supply chain collaboration

MANUFACTURING KNOW HOW Guide 3 How to improve supply chain collaboration 4 STEPS TO IMPROVE your business CRITICAL QUESTIONS to ask yourself LEARN FROM best in class manufacturers FIND OUT how Microsoft Dynamics can help Oil the wheels of your business! Based on Aberdeen Group Benchmarking Research Commissioned by Columbus

Effectively dealing with Supply Chain Complexity may well prove to be one of the most important challenges facing Discrete Manufacturing companies over the coming years. The industry is increasingly becoming a complex and global industry where discrete manufacturers can no longer operate the same way they have in the past and remain successful. New products are incredibly complex, engineering is now a globally distributed and collaborative process, manufacturers as well as suppliers are also globally distributed, and consumer growth is almost entirely located in emerging economies. For discrete manufacturers to succeed in this environment, it is essential they orchestrate an integrated network of suppliers and customers. A company that is in control of a flexible and adaptable supply chain is better positioned to react when the market changes and deliver innovative, high quality products to customers. This guide to discrete manufacturing is designed to be a quick yet effective reference for executives to understand and deal with supply chain complexity in four easily implementable steps. Each step will give a high level overview of the concept, support the concept with proof points from industry analyst research as well as from real manufacturers experiences, and end with a discussion of how Columbus technology and services can play a supporting role. Finally, we hope this guide is only a first step in your journey towards effectively managing a flexible and adaptable supplier network and we look forward to the opportunity to be a trusted resource and partner. Based on Aberdeen Group Benchmarking Research Commissioned by Columbus

4 STEPS TO IMPROVE SUPPLY CHAIN COLLABORATION Step 1: Get all supply chain stakeholders on the same page by putting in place a formal Sales and Operations Planning (S&OP) initiative Step 2: Implement multi-echelon supply chain optimization tools to improve coordination and flow of materials across multiple tiers of suppliers Step 3: Reduce supply chain risk and stay in compliance with integrated traceability Step 4: Extend quality management to the supply chain RESPONSIVENESS Introducing RapidValue, a business process modelling solution that is fully integrated with leading ERP solution, Microsoft Dynamics AX. It enables manufacturers to meet up to 80% of their business requirements right out of the box. ColumbusManufacturing has mapped best practice manufacturing processes and built them into Microsoft Dynamics AX to help organizations realize the full potential of the solution and gain a quicker return on investment. Ability to leverage world-class performance metrics and benchmarking with SCOR mapping Flexibility to adapt business models to suit changing situations Business processes and applications fully aligned giving supply chain visibility Off-the-shelf integration templates to leading CAD and PLM systems giving faster new product introduction and better controlled product change How Does RapidValue help you improve Supply Chain Collaboration Best practices built in from the start Tools to streamline business processes RapidValue gives you best practice processes and procedures with the ability to respond to fast changing business needs For more information on RapidValue please go to www.columbusglobal.com/manufacturing/rapidvalue

1: Get all supply chain stakeholders on the same page by putting in place a formal Sales and Operations Planning (S&OP) initiative The first way discrete manufacturers should attempt to address complexity in the supply chain is by focusing internally and making sure all the different stakeholders in the supply chain have a common understanding of the goals. One of the main ways discrete manufacturers have been creating this common understanding of the supply chain and eliminating silos in the organization is through initiatives like Sales and Operations Planning (S&OP) or Integrated Business Planning (IBP). To ensure the success of S&OP or IBP planning initiatives, discrete manufacturers should first focus on bringing together different departments like finance, supply chain, manufacturing, engineering, procurement, sales, and marketing to create a formal collaborative management process. Many times these different groups and stakeholders will have their own agendas so creating a collaborative environment with shared goals and a trusted financial planning and budgeting capability can help align these groups and make communicating in a common language much easier. Furthermore, to make an S&OP or IBP initiative truly successful, it should go straight to the highest levels of the organization and be supported at the executive level, hopefully by the CEO. These initiatives should also have an agreed upon set of shared metrics that measure success over time. Innovative discrete manufacturers are also starting to tie compensation to these shared metrics through management by objective type initiatives. Finally, as we will see in the next section, it is important to support these initiatives with collaboration and visibility tools. QUICK START: To quick start performance in Sales and Operations Planning, leading discrete manufacturers are taking the following actions: Establish executive support for S&OP initiatives Set clear goals for the supply chain and make sure all stakeholders understand their role in achieving these goals Put in place formal collaboration processes for S&OP to sustain momentum over time 4

