Organize and Justify Your EMI Initiative

Agenda

Presenter

Presentation Notes

Discuss Lunch – Round Table Discussion

Why

“1: Some of the things customers care about most, such as quality and on‐time delivery”

Shocking Statistic:

2% of dissatisfied or not very satisfied come back. Only 6% of satisfied customers return. 66% of very or extremely satisfied come back. It cost 5 times as much to win a new customer as to keep a

current one

MESA Metrics that Matter Revisited 2/4/10

Presenter

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MESA -Metrics that Matter Revisited , A MESA International and Cambashi co‐branded white paper. 2/4/10

A New Way Of Thinking in Terms of “Quality”

A 99% level of quality results in : 14 minutes per day of no power. Over 35,000 babies per year accidentally

dropped by doctors or nurses. More than 250,000 incorrect surgical

procedures per year. Approximately 700 long or short airport

landings per year at most airports.

A Commodity Business?

Nothing required to be a commodity. – Coffee – Water

Progression towards distinction – Sameness – Differentiation – Distinction

“Yesterday’s Best Is Today’s OK, Which Is

Tomorrow’s Not Good Enough”

Presenter

Presentation Notes

You may say: “I am in a Commodity Business” Nothing required to be a commodity. Starbucks differentiate by coffee. Why did Maxwell or Folgers not create a Starbucks? Water is another analogy. Do you have favorite water? IT IS WATER. Progression towards distinction: (Source: Scott McKain) Sameness (Gateway, NEC, Acer etc…) Differentiation (Dell, Sony, HP) Distinction (Apple)

Pressure for business improvement is immense

Organizations face:

• Market volatility

• Uncertainty

• Lack of product demand

• Lack of visibility

• Reduced spending

Presenter

Presentation Notes

In today’s business climate, organizations are facing: Market volatility Uncertainty Lack of product demand Lack of visibility Reduced spending across the board

Manufacturing Challenges

What is EMI/MI/MES/MOM?

• EMI/MES/MOM Projects – OEE and Downtime – WIP Tracking & Genealogy – Inventory Tracking – Plant Floor Scheduling – ERP Interface – Production Reporting – Environmental Reporting – Manufacturing Business Information – Quality Systems

Presenter

Presentation Notes

EMI/MES/MOM Projects Overall Equipment Effectiveness (OEE) and Downtime WIP Tracking & Genealogy Inventory Tracking Plant Floor Scheduling ERP Interface (P2E) Production Reporting Environmental Reporting Manufacturing Business Information � data collection and reporting Quality Systems

The Challenge - Access to Plant Data

Enterprise information Network

standardized and optimized

Routine downtime for maintenance

Plant information Protected on separate or

isolated network Interference can cause

production downtime

Presenter

Presentation Notes

Business Movers = Over 10% improvement in EBITDA or Net Operating Profit Problem is, the information about the drivers is often well protected from the enterprise where the business outcomes matter most. And that is as it should be in some ways. Best practice does isolate the IT systems in the plant from those in the business to ensure that the operation and its revenue-generating activities are never disrupted due to IT issues. However, the business does need information about the plant – and the plant also needs to align its activities with business objectives and metrics. Often, for the context of data to be clear, the data must come from both enterprise and plant IT systems. Fortunately, there are applications today that can help bridge that gap. - So what did the business movers do differently than others? For one, as this graphic shows, they made clear links between operations metrics and business metrics or key performance indicators. This is the step that establishes that connection between drivers and outcomes we discussed earlier. They also improved on more of the operations metrics – quality, on-time delivery, cost which allows pricing that’s competitive while preserving margins. Also on enablers for these such as IT uptime and data quality. The lessons are: issues that matter to customers are important drivers! And you must improve on all fronts to keep up with these business movers! Finally, they display data about performance to employees rapidly enough that when they take action, the performance on those drivers can improve. One of the keys to enabling that is

