- By Louis Columbus
- December 21, 2021
To recalibrate as market conditions change, manufacturers need real-time data and applications that deliver insights.
If there’s one thing the past year has taught us, it’s that what’s true today may not be tomorrow. Consider just-in-time (JIT) manufacturing strategy, which excels during periods of supply chain stability and predictability. But now, with constrained supply chains, some manufacturers are stockpiling raw materials. Others are choosing alternatives—like the automakers using manual dials for entry-level models and reserving advanced electronics for their higher-end, higher-profit vehicles. However, manufacturers need to embrace more adaptive, contextually intelligent, and flexible manufacturing strategies to achieve long-term profitability.
Digital transformation is a prerequisite to implementing an adaptive manufacturing strategy because using manual processes to achieve it doesn’t scale.
To recalibrate as market conditions change, manufacturers need up-to-the-moment data and applications that put information in context and enable collaboration. When solutions like enterprise resource planning (ERP) and manufacturing execution system (MES) software enable teams across different functions to share and act on the same data in real-time, manufacturers can achieve the collaboration and timely communications required to adapt quickly.
Here are five common ways adaptive manufacturing strategies play out in the real world.
- JIT vs. make to forecast. JIT works well when raw materials, equipment and labor are plentiful. But with tight labor markets, higher material prices, and equipment running near capacity on short-notice production runs, advance planning becomes essential. By using ERP for forecasting, scheduling and production planning, materials requirements resource planning, and master production scheduling, manufacturers gain the visibility and control needed to manufacture to forecast.
- Fixed vs. variable price contracts. In stable markets, long-term, fixed-price contracts ensure revenue flow and capacity utilization. In more volatile times, suppliers who can fulfill demand also can dictate price. Here ERP capabilities are invaluable for playing out what-if scenarios, guiding the most profitable production strategies, and automatically adjusting pricing as costs fluctuate. These factors taken together become powerful multipliers for taking advantage of high demand, low supply macroeconomic conditions.
- Build vs. buy plant capacity. Manufacturers often build more plant capacity on adjacent properties when resources are readily available. When construction resources are constrained, ERP systems make buying existing facilities a viable option since they easily support multiple plant locations and automatically embed established operating procedures into new locations. Also, multi-plant ERP systems provide remote visibility across all locations in a single view.
- Staffed vs. lights-out third shift. Running a staffed third shift isn’t easy, but it’s a straightforward extension of operations. Lights-out shifts are a leap in operating practices that typically require investments in automation and MES software. Still, the payback is large in labor and cost savings. ERP systems with native MES functionality are purpose-built to provide the scale that lights-out manufacturing needs to succeed. MES systems provide real-time production and process monitoring to maintain production records, and greater visibility and control on a 24/7 basis if needed. Exception alerts are automatically generated and texted to production and quality management teams if real-time production and process monitoring systems identify anomalies in workflows and specific machinery performance levels so corrective actions can be taken.
- Linking vs. not linking prices for materials and finished goods. When supplies are stable, most manufacturers rely on their buying savvy and procurement skills to meet or undercut original raw materials cost estimates. With today’s volatile, constrained supply chain, many manufacturers are negotiating the variability of raw material costs into their production contracts. Managing the link between raw materials cost and finished goods pricing requires a comprehensive inventory control and procurement system operating in conjunction with production planning and execution that is tracked at batch and lot levels. This allows raw materials costs to be precisely matched to finished goods production pricing—protecting profit margins during rising costs and managing revenue expectations when material prices decline.
The key to any adaptive manufacturing strategy is hidden in the real-time production and process monitoring data produced by manufacturing operations every day. By capitalizing on real-time data to discover new insights, manufacturers bring greater accuracy into strategic decisions and greater visbility and control to daily operations. By utilizing the information real-time data provides in new ways, manufacturers can make more profitable strategic decisions, adjust their production, and update their policies to align with current market conditions in order to drive profitable growth.
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