EAM to assist with recessionary challenges

(With acknowledgement and thanks to Lisa  from Watt Communications who assisted taking down some thoughts and researching the subject to produce the piece below, and to Richard from Infor for his proof reading).

Today’s competitive marketplace and increasing economic challenges sees companies across most industries attempting to drive costs down, and in the case of manufacturing, increase production performance. Increasingly, companies are focusing on maximising asset performance and maintenance program effectiveness, and given the climate in which manufacturers are operating in 2012, it would be almost impossible to stay in business without a reliable Enterprise Asset Management (EAM) system in place.

 

Infor, the world’s 3^rd largest ERP vendor, says that underperforming or badly managed assets can have many far-reaching and negative impacts on the overall health of a company.  Unexpected asset downtime can disrupt production and lead to shortfalls in customer deliveries, and poorly functioning assets can have a hidden detrimental impact on energy bills.  The fundamental problem is that asset management isn’t always top of the management priority list due to the constant focus on increasing sales during tough times.

 

However some of the benefits for implementing EAM which cannot be ignored,  include :

• Maximising maintenance effectiveness i.e. streamlining the maintenance process so companies can extend the longevity of their assets and improve productivity.
• Reduction of inventory costs i.e. enabling companies to avoid carrying unneeded spare parts inventory or experiencing downtime because of inadequate inventory.
•  Increased warranty recovery i.e. assisting companies to improve their tracking of repairs eligible for warranty claims.
• Increase equipment uptime i.e. improving asset performance so companies can avoid costly unscheduled downtime in production or service operations.
• Improve reliability and risk management i.e. anticipating and mitigating asset reliability and regulatory risks.

 

It has been very interesting to witness the massive transformation that Infor has undergone in the past year.  There has been much hype about Infor’s most publicised offering, Infor10, and in South Africa, the company completed a recent visit to talk to local partners and customers about the new outlook and transformed vision for the company and its products. The same is true for many of Infor’s other products and solutions including EAM.

 

A major focus for Infor is the updated look and functionality of their software to suit the changing needs of the end user. With the increased adoption of social media tools and aggregation software available, customers are fast expecting the same functionality from their enterprise software as they do from their mobile applications and social sites like Facebook or  Tweetdeck. This thinking has driven the development of Infor enterprise applications.

 

Infor’s EAM system provides great choice as it can be deployedon–premise, in the cloud, or a hybrid of them both. Crucially each deployment type has the same full-featured application – not a scaled-down version as is seen with other systems. 

 

Whilst a deployment method to suit a business is critical, it is also important to update your system regularly to keep up with industry requirements and trends. One such trend is the ability of a EAM system to monitor, manage and ultimately save energy at an asset level. Advanced EAM systems collect data from various sources to assess the effectiveness of a machine. Parallel to this, it is clear to see the amount of energy consumed during the production process and which machines or parts are consuming more energy than they should, and perhaps highlighting peaks at certain times of the day. In summary, this reduces wasted energy, ensuring that manufacturers can monitor excessive energy consumption and allow for decisions to be made on maintenance or the overall lifecycle of certain machinery or parts.

 

As this year progresses I look forward to seeing more South African companies embrace newer technologies to keep abreast of their asset performance, and ultimately improve their profitability to fare the economic conditions in better condition.

IT in mining – balancing global standards with local flexibility

 

The medium-term outlook for the world’s mining sector remains positive. Global demand for resources driven from the emerging economies has over the past 12 months led to unprecedented levels of investment in certain regions, notably in Australia. These new projects are placing a strain on resources as companies compete for scarce skills and expertise in the labour markets.

Unique demands

Mining companies are increasingly looking to technology solutions to standardise processes and to help manage increasing complexity, and in this regard the sector is no different from any other global operation. It should come as no surprise that the information technology challenges experienced by mining companies have much in common with companies in other sectors such as petrochemicals, energy and process manufacturing. However, there are unique and specialised aspects of mining that do not necessarily apply to these other sectors. These include the fixed location of raw materials, finite tenement resources, asset and energy intensive plants, inherently hazardous operations, relatively small volumes of very high value products (e.g. gold and platinum) and large volumes of relatively low value commodity products (e.g. iron ore and coal).

Two-tiered technology

Efficiencies and improved business processes can in general be realised by adopting a single global ERP system with standardised business processes. Many mining companies are actively busy consolidating their business systems to standardise processes in this way, and the emphasis is usually on financial, HR and logistics management. However, as is the case in other sectors, unified business systems are not necessarily particularly effective at improving operational efficiencies in the mines themselves, where plant managers are daily faced with the challenges of managing people and processes with variable raw materials, real world stoppages, delays and breakdowns. Furthermore these local operations are often taking place in operations scattered in different countries, with vastly different skilled labour pools, environmental and energy conditions.

