2.4 ICT utilisation

In many manufacturing businesses, the take-up and utilisation of ICT has taken concurrent but distinct paths: one that focuses on corporate functions, associated with managing the manufacturing enterprise, and the other that is concerned with engineering applications that focus on production in a factory environment.

The features of each path are broadly as follows:

• Corporate, or enterprise, systems – covering enterprise resource planning management (ERP) systems, customer relationship management (CRM) systems and supply chain management (SCM) systems. These systems focus on corporately managed interests and activities such as finance, human resources, purchasing and the order fulfilment process.
• Production, or plant, management systems – covering a range of areas, including:
  • Product lifecycle management systems – including product design and development, data management and computer aided design and computer aided management (CAD/CAM) systems.
  • Asset management systems – allowing identification and tracking of physical assets in order to perform scheduling and maintenance tasks with greater efficiency.
  • Plant intelligence systems – allowing decision makers to make business sense out of plant data in real-time, drawing on information generated through the production process.
  • Process execution systems – software applications that allow operators and process engineers to better manage their production processes.
  • Control hardware – covering ‘industrial-hardened’ personal computers, computer numerical control (CNC) systems, programmable logic controllers (PLCs) and robotics.

The relationship between corporate and production systems is illustrated in Figure 1

Figure 1: Framework for representing ICT in manufacturing

Aspects of adoption and application in each of these areas are discussed below.

2.4.1 Corporate systems

At the corporate level, major commitments have been made by manufacturing businesses for acquisition, development and implementation of ERP, SCM and CRM systems. The performance and effectiveness of these systems have been the subject of a great deal of comment and criticism in contemporary management literature, particularly in journals such as the McKinsey Quarterly and Harvard Business Review (Carr 2003; Farrell, Terwilliger, et al. 2003; Kempis and Ringbeck 1998; Monnoyer 2003) [4]. In general terms, investments in corporate ICT have been seen as underperforming.

It has been argued that part of the reason for underperformance of ICT systems, and their failure to achieve their full potential, is that decisions about the use of ICT have been made at the corporate level and have principally focussed on the needs of corporate functions, such as accounting, finance, human resources and the order delivery process. Consequently, integrating corporate systems with production systems has been a major challenge, particularly where they have limited capacity for interoperability with specialised manufacturing operations (Ake, Clemons, et al. 2004).

This observation was supported in a number of the interviews undertaken for the study and will be canvassed further in Section 2.4.3 below.

2.4.2 Production systems

Plant intelligence systems extract and convert real-time data generated by production machinery, warehouse systems, production planning software and other systems and turn them into useful information for business decisions. New communications technologies and advanced software tools now allow manufacturers to adopt, experiment and implement new information and decision systems that finally wire the ‘last few feet between the top floor and the factory floor’[5].

Some analysts and leading companies believe that in two to three years, businesses that are not making daily decisions based on real-time data will struggle to survive [6].

Process execution and supervisory control systems serve as a conduit for both communicating with the hardware and extracting real-time data from the industrial processes they control. They help manufacturers visualise plant floor operations, perform supervisory functions and deliver the production data that feeds reliable, up to date information to the higher-level analytic applications in manufacturing execution systems.

Potentially, manufacturers can increase production, maximise quality and efficiency and improve regulatory compliance through the adoption of process execution and supervisory control systems.

SCADA and supporting systems allow machines to ‘learn’ as well as be instructed, and to report a vast range of process information that can be used for subsequent review and analysis of performance. Whilst less error prone than human direction, there is often a need for a ‘machine override’ when ‘things don’t look right’. This sort of intervention requires the skills, knowledge and experience of ICT professionals, engineers, business managers and a wide range of science professionals and an understanding of the logic of the interactions between machines and ICT.

Control hardware represents the durable assets that are used to physically manufacture products, maintain the flow of materials and protect the safety and quality of what is being produced. Although this hardware is constituted as ICT, and includes advanced processors, integrated circuitry and wireless capabilities, it is generally referred to as production machinery and equipment.

Control hardware does not appear physicallyas computer equipment; there are very few ‘screens’ and keyboards associated with its operation. In the current factory environment hardware is programmed at the time of manufacture (like a photocopier in an office environment), or installation (like a PABX) and then upgraded remotely and maintained through laptops or Personal Digital Assistants (PDAs).

