Anyone placing a bet on a direct relationship between spending on information technology and profitability would be wise to hedge that bet with an equal wager on Lucky Lightning, the 16-1 shot in the sixth at Santa Anita.
In fact, manufacturers that run a profitable operation generally tend to be savvy users of IT and have been careful to pull in the reins on technology spending wherever possible in recent years. That's because many large companies found in the late 1990s and early this decade that they overspent on IT projects. With revenues under pressure since then, manufacturers have had to find ways to do more with less technology and IT staff.
At the same time, a number of companies on IndustryWeek's elite list of the IW50 Best Manufacturing Companies that are on a fast growth track are taking the opposite tack, investing heavily in new software and other technologies to support the expansion of their business in the coming years.
Software Support For Lean
With so many major manufacturers today adopting lean manufacturing techniques, an important trend among the IW50 Best Manufacturing Companies is an emerging emphasis on technologies that can effectively support lean efforts. Although most ERP software firms have added modules that help manage certain lean capabilities, some manufacturers are finding value in lean-specific applications such as Factory Logic's Lean Operations Management System.
That's the case at Johnson Controls. "We place a significant emphasis on lean manufacturing as a means of continuous improvement, and Factory Logic aligns very closely with our lean manufacturing methodologies," says Steve Valentine, director of supply-chain management for Johnson Controls' North American operations.
Earlier this year, after completing a pilot project at a facility in Holland, Mich., the automotive supplier, which builds seating and interior systems and batteries, began implementing Factory Logic across its North American operations. The company plans to have the system installed in all plants by early next year.
"We found that Factory Logic's integrated leveling, sequencing, scheduling and kanban/supermarket capabilities enable us to respond to changes in demand, production and inventory levels," says Valentine. "It also ensures that all production and supply resources remain in sync with the production plan. Those capabilities, combined with Factory Logic's exception-based monitoring and alerting, help us to manage our production closely and consistently across multiple locations."
Colgate Cuts Costs 70%
Driving down the cost of computing is the goal of Colgate-Palmolive's decision in September to go with a new "adaptive computing" architecture from SAP AG. "With adaptive computing capabilities from SAP, Colgate has reduced the total cost of specific IT infrastructure by 70%," says Jim Capraro, director of global IT at Colgate. "It also simplifies the system landscape and reduces overhead required to manage such complex IT landscapes as ours."
In the past, the consumer package goods manufacturer had to maintain each enterprise application or version of the same application running on its own dedicated computer server. Now the adaptive platform enables the company to boost utilization of computing resources by allowing multiple instances of the application or a database to run on one server. SAP's adaptive computing is part of its SAP NetWeaver platform.
Portal Gives Visibility
IT also is being used to help manufacturers mitigate the growing complexity of their operations. For example, Winnebago Industries is harnessing IT to keep track of its manufacturing plants that make a variety of products out of plastics, aluminum, wood and other materials that eventually are installed in its motorized recreational vehicles. Complicating matters, the company's product line includes 94 different models, each with different floor plans and option choices. Finally, Winnebago operates 11 facilities at four plant locations.
"We depend on our own system that we created to do our scheduling and delivery of parts to the line," says Dave Ennen, MIS director at the company's headquarters in Forest City, Iowa. The company maintains a staff of 13 programmers who continue to update and customize the company's production management system. Changes in the business, such as new models and a shift to a full-body painting process, necessitated corresponding changes in the production management system.
Although about 85% of the company's sales come from vehicles already on dealers' lots, the company recently set up a portal using IBM Websphere for dealers to order parts and check status of orders for new vehicles.
Most of the company's systems run on an IBM Z-series mainframe. "We do more than 300,000 requests a day for information from this system, and our response time right now is .08 seconds," Ennen says. More than 1,000 network stations, in this case mostly PCs, are used by both plant and office employees to access company data on production, orders, inventories, etc.
"Our biggest challenge is giving visibility to all the processes throughout the company, because we are the most vertically integrated of all the RV manufacturers."
New Logistics For Dell
Other Best Manufacturers are investing in IT to sharpen their logistical edge. At Dell Computer, the company recently invested in a new shipping and logistics management system called ION that it has just begun rolling out to its various plants worldwide. "This entire system is running on Dell equipment and demonstrates that we are able to scale to meet our volumes using clustered solutions and Web services," says Ahmed Mahmood, vice president of global manufacturing fulfillment systems. "We use this to show customers how we design systems. The ION system is 100% Dell on Dell."
While Dell's earlier shipping and logistics systems weren't broken, the company expected to soon outgrow them, explains Fred Montoya, vice president for outbound logistics. "Our previous shipping applications were born in the late 1980s and early 1990s when we were a $10 billion to $15 billion company," Montoya says. "Now we are a $50 billion company heading toward $80 billion, and that sheer growth in volume and transaction rates is the business reason for the change."