A two-tiered technology approach is therefore necessary, whereby global business systems are implemented at the one level, and localised operational systems are implemented at another. Where local systems are implemented, minimum standards representing best practice can be used to ensure that the local implementation is in line with corporate practices in other territories, mines or plants.

In practice, IT in mining is characterised by some standardised business systems aligned to best practice and consolidated to some degree or other, and complemented by best-in-class operational management systems that are selected with local considerations in mind. This two-tier complexity requires an appropriate systems architecture that encompasses IT infrastructure, applications, integration, scalability and support. It is feasible that a large mining company already has its infrastructure and certain applications hosted as a service, and in this way this company may be well positioned to consider and exploit future cloud-based solutions. However, at the other end of the scale, equipment and process control, safety and production management systems need to be very close to the specifics of the operations and will usually be delivered on-premise by specialised solution providers.

Strategic relationships

IT managers in mining companies therefore need to consciously form strategic relationships with software suppliers at both levels of their IT systems. The mining industry is not afraid to innovate and – when this innovation is done in conjunction with suppliers who can quickly embed these ideas in new systems functionality – the result can be an impressive improvement in efficiency, asset utilisation and safety performance. When there is a lack of a strategic engagement between the mine and software suppliers, performance will suffer by virtue of operations being shoehorned into standard practices that may be appropriate for another operation in another country, but not for the local specifics.

Standard commercial processes may be implemented in areas such as purchasing, inventory, financial accounting and so on. However when considering mining operations, system flexibility is the most significant element to consider. For example, in the area of safety, while the underlying principles are prescribed globally, detailed safety practices can differ significantly between different plants. When the local detail is ignored and attempts made to implement generic safety systems, unsafe practices can result. Centrally deployed safety systems in mines need to be able to accommodate the nuances between plants in different countries in a flexible way without compromising the underlying integrity of the processes in the individual plants. In the same way, execution of operational processes such as shift work, standing instructions, incident management and more will all differ slightly between plants, and certainly between countries, to accommodate cultural and other local factors.

Recognising limitations

Management of complexity is a universal and essential competence of IT managers. The natural tendency to simplify matters by adopting a single, all-embracing integrated system will only work in certain situations. The reality is that mining operations are complex and localised in nature and the implementation of global standards will differ from plant to plant. IT Managers therefore need to recognise this limitation, and select systems suppliers that understand the importance of flexibility in their solutions and with whom they can form strategic relationships to bring innovative ideas to fruition.

Can a risk assessment reliably predict if you will have an accident today?

Statistics is one of those areas which can look very impressive in mathematical circles.  In a nutshell,  given sufficient samples and assuming all the factors are considered,  past trends can be a reasonable indicator of future events.  However, as weather forecasters know all to well,  the field of statistics can only result in a probability.  It may be predicted that the chances of rain today are 80%.  But there is always a chance of 20% that it will not rain.  Reliance on probabilities to precisely forecast individual specific events is therefore  flawed because a probability is by definition based on an uncertain set of factors and the probability is only valid given sufficient samples.

In the natural world risk is a reality.  Throughout history, humans have endeavoured to mitigate against risks to their safety,  from avoiding sabre toothed lions to carefully depressurising a vessel before drilling into it for maintenance.  Those risks that cannot be adequately mitigated need to be avoided or simply accepted (i.e move far away from sabre toothed lions or don’t ever drill into a pressure vessel).

In hazardous industries , risk assessments are a fundamental part of the management of safety.  Risk assessments endeavour to identify those serious risks that demand attention.    A common approach used in industry to quantify risk is to consider the probability of an incident on a scale of 1 to 5,  and at the same time the consequences should the incident occur,  also on a scale of 1 to 5.  The product of the two numbers is the overall risk figure.  The risk can be plotted on a graph or so called “heat map” where the top right quadrant shows risks with a high probability and a serious consequence,  and the bottom left quadrant shows low probability and low consequence.

In general,  because with finite resources companies cannot concentrate on all risks they tend to look at the “top 10” or some other ranking.  These top 10 risks are typically found in the “hot” zone of the heat map (top right quadrant).

This approach is simple, practical and quite useful.  It is however flawed in three main respects:

(1) The probability of a risk occurring is based on judgement, is a statistical metric and is therefore imprecise in predicting specific future events.

(2) The risks with very low probabilities and very high consequences are sometimes not in the “Top 10”.  (For example a nuclear accident,  high consequences, low probability).

