Connected Series Books—Download Connected Manufacturing, a collection of essays coedited by Schlesinger about trends in manufacturing—including supply chains, customer intimacy, customer experience, tracking purchasing patterns, and other topics.
The customary supply chain is breaking up. The links of research and development, product development, manufacturing, delivery, and service no longer exist in a linear fashion, so chain is no longer even an appropriate metaphor. What we are moving to is a more fluid concept, like that of a network, in which the intersections are multifold and can be reconfigured according to specific needs.
In our consulting work, we're see customers purchasing parts from different suppliers and changing suppliers in real time, sometimes depending on quality and cost, sometimes depending on capacity utilization or market moves. That's now possible because businesses can now share information far more richly than ever before. Users are knowledgeable enough and the infrastructure is robust enough to allow real-time visibility.
That reflects the big difference between the supply chain and the supply network. In the supply chain, information flows downstream as a product moves along the chain from research to sales and service. But as products progress around the supply network, also information moves downstream and upstream. At the push of a button, companies can find out what's going on in the supply network—where products are, where they have come from, which state they are in, and when they will arrive. If there's an energy outage or a port of entry is clogged with ships waiting to be unloaded, companies can understand the ramifications more quickly than ever before and reschedule capacity to fill the gap.
If you want to see how damaging the effects of getting delayed information can be, download The Beer Game, a simulation program written by a student from the Massachusetts Institute of Technology, which shows the effect of spot outages and inventory fluctuations.
The importance of this visibility resonates with companies big and small. Look at General Electric (GE), which manufactures 50 percent of its goods outside the United States. GE has had to abandon isolated, "silo" thinking and be much more transparent in what it does across multiple business units.
I've been working with a midsized manufacturer in Germany, which has recently set up manufacturing sites in China and Romania. Even though the company is relatively small, it nonetheless has taken advantage of the strengths of Industrial Ethernet to achieve real-time visibility of the factory floors, down to what's on which machine. This lets the company to balance capacity and reroute orders between its manufacturing facilities if necessary. And that helps the company to deliver on time to customers anywhere.
The more real-time visibility you have, the better you can plan production. You can take advantage of opportunities to acquire materials in countries where costs are lower, and you can balance your production costs. Done correctly, such visibility gives you more knowledge about customers' wants and needs. With that insight, you're in a better position to localize and redesign products for that market. That's a competitive advantage over manufacturers who can't accommodate customer preferences.
How do you achieve this? It's not easy, for a variety of reasons. You need to have the proper technology connected on an open-standards network. If you have a legacy enterprise resource planning (ERP) system, and none of your partners can input or receive information, that's a problem. Similarly, it's a problem if you can't exchange information between your factory floor and your back-end ERP systems to track inventory and other updates. That's especially an issue in factory automation, which has a ten-year refresh cycle for some manufacturing equipment; it's just not swapped out as frequently as desktop computers. There needs to be equipment that accommodates common network protocols. Otherwise, you run the risk of bottlenecks and data latency even if the equipment is connected. As with any other network, you also need highly secure connections.
But it's not just a question of technology. There are also cultural issues to be overcome, issues that deal with business processes and how people work together. The customers I deal with know that they need to update technology, but they must also understand how to implement it within their own organization. It requires that the CIO be much more involved in research and development. It requires the CIO to understand how all the elements—data and machinery—tie together. And it requires the CIO to bring together all the different functions of the corporation—manufacturing, operations, logistics, IT—to make that vision come to fruition. It's not easy, but it is worthwhile.
Dirk Schlesinger is managing director of manufacturing for the Cisco Internet Business Solutions Group.