The Challenge - Access to Plant Data

Understand drivers of performance outcomes

Measure & improve on an array of drivers

Display performance data rapidly so employees can act

Presenter

Presentation Notes

Business Movers = Over 10% improvement in EBITDA or Net Operating Profit Problem is, the information about the drivers is often well protected from the enterprise where the business outcomes matter most. And that is as it should be in some ways. Best practice does isolate the IT systems in the plant from those in the business to ensure that the operation and its revenue-generating activities are never disrupted due to IT issues. However, the business does need information about the plant – and the plant also needs to align its activities with business objectives and metrics. Often, for the context of data to be clear, the data must come from both enterprise and plant IT systems. Fortunately, there are applications today that can help bridge that gap. - So what did the business movers do differently than others? For one, as this graphic shows, they made clear links between operations metrics and business metrics or key performance indicators. This is the step that establishes that connection between drivers and outcomes we discussed earlier. They also improved on more of the operations metrics – quality, on-time delivery, cost which allows pricing that’s competitive while preserving margins. Also on enablers for these such as IT uptime and data quality. The lessons are: issues that matter to customers are important drivers! And you must improve on all fronts to keep up with these business movers! Finally, they display data about performance to employees rapidly enough that when they take action, the performance on those drivers can improve. One of the keys to enabling that is

Managing Performance Value Real

MOM / MES

Largest Dollar (n=939)

Most Important (n=939) IT Budget Survey

Source: AMR Research © 2007

15%

15%

8%

14%

19%

7%

Customer Mgt.

Sourcing & Procurement

ERP

12% 12%

23% 19%

8%

6% 6%

10%

Supply Chain Mgt.

Product Lifecycle

Performance Mgt.

Presenter

Presentation Notes

Value of Managing Performance is Real�EMI/MOM/MES Systems Ranks #1 for 06-07 Why? Industry struggles with the financial hurdles Eliminate Disconnects between Operations, IT and Finance MOM systems are bridging the financial gaps

EMI & MES on Buying Agenda

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And quite a few more of the respondents think that sounds like a good idea – so you can see in this selection of data about what systems companies are planning to buy, that manufacturing intelligence, or EMI/OPM on this chart, is in purchase plans for over a quarter of companies across all production industries. As a newer technology, that is quite a bit more than BI. And added on to those already using it, 60% will have this soon. The lack of information from the plant floor is clearly driving purchases of both manufacturing intelligence and the manufacturing operations management systems that can help to guide plant employees’ actions at all times.

Technology Evolution

Innovation Growth Maturity 100 90 80 70 60 50 40 30 20 10 0

100 90 80 70 60 50 40 30 20 10 0

Time

% A

dopt

ion

EMI/ MES/MOM

HMI / SCADA / PLC

ERP

SCM

Presenter

Presentation Notes

Technology S Curve: Evolution Explained Also applies to methods development of: sales, delivery, training and support disciplines It is against this backdrop that global manufacturers are getting back to the basics and focusing attention on their core manufacturing capabilities. Why now? Fortune 1000 manufacturers have been in the midst of massive ERP rollouts and consolidations – these are wrapping up and businesses are slowly discovering that ERP alone is not enough to achieve the level of operational excellence many had hoped for – or been promised. Companies have also been working to lean out their supply chains and procurement processes, and are awakening to the realization that manufacturing – or you can think of is as the ability to reliably supply product into these lean supply chains - is a critical capability that’s been starved for investments for nearly a decade. So if you look at what the gating factor is for making that next leap in operational excellence, it boils down to manufacturing itself. There’s been a lot of talk about demand visibility and the impact of demand visibility on performance. In fact, benchmarking studies we’ve done here at AMR show that slight increases in demand visibility yield substantial improvements in what we call “perfect order” performance – and profitability. Industry leaders have figured this out, but when you look at the leaders, they’ve also invested in the manufacturing capabilities needed to respond to the demand. So the real takeaway here is that even demand visibility isn’t enough if you can’t respond to that demand with high quality products out of the gate. In short – you can have the best demand visibility in the world, but it’s not going to matter if you can’t get a quality product out the door.

