How Modern Enterprise Software Enables Industrial Machinery and Component Manufacturers to Fully Implement Lean Manufacturing

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1 How Modern Enterprise Software Enables Industrial Machinery and Component Manufacturers to Fully Implement Lean Manufacturing

2 Executive Summary With ongoing globalization, industrial machinery and components (IM&C) has become among the most competitive of all manufacturing segments. To create an advantage in this economic climate, IM&C manufacturers are looking to more fully incorporate lean manufacturing principles into their operations. Properly implementing lean principles enables IM&C manufacturers to reduce lead times, improve quality, reduce cost, increase profit, improve productivity, and enhance customer service. While manufacturers have long looked to ERP solutions to enhance their lean manufacturing efforts, earlier solutions, such as enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), or others, were stovepipe systems that streamlined only individual operations. This limited visibility and workflow automation to specific areas within the organization. Now, enterprise manufacturing solutions are becoming available that offer a complete set of fully integrated applications on top of a service-oriented architecture that are able to support cross-organizational and even inter-organizational processes. This white paper describes how these solutions can enable IM&C manufacturers to fully incorporate lean principals throughout their operations and even extend them to their interactions with customers and suppliers. As a result, these solutions enable IM&C manufacturers to reduce waste, improve continuously, enhance collaboration and improve customer service.

3 Table of Contents Increasing Global Competition 1 Lean Manufacturing Enhances Competitive Advantage 2 Technology as an Enabler 2 Modern Enterprise Solutions Support Enterprise-Wide Lean Initiatives 3 Reduce Waste 3 Real-Time Information Enhances Visibility 4 Business Intelligence Improves Analysis 4 Streamlined Workflows Enhance Business Process Efficiency 4 Improve Continuously 5 SOA Enhances Flexibility 5 Advanced Quality Management Improves Products 5 Enhance Collaboration 5 PLM Capabilities Simplify the Sharing of Product Data and Documents Across the Organization 6 Production Management Enhances Collaboration on the Shop Floor 6 Supplier Relationship Management Simplifies Collaboration with Suppliers 7 Improve Customer Service 7 Streamline Production with Order Less Manufacturing and Kanban 8 Epicor Vantage 8 Offers the Complete Solution 9 Conclusion 10 About Epicor 11 How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg i

4 Increasing Global Competition Manufacturers of industrial machinery and components (IM&C) face a daunting business climate. Competition is becoming increasingly global, making IM&C among the most highly competitive of all manufacturing segments and threatening to turn sophisticated products into commodities. At the same time, the products themselves are among the most challenging to manufacture. Each product is complex and unique typically engineered-to-order or make-to-order with lead times of months to years. Customers are heavily involved during the design and manufacturing process, which means mid-stream changes are common. And as IM&C manufacturers increasingly turn to global suppliers to reduce costs, they must deal with complex inventory and supplier management challenges. In order to compete, IM&C manufacturers must add value by more efficiently producing higher quality products at lower cost with shorter lead times and by providing better aftermarket service. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 1

5 Lean Manufacturing Enhances Competitive Advantage One of the primary ways IM&C manufacturers are addressing today s competitive challenges is by adopting the principles of lean manufacturing throughout their operations. Adapted from the Toyota Production System, widely viewed as a model of efficiency and productivity, lean principles were developed to enable manufacturers to reduce lead times, improve quality, reduce cost, increase profit, improve productivity, and enhance customer service. Becoming lean requires an IM&C manufacturer to analyze its work processes and practices on an ongoing basis with an eye toward continually enhancing those that add value to the customer and eliminating those that do not. And while lean manufacturing concepts were first applied primarily to manufacturing processes, today most organizations are implementing them throughout their organization from administration to engineering to warehousing to logistics, even to customer service. Technology as an Enabler While it is possible to implement lean principles using manual processes, enterprise software technology has long been an important enabler. Yet, until recently, enterprise software could only go so far in supporting lean initiatives. IM&C manufacturers typically ran their operations using heterogeneous departmental systems. These included separate systems for enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM) and so on. While these solutions streamlined and enhanced operations within individual departments, the difficulties in integrating these IT systems impeded visibility across the organization, hampering coordination across departments. The resulting inefficiencies included scheduling conflicts, high inventory carrying costs, and low capacity utilization which resulted in long lead times, frequent delays, and higher costs for customers. Such inefficient operations are not the way to compete in a global economy. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 2

