Rediscovering Efficiency

Once upon a time, manufacturers operated on a simple build-to-stock model. They built 100 or 100,000 of an item and sold them via distribution networks. They kept track of inventory and made more of the item once stocks dipped below a threshold. Rush jobs were both rare and expensive, and configuration options almost as limited as "any color as long as it's black."

Things have changed. Concepts like just-in-time manufacturing, build-to-order (BTO), end-to-end supply chain visibility and the explosion in contract manufacturing have revolutionized plant management.

"We can have goods en route to the airport, and the customer calls us requesting a change," says Mannon Wong, vice president of operations at San Jose-based Netro Corp., a manufacturer of broadband wireless access systems. "These days, you have to go out of your way to accommodate such requests."

Netro copes with the need to incorporate that kind of flexibility into its manufacturing processes by using a Web-based manufacturing execution system (MES) from San Jose-based Datasweep Inc. The MES helps the company maintain tight control over an operation in which 99% of manufacturing is outsourced and which was designed to let customers adjust hundreds of possible product configurations up until final delivery.

MES evolved during the 1980s and '90s as a staple of semiconductor fabrication plants and big aerospace and pharmaceutical concerns. But at $500,000 to $2 million per installation, the technology remained in the hands of big manufacturers and big government. As the name suggests, MES was originally designed to allow better management of production within a single factory.

Then, a series of changes pushed MES off the radar: The move from build-to-stock to BTO placed attention on the order end of the manufacturing equation, driving the broad adoption of enterprise resource planning (ERP) and customer relationship management (CRM); an increasing dependency on contract manufacturing necessitated tight integration with suppliers using supply chain management (SCM) software; and the arrival of the Internet sent companies scurrying to develop a Web presence and e-business applications.

Kevin Prouty, an analyst at AMR Research Inc. in Boston, says he's seen a revival of interest in MES; he attributes the turnaround to the economic downturn and the evolution of MES technology. For several years, companies focused on external-facing systems. But the moment the technology bubble burst, many firms suffered an immediate introversion. Attention shifted back to internal efficiencies, and MES regained its allure.

All the attention on the order-taking side created an imbalance. Companies could now accept orders, coordinate supply chain logistics and communicate with customers like never before. This exposed the weakest link—visibility of the manufacturing floor. And that's where MES comes in.

MES has evolved from an inflexible, monolithic offering for the elite few into a collaborative tool that reaches beyond the walls of a single factory. It exposes shop-floor data from any of a company's manufacturing plants to anyone in the supply chain. While ERP addresses what has happened (historical and financial data) and SCM deals with what will happen, MES fills a critical gap—what's happening now.

For example, customers such as Murray Hill, N.J.-based Lucent Technologies Inc. and Espoo, Finland-based Nokia Corp. hold Netro accountable for constant changes in orders for goods that aren't even produced on its premises. Such a BTO model requires that manufacturers have a clear and detailed picture of each order and of the individual products within the order as they move through the production cycle. Only with that knowledge is it possible to make changes to configurations on short notice. Without MES, companies don't have the ability to respond at the pace demanded by today's customer.

But MES isn't just attractive to virtual manufacturers with widely dispersed operations. Almost anyone in the BTO space will find MES attractive, particularly since MES module pricing has dropped to less than $100,000 for small plants, says Prouty.

"We needed MES to gain immediate visibility into operations for real-time inventory control, yield improvements and cycle-time reduction," says Doug Barnes, IT manager at Lightwave Microsystems Corp. in San Jose. Lightwave manufactures planar lightwave circuits and integrated devices for optical communications systems. It uses InSite, a modular MES Windows NT application from Camstar Systems Inc. in Campbell, Calif., for data collection, traceability, process control, yield management and work-in-process tracking in one facility that handles multiple functions.

Lightwave previously used a homegrown access-based engineering database with simple tracking capabilities. Supervisors had to walk onto the plant floor, inspect the production line, update the sheets daily and manually enter numbers into the database.

"As everything was manual, we tended to question the validity of data, rather than act on it," says Barnes. "Management was largely in the dark."

He attributes early implementation problems to an immature manufacturing model—the optical communications industry was new and it took time to figure out the basic architecture for the system. How exactly would Lightwave's ERP system, Epicor Platinum from Epicor Software Corp. in Irvine, Calif., integrate with InSite, and where should key data reside?

The company asked consultants to modify and extend ERP to contain product and bill-of-material data and feed this to the MES system via a homegrown interface using Visual Basic and SQL.

