evaluate changes in the mechanical parts, besides going a step further and
integrating it with customer feedback processes.

BMW has also outsourced the production of
certain components to BMW’s own facilities in places like Graz in Austria.
Collaborating with the manufacturing processes of these ‘offsite’ or
‘imported’ components demands a certain dedicated workforce which monitors,
collaborates, and places requirement for certain essential components in the
assembly line. But more importantly, constant online collaboration between
the two important components of the Product Development Process —
Development and Production, is also ensured by BMW worldwide. The first BMW
that came out of its Chennai plant was unveiled in February 2007. BMW plans
to continue this legacy, embrace more IT solutions and increase its customer
base drastically in the months to come.

Information about customer orders, raw material procurement and process
scheduling is so well linked that different stages virtually feed and push each
other. No more waiting for bills, signing acknowledgements or issuing
instructions for job processing. All these are uploaded to the ERP backbone for
all stakeholders. Once this is done, you need to ensure their safe transit
across different stations on an assembly line. This is important ’cause apart
from traversing large distances within the same shop floor, a company would have
multiple assembly lines across different cities and even countries.

Tracking from start to finish
To remain competitive, shop floor managers need not do anything special to
their processes. Apart from cutting costs, they need to deliver optimum quality
at all periods of time. One solution is to keep a check on what’s happening in
front of them and at their backs (on the floor) and see how efficient those
processes can be made. Tracking raw materials and components used in finished
goods is one way of keeping a check on processes. We see an increasing use of
bar coding across all manufacturing companies. Bar codes provide a fast, easy,
and accurate method of keeping track of critical components from raw material
procurement to the delivery of finished products. The use of bar codes reduces
the need for supervisors to keep a physical check on costly parts that go into
the assembly of a product, an enormous task in itself, one that saves employee
time and increases productivity. An organization typically needs to track
receipts of goods and raw materials, they need to track the movement of these
raw materials or components through different stages of assembly lines, amongst
different factory locations, the sale and dispatch of goods across various
locations and the status of goods in inventory at any point in time.

Heavy work this, sometimes even unnecessary, but scanning of information at
different stages helps update your ERP systems and ensures your wares are at the
right places.

Once your raw material has been tagged and is ready to process, you need to
follow best work order processing practices to ensure that your inventories
don’t pile up and your customers are not deprived of timely deliveries. There
are quite a few manufacturing theories in place. Lean manufacturing is one of

lineInformation Technology @ Maruti Suzuki
What does it take to become the
no. 1 compact car manufacturer in a 1.1 billion strong nation? Amongst
others, a lot of technology, a lot of capital to implement that technology
and best practices in manufacturing. We visited the company’s plant at
Gurgaon to get a first hand account of how Information Technology is driving
their compact car assembly lines, to churn out a car every 22 secs!
According to Rajesh Uppal, CGM-IT, the company was amongst the

Rajesh Uppal,
Maruti Suzuki

first in the business to adopt IT, way back
in 1985. Oracle Apps forms the ERP backbone and applications at all stages
are neatly integrated with this backbone. Information related to critical
components such as chassis, engine, fuel tank, head lamps, battery, etc is
uploaded on the system and tagged to car movement along an assembly line.
Without blinking an eye with each other, supervisors at different stages
know the status of each and every car being rolled out. All of company’s
branch offices and 750 dealer locations form part of this backbone and
there’s a continuous data interchange right from order processing to car
assembling to warehouse management and car delivery. Uppal further adds,
‘The company was one of the first in the country to introduce online
information access through Internet for vendors and suppliers.’ Supply
schedules are communicated automatically to vendors every two hours for
supplies throughout the day. Maruti has also implemented a GPS and GPRS
based tracking system for outbound car carriers transporting finished
vehicles from the factory to dealers. A mobile device is installed inside
the truck which has an antenna to communicate to the GPS satellite for
location information. The device sends the location information through GPRS.
The tracking software displays the vehicle on the map, which can be viewed
by various end users through web based interface. It also helps reach out
the trailer struck in any kind of crisis like flood, terrorist attack or
riots. And the overall impact-the company was able to ramp up production
from some 300,000 cars in the year 2000 to about 800,000 at present. Some
18,000 consignments from different suppliers reach Maruti everyday, still
the average domestic inventory remains lean. In effect this means cars worth
Rs. 550-660 million are sold every day, all at the click of a mouse!


