The idea of a highly efficient, cost-effective, intelligent, and streamlined manufacturing process is the ultimate goal of all manufacturers.

A situation where you know the precise materials used at each stage, you know where each product sits at any point in the supply chain, you can plan when sales will dip and rise.

The solution to achieve this is ultimately building a production planning solution. This is a ‘guide’ for the production of a given product or service.

When coupling this planning solution with the information learned during your Manufacturing Execution System (MES) rollout, you can gather insightful data that will help build an optimised system.

This relationship is the key to continual optimisation.

As you’ll see, creating the perfect production planning solution does not require a silver bullet approach. It’s a methodical, staggered and data-driven process.

The problem that happens all too often…

A vast majority of failed MES implementations go wrong when companies try to optimise their plan too quickly using the newly discovered capabilities of their MES configuration.

This creates the double risk of making changes to procedures and systems at the same time. There are too many variables that can go wrong when you change too much too quickly.

A good MES rollout provides you with the information needed to effectively optimise your production plan after you go live. So it’s important to tackle it in a set method.

We’ve put together these 5 tips to ensure your production planning solution is a roaring success.

1 – Get organised BEFORE any project starts.

Information gathering is an important part of any new strategic rollout.

It’s important to make sure your current systems, processes and reports are up to date so that you can easily access information when required.

It doesn’t have to be perfect data, but it must be up to date enough that you can complete a proof-of-concept build. You need to have a general idea of the direction you want to head so that you can formulate a plan.

Some very common considerations are:

• Do you have process maps of your production workflow?
• Have you ensured the bills of materials are up to date?
• Have you defined workstation capacity?
• Listed resource requirements for successful product delivery?

Having all this prepared before the project starts will save you wasting project time preparing information that will ultimately just hold up the build.

The end goal of this process is to have more access to reliable information, start the process by being completely transparent with your current systems.

2 – Start small. Select the most typical product.

The purpose of this step is to not only get users trained on the system but to make sure they are collecting the metrics required to manage the production plan.

There’s no point starting with the most complex build you have, especially if it only occurs once a year. You’ll likely end up bogged down in workflows that are not relevant to 80% of your business transactions.

To be able to properly systemise your operations, you need to be able to scale and create repeatable processes. When the foundations are in place, you can incrementally expand these learnings into other systems, processes and products.

Start small and once your team is up to speed, move on to the more difficult builds.

3 – Focus on gathering metrics and reporting from the workflow

Now you have an end-to-end production workflow up and running, it’s time to focus on the reports. Businesses that can use data to inform more optimised workflows will have a competitive advantage.

Manufacturers need to ask themselves:

• Is run-and-lag time accurate?
• Is costing correct and posting at the right level?
• Can you trace and analyse used materials at any stage of production to identify quality issues?

By analysing data early on you’re not only confirming that the information you are gathering is showing correctly, but you may already be able to notice areas for improvement.

Reporting and optimising is the fundamental advantage that MES systems provide manufacturers. This visibility goes beyond just understanding systems, it provides insights that inform every piece of the manufacturing supply chain puzzle.

Gathering and reporting on this will inform your entire production plan.

4 – Stay on top of your inventory management throughout the project

Nothing messes up a go live more than inaccurate inventory management.

If your Manufacturing Execution System isn’t integrated with demand planning, your production floor will be brought to a halt. A classic example is if your systems show no stock due to purchase orders not being received.

This means all business processes that impact inventory levels (receiving, transfer, fulfilment) need to be executed immediately. It needs to be a communicating ecosystem.

After all, the production planning is only as good as the information it is using. So if the stock has not been received into inventory, the MES will not know that a work order can be released for production.

5 – Buffer stages to allow for errors and lag

If possible, with your current production schedule, run the new MES in parallel to existing systems and processes.

While your teams are adjusting to the new system, naturally you will experience more lag time.
However, as everyone becomes more familiar with the system, and performance is optimised, compare the outputs from each sector to ensure everyone has the materials they require to do their job.