(3)  The risk can change over time for any number of reasons such as plant modifications, operational changes or new factors.  The time between the risk assessment and the actual work in hazardous environments can be the difference between an accident taking place or apparent “safe work”.

Leading indicators of safety are sometimes used to statistically predict the underlying probability of an incident.  Whether or not this is a reliable tool is a whole debate in its own right,  but companies often use these because they are practical and useful.  For example the number of accidents per manhour worked,  or the number of near misses etc are both leading indicators that can predict an increase in the underlying probability of an accident.  Furthermore, a near miss usually results in some actions taken to avoid the incident in future,  thereby over time reducing risk.  When these indicators increase, further action needs to be taken (so the theory says) to address those factors that are resulting in unsafe conditions.  Again this approach can be flawed if it not realised that leading indicators are also statistically derived and therefore imprecise.  Also, management are often totally unaware of what action is actually required to contain rising indicators,  especially if the causes are behavioural or cultural in nature.

Software systems that address safety holistically need to consider several factors.  They need to recognise the value of leading indicators and have a good incident and near miss management capability and handle behavioural based safety observations and measurements.  They need to recognise the importance of assessing safety related risks at multiple levels – in the engineering and design process (e.g. HAZOP outputs), as well as in the actual operations (e.g. permit to work).  They need to recognise the dynamic nature of operational environments and have good change management processes to measure the impact of modifications on operational risk.  Finally, they need to have the capability to relate patterns and links in the data to warn people of risks that are the combined result of multiple simultaneous factors.  For example,  maintenance work on equipment + recent modification to equipment + previous incidents related to equipment + standing work procedure in use = overall risk.   This overall risk is something for example that is not evident to people who inspect the work sites,  but is the result of advanced system analytics that can correlate data intelligently to derive new insights.   Few EHS systems achieve this level of vital insight  which is likely to be successfully developed only by those vendors who focus on operational safety systems.

Clearly the whole subject of risk in a safety context is vast and cannot be covered in a short article of this nature.  My only advice is to be extremely sceptical of inappropriate statistics and oversimplified risk management processes.  Be extremely thorough in approach and have multiple strategies to manage safety.  Finally seek systems that have a holistic view on safety and at the same time are practical and easy to use.  Once the system is in place, look to continuously improving the quality of risk information by adding modules such as incident management, permit to work, engineering change management and advanced analytics that generate new safety related insights.

Achieving a balanced view on sustainability

Over the past few years we have witnessed the growing realisation by thought leaders that our way of life in the 21^st century is unsustainable. It is accepted that in the end all resources on the planet will come to an end (some will be certainly be depleted sooner than others) but before then our total consumption as society will be reduced as limiting resources such as energy, minerals, food and so on fail to keep up with demand. Yet, over centuries, humans have shown an amazing tenacity to survive, and an ability to adapt to a changing environment, so should we be at all concerned to maintain the status quo or simply accept environmental and social change as inevitable and rather focus on our ability to adapt?

Today in business we are now witnessing an increased awareness around sustainability, in part driven by governance requirements whereby companies have to provide integrated reports for their stakeholders. Yet frequently I find that some of this discussion is somewhat abstract and even surreal as companies seemingly alternate their focus from factual issues on operations (such as the finite amount of ore in a mine) to what seems to be far less defined and imprecise future factors such as rising sea levels or the impact of greenhouse gases on climate change. This confusion and lack of understanding of what is important allows companies to “bolt on” sustainability statements in their annual reports that are more marketing and positioning statements than any substance, and which ultimately mislead stakeholders as to the real issues. Clearly some balance and perspective on the whole subject of sustainability is necessary, and this requires analysis of hard scientific, economic and social facts.

One of the problems is that of terminology and loose interpretation. In business terms, a company will usually have an expected lifetime – very few companies are expected to continue for centuries. Some companies such as a trading company or those set up to capitalise on a major sporting event such as the World Cup may expect a very short lifetime of one or two years. A mine may expect to survive for 10 or 20 years, a chemicals producer may plan for a 30 year lifetime. For each of these companies “sustainability” means something different, it could be in the context of months, years or decades. Furthermore, the relentless quarterly profit reporting of the investor markets dominate management’s attention with a short term perspective to measure performance. Volatility in financial performance can therefore result in priority short term tactical decision making that is at complete odds with longer term sustainability initiatives. But the glossy annual reports do not reveal this and therein lies the reason for integrated sustainability reporting.

A balanced approach required that businesses integrate their sustainability initiatives into their business strategy, risk and governance processes. In other words the sustainability initiatives must be developed together with the business strategy to achieve outcomes that are relevant, measurable and enduring (sustainable). This will ensure that the risk (for example) of economic or political change is considered with the correct risk and timeframe against (for example) rising sea levels or climate change. It will also ensure that businesses don’t “tack on” a glossy brochure to the annual report with pictures of forests in an attempt to convince shareholders that they are “green”.

