ERP – Making the Investment Work using APS

The materials war has been won (via MRP and/or Kanban control), the capacity war has just started. Companies with a high cost of raw materials and/or high value of end products are trying to move towards make to order and away from make to stock but in doing this many are finding that a knowledge of the capacity constraints of their plant is key to answering the question ‘when can we deliver?’

What these companies need is a tool that will show them visually what the current load is, what the impact of unexpected events will be, and to be able to ‘what if’ solutions to delivery performance across all orders. They need the equivalent of a crystal ball for their manufacturing operations.

Of course, there are different types of production and ways to supply the demand and for each case there are a key process and IT considerations for moving to better, leaner and more efficient operations.

For example, companies that are looking to techniques such as Kanban to control the flow of product and materials through a manufacturing process and in many companies, this is very effective for some or all of their plant. The requirement for IT is thus much lower but for many companies perhaps 80% of the parts can be handled in this way while the other 20% cannot so there is often a requirement to handle control differently depending on the part.

However, in a MTO, engineer-to-order and mass customization company with many products and common resources that make them, scheduling becomes more important. We have seen cases where significant variations in cycle times from one product to another for each stage in a classic pull flow of an assembly line has made it difficult to predict the make span for a particular batch. This was dependent on what other products shared the same line, their batch sizes and their sequence.

Companies are also increasingly turning to out-sourcing of all the components and just assemble to order. They may have a long order book stretching months ahead but still find it difficult to predict the consequences of a sudden change because they do not have the capacity information of their suppliers to provide accurate answers.

Outsourcing is fine but it can lead to an erosion of a company’s visibility and control of its operations.

Measurement of the benefits achieved from a software implementation is often difficult because the objectives were not explicitly spelled out at the beginning of the project.

Traditionally companies would seek to control their operations better and along the way increase their stock turns and reduce work in process which leads to shorter delivery times. Certainly, delivery performance is becoming more important but sometimes it is difficult to put a quantitative value against it. How many extra orders did we get because of better on-time performance?

Accountants don’t really help either because they will focus on resource utilization and ‘overhead recovery’ rather than on delivery performance. The old saying of Accountants ‘knowing the price of everything but the value of nothing’ comes to mind.

Turning data into information and that into knowledge is a powerful argument and if the ERP company can’t provide what users want then a ‘best of breed’ product must be a good way forward for many companies.

It’s just another way of giving Visibility in what tends to be a ‘black box’ of data that is difficult to get at.

Today we know that most ERP systems have very limited functionality in detailed operational scheduling and APS tools have a proven track record in providing companies with an operational crystal ball to see what is happening and what will happen based on the constraints of their factory.

Knowing what the problem is can be half way to solving it using the ‘what-if’ analysis available to APS users and knowing what will happen in advance gives the planner a considerable advantage in making timely and cost-effective decisions.

The benefits are again well documented in case studies. These include lower raw material stocks and work-in-process while obtaining increased operational efficiency and on-time delivery performance.

APS brings with it additional tools which allows, for example, both material and resource constraints to be considered and some of these tools include a memory resident BOM exploder for carrying out ad-hoc capable to promise inquiries in seconds. For many companies this is the ‘Holy Grail’ that they want to add to their existing ERP installation.

On the other hand, collecting data but then doing nothing with it is just giving you an insight into what happened and maybe why. But using the information to help close the loop between what has happened and what will happen is a more powerful argument for its use.

Right now, in many companies we have ‘islands of control’ whereby a cell, a department even a factory within a supply chain seek to meet specific objectives that have been given to them and even more important, they are measured against those objectives as key performance indicators, KPIs.

However, what may be a KPI for that unit, cell or department may not actually be in the best interest of the entire business. Companies need to take a holistic view of their business and see what is best and apply those to the KPIs they provide the individual units.

About the Author
Marco Antonio Baptista is the MOM Channel Leader in Americas at Siemens Digital Industries Software. Marco has 20 years’ experience in the Advanced Planning & Scheduling space.