Web-Centric Supply Chain Manufacturing

Table of Contents

Web-Centric Supply Chain Manufacturing
Visibility, Speed, Flexibility, Collaboration, Product Lifecycle Management, and Business Operations Management
The Customization Continuum
Build-To-Order Manufacturing
Outsourcing and Cross-Company Collaboration

Product Lifecycle Management
Unit Lifecycle Management, Product Line Lifecycle Management
Web-Centric Unit Level Data Management
Web-centric Design, Unit-level Tracking, Real-time Production Metrics, Data Mart

Web-Centric Supply Chain Manufacturing  Back to top
Spurred by the growth of the e-commerce, a new model of manufacturing has emerged responding to needs of customers for build-to-order products. The impact on shop floor systems is compounded by the increasing need to outsource components or entire assemblies to external suppliers. Shop operations managers still need visibility and control of delivery, quality, and configuration records of outsourced components to service their customers. Supply chain management is critical to the manufacturing process and new tools are necessary to keep pace with the needs of manufacturing.

This white paper will discuss Web-centric supply chain manufacturing and how it solves these and other critical problems faced by today's manufacturers. Many leading manufacturers are already using these solutions to streamline their supply chain manufacturing operations. These companies include Acma, a build to order computer company; Flextronics, a global manufacturing services leader; KLA-Tencor, a leading semiconductor capital equipment manufacturer; and Intuitive Surgical, a medical equipment company. Although their markets and products differ, these companies do share the commonality of effectively using Web-centric supply chain manufacturing to solve critical problems in manufacturing and managing the extended supply chain.

Web-centric supply chain manufacturing uses the power of the Internet and the simplicity of a Web browser to meet the critical needs of today's manufacturer — visibility, speed, flexibility, collaboration, and product lifecycle management throughout the extended supply chain.

Visibility — Through Web-centric supply chain manufacturing, all aspects of the manufacturing process are visible and accessible online. This visibility extends from incoming materials to final products, from component supplier to outsourced manufacturer, and everything on one's own shop floor. All data is stored and accessible electronically. Convenient data analysis down to the unit-level provides instant feedback of in-process work and historical trends and SPC analysis. Work in process can be viewed instantaneously regardless of plant location, whether the shop is internal or outsourced, with all data available and controlled by the OEM. By using the Internet and a simple Web browser interface, the virtual supply chain is enabled with visibility into the complete manufacturing process and with the tools to manage it.

Speed — To fill the need of build-to-order products, manufacturers have been forced to switch from asynchronous production, (build to stock, wait for the order, then ship) to synchronous production, (build to order, then make and ship it now). Speed becomes paramount in this environment. OEMs must manage and execute changes very quickly, and often, outside of their own organization. By using Web-centric supply chain manufacturing, OEMs can respond to customer needs, drive quick changes to process and design, and shorten leadtimes in their manufacturing cycle across the extended supply chain. Acma, a custom computer manufacturer, exemplifies this trend in manufacturing. Previously making computers as built-to-stock, Acma has completely changed their business model to offer custom configured computers. Speed became critical as Acma struggled with their paper-based, homegrown shop floor system. Switching to Web-centric supply chain manufacturing, Acma increased their on-time delivery from 78% to 96% and eliminated 10 man-hours of time adjusting production schedules to accommodate change orders.

Flexibility — Not only do manufacturers need speed in delivery, they need both speed and flexibility to roll out new products. They must quickly modify new products, changing processes and designs on the fly. Paper-based shop floors hinder this flexibility and the ability to track "as-built" information. Electronic travelers can be viewed from networked PCs and be easily modified via a Web browser. This gives process and manufacturing engineers the tools and flexibility to quickly revise new products, updating and storing the as-built information for future use. These changes can be made easily and immediately by a process engineer via a browser interface, rather than by an IT expert. Flextronics, a leading electronic manufacturing services (EMS) company, must constantly change production lines as it builds unique products for its numerous OEM customers. Web-centric supply chain manufacturing provides the flexibility that Flextronics needs to switch these lines quickly, without having a team of IT professionals adding and changing production routes and data collection requirements.

Collaboration — Collaboration and the sharing of information with external customers, suppliers, and outsourced manufacturers are critical in this new era of build-to-order manufacturing. By using Web-centric applications, remote customers and suppliers can see real-time information from a Web browser, without having to change or upgrade costly ERP systems. Using Web-centric supply chain management, collaboration becomes a multi-way, real-time exchange of information between manufacturer, suppliers, outsourced manufacturers, and end customers. Supply chain partners use current data to ensure products are built to the correct design, built on time, and all product and process data is collected and immediately available. Flextronics now uses this collaborative capability to attract new customers by offering it as an added value information service. Using Web-based supply chain manufacturing, inter-company and intra-company collaboration becomes easy, cost effective, and efficient.

