Information is to today's manufacturing executives what fire was to prehistoric cavemen. Properly controlled and applied, it sustains life and perpetuates evolution. But mishandle or neglect it, and it can quickly destroy. This modern paradigm becomes more precarious each day, as increasingly faster and more powerful information pathways carry burgeoning torrents of data to the computers, wireless devices, telephones and desks of manufacturing executives. The secrets to competitive advantage lie in this flood of data but so do the possibilities for many missteps. It's easy -- frighteningly easy -- to become overwhelmed and miss critical cues, get bogged down in data that is irrelevant or has limited ROI for one's time, or fail to move the information into the hands of team members prepared to respond to it. Effective management of information, from entry points to execution, has become absolutely essential for sustained competitiveness in business. This goes beyond hiring a whiz-bang CIO and signing off on IT projects. Companies that have developed best practices in information management and are reaping the benefits have:
- Determined and communicated key performance indicators and aligned processes to support them.
- Selectively invested in a limited number of technologies that drive efficiency in those processes by effectively moving information.
- Built staffs with the proper skills and knowledge to respond to that information.
- Structured management to encourage decision-making and continual learning at all levels.
"The companies that can become most adept at handling these large amounts of information are the ones that are going to be able to create a little bit of an edge for themselves," says Bo Foster, manager of corporate systems and e-commerce, for Alcan Aluminum Corp., Cleveland, a subsidiary of $12.5 billion Alcan Inc., Montreal. "Information has always been valuable. I don't think it's any more valuable today, but I think what's happening today is that people are able to see the information much quicker and respond much quicker. People who aren't going to be able to respond quickly to that information . . . their business practices are going to be slowly marginalized. It's not going to make you go out of business tomorrow, but you are a little less nimble."
One of the most profound effects of proper information management is reduced costs -- immediate and long-term. Logistics and purchasing are two areas where manufacturers have reaped abundantly. Alcan, which collects and recycles 20 billion-plus aluminum cans each year, has tripled its volume of pick-ups and deliveries in the past few years with no increase in staff. "We've done it all through business processes and the right use of technology," Foster says. Using Web-based tools, the company built a collaborative Internet site that logistics providers and Alcan logistics staff use for more efficient, up-to-date communication regarding movement, processing and delivery of the aluminum. "We're actually going beyond that," Foster continues. "We're going to create a new payment process . . . to ask these people to no longer submit freight bills to us. Since we already know the price and rate for that traffic movement lane, we're going to pay them automatically." Alcan also built a freight database that its logistics group uses to reduce the number of carriers and secure lower freight rates. The Internet site, the database and a new RFP to carriers are combining to save the company $12 million annually in logistics costs. "The best practice [of information management] is the business people and the IT people working together to achieve the business goal." Logistics also has been an area of savings for $13.8 billion technology and engineering company Emerson, according to Charles Peters, senior executive vice president. Last year the St. Louis-based company centralized its logistics management, which historically had been handled independently by about 50 divisions. Peters says that approach generated thousands of origins and destinations in a very fragmented transportation network. "Our new approach allows multiple divisions to share real-time information about transportation requirements, allowing operations to be consolidated into a common logistics management system," he says. "To-date, our new Hub System has saved Emerson approximately $20 million with the potential of saving a total of $150 million." Emerson also has saved more than $100 million over five years by consolidating materials purchases with the Emerson's Materials Information Network (MIN) -- a common database that amalgamates purchases from 1,000 Emerson locations into a common format that can be tracked and analyzed. Centralized commodity management teams use MIN to work with suppliers in cross-divisional relationships. "This represents the first time we have been able to truly and effectively manage our supplier base from a companywide perspective," Peters says.
Factory Floor Challenges
It's not just large companies such as Emerson and Alcan that need to master information management to remain competitive, small and midsize manufacturers must achieve it as well. John Hayes knows this. Eighteen months ago he joined Chicago-based Republic Windows & Doors as CIO. The $80.1 million company manufactures custom windows and doors for commercial and residential construction and remodeling. Before focusing on information management improvements, the company wisely improved its production processes, implementing a lean manufacturing system that more than doubled productivity, cut floor space in half and slashed defects. Now Hayes is working with Oracle Corp. on an IT systems upgrade. "The market is complex enough that having silos of information has been a problem for us because of the time it takes to access information," Hayes says. "By the time you gather the information, it's past the time when you should have made a decision. Our strategy is to move that into an integrated environment in which we can establish the relationship between information generated from different sources so that we will have an easier time analyzing it. Down the road, Hayes envisions using terminals on the factory floor that would display job-specific information. This could be a crucial time and money saver because each door or window the company produces is customized. Right now, production workers use binders with paper instructions inserted. Hayes says electronic delivery of information will reduce errors and make it easier to communicate precise specifications. "The cost of remaking a window is a significant cost. If somebody makes a mistake, we catch it at the next station. But that happens more frequently than we would like. We would like to make the information more specific to what they are working on." Hayes says eventually, the company will offer customizable Web-based portal pages to managers. For production workers, his long-term plans include strategically placing computer kiosks in common-use areas. "Our goal is to make the exchange of information a part of doing business as opposed to something that needs to be managed and controlled."
In The Toolbox
Alcan's Foster says that when choosing information-management tools, his company concentrates on matching appropriate technology to business processes. The company's intranet has been a crucial and relatively inexpensive way to disburse information, and it is now evolving to include more customized portals for individual business groups. "We try to keep our IT investments low by concentrating on just a few tools," he says. On the receiving end, Alcan uses database technology to aggregate incoming information then applies Cognos performance measurement tools to analyze it and make business decisions. Foster says that's the information-management power play: aggregate, analyze then act. "Once you create these findings out of the information, you have to be able to classify, to do a triage: Is it something I have deal with quickly? Or does it go on a rainy day list? And then, get it out in front of the appropriate management." A good example of this dynamic is Republic's method for making design decisions and seasonal staffing adjustments. Hayes says the custom window and door business is heavily dependent on construction and home remodeling. So the company tracks government statistics related to these, has regular meetings with customers and constantly collects information gathered on calls. All of this is then placed into a database and/or spreadsheet program and reviewed in detail by geographic region. "We look at, 'What are they [salespeople and customers] seeing?' " Hayes says. " 'Are people buying the basic home or are they going for upgrades?' So we have some idea on the trends because that has an influence on the mix of business we see coming in. Indirectly we will use this information to project unit sales forecast, and that drives into material planning and procurement. But as important are some of the decisions on new products we are coming up with and where we would be placing them in the market." Additionally, the information tells the company how many seasonal workers to hire and train in the summer, when its staff can grow as much as 30%. How were all of these important decisions made prior to the widespread use of database, spreadsheets, the Internet and other information-management tools in manufacturing? "The president and vice president would hang out with their friends and then come back and argue over a cup of coffee what they would or wouldn't do," Hayes says with a chuckle. Warning: If this sounds like your company, beware of extinction. "The amount of information is going to increase," says Alcan's Foster. "It's the companies that can really effectively apply the best practices, eliminate as much work as you possibly can, automate what you can't, and continue with your productivity improvements" that will survive. "It's data Darwinism."