operational intelligence:aligning plant and corporate it · particular importance in the realm of...

Operational Intelligence Aligning Plant and Corporate IT

March 2011

Matthew Littlefield, Mehul Shah

~ Underwritten, in Part, by ~

Operational Intelligence: Aligning Plant and Corporate IT

© 2011 Aberdeen Group. Telephone: 617 854 5200

Executive Summary Research Benchmark Many organizations struggle to unlock the potential of their real time

manufacturing data. In many other areas of the business, including: sales, marketing, and finance; traditional BI tools have performed very well at providing executives with real time visibility and analytics. However, the same can’t be said for manufacturing. The working environments, data structures, and criticality of information operate at a different standard than in these other areas of the enterprise. This new research will examine how Best-in-Class manufacturers will unlock the value of real-time manufacturing data by bringing together corporate and plant IT environments with new technology enablers and system architectures.

Aberdeen’s Research Benchmarks provide an in-depth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations

Best-in-Class Performance Aberdeen used the following four key performance criteria to measure maturity; Best-in-Class vs. Laggard companies averaged:

• 89% vs. 74% Overall Equipment Effectiveness (OEE)

• 94% vs. 86% on-time and complete shipments

• 94% vs. 49% successful new product introductions

• +5% vs. -3% operating margin versus corporate plan

Competitive Maturity Assessment Survey results show that the firms enjoying Best-in-Class performance shared several common characteristics, including:

• Nearly twice as likely as Laggard manufacturers to provide real-time visibility into global manufacturing operations for executives

• Over 50% more likely than Laggard manufacturers to have the ability to drill down and aggregate KPIs by geography, product line, product mix and more

Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must:

• Establish an executive-led vision of flexible and integrated manufacturing operations as a true competitive advantage for the organization that is supported by both Line of Business (LOB) and IT leaders

• Create a coherent strategy for manufacturing operations that integrates real time manufacturing data with data visibility and analytics initiatives from other areas of the enterprise and within corporate IT

www.aberdeen.com Fax: 617 723 7897 This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

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© 2011 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

Table of Contents Executive Summary....................................................................................................... 2

Best-in-Class Performance..................................................................................... 2 Competitive Maturity Assessment....................................................................... 2 Required Actions...................................................................................................... 2

Chapter One: Benchmarking the Best-in-Class.................................................... 4 Business Context ..................................................................................................... 4 Cost Cutting Top of Mind ..................................................................................... 4 The Maturity Class Framework............................................................................ 5 The Best-in-Class PACE Model ............................................................................ 6 Best-in-Class Strategies........................................................................................... 6

Chapter Two: Benchmarking Requirements for Success................................... 8 Competitive Assessment........................................................................................ 9 Capabilities and Enablers......................................................................................10

Chapter Three: Required Actions .........................................................................15 Laggard Steps to Success......................................................................................15 Industry Average Steps to Success ....................................................................15 Best-in-Class Steps to Success ............................................................................16

Appendix A: Research Methodology.....................................................................18 Appendix B: Related Aberdeen Research............................................................20 Featured Underwriters ..............................................................................................21

Figures Figure 1: Pressures........................................................................................................ 4 Figure 2: Strategic Actions .......................................................................................... 7 Figure 3: Organizational Capabilities ......................................................................11 Figure 4: Technology Enablers – Enterprise Software .......................................13 Figure 5: Technology Enablers – Standards and IT Tools .................................14

Tables Table 1: Top Performers Earn Best-in-Class Status.............................................. 5 Table 2: The Best-in-Class PACE Framework ....................................................... 6 Table 3: The Competitive Framework..................................................................... 9 Table 4: The PACE Framework Key ......................................................................19 Table 5: The Competitive Framework Key ..........................................................19 Table 6: The Relationship Between PACE and the Competitive Framework.........................................................................................................................................19



Chapter One: Benchmarking the Best-in-Class

Business Context Fast Facts

The role and responsibilities of the Chief Information Officer (CIO) has changed immensely over the past decade. New tool sets, architectures, and standards have allowed IT organizations to create both standardized yet flexible business processes, enabling a much more collaborative environment between IT and many Line of Business (LOB) executives. Over that same time period, the needs of manufacturing executives have changed as well. Increased expectations for successful new product introductions, manufacturing flexibility, customer service, quality, and compliance; along with more dependence on a global supply base have all contributed to added complexity for the manufacturing organization.