Manufactured by Hi-Tech Mold and Engineering S.E. Inc., Pumps manufactured by MetPro, Microsoft Dynamics in the spotlight: Sales and Marketing To assist in the planning of materials and capacity some business scenarios can deliver significant reductions in lead time to the customer by planning against a demand forecast. Tools are available within Dynamics AX that can assist in generating forecasts from sales history, using statistical algorithms to arrive at a suggested forecast. The suggested forecast can then be passed around a collaboration group of people for adding the additional human intelligence that might be necessary. Best-in-Class discrete manufacturers are more than 25% as likely as Laggard organizations to collaborate between manufacturing, the supply chain, and IT on the deployment of software systems. According to a recent Aberdeen Group Benchmark Research Project sponsored by Columbus Business Planning Having a comprehensive, easy-to-use and (most importantly) effective suite of planning tools can significantly improve the operational performance of a business. Buyers and procurement planners need clear and concise visibility of what is required, when it is required and why it is required, and equally they need to know the consequences of failure. At the same time the supply of raw materials needs to be balanced and synchronized with the capacity of the business manufacturing resources (including sub-contractors). Production planners need a flexible and a highly graphical representation of the production schedule that allows the inevitable fine tuning to be completed with the minimal amount of fuss and effort.? Questions to Answer: > Does procurement and the supply chain have a common understanding of preferred vendors and high performing suppliers? Heating ducts manufactured by Exheat, 5

2: Industrial robots manufactured by Kuka Systems, Implement multi-echelon supply chain optimization tools to improve coordination and flow of materials across multiple tiers of suppliers A major factor in the increasing complexity of discrete manufacturing supply chains is the increasing interdependencies between different players in the supply chain. Often a large Original Equipment Manufacturer (OEM) will have 10, 20, or more Tier 1 suppliers. These Tier 1 suppliers are often viewed as partners and may collaborate on engineering, manufacturing, and supply chain operations. Then, for each of these Tier 1 suppliers, there is another set of Tier 2 suppliers that can quickly grow to 100 s or 1,000 s. The interactions of these suppliers in different tiers, (multi-echelon supply chain optimization) now needs to be coordinated both with the Tier 1 supplier and also OEM s to optimize the performance of the complete network. With modern ERP systems that come with built-in supply chain optimization and collaboration tools, it is now becoming possible to much more easily model and optimize supply chains. With web-based supplier portals, multi-enterprise data sharing is becoming a reality. QUICK START: To quick start performance in Multi-Echelon Supply Chain Optimization, leading discrete manufacturers are taking the following actions: Build a model of the supply chain that goes beyond just direct suppliers and customers. Consider suppliers suppliers and customers customers Establish lines of communication and collaboration with multiple tiers in the supply chain Create relationships with suppliers that align incentives and smooth inventory flow across the entire network 6

Manufacturing equipment from Wheelabrator Group, Controller manufactured by Sevcon, Microsoft Dynamics in the spotlight: Supply Chain Collaboration Technology has an important role to play when it comes to improving the flow of information between a business and its business partners - customers, suppliers and sub-contractors. In its simplest and most traditional form this is the transmission of documents (sales orders, invoices, purchase orders, etc.) in a batch file format, usually involving the use of a costly EDI service provision company acting as middle man to the process. Today s technology allows Web Services to be deployed to streamline this process and can often remove the need for EDI service provision companies. Frequently this then permits electronic collaboration with smaller business partners that would have found the cost of traditional EDI to be prohibitive. Quote from a Columbus Customer COLLABORATION BETWEEN DEPARTMENTS We are focused on improving visibility and collaboration between sales, distribution, and manufacturing sites distributed over seven different countries to help reduce and ensure we hit quoted lead times to customers. Furthermore there is increasing value in providing strategic business partners with a level of access to the information that is held within the business system. The Microsoft Dynamics AX Enterprise Portal makes it easy to provide Role Tailored data and business processes in real time over the Web, enabling the business to drive down costs by decreasing paperwork and providing the right level of information to customers and suppliers. The Enterprise Portal can be used to allow sharing of design processes and documentation with customers. This allows customers to review the status of their account, permitting suppliers to update delivery dates and pricing information, and so on.? Questions to Answer: > Can you easily communicate and collaborate with trading partners if there is a supply chain disruption? Best-in-Class discrete manufacturers are more than 25% as likely as Laggard organizations to have visibility into inventory of suppliers suppliers. According to a recent Aberdeen Group Benchmark Research Project sponsored by Columbus 7