Dell's logistics systems also must grapple with operational complexity. One reason is the company's unusual business model of manufacturing only on a build-to-order basis, which means there is a huge variety of product offerings. "We ship thousands of unique customer orders, and we have very divergent customers, from the top 100 companies to consumers at home," Montoya says. "Because of this, the shipping application must have a great deal of flexibility."
Further complicating matters, Dell recently got into other businesses besides PCs, including printers, personal digital assistants and MP3 players. "We had to have an application that could deal with the growth in both volumes and complexity," he says.
To manage the logistics and shipping, Dell decided to go with a three-part solution: an internally created materials handling setup; a package warehouse management system from Manhattan Associates; and a transportation management system created in partnership with Manhattan Associates.
The transportation system allows Dell to route packages via ground transportation such as UPS or Federal Express or by LTL carrier based on order size and customer, and to track each order from shipping to delivery. Again, Dell worked with Manhattan to build a system that could easily be manipulated to deal with the vagaries of factors affecting transportation, such as port strikes, floods and hurricanes.
"It gives us a great amount of flexibility, such that we can, if needed, restrict zip codes to deal with environmental issues such as those we are dealing with right now in the hurricane-affected areas," Mahmood says. Actually, orders for those areas are stopped before the computers or other products are assembled, until they can be shipped and delivered.
Instead of converting all at once in a "big bang" fashion, Dell smartly elected to test the new logistics and transportation system and then gradually roll it out to various facilities. "We did a pilot to test the system to get realtime experience," Montoya says.
One of the first sites to use the new system will be Dell's new Winston-Salem, N.C., manufacturing plant, which opened Oct. 5, 2005. The new plant, besides adding much-needed manufacturing capacity, will support the PC manufacturer's East Coast customers with shorter delivery times.
IGT Bets On SAP
International Game Technology, a leading manufacturer of slot machines and lottery machines, went live with a corporate-wide implementation of SAP R3 version 4.6 two years ago. The results have been impressive, with the company experiencing process improvements throughout the business. "We improved our customer order process all the way through, from configuration to shipping of the order," says Tony Ciorciari, executive vice president of operations at the Reno, Nev., company.
Similar to Dell's business driver, IGT's primary reason for moving to an enterprise-wide implementation of SAP was to accommodate growth in its business while integrating company-wide information. With sales of $2.5 billion, IGT has 5,000 employees worldwide. IGT's flagship Reno plant can produce 140,000 machines per year, and the company operates manufacturing facilities in Las Vegas and the United Kingdom. The company also works with a subcontractor to build machines in Japan.
"What we really wanted was a system that would allow us to grow, and to integrate all our major functions into a common platform," Ciorciari says. "In the past, each business function had operated with its own system, including manufacturing, finance, sales and order processing." For instance, he says, IGT previously had maintained several standalone databases and systems for processing customer orders. "Implementing an ERP system gave us the chance to look at all our major operational processes and to install a common system across all these major functions."
IGT also was able to tap into an added feature of SAP -- its project management system. "This system contains tools for our design engineers to track the costs and time to market for the rollout of new products," Ciorciari says. "It also enables us to have a smoother handoff of new products from design to manufacturing."
Another benefit IGT has reaped as a result of SAP is the way the system enforces discipline throughout the company in the way people perform their jobs. "We've seen an overall improvement because the system is very demanding, and requires a tremendous amount of discipline," Ciorciari points out.
As a result, error rates are down. "It forces you to do things right. If you try to cut a corner, the system stops you," he says. "That's important, because each transaction has an impact on other parts of the organization. Also, the time it takes to process business transactions has improved."
IGT has been able to cut its lead times as well. As with Dell, the company's business is build-to-order for casinos as well as governmental lottery agencies. In the past, typical lead times from customer order to shipping were nine to 10 weeks. "We've been able to drive our lead times down to seven to eight weeks," Ciorciari reports.
For some orders, the company has set up a quick turnaround process that drops the order-to-ship time to four weeks. Says Ciorciari, "We are able to prioritize orders and improve the predictability and speed with which we respond to customers."
Documentation management is another area where IGT has experienced process benefits. "Today because of the documentation management system in SAP, all our documentation is online," Ciorciari says. "Our designers and managers have the ability to get the manufacturing process sheets and instructions right online. The benefits from this are subtle but enormous."
The company also has changed its kitting process, so that parts get to the assembly line faster than before. "Our kitting performance is up more than 30%," Ciorciari notes. Warehouse employees and others involved in the logistics process use handheld RF readers to pick and deliver parts to the production line. These technologies have boosted inventory accuracy from the low- to mid-90% to the high-90% level. Annual inventory turns also are up, from 6.3 to 8.4.
"We've seen some pretty good improvements in lead times and warehouse performance as a result of these changes and new systems," Ciorciari concludes. "Our people have the data they need to do their jobs."