Best-in-Class companies significantly outperform their competition in all four KPI's. These organizations enjoy:

√ 94% New product introductions

√ 89% Overall Equipment Effectiveness (OEE)

√ 94% On time and complete shipments Unfortunately, in many cases, these changes have not made it all the way

down to the shop floor. In fact, less than 50% of manufacturers surveyed from June to December of 2010 currently have IT and manufacturing organizations that collaborate on the design and deployment of software in manufacturing operations. On the upside, the number one organizational change companies are planning on making over the next 12 months is creating collaboration between these two groups. Many Best-in-Class companies are at a major crossroads regarding the deployment of software systems in manufacturing and the decisions they make today will greatly impact the competitiveness of the firm for years to come.

√ +6% Operating margin vs. corporate plan

Cost Cutting Top of Mind When asked which market pressures are driving decisions in operations, the number one choice by the large majority, is the need to reduce costs. “Within our organization, we

find it very challenging to get people to invest the time required to appropriately map out and define detailed requirements to produce robust and credible automated processes in order to reduce manufacturing costs. Indeed, we need visible solid wins to demonstrate capabilities people can relate to.”

Figure 1: Pressures

27%

32%

36%

38%

70%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Customer mandates for improved orderfulfillment

Management of demand volatility

Management of global supply chains

Need to improve delivery of new products tomarket

Need to reduce the cost of manufacturingoperations

Percentage of Respondents, n=332All Respondents

27%

32%

36%

38%

70%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Customer mandates for improved orderfulfillment

Management of demand volatility

Management of global supply chains

Need to improve delivery of new products tomarket

Need to reduce the cost of manufacturingoperations

Percentage of Respondents, n=332All Respondents

~Director of Operations Large Food and Beverage

Company

Source: Aberdeen Group, February 2011

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This finding provides further evidence that no matter what area of the business is being contemplated; cost is still top of mind in manufacturing. Because of this finding, much of the analysis contained within in this report focuses on how manufacturers are better using real time manufacturing data to reduce costs and improve decision making.

The Maturity Class Framework In this study Aberdeen uses four key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations: “We are currently

implementing more electronic and automated tools to improve performance (reduce operation times) for many of our business practices. The greatest benefit has been a thorough review of all business policies. What a great way to Lean out the waste.”

• On-time and complete shipments - products delivered on time and complete as compared to total original commitment, with no re-promise dates

• OEE - composite metric accounting for availability, performance, and quality averaged over all assets (no penalty for unproductive assets when the asset has scheduled down time)

• Successful new product introductions - measured as the average share of new product introductions that hit quality, time, and volume targets

~ Engineer, Aerospace and Defense

• Operating margin versus corporate plan - measured as operating margin realized relative to the corporate goals established

Respondents were divided among three categories based on their aggregate performances in these four metrics. Table 1 displays the average performance of Best-in-Class, Industry Average, and Laggard organizations.

Table 1: Top Performers Earn Best-in-Class Status

Definition of Mean Class Performance Maturity Class

94% Success with New Product Introductions Best-in-Class:


Top 20% 89% OEE of aggregate 94% On Time and Complete Shipments

performance scorers +6% Operating Margin vs. Corporate Plan

78% Success with New Product Introductions Industry Average: 82% OEE Middle 50%

of aggregate 90% On Time and Complete Shipments performance scorers +2% Operating Margin vs. Corporate Plan

49% Success with New Product Introductions Laggard: 74% OEE Bottom 30%

of aggregate 86% On Time and Complete Shipments performance scorers -3% Operating Margin vs. Corporate Plan




The Best-in-Class PACE Model Effectively cutting costs in manufacturing operations, ensuring finished product quality, responding to economic conditions, or successfully delivering new products to market can be a daunting task. Table 2 summarizes some of the strategic actions, business process capabilities, and technology enablers Best-in-Class companies have implemented to address these market pressures.

Table 2: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers Need to reduce manufacturing cost

Synchronize metrics and performance management across the organization Increase responsiveness in manufacturing, product development and the supply chain to adverse events across the enterprise

Business processes are largely reusable and deployed globally across operations System Integrators engaged at the executive level Executives have real-time visibility into the performance of global operations Real-time visibility between operations and supplier performance Real-time visibility between manufacturing and customer orders Drill down and aggregation in KPIs by geography, product line, mix, etc.

Manufacturing Operations Management (MOM) Manufacturing/Operational Intelligence (MI/OI) Manufacturing Operations Management (MOM) and Enterprise Resource Planning (ERP) Interoperability Business Intelligence (BI) Business Process Management (BPM) Master Data Management Service Oriented Architecture (SOA) enabled application interoperability ISA-95 Standards Adhered to


Best-in-Class Strategies There are number of strategies more likely to be deployed by the Best-in-Class in response to the market pressures faced, two of which are of particular importance in the realm of operational intelligence: synchronizing metrics across the organization; and increasing the response time to adverse events across the organization (Figure 2).