Shed flab, go Lean
Yes, Lean is the way to go if you want to roll out a product not just every
month, a day or even a minute, but every second. Lean manufacturing incorporates
best practices in every possible quarter during manufacturing processes, and
eliminates waste (non-value added activities) that increase unnecessary costs,
lead times and inventory storage. Most ERP systems today include processes that
might not be required for your specific manufacturing setup. The reason being
they are based on rigid modules and even though you customize them, they still
dictate processes that prevent changes based on business dynamics. By
incorporating lean manufacturing practices, you would actually schedule your raw
material procurement and production based on actual orders received and schedule
manufacturing activities based on daily capacities. In fact, goods can be
produced in any sequence based on availability of machinery and not necessarily
in sequence. The same applies to storage, packaging and delivery. We’ve seen how
production can be scheduled based on raw material availability, similarly, time
of delivery would dictate the order in which they are delivered. All this
information can be routed and processed through a work order processing module,
which ensures the number of goods produced is directly linked to shipment

Job scheduling: Ignore to your peril!
You have raw material in place, you know the time of delivery and your
production capacity. But still the product needs to be finished before it can be
delivered. For this, you need to streamline your work order processing from the
initial request from a customer to completion of the product. Workers need to be
assigned tasks and orders regularly and the staff should be able to check
on-line to see what work has been assigned. Through a work order processing
module they can update information about different jobs being processed on the
assembly and their status. The staff also gets relevant information on job
requirements, such as expected due date/time, job status and costs involved. A
production supervisor can issue work orders, develop schedules and track
production costs. It suits those companies more that are engaged in
assemble-to-order, engineer-to-order or make-to-order processing. When used in
conjunction with software to generate bills of materials, you can identify the
materials required to produce a product by looking at the appropriate bill. Such
modules help in reducing the paperwork associated with the movement of jobs
through the shop floor across various stages. Through such modules, a supervisor
can also evaluate costs of components that have not been accounted for, examine
variance from standards, check for material shortages, shop floor capacities and
confirm tool requirements. Users can also pull out reports showing actual value
and amounts of product shipped over a period.

Volvo-ERP, satellite communication
and more
Volvo India, which has a
manufacturing facility near Bangalore for trucks and buses, plans to
increase its output by 66% after manufacturing 1,200 trucks and 300 buses
last year. By the end of 2008, the company also plans to export 1,000 trucks
to West Asian and South East Asian countries. This Volvo admits, will be
possible only by ramping up the ERP application that Volvo has globally
adopted. The SAP backend will be focused at the China market with immediate
effect. This will be done by exporting kits from Volvo’s Sweden head
quarters and assembling them at the Bangalore facility to be shipped-for-use
to China.

Besides this, Volvo Truck
Corporation has decided to diversify its Indian operations and make an entry
into freight forwarding, goods transport, warehousing, and commission
agency. The company also offers manufacturing-related services, such as hire
purchase, lease financing and driver training. This will directly translate
to bigger and better IT setups, and management, along the lines of its
international operations.

Globally, Volvo’s Powertrain uses a solution
that allows wireless terminals, used in assembly lines, to communicate with
host material systems, besides arming assembly workers with a flexible
display interface to access daily information. The global IT division of
Volvo has also designed a solution that utilizes hand-held computer
technology with a Pocket PC operating system. Volvo plants use a simple,
web-based application to order materials for the plant’s assembly lines.
Hand-held computer technology has led to lower development and a drastic cut
in maintenance costs. Another area of Volvo’s IT implementation has been for
fleet management. Here, it enables two-way satellite communication between
drivers or their vehicles and fleet administrators, who receive continuous
updates on vehicle location, fuel economy, and idle time. Moderators can
also transmit mobile messages to drivers and set up schedules, and inform
them of route changes.

Supply Chain Management and SOA
Ever since the rage for ERP implementation in manufacturing industry picked
up dust, Supply Chain Management (SCM) has been a favorite area of reform for IT
decision makers. The emergence of the Internet, demanding customers and the
pressure to pump up the movement of raw materials and finished goods across the
entire supply chain are pushing the boundaries of supply chain automation. The
business volumes are increasing and so is the ecosystem for IT architectures to
evolve and address the tremendous opportunities. Lean manufacturing including
Just-in-time (JIT) manufacturing principles, and vendor-managed inventory are
some of the examples of manufacturing theories that drive automated
collaboration, and therefore increased integration across a company. SCM helps
you reduce inventory and cycle-time costs, improve transportation of goods and
materials across the factory branches and vendor locations, thereby improving
operational efficiency. To add further bite to your SCM system, lean over to
Service Oriented Architecture or SOA, for short. More so because manufacturing
and logistics go hand in hand. One can’t do without the other. The need to
integrate internal applications with those outside the company (with your
customers and business partners) is the the primary driver for SOA adoption.

As the cost of procuring raw materials for production is increasing, so is
the cost of transporting and storage of both raw materials and finished goods.
Therefore, the manufacturing company as well as the logistics provider (be it an
outside vendor or a dept within the company) need real time information to get
things moving at the right pace. Nobody wants an inventory overload in
warehouses or delayed shipments. So, one of the core applications that needs to
be exposed is online tracking of consignments. Through interlinked applications,
all stakeholders-shop floor managers, warehouse managers and logistics
providers, can be provided real time information about inbound, outbound and
third party shipments. Such a move would also improve production efficiency as a
manufacturing company that imports raw materials can benefit from information
regarding the delivery date and time of raw materials and streamline their
production cycles accordingly.