Systems that support this integrated approach are required to manage the complexity of information and to ensure consistence and continuity of reporting. This must mean that pure financial, HR and resources (ERP) systems are not enough, they need to be complimented with systems that measure and report on longer term sustainability metrics. In the mining, manufacturing and energy sectors for example, such systems need to be able to measure and report on energy usage, emissions, safety and environmental impact; as well as production efficiencies and throughput. No longer is “Cost of Production” the only metric of a production manager, he or she needs to be measured on the impact of decisions on long term sustainability. Such information systems need to take core operational processes such as maintenance, safety, plant operations and measure and in addition report on sustainability metrics such as energy efficiency, waste, downtime etc. These metrics need to align to the business risks and aggregate in a way that allows management to control and take corrective actions as necessary at both a strategic and tactical level.

I am an engineer and as such am familiar with the terms megawatt, ton, cubic meters etc. And all too often I see industrial waste reported in these units. That is why I am puzzled when a major company (say a bank) puts solar panels on their office to power the TV set which uses less than 1KW in the canteen, and then devotes several paragraphs to this initiative in their sustainability report. What would be more effective is if the bank could report how investor funds have been used to achieve a 5% efficiency improvement in a power station, which correlates to thousands of TV’s consumption. Such reporting will require transparency and information systems that are designed with this goal in mind.

I have no problem with the initiative been taken by thousands of consumers to unplug their cell phone chargers when not in use. My concern is with balance and perspective – as long as you recognise where the really big waste and energy numbers are in the system then your decisions are at least informed and we have a real chance as society to tackle sustainability issues meaningfully.

What if your production meetings were productive?

 Daily throughout the world meetings are held quite often for the sake of meeting and nothing else. Agendas are often distributed ahead of time but few people prepare and even less participate, meaningfully during these sessions. Inevitably minutes are kept, actions are allocated but few are followed up and seldom are people held accountable.

With major changes in business especially around accountability e.g. King III, allocation of performance based indicators in all industries and departments from production to HR it is impossible for meetings to have all the required information to be meaningful and productive. A simple example would be the morning production meeting in a plant environment which covers production for the past 24 hours or week. An agenda should have been sent out before the time covering the following:-

 • Welcome

 • Outstanding issues from previous meeting

 • Production output

• Production logs

• Outstanding permits to work

 • Incidents

 • HR : attendance registers/leave/shifts etc

 • Close

Many of these would be printed in hard copy and taken into the meeting. Once circulated any changes would require a new copy and little input back from invitees can be included and re-distributed. On commencement of the meeting outstanding issues from previous meetings are discussed and steps taken usually all performed manually, production outputs are presented in a hardcopy form from whatever process control system that is available. Separate output KPI’s are then checked to see if and why there were variations and what the root cause of these was. Production logs are then examined to shed light on these variations usually from a log book with suspect hand writing and accuracy. Should there have been a negative variance and something similar had happened in the past which was resolved where would this information be? This would usually be an action for the plant manager or operator to follow up on. However if this information was online and available to the meeting a fix could immediately be implemented.

Being able to access all the different systems that support various parts of the organisation is virtually impossible and hard copies are made and distributed to all, or is it?

With modern technology, why can’t all the information from these system be readily available during the meeting?

This would ensure that all information is current and available, ensuring decisions can be taken using the correct information, as well as allocating various actions to individuals or teams with reminders being sent electronically which serves as a reminder after the meeting. The multitude of different systems e.g. permit to work, incident reporting, production etc. complicates running meetings effectively. Seldom if ever are outstanding issues prioritised and followed up. With an electronic meeting system these can be represented in the form of a dash board highlighting critical areas while none critical can be lower down the agenda. An incident raised on a particular system is often seen in isolation while the need for understanding the total process is critical for the organisation. E.g. an incident reported in the SHEQ department should have an impact on risk assessments, permits, process management etc. and this can be managed effectively using the electronic meeting system with the status of the progress shown within all these areas. 

 Much is discussed but little achieved, not because of lack of ability but due to information being resident in disparate systems and not available when required. Due to this shortfall, numerous issues cannot be resolved during the meetings and much is added onto the “to do” list or held over until the next meeting. This results in the next meeting spending time on unresolved issues from previous meetings and the cycle continues with little improvement.

In complex environments the need for an electronic meeting system cannot be underestimated in ensuring that production managers are in total control of the operations.