Synchronizing metrics across the organization is an important strategy, especially when attempting to manage business processes that transcend traditional boundaries in a manufacturing organization. For example, it is important for engineering to understand how design changes in products or processes impact quality, efficiency, and performance. Similarly it is important for manufacturing to understand how missing production schedule attainments or releasing poor quality product to the market impacts the supply chain and service organizations. Often, the foundation for creating this understanding can be found in an agreed set of metrics that all groups have visibility into.



Another critical strategic action, which is more likely to be deployed by the Best-in-Class, is increasing the response time to adverse events across the value chain. No matter what the adverse event is, it could be quality, customer service, safety, or any other related area, the ability of an organization to sense and respond to that event in real or near-real time can be a valuable source of both competitive advantage and risk mitigation. However, when it comes to manufacturing operations, the requirements for data visibility and system up-time is extreme, often down to sub-second reaction times and 100% up time requirements with redundant systems being the norm. Because of these requirements, the gaps between manufacturing and IT have grown quite large for many organizations. In the following sections the analysis will identify best practices being used by the Best-in-Class to close this gap.

“Collaboration across our suppliers, product developers and our 'system' is not easy. We are challenged with the ability to provide alerts and visibility at the appropriate time to the appropriate decision-maker. Indeed, having visibility into this data is key to enhancing collaboration across our organization.”

~Director of Business Development, High Tech

Manufacturer Figure 2: Strategic Actions

9%

13%

19%

16%

22%

28%

0% 5% 10% 15% 20% 25% 30%

“Build in” compliance and traceability tobusiness processes across product

development, manufacturing operations, andthe supply chain

Increase responsiveness in manufacturing,product development, and the supply chain to

adverse events across the enterprise

Synchronize metrics and performancemanagement across product development,

manufacturing operations, and the supplychain

Percentage of Respondents, n=332

Best-in-ClassAll Others9%

13%

19%

16%

22%

28%

0% 5% 10% 15% 20% 25% 30%

“Build in” compliance and traceability tobusiness processes across product

development, manufacturing operations, andthe supply chain

Increase responsiveness in manufacturing,product development, and the supply chain to

adverse events across the enterprise

Synchronize metrics and performancemanagement across product development,

manufacturing operations, and the supplychain


Best-in-ClassAll Others


Aberdeen Insights — Strategy

All the strategies highlighted in Figure 2 are more likely to be used by Best-in-Class organizations but none of them are the highest adopted strategies in the market place. It turns out that 52% of Best-in-Class manufacturers and 54% of all other manufacturers (the Industry Average and Laggards combined) are focused on improving collaboration across the value chain. One way to interpret this result is to start prioritizing "how" an organization collaborates over just "if" an organization is collaborative. When analyzing how an organization collaborates, important questions to ask include: Are the groups collaborating measured on a unified set of metrics? And do the groups that are collaborating both have access to data and events as they occur? If the answer is "no" to either of these questions, implementing strategies around collaboration may not be delivering as much value as they could.

In the next chapter, we will see what the top performers are doing to achieve these gains.




Chapter Two: Benchmarking Requirements for Success


The way in which manufacturers sense and respond to events across manufacturing operations is highly correlated to the achievement of Best-in-Class performance.

Case Study — Shape Corp

Shape Corp is a mid-sized design and manufacturing company, founded in 1974, that produces a broad range of engineered plastic and steel components. Shape Corp has 1400 manufacturing associates with 12 manufacturing facilities across the US, Mexico, Europe, and China. Starting in 2003, the company began the selection process for an integrated software solution to replace disparate legacy applications in the areas of financials, inventory, labor, and production management. After many starts and stops to the process, in 2005 the selection process was finally completed and the implementation began.

In the end, Shape Corp decided on a single vendor solution across all of the above mentioned functional areas, including Enterprise Resource Planning (ERP) and Manufacturing Operations Management (MOM). The implementation started with 5 facilities and has since been rolled out across facilities in Mexico, Europe, and China as the company has moved to a global manufacturing model over the past 5 years. For Shape Corp, an important part of moving to a global model was maintaining effective control of operations by rolling out a standardized set of metrics.

These KPIs originally included: Employee Safety, External Quality, Customer Delivery, Inventory Accuracy, and Scrap, which are now measured across the company in a single, role-based, web-enabled dashboard. Also, given the integrated, enterprise-wide nature of the solution, Shape Corp has been able to increase the number of metrics measured as well as the granularity of the metrics. The company now also looks at machine utilization and machine efficiency (the other two metrics needed for OEE), labor efficiency, and Internal Quality.