3: Rail manufacturing by Progress Rail, Reduce supply chain risk and stay in compliance with integrated traceability Traceability has become a pressing compliance issue in many of the discrete manufacturing industries over the past several years, including aerospace and defense, automotive, electronics, and medical device industries. Discrete manufacturers can no longer survive with summary level traceability data and disparate manual systems for managing traceability. Information travels quickly among consumers and it is important to be able to limit the impact and scope of a recall with certainty. To address these issues, leading discrete manufacturers today have moved to capture more shop floor information to eliminate gaps in data and the need for large wide scale recalls. Unfortunately, data is often distributed across many paper based systems which makes traceability cumbersome and slow. To address these gaps and eliminate the cost and maintainability issues with multiple systems, discrete manufacturers have moved to rely on a single ERP solution as an enterprise-wide system of record for traceability data. This means ERP systems now collect key pieces of data from across the value chain, including: design, procurement, manufacturing, distribution, and customer service data. By using automated systems to collect and connect traceability data into a centralized system, leading discrete manufacturing companies are able to better manage actual as well as mock recalls but the benefits don t stop there. Many discrete manufacturers that have implemented robust traceability solutions also report dramatic gains in supply chain visibility as well as efficiency. In fact there is a lot of industry research showing that there is a close relationship between discrete manufacturers being able to manage compliance as well as operational efficiency. QUICK START: To quick start performance in Traceability, leading discrete manufacturers are taking the following actions: Automatically collect traceability data from across the enterprise Integrate collected data with ERP and use ERP as system of record Conduct mock recalls to test capabilities of traceability system prior to actual adverse events Build on traceability initiatives to improve overall supply chain visibility and performance 8

Fluid Handling Systems manufacturing by Aliaxis, a Columbus Customer Microsoft Dynamics in the spotlight: Traceability Being able to trace raw materials from cradle to grave and vice-versa is critical for businesses. Not only does the identity of a batch of material need to be recorded but so do its properties - such as potency, temperature and other physical attributes. Torsten Lytken, Infrastructure Systems Director, Thorlabs, Inc. PROVIDE VISIBILITY TO THE SUPPLY CHAIN Microsoft Dynamics AX features full batch traceability throughout the procurement, storage, production and distribution process. Any movement of stock must record batch information, where applicable. A tree-structure view of stock movements allows the user to explore all transactions of a batch up and down the supply chain. This means that if a quality issue is identified for a batch of material or a batch of finished product the business is able to immediately identify the source and where else it has been used and can take the appropriate remedial actions. We reduce supply chain complexity by consolidating systems, standardizing processes, and providing as much visibility to decision makers as possible. Inventory Management The introduction of batch number recording can create significant burdens on the operational aspects of the business. Methods that allow a business to ease this burden include bar code labeling of batches of material, with these bar codes then being read during inventory movement. Batches can also be automatically assigned to customers based on the attributes of the batch (expiry dates, potency, etc.) and the requirements of the customer.? Questions to Answer: > Is your plant more of a black box than an integrated node on the supply chain? > Can you easily narrow the scope of a recall if the need arises? Watch manufactured by Georg Jensen, 9

4: Lighting system manufactured by Urbis Lighting Limited, Extend quality management to the supply chain As supply chains have become more complex, supply chain risk has also increased. In today s global environment, a supplier quality issue quickly becomes an issue for the whole supply network. Many discrete manufacturers are trying to deal with this through more formal quality management initiatives that also include the supply chain. Most discrete manufacturing companies today still manage quality with a paper based system or a home grown set of disparate applications including spreadsheets, data bases, emails, documents, and more. By moving to an automated quality management system that is part of a broader ERP system, discrete manufacturers are able to eliminate these disparate stand-alone quality systems and move to a centralized system with harmonized quality processes across the organization. Specifically, discrete manufacturers are moving to centrally manage traditional quality activities like: non-conformances, root cause analysis, corrective and preventive actions, document management, audit management, and more. Beyond the quality department, leading discrete manufacturers are also moving to improve quality execution by focusing on visibility and statistical process control of both production processes and supplier processes. These tools can help a company reduce variability and risk in processes that allow a company to be more efficient and adaptable to a quickly changing market place. QUICK START: To quick start performance in Quality Management, leading discrete manufacturers are taking the following actions: Automate quality management with a centralized system Focus on quality activities that reduce and mitigate supply chain risk like supplier quality management, root cause analysis, and compliance 10