ICT enabled production systems allow for increased monitoring and control over a much larger scale of operations, reduced need for human direction and supervision, and greater flexibility in responding to customer orders. At the same time, ICT enabled automation is calling for people skilled in the technologies required to manage, operate and maintain the facilities based on digitised flows of data and information.

This study found that in the current manufacturing environment, investments in digitised plant and equipment are not being viewed as an ICT investment – in the same way that investment in mechanised electrical equipment is not thought of as the purchase of electric motors. However, in terms of delivering overall productivity and performance gains in manufacturing, the major source of advantage for companies at this stage derives from improvements and innovations in production systems (Ake, Clemons, et al. 2004).

It has been argued that during the 1990s ideas about how to use ICT to improve plant operation were largely ignored – and in many instances continue to be ignored – at a time when computer technologies have become more sophisticated and increasingly applicable in the manufacturing context (Ake, Clemons, et al. 2004). This reflects differences in corporate cultures and understandings of the potential application and use of technology, and between the cultures of the corporate and operational parts of a company. One production manager consulted for this study advised that he had obtained approvals for an ICT enabled innovation on an incremental basis, rather than on a whole of project basis, as he was convinced the larger proposal would have been rejected on the basis of cost and risk considerations.

Resolving the inter-relationship between corporate and production systems is currently a major challenge in the development of management execution systems (MES). These systems seek to integrate the order fulfilment process with the production process, as well as making more effective use of machine generated data to validate and certify interacting processes, allow for more effective sequencing of processes and real time reporting of performance information. MES functionality can be included in either ERP or SCADA systems.

2.4.3 Adapting corporate systems to meet production requirements

Only a very few manufacturing businesses have developed effective interfaces between production and business systems in a way that allows real time information to flow between the factory environment and the corporate management setting.

In many manufacturing enterprises the two systems remain entirely separate with paper based interactions between the two. For example, orders may be received and entered into business systems, bills of materials prepared and then re-entered into production systems: this of course invites errors. In this study, Prowler Proof Doors provides an exemplary example of successful systems integration between corporate and production requirements.

Practices in the manufacturing sector contrast with the finance sector, for example, where transactions data are extensively aggregated into management information and reporting systems. The profiles included in the study identify several manufacturing companies that have traversed the barrier between enterprise and production systems – as well as a few where the barriers still remain.

As a result of the separate development paths of corporate and production systems, many enterprise resource planning (ERP) and other corporate systems are not sufficiently adaptable for manufacturing operations. They are often unable to support the smooth flow of data across the functions of ordering, scheduling, production, delivery and billing or to meet the detailed functionality needs of different industry and business requirements – particularly in relation to scale and variation in production schedules (Ake, Clemons, et al. 2004).

ERP has not always been appropriately applied to manufacturing businesses, with essential elements of manufacturing processes sometimes not acknowledged. That is, systems developed in a corporate context often did not understand that the amount of materials needed to produce a product can vary; that scheduling must be dynamic rather than static; and that quality, instead of always being black or white, can be a matter of degree (Ake, Clemons, et al. 2004).

As a result of these issues, effective use of ERP systems requires adaptation and ingenuity in linking to production systems. Moreover, apart from functionality considerations, an important reason for the lack of integration is difference in use: while corporate systems are driven by customer relationship, management, reporting and accountability requirements, production systems are driven mainly by a search for operating efficiencies. Quite often systems are based on and developed from different operating platforms.

A major constraint in achieving successful integration relates to cost and scale. In the SAP enterprise resource planning environment, for example, costs of achieving a production-corporate interface were reported by ICT professionals contacted during the study as being expensive and exhibiting low end return on investment. There is, however, an increasing range of software available to build the bridge between corporate and production requirements and uses of ICT. Nonetheless, this study indicates that there can be substantial costs associated with building certified connections between proprietary ERP systems and production systems.

It has also been argued that over the years many manufacturing companies have allowed a corporate ICT culture to assert control over most aspects of ICT. This follows from the centralisation of ICT functions in many conglomerate businesses as executives looked for consolidation and economies of scale. Centralisation was followed by decisions to outsource with a view to achieving cost reductions. It is now appreciated that companies outsource to acquire a capability which would be difficult to develop and retain internally (Quinn 2002; Quinn, Baruch, et al. 1997, 2002).

Whether driven corporately or operationally, the effective link between ERP systems and factory floor automation systems is seen as a critical tool for companies to gain a competitive edge through improved operations, collaborative production and corporate accountability. In order to realise this potential, managers have to understand the contribution of technology generally, and information technology specifically, to innovation and business performance.

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