According to Information Technology Manager, Molly Hunting, "A common visual dashboard of KPIs has helped our executives better understand and manage our manufacturing operations as well as improve collaboration between disparate groups like manufacturing, quality, and maintenance. We have also been able to effectively evolve with new trends, like measuring OEE. On the granularity side, we have been maturing the system over time and are now able to collect data directly from shop floor machines for more accurate and timely visibility. Our next goal is to improve our analytical capabilities and provide the capability to do Pareto type analysis by work center, part type, and more across sites."

Fast Facts

As compared to Laggards, Best-in-Class companies are:

√ Over twice as likely to have the ability to deploy and re-use business processes globally

√ Almost four times as likely to have the ability to manage the complete lifecycle of business processes

√ Almost two times as likely to have system integrators engaged at the senior level



Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of the appropriate tools and the effective deployment of those tools); and (5) performance management (the ability of the organization to measure its results to improve its business). These characteristics (identified in Table 3) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics.

Table 3: The Competitive Framework

Best-in-Class Average Laggards Business processes are largely reusable and deployed globally across operations

50% 23% 23% Ability to manage the complete life cycle of industrial business processes

33% 15% 9% Business processes are dynamically updated as new best practices emerge

Process

21% 16% 13% Executive sponsorship for initiatives on improving operations through process improvement, collaboration, and technology interpretability

72% 57% 59% System Integrators are viewed as strategic partners in the design and deployment of product development, manufacturing, and supply chain systems

35% 25% 22% System Integrators engaged at the executive level

Organization

33% 28% 22% Executives have real-time visibility into the performance of global operations

52% 23% 22% Operational metrics are linked are to financial metrics

50% 42% 41% Real-time visibility between manufacturing and customer orders

41% 33% 26% Real-time visibility between operations and supplier performance

Knowledge

35% 23% 21% Standardized measurement of KPIs across the enterprise

47% 48% 31% Drill down and aggregation in KPIs by geography, product line, mix, etc.

Performance Management

36% 22% 23%



Best-in-Class Average Laggards Manufacturing Operations Management

40%


27% 23% Manufacturing/Operational Intelligence (MI/OI)

12% 10% 8% Standards and IT tools in use for Industrial Operations:

Technology 33% Master Data Management 33% Service Orientated Architecture (SOA)

26% Master 19% Master Data Data Management Management 10% Service 14% Service Orientated Orientated Architecture Architecture (SOA) (SOA)


Defining Operational Intelligence Capabilities and Enablers

Software vendors use varying labels for different types of technology. In this report we reference Manufacturing Intelligence (MI) and Operational Intelligence (OI). Another common term is Enterprise Manufacturing Intelligence (EMI). In general these terms are relatively interchangeable. They refer to software solutions that collect and aggregate data, provide visibility to data through role based dashboards, provide analytics and drill down capabilities to these sources of data, and help integrate systems, often plant equipment with MOM or MOM with ERP.

Based on the findings of the Competitive Framework and interviews with manufacturing executives, Aberdeen’s analysis demonstrates that there are a number of different business capabilities and technology enablers driving Best-in-Class performance.

Process Best-in-Class organizations are almost twice as likely as Laggard organizations to have processes that are reusable and easily deployable. Although implementing such a capability seems relatively simple, achieving such an environment can be quite a challenge. Generally, it requires well defined work processes that have been standardized across the organization. Additionally, for this approach to be effective, the standardized work definitions must be granular. Often going right down to the work itself and what operators, supervisors, and managers do on a minute to minute basis, including: how they would record down time, define down time, change over a production line, perform a quality test, change a part, or handle work in process just to name a few. It is also important to note, that defining work process in such a way can be quite laborious and requires dedicated personnel. In the most successful instances, these resources come in the form of Lean practitioners and as part of a global Lean initiative.

It is not with in the scope of this report to redefine this space. There are many nuances, including what type of software vendor is offering the MI/OI solution (MOM vs. ERP) or what vertical industry strengths the vendor has. What this report is attempting to do is help define an overall "Operational Intelligence Strategy," which includes taking a collaborative approach to manufacturing and IT, leveraging traditional IT tools like MDM and SOA, along with the use of MI/OI software along with MOM and ERP.

Second, Best-in-Class manufacturers are almost three times as likely as Laggard manufacturers to have the capability to manage the complete life cycle of an industrial business process. This means these organizations can manage the authoring, deployment, compliance, updates, and end-of-life for all business processes across the organization. Clearly this is a challenge for many and necessitates the support of technology enablers to be achieved in a timely manner and to reduce the errors and version control issues that are inherent with paper based systems designed to do the same.