Delays in feedback on production and other related areas can no longer be tolerated as this affects the net worth of any organisation that is output driven and who strives for high levels of safety and staff satisfaction. Meetings need to be productive with priority issues dealt with first ensuring that the levels of production remain high and resources utilised effectively.

Another important aspect is that this concept is not limited to mining and production but can be extended to all industries who have complex environments and require meetings to manage daily operations eg. Hospitals, financial institutions, parastatals etc.

In short management are accountable and need to be effective in managing all the diverse areas of the organisation and should consider an electronic meeting system to help them meet this requirement by being productive .

The Cart before the Horse : Paper based Permit systems exposing Plant /Mine management to possible liability.

It has mystified me over the years the amount of money, effort and resources that are invested into getting  paper based permit to work systems working properly.  Yet many organisations still argue that they need to get their paper based systems working before they consider “upgrading” to a computer based permit system.  There is evidently a misunderstanding as to the benefits of such an electronic system over the paper system.  These can be summarised at a high level as follows:-

-          Accurate permits with minimal time to produce

-          Policies and procedures are built into the rules in the system and are improved according to experience on an on-going basis

-          Authority levels are always adhered to

-          Required PPE and isolations are accurately specified provided in accordance with the hazards

-         The flexibility to make audited and controlled changes “on the fly” should working conditions change

-          Constant training by the system reminds the permit issuer of what is required

-          Management of contractors including induction and competencies, thereby ensuring only accredited contractors can accept permits and hence perform the work.

The need to get a paper based system into operation as a prerequisite to an electronic system introduces unnecessary risk.  Paper systems seldom can reliably manage the permit lifecycle process due to human error, lack of training and hence adherence to policies and procedures.  The time to implement paper systems, because of the inherent limitations takes considerable longer than implementing an electronic version.    The auditability of these paper systems is usually costly with the poor results. Maybe people are conservative and are comfortable with this process and are resisting change.  Reasons to do it in this way could include the following:-

-          We have always done it this way so why do it differently?

-          We need to first get our policies and procedures  in place,   and then once instilled we will consider an electronic version.

-          We don’t believe electronic signatures are valid, and having passwords will increase the administration of the IT department?

-          Who would own the system if it is electronic?

-          Wouldn’t an electronic system be too complex and we don’t have a computer literate work force?

-          Surely by going electronic ahead of a stable paper based system is putting the cart ahead of the horse?

The answer to many of these concerns is based on perceptions about IT systems in general, especially around complexity and the inflexibility attributed to them.   Historically the implementation of these systems (usually business systems) has far exceeded the planned implementation times and costs.  The resultant complexity and inflexibility of these IT based systems has resulted in only highly skilled individuals managing and running them.

Few companies have fully documented policies and procedures around permit to work operations and in many cases even less is understood or adhered to by employees who are constantly under work pressures to solve operational issues while the permit system is quite often viewed as an unnecessary evil, and are completed in the shortest time with little thought going into the process.  Considering errors on a permit can result in injury or even worse fatalities. Can companies afford this type of behaviour?

In modern day operations little if anything is cast in stone so changes to paper based systems can only occur once all involved have been trained on the new requirements, while with an electronic system this change immediately becomes effective once the system has been updated.

If a person can read then an electronic system should be practical.  Detailed “wizards” can drive the process and incorporate everything that needs to be considered when issuing a permit.  These include the following:-

-          Competencies of permit issuers and contractors

-          Selection of the type of permit eg. Cold work, hot work etc, without having to find the correct book or template

-          Identification of inherent risks and any others that may be present

-          Linking of associated permits and key Locks

-          Selection of appropriate PPE

-          Adherence to applicable isolations

-          Control of the process from permit preparation to completion of the work and the permit being handed back and accepted (This final step seldom if ever happens with a paper based system)

In any organisation external and internal factors drive change and any system should be flexible enough to adapt and evolve with these changes.  In my view not having everything ready up front should NOT be an excuse for trying to perfect a paper based system, on the contrary it should be the reason for implementing a flexible electronic permit system.

The acceptance of technological innovations have been accepted in numerous countries and across multiple industries eg banks , public sector etc.  Not long ago the UK HSE has acknowledged the value of computer based permit to work systems in their latest safe work guidelines.

Manual signatories on a permit can require a PhD in writing analysis to see who the person is or was after an incident!  Seldom, if ever can you identify who the original contractor was that accepted a permit.  What recourse would any organisation have should a fatality occur and you cannot identify the individual from the scrawl on the permit?  Who would be held responsible?

