Extend the Value of ERP

Integration with manufacturing operations promises substantial benefits.

By Fred Reever, CISUG, and Frank Kochendoerfer, SAP

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The integration must have three dimensions:

vertical integration
Figure 1. -- Vertical integration: This enables
monitoring an order from when it was placed to
its delivery, and assessing its impact on
financial results.
Click on illustration for a larger image.


1. Vertical. This integration goes from the plant floor to the board room (Figure 1). It connects plant-floor control system data with process management systems, production planning and production control systems, and business and financial planning and monitoring systems. Vertical integration enables a company to monitor a customer order from inception through execution to delivery, and to assess the order’s impact on financial results.

2. Horizontal. Such integration involves connecting all constituents in the value chain — from suppliers, through global manufacturing and businesses systems, to customers — as deeply as desired, guided by mutual confidentiality, legal and security system policies (Figure 2). It provides the capability to communicate on a real-time basis with value chain partners, to react to and deal with unforeseen manufacturing upsets or

business environment changes. It enables problems to be anticipated and solutions created that minimize costs to the company and its customers and suppliers. The company reaps direct financial benefits and also goodwill and credibility that will have a positive impact on the bottom line.

3. Geographic. Most companies operate internationally and need to be able to quickly respond to the dynamics of the global marketplace. This demands integration of their businesses and operations worldwide, so they can properly address production upsets and market changes (Figure 3).

The Benefits
The team identified key benefit areas from this three-pronged integration:
• reduced cost of manufacture, e.g., from improved plant utilization, lower conversion costs, higher yields, better quality and decreased maintenance costs;

horizontal integration
Figure 2. -- Horizontal integration: Close
communication with suppliers and customers
can allow anticipating and addressing problems,
minimizing costs and disruptions.
Click on illustration for a larger image.


• enhanced employee efficiency and performance;
• better customer service; and
• higher morale.

They concluded that the biggest direct impact will come from increased manufacturing efficiency and decreased manufacturing costs. In the CISUG vision, plant staff will be able to anticipate process and equipment problems and be in a better position to respond more quickly and efficiently — in some cases avoiding emergencies and unplanned shutdowns. This, in turn, will reduce product-quality and delivery problems and improve relationships with customers. An integrated/collaborative environment also will allow companies to better leverage their skilled workers and more easily pass knowledge to new employees. Enabling people to do their jobs more efficiently and effectively also undoubtedly will boost morale.

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