6 Modern Enterprise Solutions Support Enterprise-Wide Lean Initiatives Today, new enterprise applications are becoming available that address the drawbacks of earlier systems, providing the complete and integrated capabilities necessary to enable IM&C manufacturers to fully implement lean initiatives throughout their operations and thereby compete more effectively in today s challenging business climate. Complete, targeted enterprise solutions meet IM&C manufacturers requirements for ERP, CRM and Help Desk management, Product Lifecycle Management (PLM), Production Management, and Quality Assurance capabilities. Their full integration means these solutions provide a single source of real-time operational data to enable visibility across the entire enterprise. Business intelligence capabilities take advantage of real-time data to track progress against key performance indicators and document gains. Departmental and cross-organizational automated workflows and service-oriented architecture enable IM&C vendors to continually improve business processes. As a result, IM&C manufactures can fully implement the lean manufacturing principles of: Reducing waste throughout their organization Continuously improving operations Increasing collaboration, internally and with suppliers and partners Enhancing customer service during sales, production and after delivery Streamlining production processes through order less manufacturing and Kanban Reduce Waste In lean manufacturing parlance, waste is defined as anything that does not add value for customers. The first step in eliminating non value-added activities is to understand how the organization is currently operating. All enterprise systems assist with this endeavor by defining and reporting on the data and workflows within the areas they manage, including data definitions, data, and records of activities. In addition to this basic data management, modern enterprise solutions provide real-time visibility across the entire enterprise, complete business intelligence capabilities that enable the sophisticated analysis necessary to plan strategies and plot progress, and automated workflows to streamline business processes. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 3

7 Real-Time Information Enhances Visibility Unlike integrated applications, which process requests for information asynchronously, an enterprise solution with a complete set of robust, embedded applications part of a single system is able to provide all modules with data in real time. This reduces waste by enabling real time collaboration. For example, IM&C manufacturers can take advantage of real-time information to optimize their production schedules in light of the available supply of parts and shop floor capacity. An enterprise system that includes scheduling and furnishes a real-time view of multiple resources gives the master scheduler the ability to visually locate overload problems and slack conditions and then perform cost and throughput analysis on scheduled changes before they are firmly committed. Business Intelligence Improves Analysis Enterprise manufacturing solutions that offer business intelligence allow IM&C manufacturers to view and analyze all relevant real-time information in a highly actionable fashion through tools such as business activity monitors, dashboards, and balanced scorecards. Managers at all levels, from line-of-business managers to executives, can more easily determine where opportunities for improvement lie as well as measure progress on efforts to reduce waste. Streamlined Workflows Enhance Business Process Efficiency Automated workflows within an enterprise manufacturing system can dramatically reduce waste and improve business process efficiency. Such automated workflows fully document everything that needs to occur to complete each step in a business or manufacturing process, including the personnel involved, the tasks that must be completed, the procedures to be followed, and the necessary data input or output. Included business rules then specify and automate the various steps in the workflow, as well as assign and track tasks that require human intervention. Workflow tools can automate both standard processes and exceptions to those processes. Because the process of automating workflows begins with documenting existing workflows, IM&C manufacturers can see exactly how they are currently performing various processes and can thus determine areas for improvement. Line-of-business experts can then modify processes to improve operations and minimize waste. By automating new, more efficient processes, automated workflows ensure that effective processes are followed consistently. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 4