Unfortunately for management,  in many cases the plant manager (In South Africa the Section 16.1 or 16.2 responsible person) are responsible and would be liable should any incident occur on the plant or mine.  Few are aware of the implications of the shortfalls of a paper based system, thinking that the SHEQ department have this under control. To be blunt there is little if any control with a paper based permit system.  I am not in any way saying there is no merit to a paper based system because it is definitely a step in right direction considering not having one at all.  In today’s business it is however “Old School” and may even be challenged as not having done everything “reasonably practical” to ensure safe work.

To conclude:

Can you risk the lives of your workers and contractors and personal potential liability by trying to perfect a paper based system?

Can you afford to spend time and financial resources on a system that is sub-standard and will be replaced in the future?

If you believe that a paper based system or perfecting it has major limitations then why don’t you put the “Cart in front of the Horse”?

Major organisations have seen the merit of an electronic permit to work system and have implemented these quick and effectively and adapt to changes in working conditions immediately.  They are constantly changing the way permits are being issued as well as the process.  Can you afford not to be running an electronic permit to work system?

Sustainability – more than just “Green”

The recent events on world markets have led to business leaders everywhere seriously questioning the sustainability of their operations.  While many factors are outside the direct control of management, such as raw material prices, demand for product and availability of capital, there are nevertheless many areas that are within managements control.  These areas, if addressed holistically will lead to more sustainable and profitable operations.

Business leaders in the process manufacturing industry have concluded that sustainability needs to be a combination of initiatives in three key areas:  financial, environmental and social.  When all three are addressed simultaneously, new value can be created.  This of course makes good business sense, companies that address these areas are likely to show greater returns to shareholders and other stakeholders.

A production manager can make a significant difference in the way plants are operated.  Previously it was sufficient for them to concern themselves mainly with production targets, such as production rate, conversion efficiency, cost of production (per ton), inventory and supply chain management.  However there are other significant KPI’s such as incident rates, emission management, health and wellbeing of employees and community development which need to be superimposed in order for a plant and business to operate responsibly and of course more sustainably.

The IT industry has recognised this and software vendors have started recognising that sustainability is a key driver in successful manufacturing operations.  The philosophy is that Health, Safety, Environment and Quality (HSEQ) needs to be embedded into all production processes and made intrinsic in the overall measurement and reporting of all activities.  No longer is production cost the only factor.   Unfortunately, it is unsatisfactory to try and “bolt on” SHEQ systems on top of business systems.  It is far better when designing and selecting software based systems that HSEQ is seen to be embedded in each and every step in the software and when selecting systems the practical integration of these with each other and the business systems needs to be evident.

A simple example of how a holistic systems approach can be achieved is through the integration of production, maintenance and SHE in a typical operating company.  It is often that these three areas report to a common production manager, but this is the only point where there is joint accountability.  Production, maintenance and SHE teams often operate in separate “islands of information”, citing every reason as to why they are different and need separate systems.  A typical production environment therefore has separate maintenance, SHEQ and operational software with absolutely no thought given to the process integration between these areas, and the consistency between these systems.  An fragmented approach definitely leads to wasted opportunities to drive improved sustainability through a common integrated approach. 

The overall production processes includes several activities including determining rules for safe work; enforcing these through the maintenance function when executing work orders, getting authorisation from operations through the permit  to work process, integrating this into the SHEQ management system through incident management and non conformance handling; while always retaining a strong focus on the process operations in the control room.  Additional areas include measurement of production efficiencies, energy efficiencies, emissions and environmental spills.

IT systems are evolving (some quicker than others) to embrace this holistic approach.  The business drivers are there; and several vendors have been adopting the holistic vision for many years.  It behoves business and plant management to take a new look at these IT systems and understand how they are evolving to a more comprehensive solution. These new generation systems can act as a vital tool for production managers who need to contribute to improved sustainability within their production environments.  This will improve the chances of weathering the Global economic storm and allow your business to emerge stronger to take advantage of the inevitable upturn in a world that will be much more aware of sustainability as a key business success factor.

Has IT Been Sidelined by Success?

In the past as certain technologies mature they become pervasive and eventually disappear into the “fabric” of the world around us. For example, a device like a cell phone has now become a commodity item, and we take it for granted that people can communicate via voice, SMS, e-mail and video through a small portable wireless device from just about any location. Ten years ago I worked in a plant environment where cell phones were limited to “management only” and there were less than 10 in the whole company. Now every employee in the same plant carries a cell phone. In a few short years we have all simply forgotten how useful a communication device a mobile phone has become.

It is my observation that in the manufacturing sector, to a large extent information technology has become side-lined by its own success. For years, IT managers concerned themselves with implementing reliable information infrastructures. Business systems had to operate 24X7. Failures had to be constrained to a few hours in a year and the mean time to repair had to come down to minutes. Is it therefore really surprising that business leaders have come to regard their IT systems as mere commodity infrastructures, unable to add new strategic value and in the same category as office buildings, telephones and photocopy machines? IT Managers may be tempted to switch off the mail server for several days just to prove a point.

