Part 2 - SAP HANA In-Memory Processing and Big Advantages for Manufacturers – Shortening Business Cycles

This is a follow on to my previous blog post titled SAP HANA In-Memory Processing and Big Advantages for Manufacturers published on February 28, 2016. The previous post was about running a manufacturing operation in real-time. Many companies will say they run a real-time system, but will soon admit that they run in a batch manner and their ERP system is not effective for day-to-day, hour-by-hour decision support.

This blog will explain about manufacturing business transformation made possible by in-memory processing.

Business transformation?

Much has been said as of late about business transformation being the key to improving corporate performance. But examples of companies that claim to have “transformed” are few and far between. Manufacturing managers are scratching their heads about what “transformation” means and how to do it. Many are waiting for someone to explain what it is and provide some ideas on how to go about it.

It may be easier to explain what business transformation isn’t. It isn’t doing what you have always done with faster computer processing. While in-memory processing will certainly speed up processing, having faster production postings, receipts, and once-daily MRP runs won’t likely have a huge impact on your manufacturing performance.

Further, business transformation isn’t a module that is attached to company’s previous-generation ERP system. Merely tweaking the old system and the surrounding business processes may provide some incremental benefits, but real business transformation is going to take more than that. Any company interested in transforming their business needs to step back from how they have done things in the past, and reimagine how things could be done better.

Reimagining the business

Reimagining the business is not as easy as one may think. Most people are too entrenched in current and past business practices to imagine life any differently. But a key question is this: How many of your current business processes are based upon the capabilities and limitations of the systems you had in the past? Interestingly, you can probably identify current procedures that were carried over from systems that were in place prior to your current systems. When the current systems were implemented, past procedures were adopted with the new computer system – maybe not because they were good procedures, but because “we have always done it that way” and no one was inclined to consider changes for improvement.

So let’s consider the traditional process of running MRP. It’s very likely that your company currently runs MRP once every 24 hours – probably during the slower overnight hours when system usage is low. It’s not uncommon for an MRP run to take hours to crank through many finished goods with many customer requirements and with broad and deep product structures. Re-planning during daylight hours may not be practical or possible due to the long MRP run. A 24-hour business cycle may be the shortest cycle realistically possible. The MRP run will generate new or revised production schedules and procurement schedules based upon a snapshot of demand and supply from one point in the day.

But things change all day long. And re-planning by re-running MRP very likely is not an option. As a result, materials and production people spend a big share of each day manually addressing the many issues that occur every day that threaten on-time shipping performance and cost control. With each passing hour of the day, the plant will get progressively more out of control and incur customer delivery and cost management issues.  It is not uncommon for materials and manufacturing people to spend most of each day fighting fires in order to meet customer requirements.  But at what incremental costs?

A 24-hour business cycle would indicate that this process occurs once every 24 –hour period. So what’s the issue? A lot of things change in a 24-hour period. Customer demand changes. Inventory adjustments are made. Machines break down. Material receipts are late. Many things happen that require re-planning. Without systemized re-planning, production and materials people need to manually fix problems as they arise. They make phone calls, send emails, run around the shop floor counting stock, and other forms of fire-fighting, including expediting and the use of premium freight. Premium freight is a great indicator of just how volatile, or out of control, a manufacturing operation is especially in an automotive environment.

A shorter business cycle

A shorter business cycle means that the enterprise systems will handle the heavy lifting; the rescheduling of production to compensate for a late supplier delivery, or a new shipping schedule based upon a revised customer requirements schedule. Today, many of these sorts of demand and supply changes will be handled manually because 1) re-planning in the middle of the day isn’t feasible, and 2) the system probably isn’t kept up to date with actual customer demand and inventory transactions (see my previous blog on true real-time ERP).

With sub-day business cycles, the enteprise system will plan and re-plan based upon the most current demand and supply data, and minimize the amount of manual work required by materials and manufacturing staff members.  The resulting improved schedules will help respond to demand changes more effectively, and minimize incremental costs associated with poor planning and manual intervention such as premium freight and inventory inefficiencies.

A 5-minute planning run?

In-memory processing enables dramatically shorter planning (MRP) execution times. The MRP run length for any particular company will vary greatly depending on the number of end items, complexity of the product structures and routings, and the cranking power of their computers. More frequent planning means that the enterprise system will automatically adjust to demand and supply changes and reduce the amount of manual tasks that materials and manufacturing people need to make. While some unexpected situations will still result in issues with customer delivery and additional costs, many potential issues may be corrected before any bad results are realized. Some delivery and cost issues may be resolved earlier thereby reducing their negative impact.

A 5-minute MRP run can greatly improve a manufacturing operation by adjusting schedules based upon the most recent snapshot of demand and supply. What is the right number of business cycles to run each day? This depends on the dynamic nature of the business. Most automotive suppliers would certainly benefit from multiple planning cycles per day. Hourly MRP runs are possible, but with smoothing filters to limit or restrict the amount of “noise” or unnecessary schedule changes recommended.

The bottom line

For a manufacturing enterprise to transform for the purpose of providing improved demand responsiveness or improved cost control, business processes need to change. Operating the same way as the company operated 10-20 years ago is not going to change anything even with the fastest ERP system. Daily procedures need to be re-engineered or re-imagined to take advantage of the computing power of today’s technology. The first step is to begin operating in true real-time and then move to sub-day planning cycles. Manufacturing managers need to catch up with what technology can do for them and their companies.

2016 Best Practices for Automotive

The 2016 Best Practices event is planned for October 16-18 at the MGM Grand in Detroit, MI.  Click here for more details.