8 Improve Continuously To compete in today s highly competitive marketplace, IM&C manufacturers must continuously improve the quality of both their operations and their products and lean principles encourage the pursuit of continuous improvement. Once an IM&C manufacturer has completed an initial set of improvements, it can use the same enterprise software tools, including real-time information, business intelligence, and automated workflows on an ongoing basis to continuously improve operations and products. SOA Enhances Flexibility In addition, an enterprise application based on a service-oriented architecture (SOA) gives organizations the flexibility to seamlessly integrate new capabilities as their needs change. Web Services provide a simplified mechanism for connecting applications regardless of their location or the technology or devices they use. Based on industry-standard protocols, such as XML and SOAP, with universal vendor support, Web services leverage the Internet for low cost communications. Web services loosely coupled messaging approach supports multiple connectivity and information sharing scenarios via services that are self-describing and can be automatically discovered. By using enterprise applications based on an SOA, IM&C manufacturers can easily add new functionality in a highly granular fashion, as they need it, and can easily reconfigure workflows with minimal integration costs or impact on their business operations. Advanced Quality Management Improves Products While more efficient operations are essential to reducing lead times and costs, IM&C manufacturers must also compete on the quality of their products. An enterprise solution that incorporates advanced quality capabilities makes it easier for IM&C manufacturers to define and implement processes that ensure the highest product quality and enable them to improve quality on an ongoing basis. Advanced quality capabilities, tied together in an automated workflow, for example, enable shop floor employees to flag parts as nonconformant, move them into inspection queues, give inspectors access to the items and enable inspectors to flag parts that fail inspection for further review by the material review board. Business Intelligence capabilities can be used to analyze information that the system collects during these quality assurance processes to enable IM&C manufacturers to determine how much product quality problems are costing and to improve product quality. Enhance Collaboration Designing and manufacturing engineered-to-order or make-to-order IM&C products requires considerable collaboration both internally and with suppliers. Extending lean principles to reduce duplication and waste during collaboration can significantly reduce lead times enabling IM&C manufacturers to improve responsiveness to customers. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 5

9 PLM Capabilities Simplify the Sharing of Product Data and Documents Across the Organization Industrial products and components require large amounts of information at all stages of their lifecycle from conception to retirement. This information includes both data and documents, such as parts data, bills of materials, sketches, CAD drawings, engineering documents, plant floor routings, change orders, sales orders and quality documentation and other documents. In the past, this information has been stored in multiple databases, as well as CAD and other systems. An enterprise manufacturing solution that incorporates product lifecycle management (PLM) and product data management (PDM) capabilities provides a central repository for all design and development data and documents. It also makes this information available throughout the enterprise to engineers, production managers, sales departments, even service representatives. These applications provide flexible classifications of parts and assemblies that facilitate future re-use by making it easy to locate parts and assemblies, improving the productivity of the design department. An enterprise manufacturing system that offers full integration between PLM and PDM capabilities and a wide variety of CAD products allows engineers to look up parts from within the CAD applications, process CAD models controlled by the product data management solution, update title blocks when product data is modified, and automatically generate a bill of materials. By furnishing tight security controls over who can view or access documents, the system can protect manufacturers from loss or unwarranted access. Production Management Enhances Collaboration on the Shop Floor By integrating Production Management capabilities, an enterprise manufacturing solution can help IM&C manufacturers enhance collaboration during the production process, and thereby reduce waste. Production Management capabilities enable comprehensive control over every aspect of jobs on the shop floor, making it easy to route, schedule, cost and track custom or repetitive parts. They provide real-time views of multiple resources to give the master scheduler and management the ability to visually locate overload problems and slack conditions and then perform cost and throughput analysis on schedule changes before they are firmly committed. The shop floor can use these capabilities to report inventory movements and labor requirements to give management a more accurate view of production. Production Management capabilities can even queue requests for inventory movements of raw materials and work in progress as well as order allocations and inventory reservations. This improves control and visibility of raw materials and work in process as it travels throughout the enterprise. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 6