Common Metrics

Presenter

Presentation Notes

Common Metrics Used Today

Corporate Goals

Example

Focus on Strategic Priorities Avoid Excess Inventory Improved Manufacturing Performance

– Lighter product – Lower Production Costs – Reduced Waste & Emissions

Presenter

Presentation Notes

Despite the global recession, the company had one of its best years in 2009 in terms of earnings and cash flow, and the changes it has made since 2007 have it positioned well for 2010 as the recession recedes, the company's top executive said yesterday, speaking at its annual shareholder meeting, said the firm "remained strong and financially stable," as he predicted a year ago even amid the recession. He pointed to the firm's performance last year, from its profits to its cash flow, even though its $7.1 billion in sales was down from the year before. It reported a profit of 95 cents a share last year. The company weathered 2009 because it "remained focused on changing strategic priorities and adapted business to changing conditions and the economic climate,”. The company last year avoided piling up excess inventory by sticking with a 2007 plan to match supply with demand, the CEO said. "This required temporary production curtailments in all regions, which were an enormous burden on the individuals who work in our plants," he added. But the moves let Company cut inventories by 11 percent from 2008 and was the key to its cash flow. "This was really in sharp contrast to previous recessions where volume drops of 2 and 3 percent wiped out nearly all our profitability and certainly our cash," the CEO said. He said he didn't expect "any more major restructuring in the foreseeable future." The company last year negotiated contracts with customers that allowed for more cost pass-throughs and was able to make lighter product, lower production costs, and reduce emissions at its factories, Area’s largest company, said yesterday (2010) it would embark on a plan to significantly reduce energy use and carbon emissions at its operations worldwide. They said it will cut its global energy consumption by 50 percent by 2017, reduce its carbon dioxide-equivalent emissions by 65 percent, and nearly double use of recycled material so 60 percent of each of its new product has recycled material. It already has acted toward those goals, reducing some weights by 30 percent and its energy use by 8 percent in the past three years.

Manufacturing Challenges

Operations Intelligence - Support for Metrics

Presenter

Presentation Notes

The business movers have done that and more. Using manufacturing intelligence effectively is key Link dashboard to enterprise & plant wide systems Ensure ability to confidently take action You can see that most business movers that have an operational dashboard can leverage that data at the enterprise level. They can link it to the MES/MOM that guides operators and captures data. They can drill down to find root causes – to move from outcomes to drivers to root causes that someone can really fix. Quite a few of them can also put out alerts if there is a known way to reverse a trend that will lead to problems – such as calling in maintenance, alerting materials management if a batch of raw materials is causing a problem, or shifting product mix to avoid an going over the limits of an environmental regulation.

How Do We Stay Ahead of the Game?

Competitive edge Performance First to market The questions manufacturers ask:

– How do we perform against goals? – Which facilities perform? – Which facilities struggle? – What is prevents us from achieving goals?

The answer in company’s metrics

Presenter

Presentation Notes

Manufacturers strive for a competitive edge Through on-time delivery, quality and customer satisfaction. They strive to be the first to market, and on the financial side, look for strong margins and profitability. The questions that manufacturers keep asking are: How are we performing against our goals? Which facilities are performing best? Which facilities are struggling? What is preventing us from achieving our goals? The answer lies in the companies’ metrics. Real-Time It is by setting new and more aggressive targets for metrics that companies become leaders in their markets

The Justification Business Problem

• Technology Terms Difficult for Management to Understand

• Difficult to Demonstrate Benefits. • Continued Investment / Reinvestment

A Management Turn-Off

There is NO MAGIC BULLET!

Presenter

Presentation Notes

Difficult for Management to �Understand Technology terms when explaining what is provided. Difficult to exhibit the business benefits. Turn off for some with regard to continued investment / Reinvestment. There is NO MAGIC BULLET….

The Manufacturing Systems Maturity Curve

TECH FOCUS

EMI Systems Maturity Curve

The Justification Process … Organization & Operational Goals

Not Technology

Organization Process

Reengineering Change Mgmt

People &

Process

Systems & Technology

Systems & Technology

People &

Process

Organization

Decision Making

Justification Options & Expected Results

Organization, Process

Reengineering, Change Mgt.

People & Process

Systems & Tech.

Comprehensive Business , Financial

& - Technical Strategy

•Justification for Broader-Integrated Programs Must include Reengineering of:

•How decisions get made. •How results are measured & new work processes established. •Strategy integrated with Budgets •How Information technology can enable •Often integrated with increased Automation •Follow a Systems Migration & Life cycle investments methodology.

2012, Systems Innovation Management, All Rights Reserved

Systems Life Cycle Model –

Tool for Stability & Improvement

Focus on what Counts !

Q&A Discussion

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Organize and Justify Your EMI Initiative

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