Product Lifecycle Management — Throughout a product's lifecycle, many changes and revisions are employed to constantly improve performance, quality, and yields. By replacing paper travelers with electronic ones, an OEM can quickly make changes to product design and production processes, especially critical in the early stages of the product lifecycle. Another powerful benefit is deep unit-level traceability, capable of tracking component level quality and serial number information. Many industries, (e.g., semiconductor equipment, telecommunications, and medical) require deep unit-level traceability. Intuitive Surgical, a medical equipment manufacturer, would spend three days compiling quality information for governmental reporting requirements. Using Web-centric supply chain solutions, Intuitive Surgical can now generate a report instantly, compiling all component level history into the required report format.

Online data is captured throughout the product lifecycle. This unit-level data tracks product quality and manufacturing information throughout the supply chain. The historical data can be used for complex analysis providing valuable information to manage the product line lifecycle. KLA-Tencor, a leading semiconductor equipment manufacturer, uses this information to quickly analyze the trends in quality for a product line. Previously, using paper-based shop floor systems, KLA-Tencor would take weeks compiling and analyzing complex quality issues. By using such analysis, a product that is less costly or more reliable will be marketed longer than a less stable product that requires extra handling during or after production. By using Web-centric supply chain manufacturing, complex analysis tools are readily available to make informed decisions on both product lifecycle and product line lifecycle management.

Business Operations Management — Web-centric supply chain manufacturing systems provide detailed information from the OEM's shop floor and the floors of supply chain partners. Managers running the daily operations — shop floor, quality, procurement, service, sales — benefit greatly from these new tools. These Web-centric tools also provide equally powerful benefits to the business operations management. The COO and other executive-level staff must make critical decisions regarding the use of outsourced manufacturers and multiple manufacturing sites. Data on cycle time, cost, and quality from each and every supply chain partner is immediately available for cost-benefit comparisons. If one supplier has a quality or cycle time issue, then another one can be employed for the next build. By having visibility and control over the extended supply chain, the executive level staff can make informed decisions regarding the critical business issues they face.

The Customization Continuum  Back to top
It is the hottest trend in manufacturing and customer service over the last decade. The model has many names — mass customization, build-to-order (BTO) manufacturing, and supply chain automation. Regardless of the term, one of the most important modern economic trends is the shift from build-to-stock (BTS) and one-size-fits-all to build-to-order and personalized production.

As this process of customization evolves, it places new technical demands on manufacturers and their IT infrastructures. While some manufacturers may continue to build-to-stock, many companies in the computer, medical, telecommunications, and automotive industries were early adopters to build-to-configure (BTC) or BTO strategies. These manufacturers are now switching from paper-based tracking to online monitoring and Web-based intracompany and intercompany communication. In the process, they are achieving new levels of efficiency and customer service, which is passed on to the Web-savvy customers, anxious to buy and track their orders online.

The benefits of direct-to-consumer marketing and other selling models on the Internet are spurring interest in mass customization. Leveraging the Internet, companies, regardless of size, can extend their reach to the individual consumer at relatively low cost. The nature of the Internet pushes the drive to personalized service and customized products. According to the AMR Research Report on Manufacturing for May 1999, "E-commerce forces manufacturers to build to order… From telecommunications to tractors, customer focus speeds the personalization of manufactured goods and shrinks product lifetimes."

Progress along the customization continuum toward BTO production (see Figure 1) is driving the demand for more detailed, real-time visibility into factory-floor operations. Until now, most companies were satisfied if they could manage bulk orders, essentially working with an information blackout between the instant the order entered the manufacturing plant to the point units rolled off the assembly line. Before the era of customized production, BTS manufacturers could make do with this data gap. However, BTC and BTO are synchronous manufacturing strategies that require that the manufacturer have a clear and detailed picture of each order and of the individual products within the order as they move through the production cycle. Without this picture, manufacturers are forced to engage in costly expediter processes to tell customers the status of their orders, trace the actual content of a product with a service problem, and so on.

Figure 1

Acma Computers, a Datasweep customer, illustrates the challenge. Acma is a PC manufacturer that sells to both the private and public sectors. At one time, Acma's customers ordered batches of identical PCs. Now, customer orders include a variety of special hardware and software configurations. Not only must Acma manage the assembly and testing of each individual PC, they also need to track individual components on every PC built. Without unit-level tracking, the company risks potentially large and costly recalls of computers for component level failures. Acma requires complete supply chain visibility down to the unit-level in order for the BTO model to be successful for the company's customers and its bottom line.