Finally, the Best-in-Class are also differentiating themselves by putting in place the ability to standardize and then update best practices across the entire manufacturing network. Such a capability is the foundation of any



effective continuous improvement initiative; with examples of this standardization including: the ability to create and update KPIs across multiple facilities or establishing best practices for optimizing production schedules or inventory levels. When put in the context of the top market pressure of reducing cost, it becomes clear that manufacturers can only accomplish this if best practices and standardized operating procedures are continually improved and then followed consistently and universally.

Organization It remains controversial, and the adoption rate is still low, but there is evidence to suggest that Best-in-Class organizations are becoming more likely to collaborate between LOB manufacturing and IT.

Figure 3: Organizational Capabilities

40% 40%33% 35%32% 29%

26% 24%

0%5%

10%15%20%25%30%35%40%45%

Operations and ITleadership collaborate on

the design and deploymentof product development,

manufacturing, and supplychain systems

Increasing IT involvement(as an organization) in plant

manufacturing

System Integratorsengaged at the executive

level

System Integrators areview ed as strategic

partners in the design anddeployment of product

development,manufacturing, and supply

chain systemsBest-in-Class All Others Source: Aberdeen Group, February 2011

This evidence comes in two forms; first the Best-in-Class are seeing IT being about one third more likely to take more of an active involvement in plant operations. Second, the Best-in-Class are also about a third more likely to be collaborating between these two groups. Which is not surprising given the number of cross functional continuous improvement teams in the market place that now have IT as members, as well as the increase in traditional IT systems on the plant floor with the emergence of Industrial Ethernet and Industrial Ethernet enabled devices.

“Our integration with our MES system and external systems has continued to do everything it has promised it would do. There have been few (if any) instances where the integration support has failed.”

Another interesting and related trend is that Best-in-Class organizations are almost 50% more likely than Industry Average and Laggard organizations to be leveraging third party system integration firms to help with implementations. In many cases, these organizations can help bring together manufacturing and IT to bridge gaps in language, goals, and understanding that can sometimes exist between these groups. In many cases, these system integrators have become quite adept and bringing these groups together and it has even become part of their overall value proposition.

~Manufacturing Manager Medical Device Manufacturer




Knowledge Management Knowledge and Performance Management, the next two sections, are perhaps the most important set of capabilities for an organization to focus on in trying to achieve Best-in-Class performance. Within Knowledge Management there are two main sets of capabilities that have helped Best-in-Class manufacturers achieve the performance they enjoy, the first set revolves around visibility and the second set revolves interpreting metrics:

• Visibility. Best-in-Class manufacturers are more likely to have real-time visibility between executives and global manufacturing operations, between suppliers' performance and manufacturing, and between customer orders and suppliers. Such architecture allows for improved decision making in a number of different ways. It gives executives an unadulterated view into what is happening in operations and how the product supply decisions made will impact manufacturing. It also allows for manufacturing operations to have an unadulterated view into the flow of demand and goods through the supply chain. This generally allows for the reduction of buffer stocks, creates a more demand-driven operation, and gives each node in the supply network a better perspective on how the decisions they make impact the rest of the system.

“MES is an integral part of our operations. Our business cannot run without it. We are currently upgrading and rationalizing MES to support more integrated, end-to-end business processes and metrics.”

~Manufacturing Engineer Food and Beverage

• Financial impact. It is also important for organizations to allow for the manufacturing organization to understand how the decisions made impact financial performance. In operations it is often intuitive to connect metrics; when there is down time, throughput goes down. However, it is often unclear how manufacturing performance impacts high level corporate metrics. At the executive level companies are often focused on metrics like Cost of Goods Sold or Return on Net Assets. Best-in-Class companies are more likely to invest in systems that help see and understand how down time, quality, efficiency, and more impact metrics.

Performance Management Performance management is all about how an organization measures and improves performance over time. A critical capability the Best-in-Class are leveraging is standardized Key Performance Indicators (KPIs). This means the Best-in-Class have established a standard set of metrics across the enterprise with which to measure operational performance. In fact, the Best-in-Class and Industry Average are nearly twice as likely as Laggard manufacturers to have standardized metrics. To compliment and fully realize the benefits of standardized metrics the Best-in-Class are also more likely to provide analytical capabilities around these metrics in the form of both aggregations and drill downs for a number of different data cuts including: geographies, product lines, and customers. The Best-in-Class are also more likely to be able to then display this data in a normalized scorecard. Again, all designed to provide the right data, to the right decision maker, at the right time, in an easy to understand format, with built-in analytical capabilities.




Technology “In such a large organization, we have many initiatives to improve links between applications - ERP to PLM to CRM. It just takes a very long time to fully implement all of the requirements across the different cultures and processes. Our biggest failure seems to be the speed required to incorporate all of the tools in the most important locations. We continue to work on this, but the complexity can seem overwhelming.”