Printing solutions manufactured by Mueller Martini, Furniture manufactured by Orangebox, a Columbus Customer Microsoft Dynamics in the spotlight: Quality Management Quality is one of the key attributes that sets apart one business and its products from another. But managing quality is an expensive cost to the business and usually requires careful enforcement and audit. The quality management features within Microsoft Dynamics AX allow the quality checkpoints in a business to be defined and managed. Quality orders are automatically issued to QA staff and quality measures are recorded for subsequent analysis and certification. Where quality failures do occur they can be managed through a closed loop process incorporating non-conformance reporting, concessions and corrective actions. Non-Conformance Reporting Non-conformance reporting is directly from quality management actions. All non-conformances are recorded with reason codes in order to support root cause analysis. Using the in-built alerting and workflow tools the entire business can be kept informed and up to date as non-conformances occur and as they progress through the system. As efforts and expenses are expended in resolving the non-conformance they can be recorded, allowing a cost-of-quality-failure to be established. Against any non-conformance a corrective action can be raised in an effort to prevent the quality failure from occurring again, important where a business is adopting lean continuous improvement practices. Statistical Process Control and Supplier Visibility Dynamics AX leverages the power of the SQL Reporting and Analysis Services to deliver a deep insight and understanding of the trends and patterns of quality incidents. The self service aspects of the Business Intelligence offering allows users to create security-enhanced reports using drag-and-drop report authoring, and to display key performance indicators (KPIs) directly in a management dashboard style view (called Role Centres).? Questions to Answer: > Do you know what your cost of quality is? > Do you really know how well your suppliers manage quality? Best-in-Class discrete manufacturers are more than 75% as likely as Laggard organizations to flow quality data throughout all departments of the organization. According to a recent Aberdeen Group Benchmark Research Project sponsored by Columbus 11

DON T MISS OUR OTHER GUIDES Guide 1: How to improve operational efficiency Guide 2: How to improve revenue growth Guide 4: How to improve quality control & industry compliance Columbus has a deep engagement in the manufacturing industry; we build targeted solution sets on top of the reliable Microsoft platform. Our solutions often meet 80% of the industry requirements right off, and with basic system configuration, you will experience the full impact on your business performance with a lower total cost of ownership. To-Increase, a global ISV and division of Columbus, has been developing high quality software solutions for Manufacturing since 1999. Today, they offer an extensive library of customized modules and industry-specific solutions to reduce implementation time and cost, and improve business operations. Customers from all over the world tap into this vast library of software modules to improve performance and shareholder value. The full Columbus solution includes best practice process modelling with RapidValue, the leading ERP solution with Microsoft Dynamics AX, specifically built manufacturing modules from our To-Increase software division and SureStep+, a proven implementation methodology. ABOUT COLUMBUS Columbus is widely recognized as a global leader in maximizing efficiency and business performance for manufacturing and distribution companies. With deep industry expertise we know how to make our clients more successful by adapting and implementing proven Microsoft-based solution sets for immediate business impact. Columbus is a part of the registered trademark Columbus IT Implementation Methodology SureStep+ Business Integration Solutions To-Increase Business Process Modeling RapidValue COLUMBUS KNOW HOW Industry Solutions To-Increase ERP Solutions Microsoft Dynamics FOR FURTHER INFORMATION PLEASE VISIT WWW.COLUMBUSGLOBAL.COM/MANUFACTURING Address: Icon Business Centre, Lake View Drive Annesley, Nottinghamshire, NG15 0DT United Kingdom Phone: +44 (0) 1623 72 99 77 Fax: +44 (0) 1623 72 93 77 Web: www.columbusglobal.com