Info flow project mfg paper

Information Flow for Agility, Compliance

and Performance in Project Manufacturing

By Jeffrey Hill and Julie Fraser

Iyno Advisors

Sponsored by Deltek

Q4 2012

Iyno Advisors

Information flow for Agility, Compliance and Performance in Project Manufacturing

© 2012 Iyno Advisors 1

Executive Summary

Prolonged weak economies around the world mean that governments and

some commercial businesses have been cutting budgets. For many project-

based manufacturers, this presents a challenge. Companies cannot continue

to operate as they have in the past and expect to perform as well. Project

manufacturing has never been easy, but in these conditions, the pressure is

on to become more agile and streamline operations to improve financial

performance.

Project manufacturers do not have the luxury of riding up an experience

curve for high volume product offerings year after year. Instead, they must

learn from similar projects, and then extrapolate, as they often build complex

product offerings from “scratch”, or modify and improve designs with low

volumes at each stage of the learning curve. Many of these products are built

under government contracts, which impose regulatory requirements and

oversight which differ substantially from high-volume manufacturing.

Business and manufacturing software applications designed for volume

manufacturers don’t fit the requirements of project manufacturing, so many

companies resort to using manual systems to manage planning, production,

and reporting. Using manual methods to manage projects only increases the

management burden and can increase the chances of production delays and

errors. Companies that integrate plant information into the enterprise

information flows can overcome these challenges and show drastic

improvements in overall manufacturing performance and financial results.

The main way companies do that is by

implementing plant-wide manufacturing

execution systems (MES) and

integrating them to ERP.

Figure 1 shows data from a study of all

types of manufacturing companies,

comparing those who use MES to

others’ ability to improve in key financial

performance areas.

MES provides data to those in the plant,

and provides status updates on progress

to managers. This timely and integrated

information flow allows companies not

only to streamline regulatory reporting and compliance, but also to focus on

metrics, efficiency, and improvement.

Source: Pursuit of Performance Excellence,

© 2012 MESA International and Cambashi Inc.

0%

10%

20%

30%

40%

50%

60%

Increased ROA/RONA3% or more

Increased Net OperatingProfit

3% or more

MES/MOM Users Others



Project Manufacturing Challenges

Project manufacturing is characterized by variety, in both manufacturing

processes and tasks. Even products that have been manufactured in the past

are likely to be subject to revisions and improvements. For example,

airframes are built to order, but usually have a production life of many

decades. A new order for a particular model needs to incorporate design

changes, improved materials, more efficient assembly practices – all of the

accumulated progress since the last time the model was produced.

Project manufacturers have highly specialized needs:

Tracking labor time and materials – whether contractual or simply to

quote accurately on future projects and protect profitability

Readiness for regular and stringent audits designed to ensure all

contract terms are met

Traceability requirements that extend to every item produced and

every component in each item

Compliance with government regulations such as FAR, CAS, and

DFARS

If that’s not challenge enough, contracts are different for every project, and

several contracts may cover different parts of the same project. Projects are

often grouped into programs.

Project management in this kind of environment requires a painstaking level

of detail, whether the customer is a government or commercial enterprise.

Unlike volume manufacturing,

project manufacturing can be

chaotic, a mix of unfamiliar

processes and tasks that are

unique to each project. This

means that project manufacturers

need to be adept at transitioning

from one project to another, or

running multiple discrete projects

that may have no relationship to

one another.

Software can help, but Figure 2

shows that only about a third of

all manufacturers use plant floor

manufacturing execution systems

(MES) widely in their enterprises,

considerably less than report

using ERP. It’s not as easy as just

Source: Pursuit of Performance Excellence,

© 2012 MESA International and Cambashi Inc.

Figure 2: Fewer than half of manufacturing companies

have MES in wide use now, compared to

the majority with wide use of ERP.

0%

10%

20%

30%

40%

50%

60%

70%

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100%

ERP MES / MOM

Planningto buy innext 1-2years

Someuse orpilot

Widely inuse



implementing software. Business and manufacturing applications for high-

volume manufacturing companies don’t fit the project model of production, so

planning, production, plants, and reporting are often managed piecemeal or

with manual systems.

Many companies resort to using Excel spreadsheets to manage projects

through production. Applications like Excel don’t have built-in revision control,

which is necessary to ensure that project documents are up to date, or a

mechanism for sharing project information between design, production

planning and the shop floor. So, many companies use manual means to

manage production information, often using paper documents. Manual

workflows can introduce problems into the production process in several

areas:

Delays in communicating essential information between production

management and the shop floor

Handoffs between various parts of production can be slowed or stall

while the paperwork “catches up”

The wrong paperwork can hit the floor, with incorrect specifications or

standard work, resulting in at least paper re-work and sometimes

production re-work as well

Cumbersome processes to check production status and materials

status and materials location

Time-consuming reporting processes that require additional labor

As a result, manufacturing has little visibility or control over production

outcomes. This, in turn, can hurt overall production schedules and outputs.