Outsourcing and Cross-Company Collaboration  Back to top
The trend to replace vertical manufacturing with outsourced manufacturing began many years ago. Outsourcing of part or even all production processes by brand-name companies to a variety of contract manufacturers is a very common and accepted manufacturing practice today. (See Figure 2)

Figure 2

This trend toward outsourced manufacturing has been boosted by the advent of Internet commerce. Contract manufacturers are no longer low-end "board stuffing" shops. Growing at an annual rate of more than 20 percent, this sector is projected to hit $105 billion by 2001, according to Technology Forecasters Inc. Within the contract manufacturing market, high-mix companies — those that handle large numbers of small volume orders — and customized unit manufacturing are growing faster than the industry averages and have twice the operating margins. Outsourcing combined with BTC or BTO production makes unit-level data management a top priority for contract manufacturers and their OEM customers. The ability to keep track of every product, each of its parts, and its stage in the production cycle is a prerequisite to production efficiency and corporate profitability. In addition, ongoing storing and accessing test history, along with the ability to run complex analyses, is crucial to keep costs low and quality high.

Particularly in the case of outsourced BTO manufacturing, where the aim is rapid turnaround of uniquely configured products, the contract manufacturer is likely to ship the finished product directly to the customer. As a result, the OEM is absolutely dependent on the information provided by the contract manufacturer in order to effectively service its customers and operate its business. The OEM must have visibility to details across the operations of its supply chain partners. Its bottom line, reputation, and ability to leverage its sales and marketing investments, depend on how well it understands and manages the manufacture of its products by other companies. The problems usually associated with production — quality assurance, scheduling, change-order management, cost control, reconfigurations, and customer support — are magnified when the information resides off-site and is distributed across multiple locations.

OEMs and contract manufacturers can share production information in three different ways, as shown in Figure 3. In the first instance, OEM Direct Input, the OEM owns the production tracking system, and requires its contract manufacturers to input information into that system via the Internet by accessing the OEM's application via a browser. The second sharing option, OEM Direct Access, is for the contract manufacturer to own the production management system, and provide appropriate access to that system to each of its OEM customers. In the third sharing option, Data Sharing, the OEM and contract manufacturers both have copies of the unit-level production information, and synchronize updates to that information. Each of these collaboration options is enhanced by the use of Internet technology.

Flextronics, a leading electronic manufacturing services company, illustrates the advantages of Web-centric supply chain manufacturing. Not only does the company use the flexibility to quickly change production lines, it can also track the products and subcomponents from multiple locations, building for multiple OEMs around the world. Using a Web browser, the company can transfer data immediately between locations 24 hours per day. They can also supply information to their OEMs and suppliers in an efficient and cost effective way. The bottom line is that now Flextronics can offer more services to their customers, more detailed information to their supply chain to help bring products to market quicker. Web-centric supply chain manufacturing makes it possible.

Figure 3

Product Lifecycle Management  Back to top
With unit-level production information, OEMs can more effectively manage the lifecycle of the individual product and the lifecycle of the entire product line.

Unit Lifecycle Management: Unit-level data tracking provides value throughout the product lifecycle — during production and long after the individual product has left the factory floor. Unit-level data management can improve customer service. For instance, Acma computers increased on-time delivery through unit-level tracking from 78% to 96%. When placing computer orders, Acma's customers designate the type of shipping service they want — overnight express or regular ground. As the computers move through manufacture, unit-level tracking enables the company to prioritize production according to shipping time, improving customer satisfaction, and reduce final inventory by coordinating final test and packaging with FedEx or UPS trucking schedules.

Regardless of whether they build to stock or build to order, most manufacturers want or need to track detailed "as-built" information on quality tests, sub-component serial numbers, and suppliers. This allows them to make sure the unit is built correctly the first time and also assists in managing service and warranty requests. For instance, knowing the precise software installed in a system can allow companies to implement more efficient upgrade programs.

For many companies, the key to BTO quality and productivity is simply eliminating paper-based travelers and manufacturing procedures and replacing them with an electronic shop floor management system. Web-centric applications take this a step further, by providing unit-level visibility throughout the supply chain.

Product Line Lifecycle Management: When manufacturing takes place across companies, access to data gathered at the contract manufacturer's site is crucial to the OEM's ability to service customers and operate efficiently. OEM engineers want to view and analyze the production data to improve time to market, output levels, quality targets, field failure rates, and other factors. By leveraging both real-time factory-floor data and historical information, the OEM can determine short-term actions and design long-term product strategies to optimize the lifecycle of its various product lines. Thus, a product that is more reliable or easier to modify is likely to be sustained longer than one that requires extra handling during or after production. Granular visibility into the assembly floor across the supply chain enables the OEM to monitor trends and make cost-benefit comparisons across product lines, while leveraging the economic benefits of outsourced manufacturing.

A great example of managing product lifecycle with supply chain manufacturing is Intuitive Surgical. Intuitive Surgical is a fast growing medical equipment manufacturer. Building complex equipment in its early lifecycle stage, Intuitive relies on supply chain manufacturing to facilitate production as engineers make changes to design and manufacturing processes. By using complex data analysis at the unit-level, Intuitive better manages its ECO, manufacturing process change procedures, and FCO and repair processes. Also, by having the "as-built" information available on the Web, field service engineers have 24-hour access to information, which reduces diagnostic time and improves customer satisfaction.

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