Feature: A view to savings

When RPM International Inc. was looking for a way to streamline its purchasing processes, the multibillion-dollar manufacturer of speciality chemical products decided that the best approach would be to consolidate requirements from across all of its operations.

RPM, which owns brands such as Rust-Oleum, DAP and Zinsser, buys complex raw materials that go into the formulation of recipe-based coating, sealant and paint products. By collapsing requirements from across all of its brands, RPM reduced its list of standard ingredients, consolidated suppliers and created a new workflow for the purchasing process.

"We purchase (US)$900 million a year in raw materials," says Paul Hoogenboom, CIO at Medina, Ohio-based RPM. "The ROI from having a consolidated view of this process is pretty darn obvious."

An increasing number of manufacturing companies are looking to improve efficiencies and trim costs by building more visibility into various levels of their operations, says Andy Chatha, president of ARC Advisory Group Inc., a Dedham, Mass.-based manufacturing consultancy.

"The change in the economy and the decline in demand has highlighted the overweight cost structures a lot of companies have," says Lou Unkeless, a vice president at Datasweep Inc. in San Jose.

As a result, companies are trying to "gather, aggregate, retain and analyze" data trapped at various levels of the organization, Unkeless says.

It helps them get a better understanding of "all the incoming logistics and outgoing logistics, right up to the customer's door," Chatha adds.

In RPM's case, to consolidate demand, the company had to first find a way to look at the chemical properties, specifications and test attributes of the various raw materials required by its business units to find out if multiple units used the same products.

RPM implemented a specialized content management suite called Optiva from Formation Systems Inc. in Southboro, Mass., to create a product information backbone for capturing and sharing product knowledge, formulation attributes and purchasing histories.

Optiva is specialized for makers of recipe-based goods such as paints or processed food and has allowed RPM to have a much better visibility of its product requirements, Hoogenboom says.

"It's the mother of all consolidated systems, so it can provide a single cross-referenced look at everything we buy," Hoogenboom says.

Other companies are also implementing data integration applications in order to achieve similar goals.

For instance, greater visibility across manufacturing operations can result in better quality and business processes, says Chuck Word, corporate quality control manager at Flash Electronics Inc., a Fremont, Calif.-based contract manufacturer of electronic components. Since June, the company has been pulling real-time quality information off the plant floor using Web-based monitoring and tracking software from Datasweep. Previously, "we had no reliable way to report quality data to customers," Word says.

Datasweep's Advantage software allows Flash to collect, integrate and analyze production data at every critical step, says Word. The software has also let the company implement what it calls a line-stop process to ensure that every manufactured component passes every quality step before it's shipped to customers.

Access to Detailed Information

Such data integration between the plant floor and the quality control and shipping departments has allowed Flash to give its customers detailed online access to quality reports, product genealogy and tracking information, Word says. It has also helped the company pinpoint and fix quality problems more quickly.

"The ROI has been very high," Word says.

Going forward, the company plans to "back-flush" the data it's gathering from the plant floor into its main enterprise resource planning (ERP) system, he says. That would give the company's purchasers and suppliers real-time information related to its raw materials needs.

Henkel Consumer Adhesives Inc. in Avon, Ohio, is able to better manage its customer relationships thanks to greater visibility of its point-of-sale data and of internal processes such as accounts receivable, shipment delivery dates and warehouse staff productivity levels.

Henkel makes Duck brand adhesive products and distributes them to retailers like Wal-Mart, Target and Staples. In an effort to provide more value to its customers, the company decided to give retailers detailed analysis of their sales of Duck products, including projected demand patterns, says Matthew Rhoades, team leader of Henkel's advanced technology development effort.

Last March, Henkel implemented a data integration software tool called DataStage from Ascential Software Corp. in Westboro, Mass. Ascential's tool extracts, cleanses and analyzes point-of-sale, inventory, shipment and marketing data daily from Henkel's main ERP systems. The data is then used to generate detailed analysis for customers. It's also used to populate several data warehouses that Henkel's finance, marketing, sales and operations management teams utilize to perform at least 50 different types of analysis.

"We have an almost 360-degree view of sales, inventory, manufacturing, shipment and consumption information," Rhoades says. "It has completely changed the way we do manufacturing." Instead of manufacturing to meet forecast levels, the company now manufactures to meet actual demand.

Improving Collaboration

In much the same way, a cross-functional view of design and engineering processes is helping Fort Worth, Texas-based Lockheed Martin Aeronautics Co. in a massive collaborative manufacturing effort involving three major manufacturing partners and more than 80 major suppliers in three countries.

Lockheed is using Catia Metaphase Interface (CMI) software from Lisle, Ill.-based T-Systems Inc. in the design and engineering of the Joint Strike Fighter (JSF) aircraft, which it's developing for the U.S. armed forces. CMI allows Lockheed to visually represent alphanumeric product data in a 3-D graphical format. With CMI, Lockheed can take assembly and subassembly design information related to the 25,000 parts contained in the JSF and render it in 3-D form using Catia computer-aided design software from Dassault Systemes SA in Suresnes, France.

"Effective communication is one of the biggest challenges in a project of this scope," says Larry Mestad, a senior manager of the JSF integration team.

With CIM, "we are able to provide product information both visually and textually to all of our partners and supply base," he says.

It's not always necessary to rip out existing systems to build better visibility, says Bill Fisher, CIO at snowmobile maker Polaris Industries Inc. in Minneapolis. Faced with the challenge of integrating multiple data sources about three years ago, Fisher decided that the best course of action was to build on the investment Polaris had already made in ERP software from Mapics Inc. in Alpharetta, Ga.

Instead of spending about $20 million on a new ERP installation -- which was what a team of consultants recommended -- Fisher and his team decided to use Microsoft Corp. extranet and intranet technology to connect various Mapics modules, such as procurement, inventory management and resource planning.

During the past two years, the "integration over time" approach has resulted in a connected enterprise where information flows far more efficiently than before, Fisher says. Polaris' new extranet for its 2,000 dealers has eliminated costs related to the use of electronic data interchange technology, cut out paperwork associated with purchase orders and warranty claims, and made it far easier for the company and its dealers to schedule, track and manage orders.

"For a lot of people, the easy answer is to throw away everything they have in place" to get new functionality, Fisher says. "Its just not obvious to me that it is always the best approach."

Manufacturers look inward

In a tough economy, manufacturing companies are increasingly looking inside their operations for opportunities to cut costs instead of focusing on building better links with suppliers and external partners, as they once did, analysts say.

"Right now, most manufacturing companies have a big focus on lowering costs," says Andy Chatha, president of ARC Advisory Group. This has resulted in a greater scrutiny of internal inefficiencies and a focus on building "operational excellence," Chatha says.

Manufacturing companies have been very good at optimizing individual pieces of their organizations, such as plant floor operations or inventory management, but they've been relatively slow to integrate them, Chatha says. Consequently, the goal is to foster a more "collaborative culture" across an organization, he says.

Expect to see projects that are directed at building a more real-time and cross-functional view of internal operations, says Lou Unkeless, a vice president at Datasweep. "There's been somewhat of a retrenching in that companies are starting to look more at their operations first and only then looking at collaboration and information sharing" with external entities, he says.

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More about ARC Advisory GroupAscential SoftwareAvon ProductsCMIDassault SystemesDatasweepLockheed MartinMapicsMicrosoftT-SystemsWal-Mart

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