Information Flow from Plant to Enterprise

Information is the key to managing production effectively, but information

needs to flow in all directions, so that all of the parts of manufacturing can be

informed. For example, production scheduling needs timely information from

the plant floor on the status of current tasks so that production management

can build accurate schedules for future production. The same information

needs to be available to purchasing so that materials or components that are

needed for production will be available when they are needed. Production is



pivotal to maintaining the

product lifecycle and

supply chain, as Figure 3

illustrates.

Successful companies

recognize the value of the

management maxim: “you

can’t manage what you

don’t measure.” For any

organization, developing

metrics to assess progress

and measure performance

is a critical part of process

improvement, but it is

especially important in

manufacturing. Some of

the reasons metrics are

essential in manufacturing

include:

Measuring

production processes

allows companies to

understand the relative

efficiency and effectiveness of those actual processes when measured

against baselines or work standards.

Metrics can be invaluable in identifying the root cause of production

bottlenecks which can affect both profitability and on-time

performance.

Along with profit and loss variables, manufacturing metrics can be

used when pursuing new business opportunities.

Metrics enable organizations and their customers to compare

performance with industry averages as well as competitors’

performance.

Managers should consider carefully which metrics best represent production

processes, especially if results are going to be used for sales or comparison

purposes.

Manufacturing Execution Systems (MES) present an effective alternative to

manually managing projects because MES systems can support

manufacturing with the information to make better decisions in all of parts of

the production process. MES systems can provide tools for document

management, revision control, operator guidance and consistent collection of

the data needed to support both reporting and performance metrics.

Figure 3: Production sits in a critical point of both the

product lifecycle and the supply chain.

Supply

Chain

Time to Customer In-service market and

product development

Market and product planning

Manufacturing engineering

Product development

Ramp to volume

Sales Planning ProcurementProduction Planning

ProductionDelivery / Service

Product

Lifecycle

Time to market



MES can also move data bi-

directionally into and out of

enterprise resource planning

(ERP) systems. Figure 4 illustrates

some of the major processes and

information flows in which MES

can play a major role. This

means, for example, that a

project’s current progress is

available to all of the stakeholders

in the enterprise. Information

from the MES system can be used

in such areas as project

accounting, costing, purchasing,

and customer service. When MES

is coupled to ERP, the business

can benefit even further. This

information flow between the

plants and the

enterprise

presents an

integrated

approach to

managing areas

such as business

development,

materials

management,

project

management, and

financial tasks, as

Figure 5 shows.

Performance Payoff from MES

MES systems provide the right set of tools to manage all aspects of

production in the highly variable manufacturing environment that is common

to project manufacturing. MES solves many of the issues that are

characteristic of project manufacturing:

Project variety. MES systems are designed to manage multiple

projects at the same time while maintaining effective control over

Figure 4: MES provides critical information in a number of

business processes, informing both

plant and enterprise decisions.

DATA

COLLECTION

COMPLIANCE

& DOCUMENT

MGMT

PROJECT

ACCOUNTING

REVISION

CONTROL &

ENGINEERING

CHANGES

PROCESS

PLANNING/

ASSEMBLY

PARTS & SUB-

ASSEMBLY

INVENTORY

QUALITY

CONTROL

MES/MOM

PLANNING &

SCHEDULING

Figure 5: Having accurate and timely plant and enterprise information

flowing in an integrated system feeds every aspect of the business.

Full Traceability

Comprehensive, timely business views

INTEGRATED ENTERPRISE

INFORMATION SYSTEMS

Plant/MES Business/ERP

INVENTORY

PROJECT

MANAGEMENT

BUSINESS

DEVELOPMENT

MATERIALS

MANAGEMENT

FINANCE

DELIVERY

PROJECT

MANAGEMENT

ACCOUNTING &

CONTROL

QUALITY

MANAGEMENT

ASSET &

MAINTENANCE

MANAGEMENT

PRODUCTION

RECEIVING



production for each project. Figure 6 illustrates that manufacturers

using these systems are far more likely to be able to increase the

variety of products through the plant. Their memories simply are not

overtaxed by that as people and paper

systems are.