This dilemma faced by IT Managers in manufacturing is real. Successful technology that works well must disappear into the fabric of the business. When a core business system goes down things can get very ugly and IT Managers do everything they can to avoid failure by investing heavily in system reliability. However, after the implementation is over the inherently very reliable business system is somehow forgotten for the underlying value it continues to create for the organisation, for example by coordinating financial, supply chain, HR, manufacturing, procurement, sales and logistics processes.

In a recent discussion with a leader of a reasonably complex manufacturing company, I realised that in fact managers do want the IT systems to “disappear” in the sense that in his view the underlying business processes just need to operate reliably and with integrity so that managers can focus on the areas that are far less predictable – markets, customers, competitors and so on. Like when purchasing a cell phone contract, people want their business systems to just work without any issues.

In the manufacturing systems environment two types of distinct IT professional emerge. The first is concerned with the reliability, stability and underlying predictability of the IT platforms, systems and applications. They succeed when the systems “disappear”. The second, equally important category is the group who constantly stretch the boundaries of technology to extract the last residual value and opportunity from the existing and new IT investments. The second is challenged by the need to create value. This group works tirelessly to align IT and business strategy, innovate frequently and accepts that failure in projects is an inevitable consequence of taking risk, but that when projects succeed the risk is generously rewarded. Both categories of IT professionals are critical to the ultimate success of the business, and when in balance both complement each other.

The mistake that companies sometimes make is that they fail to recognise the fundamental differences in motivation within their IT staff. As a result of a lack of insight, these companies try to manage IT as a homogenous environment. Inevitably the emphasis will either be on stability or innovation, but rarely both in balance.

As technology disappears into the fabric of the world around us, both companies and individuals are now grappling with how to create differentiated business value with what is perceived as a commodity service. The software vendors also recognise that technology is rapidly commoditised, and in order to retain competitive advantage they have to consistently and convincingly illustrate business value. They recognise that business value is created by close alignment with the challenges within vertical industry segments. The leading providers of business systems are therefore increasingly vertically focussed. While still leveraging the “big brand” to give confidence they nevertheless have to organise themselves internally along functions that have deep, credible knowledge of the target industry itself. In manufacturing companies these specialised competences include manufacturing, operations improvement, supply chain and logistics, information management, sustainability and customer relationship management.

In assessing the efficiency of an IT Department in a manufacturing company, it is no longer adequate to measure the pure commodity service. Leaders in manufacturing need to challenge IT professionals constantly for value add and alignment to business objectives. They need to challenge and constantly assess the impact of the vertical focus of the suppliers of their critical business systems. They need to so this whilst at the same time respecting and also recognising those individuals who take great pride in the fact that through the reliable infrastructure that they now maintain they have perhaps become victims of their own success.

Some thoughts on the future of IT in business

I write this summary after attending two “back to back” conferences at Sun City which provided an ideal opportunity to get away from operations,  to win back some mind space and reflect on the state of the industry.
It will take some time to feedback all of the great ideas from both our strategic technology partners (Microsoft and Infor).  So I have resolved to write several blogs on our website to help share some of the highlights over the
coming months. 

At a very high level, these are the key messages I have for you from the past week:

Quote of the week:  “If you do not like change, then you should not be in the IT Industry”

Second quote of the week:  “If you truly want to be world class you truly have to focus, no matter how capable you are” 

Here are the headlines which I will drill down into in the next few months:

1. There is a significant shift taking place in IT today, as important as the early development of the web itself.   This is the migration of applications, including business applications to “the cloud”.  We will have to take this trend seriously, and investigate carefully how the cloud will impact on OpSUITE.

2. CIO’s are rapidly warming to the outsourced application model where the business application is served from the cloud.  Within a few months CIO’s will start accepting ERP, CRM and even MES applications served off premise from hosting service providers. 

3. CIO’s actually want IT to be a commodity, that runs at the lowest cost and highest level of reliability.  An example of how costs are dropping comes  from Microsoft where one of their data centres consists of several
thousand servers with only two engineers on site supporting the entire system.

4. In South Africa, bandwidth is about to increase substantially and prices will drop such that cloud computing will be a viable model for this region, and into the rest of Africa.

5. Consumers will drive the adoption of low cost computing through gaming, video and social network applications.

6. In South Africa, as in many parts of the world, FY10 was a terrible year for enterprise software vendors. 

7. In South Africa, unlike most parts of the world there is a tremendous opportunity in providing IT solutions to the public sector.  The potential for offering business applications to this sector is expected to increase as infrastructure investments are made, and we expect that this high growth will be sustained in FY11.