A complete Operational Intelligence strategy should enable the above strategies and business capabilities, which is no small task. To be successful it takes a lot more than a simple dashboard or OEE calculator. Based on this analysis of Best-in-Class companies, it will take a mature and global MOM implementation that interoperates with ERP as well as a Manufacturing / Operational Intelligence implementation that is integrated from the machine layer all they way through to business systems.

Figure 4: Technology Enablers – Enterprise Software

8%

23%

23%

10%

25%

27%

12%

31%

40%

0% 10% 20% 30% 40% 50%

MI/OI(Manufacturing/Operational

Intelligence)

ERP and MOM Interoperability

MOM* (ManufacturingOperations Management)


Best-in-ClassIndustry AverageLaggard8%

23%

23%

10%

25%

27%

12%

31%

40%

0% 10% 20% 30% 40% 50%Percentage of Respondents, n=332


23%

23%

10%

25%

27%

12%

31%

40%

0% 10% 20% 30% 40% 50%

MI/OI(Manufacturing/Operational

Intelligence)

ERP and MOM Interoperability

MOM* (ManufacturingOperations Management)



23%

23%

10%

25%

27%

12%

31%

40%

0% 10% 20% 30% 40% 50%Percentage of Respondents, n=332

Best-in-ClassIndustry AverageLaggard

~Director Industrial Equipment

Manufacturing


Aberdeen Insights — Technology

On the interoperability side, the Best-in-Class are well ahead of the competition in moving away from flat-file or hard-coded custom integration to standards-based web-services interfaces. This approach has the potential to greatly reduce cost as well as improve the ability for data to flow between applications in real time. On the data side, it is also important to focus on data quality as well as a common data model for manufacturing. In most cases, this skill set and expertise is much more IT focused and can be rolled into an enterprise master data management initiative or delivered through a third party vendor rather than the manufacturing organization itself. Finally, the use of Business Intelligence itself is not necessarily an enabler of Best-in-Class performance in manufacturing; it is the surrounding technologies and the alignment between manufacturing data and other sources of business data that enables Best-in-Class performance.

continued




Aberdeen Insights — Technology

Figure 5: Technology Enablers – Standards and IT Tools

24%

31%

12%

33%

33%

33%

0% 5% 10% 15% 20% 25% 30% 35%

Master DataManagement

BI (BusinessIntelligence)

SOA (Service OrientedArchitecture)


Best-in-Class


All Others

24%

31%

12%

33%

33%

33%

0% 5% 10% 15% 20% 25% 30% 35%

Master DataManagement

BI (BusinessIntelligence)

SOA (Service OrientedArchitecture)


Best-in-ClassAll Others




Chapter Three: Required Actions

Fast Facts Whether a company is trying to move its performance in manufacturing operations from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements:

As compared to Laggards, Best-in-Class companies are:

√ 50% more likely to already have executive focus on manufacturing as a core-competency

Laggard Steps to Success • Executives need to focus on manufacturing as a core-

competency. Best-in-Class organizations are nearly 50% more likely than Laggard and Industry Average organizations to already have this executive focus established. If an organization produces many (if not most) of the products it sells, manufacturing should be made a corporate priority, which will focus the attention of many key stakeholders within the organization and greatly improve the chance for long term success. For Laggard organizations wishing to improve performance, establishing an executive vision is a critical first step.

√ 33% more likely to have collaboration between internal manufacturing and IT organizations

√ 50% more likely to have Master Data Management (MDM) to ensure data quality and consistency

• Begin to collaborate between internal manufacturing and

IT organizations. Best-in-Class organizations are about 33% more likely to collaborate between internal manufacturing and IT organizations. The benefits of this approach can be wide spread. It allows for a consistent set of applications that serve the global manufacturing network, which has a whole host of benefits internal to manufacturing. It also makes it much easier to connect manufacturing to the rest of the organization, which allows executives, engineers, sales, and many others to better coordinate with what happens in manufacturing.

“Within our organization we have implemented BPM and used the Cloud. Each of these investments has driven lower operating costs while improving performance. The senior management team was responsible for driving this initiative. They remain actively involved throughout implementation and adoption of these initiatives. By doing so, it has avoided middle management turf battles.”

• Focus on data quality and consistency. Best-in-Class manufacturers are 50% more likely than Laggards to have Master Data Management (MDM) in place. These firms see data as the foundation for all they do in deploying enterprise applications, interoperating between systems, and ultimately improving decision making. Points to focus on here are establishing a manufacturing data model and extending the model across all sites.