10 Supplier Relationship Management Simplifies Collaboration with Suppliers With the increase in outsourcing to global suppliers, IM&C companies who wish to get products to market faster need accurate planning, tighter collaboration, and better real-time visibility across the supply chain. Enterprise solutions that incorporate supplier relationship management (SRM) capabilities which include tightly integrated quote management, purchase management, job management, and inventory management streamline interactions between manufacturers and their suppliers. Starting with the bidding process, SRM capabilities make it easier for organizations to create and manage requests for quotes (RFQs). Using SRM, manufacturers can filter and sort RFQ criteria based on specific needs to find the best suppliers as well as manage quotes from multiple suppliers. Once a supplier is selected, SRM can manage the development of complex purchase orders. An enterprise system that links the SRM with inventory management and advanced material management applications makes it easy to track inventory levels, and when levels become low, enables manufactures to request replenishment from suppliers electronically and track inventory movements. SRM can even track vendor performance. When an enterprise solution is built on top of an SOA, it can extend internal inventory management capabilities to enhance visibility across the supply chain both upstream and downstream. For example, when a new order coming in is a custom product requiring unique parts or materials not in stock, an SOA-based manufacturing system could send a request to a supplier s system asking about availability of the component and get a response confirming when it can be received. The manufacturer could then immediately provide a validated available and ship date to the customer. Improve Customer Service With many IM&C products coming to be viewed as commodities, customer service has become a critical differentiator. Lean efforts can help remove waste from customer-facing processes, thereby eliminating delays, inconvenience, mistakes and cost to deliver customer service. An enterprise system that incorporates CRM and Help Desk capabilities can reduce waste and improve customer service throughout the entire customer lifecycle from prospecting and lead generation to after-purchase customer service. Enterprise solutions with an integrated CRM application store information about and automate workflows for all aspects of the company s interaction with its customers and potential customers. They store contacts; track and report on communication with customers; maintain detailed call histories about new opportunities or existing jobs with customers; generate follow up tasks for key employees when communicating with customers or prospects; and share information across departments regarding customer inquiries. By capturing this detailed information and automating workflows, organizations can ensure that nothing slips through the cracks during the sales process or with any customer interaction. Integration with quote management, field service, job management, product configuration, advanced bill of materials, inventory management and document management modules, means staff anywhere in the organization can easily answer customer questions through all stages of the production process. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 7

11 Once the product is out the door, IM&C manufacturers have the opportunity to increase revenues, boost profit margins, and enhance competitive advantage through superior postsales service. An enterprise solution with integrated help desk capabilities provides the complete information that support desk personnel need to deliver personalized, high-quality service. Links to customer-focused activities where customer calls can form the basis for quotes, return material authorizations, orders, field service jobs, or workflow tasks save time. By fully documenting communication between customer service and the customers, the system can provide enterprise-wide visibility into customer cases and their resolution. These capabilities can help service teams better manage their current case loads and respond more quickly to customers to provide industry-leading customer satisfaction. Streamline Production with Orderless Manufacturing and Kanban Traditional production is controlled by work orders that require significant administration and paperwork in other words, waste to define, release, stage and move orders through the plant. Lean manufacturing advocates the use of order less manufacturing where work moves piece-by-piece through the manufacturing process and workflow is controlled by signals called kanbans, which can either be physical tags, labels, and containers, or electronic signals. Order less manufacturing is much faster than traditional processes, more flexible and responsive to changes, ties up less inventory, and delivers higher quality at a lower cost. While kanban-based manufacturing was first used in process manufacturing where orders flowed smoothly through production, enterprise software solutions now bring this method to the ever changing engineer-to-order environment by issuing electronic kanbans that optimize the use of resources while meeting schedules. Kanban functionality within an integrated ERP solution can automate inventory replenishment, pulling the product through production without human intervention. When inventory levels or order demand requires additional product, kanbans eliminate work orders and pull products through production automatically. They automatically trigger the movement of inventory where it is needed, request replenishment inventory directly from suppliers and receive the inventory to stores or the production floor. Kanbans can even dynamically calculate future replenishment needs to give downstream cells and suppliers visibility into future demand. These capabilities enable smooth work flow and keep production lines and cells evenly loaded and working at peak efficiency. This is particularly important in engineer-to-order and maketo-order environments where demand and product mix fluctuates. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 8

