Take Aim With APS From IW Growing Companies

Dec. 21, 2004
The advantages of advanced-planning-and-scheduling systems are becoming available to smaller manufacturers.

"You can't be a great company without understanding how to schedule your resources, and if you're depending on MRP to schedule your shop floor, you're missing out on a whole set of important tools." That may sound like a pitch by a salesman for any of the two dozen or more software vendors offering advanced-planning-and-scheduling (APS) solutions. But, in this case, the speaker is Joe Brown, a manufacturing executive. Brown sees considerable merit in the new generation of planning and optimization tools that typically work with data extracted from enterprise resource planning (ERP) and manufacturing execution systems (MES). Brown is vice president of manufacturing at Piqua, Ohio-based Hartzell Propeller Inc., a firm that has been making aircraft propellers since 1917. That was the year the Hartzell family struck a deal with the Wright Brothers, who'd landed a U.S. Army contract to build military planes during World War I. Today, this small manufacturer is one of the world's leading makers of propellers for general aviation aircraft. Because of the nature of its market -- and its product -- Hartzell faced a need to become more agile in scheduling its manufacturing operations. The 330-employee firm makes highly engineered products in a variety of configurations. Propellers can include anywhere from 100 to 300 different parts, and because Hartzell has to support designs introduced as far back as 30 or 40 years ago, its engineering database includes some 15,000 different part numbers -- not to mention thousands of variations in shop-floor routings. Compounding the difficulties inherent in such a complex manufacturing environment is an inability to adequately forecast demand. "It's a real challenge being in a business with product life-cycles as long as a human generation, and one where you are also developing new products," Brown says. "You're dealing with high variety in the marketplace -- and in what the aftermarket will demand. So you have very little idea what you are going to get orders for." It's a challenge that can overwhelm the capabilities of traditional MRP II scheduling systems that rely on a backward, infinite scheduling logic and cumbersome databases. (Most ERP systems feature MRP II-type schedulers.) "A backward, infinite scheduler," Brown points out, "will let you take an order, load it into the system, and then it will show you that you should have started working on it three weeks ago in order to meet the customer's delivery date." To improve its decision-making agility, Hartzell installed an APS system in the fall of 1996. It chose Resonance software from Thru-Put Technologies, a San Jose-based vendor whose product incorporates the "drum-buffer-rope" concept embodied in the pioneering analysis by Eliyahu M. Goldratt in his books such as The Goal: The Process of Ongoing Improvement (1984, North River Press). Like most APS systems, the Thru-Put software accommodates frequent "what if" modeling, enabling Hartzell to shift workloads to maintain a better balance between demand and plant capacity. When it appears that a constraint, such as a CNC milling machine, will become overloaded, it is often possible to divert the excess workload to another production cell -- or to the plant's prototype cell -- if the imbalance and alternative solutions can be identified in a timely fashion. It is time -- or speed -- that distinguishes APS from MRP/ERP scheduling. An APS planning system "can do in seconds what used to take weeks," says John Bermudez, group director for supply-chain research at Advanced Manufacturing Research Inc. (AMR), a Boston-based research firm. When Hartzell's planners identify loads on its milling machines or lathes that look unattainable, Brown says, "we are able to change our routing structures and send work to the prototype shop. The Thru-Put system reallocates the load -- and it does it in minutes." For Hartzell, the benefits of its APS system have included improved performance in meeting delivery dates, a 20% reduction in WIP inventory, and the ability to schedule overtime on a "rational" basis. In addition, the software is also a valuable tool for modeling the impact of investing in new equipment or adding human resources, he adds. "Before we buy a $200,000 vertical machining center, we want to know what it will do for us." Quite a few other manufacturers have also begun to recognize the value of APS systems, which now represent the fastest-growing segment of the manufacturing software market. Not only do they simultaneously consider multiple constraints -- including machine capacity, materials availability, labor, and even specific customer preferences -- but they permit rapid planning iterations to help identify "optimal" solutions. "APS is not something that gives companies just a minor incremental advantage," says AMR's Bermudez. "It allows them to harness advances in computer technology to give them an enormous business advantage. Whatever the driver is in a particular industry -- whether it is responsiveness to customers, shorter leadtimes, better on-time delivery -- APS allows you to offer that. If costs are an issue, you can drive them down by improving inventory turns. "The planning systems we had in the past didn't allow you to merge the business goals of your company with your planning," he notes. Now, however, with APS software running on platforms like Windows 95 and Windows NT, planners have access to tools that can create optimized plans -- at the strategic, tactical, or