Lag should be expected during this period as people learn new systems and processes. It will be a gradual process of understanding how outputs can be optimised and how the newly available data allows teams to adjust and optimise.

But once it’s achieved, it is profoundly worth it.

A Netsuite Manufacturing Execution System is the way to go, but…

It isn’t as simple as clicking a few buttons and, voilà.

Ultimately the objective when implementing an effective Manufacturing Execution System is to improve efficiency around inventory management, demand planning and production planning while also reducing waste.

But, it would be a massive oversight to attempt all of these at once.

If you follow the steps outlined above, you’ll find that taking a more pragmatic and incremental approach will lay the foundation for a successful rollout.

But if you do get stuck, a Klugo expert is only a phone call away.

About Klugo

NetSuite + NextService

Klugo’s vision is to unlock the full operating potential of our customers to maximise the value of their business. We do this by helping our customers achieve operating excellence using NetSuite + NextService, the world-leading cloud ERP and FSM business platform for small-to-medium-sized businesses.

Are you measuring production lag in your manufacturing procedures? If you’re not, you’re losing money.

If something isn’t being created, the lag is costing you money. Simply put, the longer it takes to make something, the more it’s costing your business. When manufacturers don’t measure production lag the cost gets overlooked. In many cases, it costs nothing to reduce production lag and all it takes is an understanding of what to measure, what to optimise and a plan to implement.

It hides in the shadows but has a heck of a bite

We regularly assess materials, labour and general overheads, as these are tangible and easy to identify. When we can touch something and quantify it, we tend to improve it.

When we dive deeper into our production plan and see the steps between the steps, we can see hidden costs which impact throughput and hence margin.

The objective is to assess the entire production plan and reduce the lag time between stages and processors. Each identified lag when multiplied ‘n’ times per run adds up to significant lost production capacity which ultimately increases costs.

Running idle, a metric to assess

When a manufacturing machine is idle, it still cost something, in materials, rent, maintenance, electricity, financing and labour, there is a cost of doing nothing. Opportunity cost is the big one as there is no book entry

How much could you be making with all of that regained capacity? What additional orders could you accept?

If an asset like a manufacturing machine is idle it costs both in direct expenses and indirect lost opportunity which impacts both your companies margins and the return on investment in the machine.

Some examples to illustrate the issue

Scenario 1. Supply Lag

You are waiting for materials from a supplier or third-party manufacturer to arrive. This delay has a knock-on effect down the manufacturing schedule. Jobs have been rescheduled or you have sourced emergency replacement materials.

This may have required re-tolling and changes in routing. Either way, all the delays add up and if it is a common scenario, we typically increase safety stock levels to mitigate the risk which increases working capital requirements.

Solution – Demand Planning
The supply issue could be due to several external factors all of which are out of your control. However, when it relates to lack of purchasing coordination, increases in sales demand or lack of demand planning then implementing a Demand Planning solution may help.

A good Demand Planning solution will coordinate sales demand with production and supply schedule. Purchase Orders will be issued taking into current lead time supplier performance and desired safety stock levels.

While not a panacea to all supply issues a fully integrated Demand Planning solution that taps into sales forecast, supplier performance and production metrics will ensure that supply planning minimizes production lag time due to supply lag.

Scenario 2. Movement lag

We spend time moving materials around the production floor. We are unsure as to how this movement affects not only production time but the lag it creates for machines waiting to be cleared or supplied with materials.

While the cost at each station might be small the compounding impact on the entire production schedule could be material. Often small impacts have rippling impacts that are only seen in throughput which when discovered is often too late.

Solution – A Manufacturing Execution System (MES)
Tracking, measuring, and checking materials in and out of each workstation and dynamically routing jobs based on production run time execution allows production managers to monitor the impact of lagging stages and adjust accordingly.

A good MES will allow the production plan to be optimised with estimated run and lag times. Optimising the route based on analytics generated by the production floor will help minimise the cost of movement lag.