~Manufacturing Direction Consumer Packaged Goods

Manufacturer

Industry Average Steps to Success • Begin the journey of deploying enterprise applications that

are critical for consistency and control in manufacturing. Best-in-Class organizations are over 50% more likely than the Industry Average to have already deployed a MOM system. Many MOM applications are built on a strong manufacturing data model and are a great starting point for building internal capabilities in operational intelligence.




• Deploy a manufacturing / operational intelligence solution globally. Best-in-Class organizations are 50% more likely than Laggards and 20% more likely than the Industry Average to deploy one of these systems. Many ERP and MOM vendors have invested heavily over the past five years in this space and the maturity level on the vendor side is reaching the point to warrant broad adoption across global manufacturers.

• Establish real-time visibility between manufacturing and executives and between manufacturing and suppliers / customers. Best-in-Class manufacturers are more likely than Industry Average manufacturers to have visibility into all of these areas and as the organization matures this visibility will become a key component of how interactions occur and decisions are made within these business processes.

Best-in-Class Steps to Success • Invest in a SOA for enabling interoperability. Best-in-Class

manufacturers are over 2.5 times as likely as underperforming manufacturers to have adopted SOA. This allows Best-in-Class manufacturers to eliminate rigid points of integration between legacy applications and provide data visibility closer to real-time across enterprise applications.

• Establish analytics for connecting operational and financial performance. Best-in-Class manufacturers are almost 50% more likely than underperforming organizations to connect manufacturing and financial data. Far too many manufacturing organizations are flying blind when it comes to their contributions to financial performance. The capability exists to remedy this shortcoming and the results can be astounding.

• Extend visibility to touch multiple levels and departments within the organization. An integrated operational intelligence strategy allows an organization to provide different views, in real time, to different roles with in an organization. Manufacturers should leverage this capability to provide the right information, at the right time, to the right decision maker.

Aberdeen Insights — Summary

Best-in-Class organizations are re-examining their strategies around automated data collection, master data management, activity monitory, dashboards, analytics, and mobility in manufacturing. Many Best-in-Class manufacturers are now looking to align investments made in Business Intelligence (BI) and manufacturing systems such as MOM ,MI, or OI to provide a more holistic solution that stretches across traditionally disparate functions like finance, sales, distribution, engineering, and procurement among others.

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Aberdeen Insights — Summary

Additionally, Best-in-Class manufacturers are now focusing on improving interactions between plant and corporate IT to create a collaborative partnership between these often disjointed groups. The benefits of such an approach can deliver a number of mutual benefits, including:

From the manufacturing executives’ perspective:

• Improved visibility and performance of critical suppliers

• Improved visibility and performance in customer service and supply chain efficiency metrics

• Improved visibility and performance of quality, efficiency, and availability metrics in manufacturing

• Reduced overall operational costs

• Hit new product introduction targets

• Transformed operator experience

• Improved analytical capabilities and find root causes, corrective actions, and preventive actions faster

• Contextualized manufacturing data with other financial metrics for improved executive decision making

From the IT executives’ perspective:

• Rationalized redundant and costly point based manufacturing systems

• Reduced corporate and “shadow” IT budgets in manufacturing

• Improved the usability and ROI of current ERP and BI implementations

• Improved ROI of investments made in corporate level collaboration tools

• Improved leveraging of the benefits of investments made in Industrial Ethernet on the shop floor



Appendix A: Research Methodology

Between November 2010 to February 2011, Aberdeen examined the use, the experiences, and the intentions of more than 330 enterprises using Business Process Management in Manufacturing.

Study Focus

Responding manufacturing executives completed an online survey that included questions designed to determine the following:

Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on business process management strategies, experiences, and results.

√ The degree to which Operational Intelligence is deployed in their manufacturing operations and the financial implications of the technology

Responding enterprises included the following:

• Job title: The research sample included respondents with the following job titles: Upper Management (CSO, CEO, COO, CFO, CTO, President, SVP, Managing Director, Partner) (18%); Vice Presidents (6%); Director (15%); Manager (32%); Staff (9%); and other (18%) √ The structure and

effectiveness of existing Operational Intelligence

• Industry: The research sample included respondents from the following industries: Aerospace and Defense (17%); Industrial Equipment Manufacturing (14%); High Tech Manufacturing (12%); Industrial Products (10%); Medical Devices (10%); Chemicals (9%); Food and Beverage (8%)

√ Current and planned use of Operational Intelligence to manufacturing operations

• Geography: The majority of respondents (61%) were from North America. Remaining respondents were from Europe (18%), the Asia-Pacific region (14%), and rest of world (7%).

√ The benefits, if any, that have been derived from Operational Intelligence initiatives

• Company size: Twenty-three percent (23%) of respondents were from large enterprises (annual revenues above US $1 billion); 48% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 29% of respondents were from small businesses (annual revenues of $50 million or less).