Result: a 15% increase in line yield, 20% better chip yield and a doubling of on-time delivery.

"The visibility we're getting into our operations represents an enormous competitive advantage," says Barnes. "Now, we can make better business decisions by looking directly at our work-in-process inventory status, increase yields by identifying and classifying failure mechanisms and detect bottlenecks that may have been preventing us from achieving maximum manufacturing throughput."

Lightwave's use of Visual Basic and SQL, however, is a stopgap; the company wants to migrate to a Web-based platform using a soon-to-be-released Epicor-developed XML interface.

XML, in fact, appears to be emerging as an interoperability standard among business systems. "XML provides the glue to bring all systems together," says Greg Sowle, vice president of operations at Camstar.

Prouty, though, cautions against focusing on XML. MES is growing swiftly among automotive and other traditional manufacturers—industries that can't go all out with XML because many of their suppliers and customers have an investment in electronic data interchange-centric infrastructures.

Still, MES usage is expected to reach $4.2 billion by 2004, up from $2.75 billion last year, according to AMR. Much of that growth will come from bit-and-piece MES deployments, with plants harnessing the MES modules they need, rather than deploying expensive enterprisewide systems.

Acma Computers Inc., a Fremont, Calif.-based PC manufacturer, for example, bought only Datasweep's manufacturing tracking module. "Our core need was for manufacturing tracking," says Acma President Allen Lee, adding that the company's PeopleSoft ERP system could adequately perform receiving and return merchandise authorization functions.

Robb is a freelance writer in Tujunga, Calif.

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How Netro keeps up with build-to-order customers

Netro Corp. is a manufacturer of a broadband wireless access system called Airstar, which provides point-to-multipoint voice and IP wireless services. Due to rapid technology and market changes, the company has to be immediately responsive to client needs. As a result, it's common for a product's configuration to be adjusted three or four times while it's being assembled.

Products are custom-configured and built for individual customers with hundreds of possible configuration permutations. Netro must build, configure and label products correctly and rapidly react to customers' requests for changes on orders already in process.

"We couldn't input data from our supply chain directly into that control software," says Mannon Wong, vice president of operations at Netro. Because of a reliance on paper, information was often dated and managers found it hard to know exactly where products were on the assembly line.

Making matters worse, customers tend to delay placing orders until the last few days of the quarter. When rapid growth necessitated a switch to contract manufacturing, it sounded the death knell of the old system.

"We need to have the history of each unit, so we can deal with customer questions and configuration changes," says Wong. "The old system didn't capture enough of the configuration data and was too inflexible to adapt to contract manufacturing."

Netro added a Web-based manufacturing execution system (MES) called Datasweep Advantage from Datasweep Inc. to an enterprise resource planning (ERP) system from Minneapolis-based Fourth Shift Corp. (which was recently acquired by U.K.-based AremisSoft Corp.) and a product data management (PDM) system from Agile Software Corp. in San Jose. Datasweep facilitates bidirectional transfer of manufacturing orders, shipments, billing, return merchandise authorizations, repairs and bills of materials with ERP and PDM. It has a Web-based architecture, unit-level tracking capabilities and a built-in data mart.

"Quality, speedy delivery and customization and a flexible product configuration mix are high on the priority list of customer expectations," says Wong.

Like most manufacturers, Netro bases initial production on a forecast. It builds a specific amount of a basic product and then changes the configuration at the last minute according to customer demands.

"As we get most of our orders at the end of the quarter, we have to be ready," says Wong. "Otherwise, lead times would be too long and we'd lose our competitive advantage."

While the implementation itself was swift, Netro had to customize Datasweep to its complex environment. It ran both old and new systems in parallel for one month in order to validate system accuracy before pulling the plug on the old software.

The MES system permits easy integration with supply chain partners. Regardless of the ERP and supply chain management system a partner may use, Netro can download information into its system.

With the MES system up and running, Netro has been able to do the following:

  • Ramp up to full production more quickly,

  • Eliminate configuration errors,

  • Reduce configure-to-order cycle times by more than 60%,

  • Decrease configuration quality discrepancies by two-thirds, and

  • Increase product shipments by more than 100% without adding new people or facilities.

Netro chose not to reveal its total investment in Datasweep, but a Datasweep spokesperson says prices start somewhere in the $400,000 range for a simple one-plant operation and increase for systems that involve multiple facilities or contract manufacturers.

"We anticipate ROI within 12 months," says Wong.

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