Keep your customers glued
The pre-liberalization era, with the dominance of PSUs, meant endless
waiting lists for customers, desirous of the latest machines, was in stark
contrast to the ‘customer is the king’ mantra of modern times. To ensure highest
levels of customer satisfaction, you need to maintain a well-knit continuous
loop of feedback between the customer and delivery systems. The ability to
extract intelligent information from customer interfaces and providing a quick
response to opportunities and feedback holds the key to remaining competitive.
Needless to add, companies have invested neck-deep into Customer Relationship
Management (CRM) systems that track and analysis wide ranging info related to
customers, from order forecasting and forward-looking applications to
maintaining databases of prospective customers to generating leads in actually
acquiring new customers, besides bringing down customer acquisition costs. As we
look around leading CRM solutions, we’ll notice that even though user interfaces
of order management systems are getting simpler and simpler, their back end
complexity is increasing to make them juicier and meatier.

Let’s recollect what you would like a typical CRM system to have:

  1. Order management applications that are integrated with supply chain
  2. A separate database for customer requests, with a clear distinction
    between regular, priority customers and casual buyers.
  3. Provision to facilitate entries by all stakeholders, such as wholesalers,
    sales agents, priority customers and even general public.
  4. Wireless and mobile applications for PDAs, notebooks and other mobile
    gadgets used by the sales force.

A good company would keep a record of priority customers and their
transactions. A database of such transactions would show track record of the
customer in terms of order placement, demands, payment history and the volume of
business transacted. Such a CRM solution would keep a record of each sale made
to a customer and also a scope for sales order revision. By tracking customer
sales volumes, one can offer special discounts and price packages. Your
experience with customer requirements would help you to align your product lines
and equipments accordingly.

Learning from Hero Honda
We checked with Vijay Sethi,
VP-IT, the challenges before India’s leading bike manufacturer

What are the new challenges before the
two-wheeler manufacturing industry?
The biggest challenge is rising costs of raw materials. Secondly, the
growth of two-wheeler sector has not been good during the last year. The
major reason for this has been the high rate of finance. In India, the
two-wheeler segment is loan intensive, so the rise in interest rates has a
negative influence on sales. Another challenge is the increase in
competition due to globalization. But looking at the brighter side,
competition keeps you on your toes and helps in providing more value to
customers. It also provides motivation to grow further. Another positive
aspect is the increase in Engineering Services Outsourcing (ESO) to India,
wherein a lot of design related work in automobiles is being outsourced.

How do you plan to tackle these challenges
and what role does IT play?
We plan to expand to new markets within India and come up with new
designs. We also plan to increase manufacturing capacity through our new
plant in Hardwar. And in the existing factories, we have to reduce costs in
manufacturing bikes and increase automation across assembly lines. IT plays
a key role here. ERP from SAP forms the backbone of automation in our
company. Right from the stage where a design concept is on paper to ordering
of goods or raw materials, to the delivery of a finished product, everything
is managed on ERP. Another important usage of IT is in the bar coding of
critical components at the shop floor, which helps in tracking the movement
of these components through different stations in the factory. Components
are scanned across different stations through bar code scanners and SAP
records are updated for a particular chassis. The entire supply chain is
automated, having good linkages with suppliers and dealers for our bikes.

Have you ever felt the need to integrate
different applications across your company and also with external
We have SAP as a single backbone, so the need for middleware is not very
high. However, there’s a need to connect logistics vendors to our system, to
reduce turnaround times in deliveries. We have deployed SAP XI that helps in
cross-vendor system connectivity and is a move toward adopting Service
Oriented Architecture (SOA).

Keeping employees in the loop
Labor unrest has since time immemorial been the biggest bane of the
manufacturing sector. Union strikes, factory lockups, factory gheraos, violent
protests and clashes between security staff and laborers have been witnessed
umpteen times in history. Singur in West Bengal comes to the mind instantly.
Ironically, all this at the time when economy is nearly touching a double digit
growth rate and with more and more companies moving on from proprietorship to
the ‘limited’ category. Having touched on the various processes of manufacturing
and how we have implemented IT based ERP solutions for each process, let’s also
look at what kind of innovation companies have brought in for their employees.

There are two ways at looking at this issue. One, is the compulsory
guidelines from the government and the regulatory bodies that entail the
security and working conditions for employees on a shop floor and other, issues
that are outside the ambit of law and have been done voluntarily by companies to
not only address employee concerns but also to make employee related processes
more efficient. Samsung Electronics has come up with LCD kiosks with a touch
screen interface across its factory floor for employees. These kiosks provide
interaction with the management on all issues of employee importance, such as
salary, leaves, incentives, awards and recognition, transportation and other
admin issues. Moreover, information on all production related issues is
instantly relayed across the entire factory in a few minutes. Conveniently
placed scanners let employees submit almost all kinds of documents to the
management without having to leave their workspace.

Similarly, car giant, Maruti has come up with an online processing
system-Oasis-that has brought all business processes within a single network so
that employees can satiate their needs online. These services vary from placing
online leave applications, to accessing salary details, procurement of goods and
services and so on. Oasis also acts as a knowledge repository for all employees
and can be used to disseminate business updates across all divisions and study
global trends in automobile industry.

Adeesh Sharma, Jasmine Desai and Vishnu Anand

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