Will it be not possible to eliminate movement it is possible to budget for it and check actuals to ensure that operating gross margins are protected.

Measuring everything so know what to improve

40.7% of modern companies believe that data analytics will be one of the key technologies for supply chain management in the next two years.

Logistics Management

Measure what you do is the key to understanding your production lag issues. We plan it is best to include key performance indicators tracking lag and run time estimates. By measuring the actuals and costing the impact we can see the true production gross margin.

Comparing the actual production growth margin vs planned growth margin help identify areas of improvement and cost reduction.

An effective ERP with integrated MES and Demand Planning allows us to measure production costs and measure the lag in real-time. This is the foundation to reducing lag costs, improving gross margins, and operating profit.

To start improving profits speak to a Klugo expert.

About Klugo

NetSuite + NextService

Klugo’s vision is to unlock the full operating potential of our customers to maximise the value of their business. We do this by helping our customers achieve operating excellence using NetSuite + NextService, the world-leading cloud ERP and FSM business platform for small-to-medium-sized businesses.

It is no secret that outsourcing manufacturing to Asian countries is becoming increasingly difficult. As these countries develop stronger economies and their standards of living increase, their workers are demanding a raise in salary, making offshoring strategies more expensive. Other factors like sudden trade-wars, new taxes or unexpected threats like the COVID-19 epidemic, can multiply the challenges for manufacturing at a low price.

Recent developments in the field of automation, robotics, analytics, and the introduction of centralised cloud Material Requirements Planning (MRP) Software offer an attractive proposition for reshoring the supply chain for Australian manufacturers.

Besides the simplicity of manufacturing within the country, onshoring offers excellent local benefits too. Whilst some low skill jobs are eliminated by automation in the manufacturing process; high skilled opportunities are created in controlling and connecting intelligent machines, automated warehouses, and developing AI. The introduction of high skilled workers leads to an increase in the standard of living within the country. 

Other benefits of reshoring include an upturn in the quality of the manufactured products as tighter control of the supply chain network can increase the final quality of the products. Besides, as more than 80% of Australians prefer products made within our country, manufacturers have another strong reason to build their products onshore.

A Centralised IoT Platform for Cutting-Edge Technologies

Most manufacturers are already using IoT to a limited extent. However, some have seen the signs and taken it to the next level, with a number of sensors and through APIs, they are leveraging the advantages of monitoring production, automated distribution of products, allocation of resources and even tracking of logistical supply.

Artificial intelligence, 3D printing and all the innovation that comes with adopting Factory 4.0 will make it much easier to manufacture. However, controlling these hardware and intelligent gadgets in a centralised platform can be a difficult task. This is where an IoT based ERP like NetSuite with a robust true-cloud API comes in handy.

NetSuite helps with the adoption of new supply chain IoT technology, by connecting all data from the sensors and peripherals into a centralised platform where all data from CRM, finances, payroll and inventory live. This data consolidation enables better reporting, advanced dashboards and a more informed decision-making process.

Easy to Scale Whenever Needed

MRP software has definitely evolved over time. We’ve come a long way from an era where every business had to use the same basic boxed software without customisation passing through a time where platforms could have so many variations that they felt into over-configuration and never-ending installation processes. Nowadays, however, with the evolution of SaaS, businesses can gradually enable modules on-demand as they grow.

Why is scalability important?

In a world where disruptive technology happens more often, profitability hinges on the ability to adapt quickly to new platforms and trends. Investing in platforms that can do virtually everything can represent a significant expense, and they usually go underutilised, whilst with modular software, you pay only the modules that you use and the investment required is drastically reduced.

Stockpiling Inventory to Address Demand

When a company decides to reshore their operations, inventory can be maintained in bulk as the production volume goes up. It often happens that there is a shift in focus from current sales to future sales. This leads to stockpiling of the inventory, and if it’s not managed correctly, it can lead to a supply chain disaster.