operational level -- based on the business' goals. Most APS installations to date have been by giant corporations -- often with the intention of optimizing and synchronizing their far-flung global enterprises. In 1996, for example, 86% of APS software license revenues were derived from client companies with $250 million or more in annual revenues, reports AMR. Only 4% of the license revenues came from firms with less than $50 million in sales. Leading APS vendors like i2 Technologies Inc., Irving, Tex., and Manugistics Inc., Rockville, Md., have been so preoccupied trying to satisfy demand in the large-company market, where a system with rich functionality can cost $700,000 or more, that they've all but ignored the middle market and down. Smaller companies may be intimidated by the price tags on APS solutions -- which can exceed pricey ERP backbone systems. However, less-expensive versions with a narrower focus on manufacturing are becoming available, and the development of industry-specific "templates" promises to reduce the cost and ease the implementation process -- which should make the technology more appealing to growing manufacturers. One vendor that has been courting customers in the mid-range revenues market is Ortems Americas Inc., the Chicago-based U.S. unit of Ortems SA of France. "I think the market today is reaching down to the $25 million company," says Ed Czupryna, vice president-operations for Ortems Americas. "I see $25 million companies that can justify a $100,000 to $200,000 solution. . . . The companies I deal with have a [problem] they're trying to solve -- and they often recognize that this is a better way to solve it than investing in a new ERP system." Another imperative, Czupryna notes, is that large manufacturers are pressuring their smaller suppliers to develop "quick-response" relationships. "So the suppliers need to have full visibility of the impact of changes in demand, if they want to get the best utilization of their equipment, resources, and available materials." Also taking aim at mid-range manufacturers is Atlanta-based Distinction Software Inc., which developed a suite of products called SCOPE (supply chain operations planning environment). Its package includes modules for demand forecasting, inventory planning, finite-capacity scheduling, and purchase planning. Distinction, a four-year-old firm that enjoyed a 750% surge in sales last year, has targeted manufacturers in process industries. "Many process manufacturers operate small facilities," notes Rick Marquardt, Distinction's COO and vice president of marketing. "They want a solution that can be implemented quickly and easily based on their business requirements -- without a lot of complexity." Distinction's forecasting-and-inventory-policy module, he says, can be implemented in as little as 30 days. In some cases, Distinction's customers are implementing APS "before they implement ERP systems," Marquardt notes. "In the past, many manufacturers installed ERP, but they ignored forecasting or front-end planning -- so they wound up making the wrong products. If you drive a bad forecast or a bad plan into your ERP, you may just generate a lot of inventory that you don't really need." In evaluating the potential of APS systems, it's important to bear in mind that the software comes in assorted flavors -- with different capabilities and planning horizons that range from long-range supply-chain-network design down to shorter-term distribution planning and shift-to-shift production scheduling. Some systems include or accommodate Internet links to customers to permit "collaborative planning." Smaller firms may not need all of the functionality that appeals to giant corporations. Moreover, they're likely to be more interested in a planning tool that emphasizes optimization at the plant level, rather than across a multiplant global enterprise. Paragon Management Systems Inc., a Los Angeles-based vendor that competes with i2 and Manugistics for top-tier multinational customers, has geared its product suite to "global optimization, rather than local optimization," notes Nima Bakhtiary, the firm's vice president of marketing. "With global optimization, you are synchronizing activities across the enterprise. The system looks at various constraints on a global level -- including materials, capacity, inventories, and such things as provisions in contracts with specific suppliers." Vendors like Thru-Put and Ortems, however, tend to stress plant-level optimization. "Companies that have installed big, strategic-level APS systems have realized benefits at the strategic level, including better response to customers," says Ortems' Czupryna. "But those strategic solutions haven't solved their problems at the operational level. They haven't improved productivity at the shop level, and they haven't reduced WIP inventory." Smaller manufacturers, he asserts, are more concerned about optimizing at a tactical and operational level -- where "granular" data on the status of shop-floor constraints is needed to support production planning "down to the second and minute," rather than basing plans on aggregated data, or scheduling work in weekly buckets. While APS systems are anything but cheap, a major selling point is that they typically produce a quick payback. "Generally people find that there is a two- or three-month payback period -- in mid-market companies on up," says AMR's Bermudez. "These systems promise a greater return on investment than ERP systems," he adds, because they can increase revenues by improving plant throughput and slashing inventory costs.

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