Optimizing the Value Chain in a New World:
It All Begins with Manufacturing

According to Gartner's Research Note entitled Manufacturing Planning: Fundamentals and Indicators of Collaboration, published 29 May 2001, "Enterprise performance within the context of the supply chain remains important to collaboration as fundamental business practices are extended from the enterprise to customers and suppliers. For many manufacturers, however, the least visible link in their supply chain is their own facilities."

Gartner's "supply chain" represents activities, such as purchasing and production, that take place in an even larger arena, where factory floor operations are linked to the supply chain, called the "value chain." At every link in the value chain, the value of products and services is increased until they are ultimately passed on to customers in the marketplace.

Steps to becoming a stronger collaborative partner: Identify how manufacturing operations fit into the value chain Optimize, or connect, those operations to the value chain Measure and analyze overall performance Whether manufacturers are operating in manual environments or with IT and ERP systems in place, Rockwell Automation Global Manufacturing Solutions Consulting Services can help them achieve these goals. Source: Rockwell Automation

Since there is room for improvement in a supply chain, a similar opportunity also exists in the value chain. Since supply and value chains are thus inexorably linked, manufacturing processes are key to the success of both. If manufacturing is the weakest link in the supply chain – therefore the overall value chain – improvements in the former result in improvements in the latter. The first step in doing this is by better connecting, or "optimizing," the factory floor to the rest of the value chain.

Optimizing the factory floor – and its interaction with the value chain – is now viewed as key to successful collaboration. Overall, collaboration at the enterprise layer has provided opportunities for stronger relationships, greater communication, and increased efficiencies with suppliers and customers. When extended to the factory floor layer, collaboration results in an even keener competitive edge.

Two KPIs: An Example Two Key Performance Indicators (KPIs) that particularly impact the customer are: lead/cycle time, and work-in-process inventory. Manufacturers want to shorten the time it takes between the customer's request for a product order and the customer's receipt of that order. They also want to reduce their ratio of inventory dollars to sales dollars. Collaboration allows lead/cycle time to be measured all the way from sourcing to distribution, allowing manufacturers to reduce lead time across the entire value chain. It also allows work-in-process inventory to be measured, enabling the manufacturer to identify points where excessive inventory exists and reduce it, versus pushing excess inventory to suppliers. Source: Rockwell Automation Up    Down

Economic experts have recognized that the opportunities for improving collaboration at the manufacturing layer are great. In a recent address to the Rockwell Automation Global Media Summit, Gail Fosler, senior vice president and chief economist of The Conference Board, the world's leading research and business membership organization, stated: "Manufacturing has more opportunity, through information communications technology, to push its value forward in the chain."

This is precisely the focus of Rockwell Automation's Global Manufacturing Solutions Consulting Services: Through their technologies and services, to optimize the value chain by optimizing manufacturing. Their approach to successful collaboration is making plant facilities an essential link in the value chain.

Wes Wernette, practice leader for operational consulting, Rockwell Automation Global Manufacturing Solutions, says that optimizing manufacturing is an idea whose time has come. "If you've already invested in IT infrastructure, an ERP system, or a supply chain software package," says Wernette, "you are in a good position to benefit from collaboration at the factory floor level. Optimizing manufacturing, and its interaction in the supply chain, provides the opportunity to increase the responsiveness and effectiveness of the entire value chain."

Optimize Manufacturing, Optimize the Flow "Order flow management" is a critical activity that spans the entire value chain. Manufacturers have four needs that stem from order flow management: To send suppliers information in order to get supplies and materials for production To get those supplies and materials out on the production floor To make the right goods on the production floor To get those goods out to customers on time Source: Rockwell Automation

One critical activity that spans the entire value chain is order flow management. The lower the degree of collaboration in the value chain, the more likely the failure of one or more of the four objectives of order flow management (see Optimize Manufacturing, Optimize the Flow). The key to reducing failure is a higher degree of integration and accurate information shared among manufacturers, customers, and suppliers – therefore a higher degree of collaboration.

"The greater the number of linkages you have between the business system and customers, suppliers, and the factory," states Wernette, "the greater your collaborative ability. In turn, the entire value chain becomes more responsive, efficient, and agile."

Improving Connectivity, Building Relationships Rockwell Automation Global Manufacturing Solutions recently provided a collaboration solution for Ferro Corporation. Ferro, the world's largest manufacturer of ceramic glaze and porcelain enamel coatings based in Cleveland, Ohio, has manufacturing facilities in France. While the company was using an SAP-based enterprise system, it had no automated way of collecting data about what was happening on its factory floor and reporting it to that system. As a result, Ferro eventually developed problems related to inventory accuracy. Specifically, Ferro asked for help with its inventory problem and its impact on the value chain. Consultants determined what key data was needed, how often Ferro needed it, and what format it was needed in. The solution? RSSql Gateway, which now links Ferro's SAP-based ERP software to its factory floor, enabling improvements in inventory accuracy. As a result, Ferro is better able to collaborate and communicate with suppliers on inventory issues. Source: Rockwell Automation

Rockwell Automation offers several solutions that enable manufacturers to identify opportunities for collaboration. Global Manufacturing Solutions™ offerings help to optimize manufacturing through order flow management, which tracks orders as they come from the customer, through a company's business systems and manufacturing floor – and throughout the entire value chain.

According to Wernette, "connectivity" is at the heart of collaboration. "Information systems are important," he states, "but the way in which they're deployed to improve collaboration is what provides competitive advantage and true value."