NetSuite is built with a number of tools and features that facilitate inventory management, from tracking inventory in various locations to keeping stock of safety inventory. Furthermore, you can plan the demand and distribution needed to meet it. NetSuite clearly suggests when and where to restock so that your decision making can be used for something more substantial.

Onshoring poses a bright future for Australian manufacturers.

We can say that the reshoring of manufacturing hasn’t looked this promising in the last two decades. Moreover, by adopting technologies related to factory 4.0, the possibilities will only get better and better.

One thing is clear: businesses that fail to adopt these changes are going to perish. Emerging technology like 3D metal printing, artificial intelligence, automation, and robotics will make your competitors produce goods of better quality locally and at a rapid pace.

NetSuite is a one-stop solution for all manufacturing challenges. By providing end-to-end services ranging from financials to warehouse and fulfilment, this best-in-class ERP software can help you embrace the new manufacturing era.

References

• Transform Manufacturing from Offshoring to Rightshoring in 3 Easy Steps
• Australian Manufacturing Technology Magazine (AMT) February/March 2020
• Government must develop plan to support manufacturing jobs
• Technology brings new hope to Australia’s manufacturing sector
• NetSuite Planning and Scheduling
• NetSuite Inventory Management

In the past decade the manufacturing industry in Australia has changed dramatically, and so has Manufacturing Software (also known as MRP software). Interestingly, the concept of Enterprise Resource Planning software was born in the manufacturing industry. In the late 1960’s, two pioneers of early mainframe computing, Black and Decker and Toyota were the first two major companies to invest significant amounts of time and money in software that at the time was considered revolutionary.

The main functionality that was available on these systems was the ability to calculate material supply and input requirements and estimate production yields. For companies like Black and Decker, this meant that hey could more confidently increase production, demand and supply plans and streamline the administration of both new product design and continual production improvement.

Modern Manufacturing Software is Changing

In the 1980’s decade, the concept of ERP really became common terminology and the MRP software’s functionality started to expand into other areas of a manufacturers core operation.  At this point in time, different software vendors started to roll in more functionality, which made these software packages more useful across the wider business.

Most commonly, accounting and financial management functionality became a part of a core MRP Software’s functionality set, but it wasn’t until recently that software vendors started to look at the requirements of a growing manufacturing business more holistically.

When broken down, most business can be divided into a few key business units. These units should work together seamlessly from marketing and sales, through to procurement and production and finally in accounting and financial management.

Traditional ERP software was designed to help streamline only two of these key business areas. Demand and Supply Planning, and Procurement and Inventory Management. However, as time has progressed and technology has gotten better, modern manufacturing software has evolved into complete business solution, with the intent on providing a single system to manage an entire manufacturing operation.

So, how does Traditional MRP Software Compare to Modern Manufacturing Software in 2019?

When comparing modern Manufacturing Software, you should expect to see the same functionality as traditional and legacy ERP systems, as well as other integrated modules that extend the functionality of the application and eliminate the need for managing multiple systems.

Industry 4.0 and the IoT are changing manufacturers view of software systems.

We now live in a world that is increasingly connected. Smart Phones now have more computing power than top end PC’s just ten to fifteen years ago. Devices are connected. Data is aggregated.

Now more than ever, manufacturers are turning to technology to give themselves a competitive advantage and to increase the efficiency and effectiveness of their businesses. Hardware, software and sensor technology are now making it possible to automate the collection of information, and modern manufacturing software is giving manufacturers. Similarly, as technology progresses the equipment and machinery that form the core of a manufacturing operation are now coming with this type of sensor technology as standard, as well as controller units that are designed to be integrated too.

Modern Cloud Manufacturing solutions, such as NetSuite have an open API and a set of developer tools to allow quick and flexible integration. This means, that any data being captured by a machine, can now be sent to your ERP and used for business intelligence, dashboarding and reporting and planning.

The impact this is having on manufacturers is huge, as they can now access this information and actually do something with it. Rather than collecting data without an end game in mind.

