Technology Trends in Manufacturing in 2014
One of my favorite things about my job is the chance to see how different businesses work. On the manufacturing side, we see all varieties of shop floors and the processes are always different between every manufacturer. As the new year gets underway, I thought it would be good to outline some of the trends that I see impacting the technology choices of manufacturers over the coming year.
I honestly believe the cloud has a smaller impact on manufacturing than just about any other industry. It's largely because manufacturing is oftentimes done in one facility that's networked together and you can place your server there on that facility where your users can access it over their local area network (LAN). Given that, I still see areas where the cloud can benefit, even a one-site manufacturer:
- Disaster Recovery - to reduce the risk of data loss for your entire system, you can go to a varying degree of lengths and the cloud is a great option for all of it. If you just want to take a database backup and store it offsite, using the offsite storage of a cloud-hosted service is a very secure way to approach it. If you want to reduce your risk even further, you can look to use a hosting provider for your key business systems
- IT Outsourcing - if you're like many manufacturers, you have 1 or less IT people in your organization. If you have one, that person is typically tasked with managing every part of the IT infrastructure in the organization, from networking to PCs to software. This is a daunting task for even the best and brightest. I suggest to customers that if they don't have sufficient staff to support their systems, they look to using tools like Office 365 for mail and office productivity and storing their ERP solution with a hosting provider. This eliminates your need to have infrastructure, and provides you with a support system of technical resources who specialize in a software area.
Integrating Engineering to Manufacturing
I'm seeing more and more customers interested in developing a tight integration between their engineering platform and their ERP. There has historically been no integration between a CAD software and ERP software, such that when you create a new design in CAD, you typically would need to set up all the sub-components, items and routes in your ERP once you've finished your design. More customers are starting to see the inefficiency there, and asking for visibility for their engineers into inventory in their CAD program.
We have a customer in Minnesota who's developed such an integration that allows them to integrate two CAD programs - AutoCAD and SketchUp into their Microsoft Dynamics AX 2012 platform. Once their engineer completes a design, he can now see what inventory is on-hand for the parts required in his design, he can publish the design directly to the ERP and he can release the parts to purchasing and production, enabling the creation of planned purchase orders for the inventory that's not on hand. This saves a ton of time between the engineer and production manager as the parts are ordered or found in inventory and the production of the design can happen much more quickly.
Increasing Information on the Shop Floor
Many manufacturers have an estimate about how long the production process takes that they've developed over many years. That estimate is typically not an aggregated number (adding up the time it takes at each production location to complete their task), but rather a total production number that was derived more through experience and tribal knowledge. By using today's tools, there are small steps you can take to start to gather more and more information from the floor and the warehouse which can help you make decisions that lead to better efficiency. Better efficiency is going to lead to higher profitability.
One of our customers in Iowa has developed this very unique solution using an iPod, of all things. It always takes people a minute once they hear you'll be using an iPod on the manufacturing floor, but it really works. They slip an iPod into a Linea Pro Scanner and from there they have a rugged, flexible device that's much easier to use than a typical bar code scanner. Our customer has enabled four pieces of functionality on their iPod device - Inventory Transfers, Kanban, Truck list (tracking loads) and Cycle Counts. By using this tool, and shedding their old scanners, they've been able to improve inventory accuracy to 99.76% - up from 97-98% before. With that and other process improvements, they've taken their ship time down from 3 days to 1 days for most orders. On top of that, the users love the intuitive interface and they've saved money on hardware. To learn more about their solution, check out their site here.
Electronic Data Interchange (EDI)
If you've ever dealt with a large, multi-national customer like Wal-Mart, Target or Grainger, they will likely have a hard requirement that if you want to do business with them, you have to provide information electronically. Those companies keep their prices low due to their high level of automation in their enterprise, so they are not going to have clerks re-typing orders into their system. For manufacturers and distributors, that means they need to be able to provide information to those companies (and many others) electronically, right out of their ERP software. Many manufacturers are doing this today, so this isn't breaking new ground, but I see the number of manufacturers having to do it reaching 100% over the next few years. If you're not able to pass data electronically, you're not going to stay in business.
EDI has several different standards, and with the explosion of data transfer using the XML format, you see more providers going that direction. The challenge with EDI is finding the right protocol on which to exchange data and determining the data that needs to be exchanged. It's important to work with an experienced EDI partner when developing this data exchange to make sure you are communicating clearly with your supplier or customer. With the amount of transaction volume that occurs over EDI, any small error could turn out to be costly.
First, I want to state that Business Intelligence is more than just reporting. In fact, I think of reporting as one component of business intelligence. Business Intelligence is the combination of reporting, querying and analysis and performance management. Let's define these terms in more detail:
Reporting is static data that is in one place for easy and consistent consumption. A lot of your data should be surfaced through a report - an example of a report is your Balance Sheet, your Inventory Report, your Purchase Orders. It's information you need to run your business that you can pull when you need it.
Querying and analysis is the ability to slice and dice data as you need it. Many people use Excel for this task - leveraging Pivot Tables or the new Power Pivot functionality. If you want to look up the number of orders placed in your Southeast sales district during Q1 last year, you need to have a tool that allows your Sales Manager to do that. This is where having a set of data that's exposed to your leadership team that can be queried is extremely valuable. The Sales Manager needs to create his forecast for this year based on that data, and he could spend hours trying to track it down if there's no analytic platform that's ready to serve it up.
Performance Management is really about having the dashboards that you need exposed to your decision makers in a way that allows them to make quick decisions. You don't want your CEO to hunt through 7 reports and run 5 queries to get the data she needs. You want her to be able to have a dashboard that has the key performance metrics exposed so she can see if something's out-of-whack right away and dig into that area. Many business intelligence solution contain dashboards now that allow you to customize what information you can see on the screen and set thresholds for alerts if inventory is low, production is running slow, or whatever you want to measure.
In talking with manufacturers around the area, the above four items are where I see the most investment occurring in 2014 as companies try to increase the information they have about the business to increase their overall efficiency. By streamlining the engineering to manufacturing process, surfacing information through the warehouse, exchanging data quickly with their customers and wrapping all that information into a dashboard, manufacturers can start to see some real returns for their investment in technology.
If you're interested in learning more about any of these areas, please drop me a note on our contact page.