Through its consulting services, Rockwell Automation Global Manufacturing Solutions provides several ways for achieving that connectivity. Once solutions are in place, not only is the factory floor now a strong link in the chain, but it can also afford manufacturers the ability to improve. By making its factory floor collaborative, an enterprise can also learn a great deal about its own manufacturing performance through significantly improved operational information. But only when a company measures, analyzes, and optimizes its performance can it improve its performance.

Rockwell Automation Global Manufacturing Solutions Consulting Services provides connectivity solutions: FactoryTalk™: Providing the backbone for communications between factory floor operations and the supply chain RSScheduler™: Optimizing scheduling on the factory floor RSSql™: Connecting the shop floor and top floor, enabling communication between the factory and ERP and supply chain integration software programs RSBizWare™: Visualizing, data forming repository, and data analysis Others: Simulating capabilities, training Source: Rockwell Automation

According to the above mentioned Gartner note, "Manufacturing enterprises can measure the impact of collaboration by starting with the best practices of traditional manufacturing planning, then extending them to all members of the supply chain." Using the enterprise's key performance indicators, or KPIs – what Gartner refers to as "Measurements of Collaboration" in Figure 1 – manufacturers can determine what they are most proficient at, and then extend those proficiencies, or best practices, throughout the value chain. Once identified and then measured, KPIs help to set clear expectations for everyone in the chain, and enable the enterprise to treat everyone in the chain as an important part of their extended operations. KPIs also drive improvement at the manufacturing level, serving to improve the overall performance of the entire chain.

The Conference Board's Fosler states that: "Manufacturing must see itself as part of the value chain. Manufacturing must not look from the inside out, but the outside in. In doing so, it effectively becomes part of the chain." Optimizing the value chain – achieving that connectivity between the factory floor and the supply chain – enables an enterprise to look from the outside in. In this way, it extends even greater value throughout the entire value chain, not just to the enterprise itself.

Optimizing the value chain creates a competitive edge by also providing accurate information throughout the chain. As a result, everyone in the chain is an informed part of the chain. Because of this inclusion, trust, the foundation of good relationships, is built. Solutions recently provided by Rockwell Automation Global Manufacturing Solutions for Ferro Corporation demonstrate these benefits (see Improving Connectivity, Building Relationships).

Ferro's collaboration success is indicative of the essential nature of factory floor interaction to the rest of the supply chain – and therefore, to successful collaboration. "If the manufacturing operation is disconnected, if it's not optimized to perform well within the rest of the supply chain," says Wernette, "then you've failed."

Collaboration at the manufacturing layer protects against this failure, providing valuable information to everyone in the value chain. "Successful collaboration enables suppliers to know what's happening, customers to know where their orders are, and management to understand exactly what's happening on the factory floor at any given time," says Wernette. "Further optimizing the value chain by way of optimizing manufacturing is the new key to collaborative success."

Source: Rockwell Automation

New Zealand Dairy Plant Optimizes to Meet Export Regulations After a plant-wide installation of Rockwell Automation's RSSql™ data transaction software, a wealth of available plant-floor data enables New Zealand dairy manufacturer NZMP to provide the crucial documentation required to meet new export regulations. 'Bits' of butter and 'bytes' of cheese – it's all part of the advanced data-grabbing technology at the world's largest dairy manufacturing site, New Zealand's NZMP Whareroa facility. Building upon an extensive automation network linking ten separate factories, NZMP has taken the next major step in plant optimization: collecting myriad data from PLC® controllers on its factory floor into a single central database. What pushed NZMP in this new direction? Compliance with new export regulations instituted by the New Zealand Ministry of Agriculture and Fisheries (MAF) that requires all of the country's dairy producers to produce accurate weight documentation. For NZMP, failure to comply meant that the company would not be permitted to export its 600-item product line. As a result, NZMP began to better integrate their ten plants – which, together, process 14 million liters of milk a day – so that they could better control carton filling and produce the documentation needed for compliance. Controlling their operations is one of the largest automation systems in the southern hemisphere. Divided among nine operation "zones," the system consists of more than 230 Allen-Bradley controllers (a mixture of ControlLogix™, PLC-2®, PLC-3®, PLC-5®, PLC-5/250™ and SLC-500™) and more than 110,000 I/O points. Each zone is also equipped with a ControlLogix Gateway – supporting Data Highway Plus™ (DH+™), Ethernet® and ControlNet™ networks. Rockwell Software's RSSql™ collects and monitors the real-time data generated on each of NZMP's plant floors, and reports it to the company's enterprise layer. The data transactions handled by RSSql, courtesy of its seamless connection with the plant-wide Allen-Bradley PLC network, have become an integral component of NZMP's operations. Not only do they provide the export documentation so crucial for regulatory compliance, but they also form a critical link in the whole chain of milk deployment, processing, and quality control in the company's facilities. In RSSql, along with other Rockwell Automation products, NZMP received a solution that allows refined control of carton filling processes, as well as accurate documentation of the exact weights it exports. "This documentation is so important," says NZMP Whareroa Automation Engineer Geoff Roberts, "we can't export any product without it." Source: Rockwell Automation

Back to Top

Global Manufacturing Solutions Webletter is published by Rockwell Automation. Additional editorial material supplied by Gartner, Inc. © 2002. Editorial supplied by Rockwell Automation is independent of Gartner analysis and in no way should this information be construed as a Gartner endorsement of Rockwell Automation's products and services. Entire contents © 2002 by Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.