New automation strategies can transform how-and where-products are made

Companies have made great strides in improving how they design, build, and manage their product supply networks, but there have been no transformational changes to physically manufacturing products. It's time to think radically about how to manufacture in a "dark" site, where you have little to no labor.

07/07/2009


The global recession is causing manufacturers to rethink business models. Plummeting demand across virtually every industry has pushed capacity utilization rates at U.S. plants to their lowest levels since the Federal Reserve began tracking those figures in 1948.

Bill Polk, AMR Research

Bill Polk

Clearly this calls for new strategies in managing production facilities. Although the automation of processes has been happening for eons, it has plateaued. Companies have made great strides in improving how they design, build, and manage their product supply networks, but there have been no transformational changes to physically manufacturing products.

It's time to think radically about how to manufacture in a "dark" site, where you have little to no labor. It's time to completely get rid of assembly line labor and run plants with only maintenance personnel and people who manage process controls and automation.

Fortunately, there are some fundamental things occurring in the development of information technology that make it possible for manufacturers to realistically consider new methods of running plants.

For instance, a large number of companies have been able to install a robust business intelligence layer. This is a product of now-mature ERP backbones from companies like SAP and Oracle that also have fully developed extensions to get real-time transactional data.

The progression has been from disintegrated shop floor manufacturing data (manufacturing intelligence) to enterprise manufacturing intelligence (EMI) to true real-time business intelligence.

This should logically lead to fewer companies operating in an "inspect and correct mode", where exception management is a primary means of delivering a perfect order versus controlling the product within the execution of the order.

In a demand-driven product supply network-where flexible manufacturing, shorter runs, and more rapid changeovers are the norm-the old way of making products must change. The leveraging of a rich business intelligence framework to help determine product non-conformance earlier in the make cycle will drive reduced costs and risks and increased opportunities for profit.

As stated earlier, external economic forces are this necessary step change. Manufacturing plants in the U.S. ran at 67.4 percent capacity in February, the lowest capacity utilization number since the Fed began tracking the figure. The U.S.GDP contracted a whopping 6.1 percent in Q1, leading to a slashing of inventories and expenditures and idled plants across every industry and geography.

These conditions are forcing companies to become flexible, lean and efficient like never before. Small, iterative continuous improvement programs won't cut it. Manufacturing needs major breakthroughs.

Ironically, the automotive sector is the one industry one industry facing a unique opportunity in the face of the current economic downturn.

The big car companies-particularly those who will lose many of their historical self-imposed shackles through bankruptcy proceedings-have a chance of a corporate lifetime to fundamentally change how they fabricate their products.

The final driver of what should be a fundamental overhaul of manufacturing processes is renewed interest in regional manufacturing, or near shoring. Intellectual property threats, currency fluctuations, political instability, energy costs, latency of overseas shipments, and the volatility of transportation costs are all driving U.S. manufacturers to rethink their heavy reliance on globally-dispersed product supply networks.

These risks clearly have manufacturers thinking about a return to domestic manufacturing operations. Before they can make that switch, however, they must build in control systems that will enable heretofore unseen levels of flexibility and efficiency to offset higher labor costs.

Bill Polk is a research director with industry analyst firm AMR Research.