Changes. Project

manufacturing is characterized by

constant changes and revisions to

product design and assembly. An MES

system enables manufacturing to keep

track of all of the variables for each

unique project, as well as for multiple

projects.

Traceability and

accountability. Many products built

by project manufacturers require

accountability for costs and labor, as

well as the requirement to trace

components or parts from supplier

through final assembly. This is true for most commercial as well as

government contract project manufacturing.

Reporting. In manual project management, reports can be difficult

and time-consuming to prepare, but MES systems can provide reports

on nearly any facet of production. Reports can be tailored to specific

roles within the organization, so that users get only the information

they need.

Monitoring production anywhere. In response to the increasing

business use of mobile devices, MES systems are incorporating the

ability to monitor production processes at any time and place.

Consistency in processes. MES systems provide a consistent

framework for defining and managing processes throughout

manufacturing.

Product quality. MES enables quality improvements. Companies

achieve tighter control over product

quality by ensuring that parts or

components used in assembly have

the right revision level or certification.

The system can also ensure that

production personnel use the correct

revision of production drawings and

assembly procedures. Figure 7 shows

that these features have an impact on

the cost of quality as well.

Efficiency. By reducing

paperwork and smoothing handoffs

between the various areas of

Figure 6: A much larger portion of manufacturers

using MES were able to increase the variety of

products through their plants.

0%

10%

20%

30%

40%

50%

60%

70%

80%

MES/MOM Users Other

Increased #of variants /period 1.1%-3%

Increased #of variants /period over3%

Figure 7: Manufacturers using MES were more likely

to make dramatic improvements in cost of quality.

0%

5%

10%

15%

20%

25%

30%

MES/MOM Users improvedcost of quality 10% or more

Others improved cost ofquality 10% or more



production, MES helps to increase overall production efficiency, as well

as reducing production errors.

Ability to manage growth. Companies who use manual systems to

manage production will find it increasingly difficult to take on

additional projects without threatening current projects. MES allows

companies to manage multiple unique projects at multiple locations

with a consistent, structured approach.

Financial results. The use of MES to manage production leads to

increased efficiency in all parts of

manufacturing which will have a

salutary effect on profitability.

Figure 8 shows examples of both

operational and financial benefits.

The common element among these

issues is the need to control costs,

improve processes, and maintain or

enhance quality to differentiate in a

highly competitive environment.

Companies need production

information to thrive, and MES

provides the most efficient way to

manage project manufacturing.

Flowing Information Feeds Competitiveness

MES is proven to increase the overall efficiency of production operations, but

when MES is used in project manufacturing, it can be a powerful tool for

managing projects through all parts of the organization. The bi-directional

flow of information between plant floor and ERP informs all of the enterprise

about the current status of every project. With this increased visibility

companies can to exert full control over every aspect of a project from design

to manufacturing to the customer and through its lifecycle.

MES provides a new level of accountability for production planning,

scheduling, process control, and production and supplies the right information

to eliminate production bottlenecks and manual systems. It can also support

continuous process improvement even on very low volume products.

By making information flow, MES enables companies to tame the chaos and

complexity inherent in project manufacturing. Companies using MES

integrated with ERP find that projects flow much more efficiently. The result

is that customers gain a better view into the status of their projects and a

higher level of confidence in the manufacturer. Thus, the manufacturer’s

revenues and cash flow improve as well. In challenging times, this can be the

key to not only surviving, but thriving.

Figure 8: Those using plant-wide manufacturing

execution systems (MES) were better able to improve

operational and financial performance than others.

0% 50% 100% 150%

Average unitcontribution

margin improved>10% per year

Time to makechangeovers or

transitionsimproved >10%

per year

MES /MOMUser

Other

Average of Responses



About Iyno Advisors

Iyno Advisors is an independent advisor on how

manufacturing and production companies can best

benefit from software applications. Julie Fraser,

the Principal, has 25 years of experience and

passion in driving healthy understanding of

opportunities that can drive added profitability and success. Associate Jeffrey

Hill has a similar length of career in IT and as a writer and industry analyst.

Our team is experienced enough to add significant value and insights to the

projects we undertake.

Contact Julie directly at [email protected] +1-508-362-3480

About the sponsor:

Deltek

Deltek is the leading global provider of

enterprise software and information

solutions for professional services firms and government contractors. For

decades, we have delivered actionable insight that empowers our customers

to unlock their business potential. 15,000 organizations and 2 million users in

over 80 countries around the world rely on Deltek to research and identify

opportunities, win new business, optimize resources, streamline operations,

and deliver more profitable projects. Deltek – Know more. Do more.®

www.deltek.com 800.456.2009

mailto:[email protected]

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