12 Epicor Vantage 8 Offers the Complete Solution Epicor Software Corporation offers a complete solution that fully enables implementation of lean manufacturing throughout an IM&C organization. Epicor Vantage 8 is a manufacturing enterprise application that allows IM&C manufacturers to manage their complete order cycle with a single, integrated, highly functional and easy-to-use and implement application. Vantage 8 has been designed, from the ground up, using.net technology, to offer a serviceoriented architecture that enables the most dynamic, flexible and responsive manufacturing application on the market today. The solution s Service Connect capability empowers business analysts to use a graphical environment to build automated workflows based on rules and push them live in real time. In this way, manufacturers can easily enhance business efficiency as well as change business rules on an ongoing basis to reflect changing business conditions. This solution offers full order-cycle visibility through robust applications and associated embedded business intelligence, CRM, PLM, Quality Assurance, Help Desk Management, and a full range of other modules. Using these flexible capabilities, IM&C organizations are able to fully implement lean manufacturing principles, reducing waste throughout their organization, continuously improving operations, enhancing collaboration internally and with suppliers, improving customer service, and implementing order less manufacturing and kanban to streamline production processes. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 9

13 Conclusion A complete enterprise manufacturing solution such as Vantage 8 enables industrial machinery and component manufacturers working in engineer-to-order production environments to automate their end-to-end processes. One with a full complement of fully integrated business specific manufacturing modules and business intelligence provides real-time visibility to enable manufacturers to analyze their existing operations and find areas to eliminate waste. One that includes workflow and a services-oriented architecture allows IM&C manufacturers to streamline their cross-functional business processes and adjust them on a continuous basis to improve productivity and reduce costs. As a result, manufacturers of industrial machinery and components are better able to implement lean manufacturing principles of eliminating waste, improving continuously, enhancing collaboration internally and with suppliers, improve customer service, and enable order less manufacturing and kanban. As a result, organizations can successfully meet the challenges of globalization by lowering costs, enhancing quality, reducing lead time, and providing better customer service. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 10

14 About Epicor For over 20 years, Epicor has been a recognized leader dedicated to providing leading edge enterprise software solutions to midmarket companies around the world. With over 20,000 customers, Epicor delivers end-to-end, industry-specific solutions that enable companies to immediately improve business operations and build competitive advantage in today s real-time global economy. Epicor s comprehensive suite of integrated software solutions for Customer Relationship Management, Financials, Manufacturing, Supply Chain Management, and Services Execution and Control provide the scalability and flexibility to support long-term growth. Epicor s solutions are complemented by a full range of services, providing a single point of accountability to promote rapid return on investment and low total cost of ownership. Disclaimer This document and its contents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of its date of publication, August However, Epicor Software Corporation makes no guarantee, representations or warranties with regard to the enclosed information and specifically disclaims the implied warranties of fitness for a particular purpose and merchantability. All information contained herein is subject to change without notice. The usage of any Epicor Software shall be pursuant to an Epicor end user license agreement and the performance of any consulting services by Epicor personnel shall be pursuant to Epicor s standard services terms and conditions. Epicor is a registered trademark of Epicor Software Corporation. All other trademarks acknowledged. This document and its contents are the property of Epicor Software Corporation. Recipients of this document should not distribute to any third parties without Epicor s prior written consent. Copyright 2006 Epicor Software Corporation. How Modern Enterprise Software Enables IM and Component Manufacturers to Fully Implement Lean Mfg 11

15 For more information on the Epicor Vantage, contact: Epicor Software Corporation Von Karman, Suite 1000 Irvine, California