Modern technology, like artificial intelligence and machine learning is now allowing unprecedented levels of automation on the factory floor. This is not only increasing the efficiency and production levels, but it is also driving lower cost of production.

Where this can be of real value, especially in industry with high risk operations, is the minimisation of manual/human intervention in the manufacturing process.

These automations and workflows can all be driven by the sophisticated in-built tools in a modern ERP/MRP solution.

Key Benefits of Modern Manufacturing Software, like NetSuite.

Modern cloud manufacturing process software is offering users many tangible benefits. These include

So, who is using NetSuite Manufacturing Edition?

 Over the past 20 years, NetSuite has established itself as a leader in providing manufacturers across the world with a world class MRP and manufacturing management software.

NetSuite has customers across a range of manufacturer types. These include:

1. Make to Stock/Forecast.
   Traditional Widget Manufacturing
2. Assemble to Order.
   Assembling products from bought components after an order has been placed by the customer.
3. Make to Order.
   Organisations that make a set range of products on order.
4. Process Manufacturing.
   Customers who rely largely on formulas and recipes
5. Configure to Order.
   Manufacturers who have a base level of product that can be configured to specific user requirements.
6. Field Repair and Service.
   Manufacturers that also provide after sale field service and support.
7. Engineer to Order.
   Design and manufacturing of large or complex products or systems.
8. Project Driven.
   Project based manufacturers that wish to track project progress and job costing.

Industry revenue in the timber flooring and carpet retailing and distribution sectors has been affected by strong import growth and increasing competition from substitute flooring products. However, higher demand from the residential housing and construction market has helped sustained upward momentum in this niche industry.

Australia’s housing market price falls in the short term will be underpinned by a stable economic growth, record-low interest rates and a steady population rise. High overseas migration is likely to increase in the following years and with stable economic conditions supply is still expected to be less than demand. This is a good forecast for the construction market and its suppliers.

Seizing Growth Opportunities and Differentiation

To beat overseas competitors and stand out in an extremely competitive market, successful flooring and carpet businesses are seizing new opportunities to grow with cloud-based software designed to streamline the operations of the carpet and flooring retail, wholesale and installation industry. Leaders in this space are streamlining business operations in order to develop new products and services, improve supplier relationshiops and order and inventory management, meet customer demand, manage eCommerce, and make informed, data-driven decisions in real-time.

Whilst technology is enabling Australian manufacturers to migrate to Advance Manufacturing in order to deliver the personalised products the industry, Aussie companies are not focusing on modernising. The trend in the industry is to increase marketing expenditure, states the AMGC in their report: Advanced Manufacturing, a New Definition for a New Era, and the results haven’t been very promising.

In the report, it is concluded that more Australian companies introduced new marketing methods (18.5% – 25%) and new products (20.6% – 24.3%), but overall trading  fell 13.3%. Only around one-fifth (19%) of Australian manufacturing companies increased their IT spending but may not be getting the most out of their investment.

There is a huge opportunity for Australian manufacturing companies to modernise their business models. Only 8% introduced a new product-related service in 2013-2014, and only 6% used flooring industry specific ERP’s . The digital divide opens an interesting window of opportunity for companies to differentiate as ‘service champions’.

Cloud Technology for Flooring and Carpet Businesses

NetSuite is a cloud-based, single business management platform eliminating the need to update multiple customer, vendor, inventory and marketing systems. Using NetSuite, a single system solution, provides you with the ability to:

• Have a single customer record across the entire business, allowing you to profile, predict and push 1:1 marketing campaigns, using NetSuite’s unified CRM functionality.
• Automate workflows across your business.
• Gain real-time visibility into full business operations across all stores.
• Use NextService, a native to NetSuite field service solution, to schedule deliveries and installations via mobile app, complete with GPS routing for drivers, compliance checklists for field service staff when they arrive at the job, and customer sign off upon completion.
• Use the mobile app to schedule service calls – this could be for after-care treatment of flooring, repairs, maintenance, cleaning services and more.