8. Dynamics CRM is worth watching closely. The new version holds much promise for ISV’s who wish to build IP solutions on the platform.

9. Microsoft is transforming into a services company.

 
Third Quote of the Week:  “The future of IT is already here, it is just unevenly distributed”

 
The IT industry can at times seem daunting and confusing.  However despite the technology waves (like cloud computing) the basics stay the same. 

Ironically the cloud is more like the mainframe than ever.  It demands disciplined software deployment and well written applications on a powerful platform.  Both Microsoft and Infor spent a lot of time talking about Azure – and you need to know what this is.  If you are technically inclined, Google “Azure” right now and see the future of cloud computing.  Most of the great ideas that will transform business applications in the future already exist somewhere, usually in other industries.  It is just a matter of time before the ideas spread into mainstream best practice.  You have the opportunity to see the future by simply being aware of what is already being used by consumers who carry iPhones and other smart devices that combine GPS, connectivity and rich applications in a mobile device.

Until next time, and keep an eye out for the blogs on our site over the next few weeks.

A few thoughts about sales and operations planning systems

Sales and Operations Planning (S&OP) is a critical set of business activities that lies at the centre of business planning. S&OP addresses planning at several levels: strategic, tactical, operational and execution. The scope of S&OP therefore ranges from yearly (including budget ), monthly, weekly and down to hourly planning (scheduling).   S&OP  is fundamental to manufacturing and every business that makes widgets will have some form of S&OP process in place.

Yet, surprisingly, despite manufacturing companies often having invested heavily in transactional systems to support manufacturing processes, the S&OP process is frequently run on spreadsheets. There are many reasons for this, for example formal S&OP training is based on spreadsheet models to assist students build up a conceptual understanding of the subject. Another reason is that there are no “silver bullet” S&OP systems available, and if you happen to not be running the all singing dancing ERP, then bad luck.

Fortunately, this environment is changing and with the increase in collaboration, business process automation, performance management and event management technologies, this is all changing.

S&OP planning is generally based on a model of the business that matches supply, finite production capacity and demand, sets operational and financial targets and monitors execution and tactics to adhere to the plan. Yet those in manufacturing will agree, these plans are useful to set objectives, but a large amount of tactical decision making is required when things change, as they tend to do in reality. Suppliers fail to deliver raw materials on time, production plants break down, customer orders hardly ever adhere to forecast, exchange rates (and prices) fluctuate and so on.

To manage the tactical decision making on spreadsheets is possible, but hardly likely to achieve an optimal result.

A good S&OP system should facilitate collaboration with suppliers and customers, react to variations in plan, constantly optimise production and distribution networks, be able to compare multiple what-if scenarios against a baseline and keep historical records of decisions that can be used to improve future tactics. Any one who has used a spreadsheet beyond the “breaking point” where the complexity of the model is beyond the understanding of the creator will understand the limitations of a spreadsheet based approach.

The ease with which spreadsheets are changed and multiple versions created has a further downside – it leads to an entrenched culture in the business that is resistant to growing the level of maturity necessary for maintaining global competitiveness – after all if “my spreadsheet works, why should I support the new disciplines required of a collaborative S&OP system that takes control (and my job) away from me”!

A good S&OP system requires both strategic and tactical elements that present metrics in a relevant and simple way to decision makers. Dashboards and KPI’s that are able to react to real world events and provide management with simple indicators on which to base tactical decisions are essential.

Strong collaboration capabilities that allow customers, suppliers and production to agree on a “single demand number” are critical. Event management and associated defined workflows are necessary to make any response to unexpected events resilient and coordinated across multiple departments.

Several technology vendors already have the building blocks of a good S&OP system in their “technology stacks”. However, coupling these components together to meet the requirements of a business is not a standard configuration process.

Existing systems need not be ripped and replaced, a S&OP system is a new technology “layer” that binds these systems together to enable better decisions, faster reactions and improved collaboration. This is unlikely to be a once-off process, but rather an series of incremental projects that start for example with a collaborative demand forecast, followed by tactical optimisation of production and distribution using a mixed integer linear programming model, then the implementation of event management capabilities and a performance management system that reports against strategic and tactical KPI’s.

Of course, each business is different, and the example above may not fit all. It is however important to recognise that the process is one of simultaneously maturing the business together with implementing a technology solution as an enabler. This is the same philosophy used when implementing ERP or any other complex system. In principle S&OP is no different, it is just a new frontier of manufacturing systems evolution. If ignored however, the business stands to lose competitiveness to those who do execute S&OP effectively with the best tools available.