The study aimed to identify emerging best practices for Operational Intelligence usage in manufacturing, and to provide a framework by which readers could assess their own management capabilities.




Table 4: The PACE Framework Key

Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)


Table 5: The Competitive Framework Key

Overview


The Aberdeen Competitive Framework defines enterprises In the following categories: as falling into one of the following three levels of practices Process — What is the scope of process and performance: standardization? What is the efficiency and Best-in-Class (20%) — Practices that are the best effectiveness of this process? currently being employed and are significantly superior to Organization — How is your company currently the Industry Average, and result in the top industry organized to manage and optimize this particular performance. process? Industry Average (50%) — Practices that represent the Knowledge — What visibility do you have into key average or norm, and result in average industry data and intelligence required to manage this process? performance. Technology — What level of automation have you Laggards (30%) — Practices that are significantly behind used to support this process? How is this automation the average of the industry, and result in below average integrated and aligned? performance. Performance — What do you measure? How

frequently? What’s your actual performance?


Table 6: The Relationship Between PACE and the Competitive Framework

PACE and the Competitive Framework – How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.




Appendix B: Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report includes:

• Manufacturing Operations Management in the Economic Down Turn, March 2010

• A Platform Approach to Manufacturing Operations Management, March 2009

• Global Manufacturing Operations Management, August 2008

• Event Based Manufacturing Intelligence, May, 2008

• Manufacturing Operations Management: The Next Generation of Manufacturing System January, 2008

• Compliance and Traceability December, 2007

• The Cost of Quality: Benchmarking Enterprise Quality Management; July, 2007

Information on these and any other Aberdeen publications can be found at www.aberdeen.com.

Authors: Matthew Littlefield, Sr. Research Analyst, Manufacturing ([email protected]) Mehul Shah, Research Analyst, Manufacturing ([email protected])

For more than two decades, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.5 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

As a Harte-Hanks Company, Aberdeen’s research provides insight and analysis to the Harte-Hanks community of local, regional, national and international marketing executives. Combined, we help our customers leverage the power of insight to deliver innovative multichannel marketing programs that drive business-changing results. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 854-5200, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com.

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2011)

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Featured Underwriters This research report was made possible, in part, with the financial support of our underwriters. These individuals and organizations share Aberdeen’s vision of bringing fact based research to corporations worldwide at little or no cost. Underwriters have no editorial or research rights, and the facts and analysis of this report remain an exclusive production and product of Aberdeen Group. Solution providers recognized as underwriters were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.

Apriso Corporation is a software company dedicated to providing competitive advantage for its customers. It does so by enabling manufacturers to achieve and sustain manufacturing excellence while adapting quickly and easily to market changes. Apriso's FlexNet is a BPM platform-based software solution for global manufacturing operations management. Apriso supports global continuous improvement by delivering visibility into, control over and synchronization across manufacturing and the product supply network. Apriso serves 180+ customers in 40+ countries across the Americas, Europe and Asia. Customers include GM, Lear, Honeywell, L'Oréal, Trixell, Lockheed Martin, Saint-Gobain, Novelis and Essilor. Learn more at www.apriso.com.

For additional information on Apriso:

Apriso 301 E. Ocean Boulevard, Suite 1200 Long Beach, CA 90802 1-508-622-0522 1-562-951-8000 www.apriso.com [email protected]


http://www.apriso.com/




Plex Systems, Inc., is the developer of Plex Online, a software as a service (SaaS) solution for manufacturers. Plex Online includes over 350 functional modules to manage operations from the shop floor to the top floor, including manufacturing execution system (MES) modules such as quality management and machine integration, enterprise resource planning (ERP) modules such as accounting and finance, customer relationship management (CRM) modules such as order entry and tracking, and supply chain management (SCM) modules such as supplier quality and traceability.

For additional information on Plex Systems: Plex Systems, Inc 1731 Harmon Road Auburn Hills, MI 48326 1-888-454-7539 (US & Canada) +1-248-391-8001 (International) 1+49 89 416160901(European Office) www.plex.com [email protected]


http://www.plex.com/




As the world's leading provider of business software, SAP delivers products and services that help accelerate business innovation for our customers. Today, more than 47,800 customers in more than 120 countries run SAP applications – from distinct solutions addressing the needs of small businesses and midsize companies to suite offerings for global organizations. Founded in 1972, SAP has a rich history of innovation and growth that has made us a true industry leader. SAP currently employs more than 51,200 people in more than 50 countries worldwide. For additional information on SAP: SAP Americas 3999 West Chester Pike Newtown Square, PA 19073 1-888-597-1727 www.SAP.com www.sap.com/solutions


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