Upgrading to a modern, scalable, cost-effective system means that your IT strategy is future-proof, providing you with more time to spend on building a seamless customer experience and business strategy.

References:

• AMGC. Advanced Manufacturing. A New Definition for a New Era.

It’s a relatively unknown fact that the Manufacturing Industry pioneered MRP and ERP technology, long before other industries caught up. In the 1960’s, two leading manufacturers, Black and Decker and Toyota were the first major manufacturing companies to make a significant investment into what was at the time known as MRP or “Material Requirement Planning” software.

This software, by today’s standard was relatively basic in the functionality it offered, however it provided a competitive advantage to organisations by providing the automation of calculations related to demand and supply planning. This information was used to optimise procurement, inventory management and warehouse management and was the starting point for the integrated business management platforms that are in use today.

So, what is a legacy MRP Software?

Materials Resource Planning, (which later changed to Manufacturing Resource Planning) provided a limited scope of functionality, mostly to do with optimising procurement, demand and supply planning and manufacturing WIP and Routing. Until recently, manufacturers would also need to maintain Accounting and Financial Management software, as well as Sales and CRM software to cover off all departments of their business.

The problem is though, that having too many disparate systems creates complexity, adds to IT overheads, and limits the usability of data being collected in each silo.

Enterprise Resource Planning (ERP) a new era for business software.

In the early 1990’s, a new breed of software packages started to gain momentum. Whilst MRP provided some support to manufacturers, they were wanting a more consolidated solution to manage the increasing complexities of manufacturing.

As manufacturing became more advanced, so too did the software that was used to manage the front and back office functions of a manufacturer. ERP, a term coined by Gartner extended the traditional MRP platform to include more advanced and integrated features such as Accounting and Financial Control, Warehouse Automation and Advanced Demand Planning. Whilst this was a step in the right direction, there were still several areas of a manufacturing business that were largely unsupported.

Cloud technology brings everything together.

Most recently, the concept of both ERP and MRP have largely been dwarfed by the concept of a complete Business Management Platform. These platforms provide deep functionality across all areas of the business including:

… the list goes on.

But the point of the software is to provide growing businesses with a single source of truth and a simplified software ecosystem. Cloud Business Management Platforms, like NetSuite offer just that. A modern technology stack to manage every facet of a growing manufacturing business.

By having everything in one platform businesses can get greater insights into their data and get better business intelligence to support strategic and operational decision making.

NetSuite is the world’s first, and leading Cloud Business Management Platform. With over 40,000 organisations across the world having already embraced the cloud BMP, it’s easy to see why NetSuite is chosen more than any other Cloud BMP.

For over 5 years, Klugo have been helping Aussie businesses embrace this revolutionary system and take back control of their businesses. NetSuite has solutions for all types of business, across a wide range of industries and at any stage of their growth cycle.

So, what are the impacts of embracing a complete Business Management Platform Solution?

• No Integration– Because a BMP is a single system across an entire business, there is no need to worry about building or maintaining integrations between different legacy systems. This modernising technology not only saves massive amounts of IT Overheads, it also minimises the risk associated with regular upgrades to the system. 
• End User Personalisation – When a business is running on a cloud BMP, each user has more control over their dashboards and roles, to ensure that they are only seeing information and functionality that is relevant to them. One of the biggest gripes we hear for our customers when talk about their old systems, was the fact that navigating and finding information was difficult, largely due to the clutter that functionality which didn’t relate to their roles caused. With NetSuite, users can design how they wish to see information through drag and drop tools. Managers can empower their users and associates to make the most of the software and increase their businesses’ efficiencies.
   
• Simple cost structure – When looking at the IT costs of a business, companies who are not embracing True Cloud BMP’s face uncertainty and risk. Depending on the industry, businesses will be spending money on software licenses, maintenance and support agreements, hardware and infrastructure, API development and maintenance, servers, whether cloud or on premise, and the risks that come along with security, backups and storage. True Cloud BMP’s offer all these technologies rolled into a single powerful business differentiator for just a monthly fee.