How well do you fit into the extended enterprise?

Aug. 5, 2005
In retrospect, Materials Resource Planning (MRP) software may not have been the best thing that ever happened to manufacturing.

In retrospect, Materials Resource Planning (MRP) software may not have been the best thing that ever happened to manufacturing. It was just too good at bringing science to the art of managing all the parts, people, time, and equipment for making stuff.

Armed with MRP, the plant floor leapt years ahead of the rest of the enterprise. The people in shipping/receiving, purchasing, sales, and even finance couldn't match the guys on the plant floor in their ability to smugly know where every rivet was going and precisely when it would be pounded into place.

Other businesses took note. The Wal-Mart empire, for instance, was built on the simple notion that, if Ford and GE could use technology to be so good at making stuff, then Wal-Mart could use it to be that good at buying stuff. Shipping/receiving became the strategic function of logistics. Marketing took up product-lifecycle management. Purchasing begat procurement.

With help from the Web, companies now share data, mastering an infinite range of variables to gain real-time control of, well, just about everything: the supply chain.

The plant floor, though, is often still a black box in the middle — sophisticated, effective, mysterious, and running on software that often works alone, rather than as a cog in the "extended enterprise."

Today, it's no big deal to source backpacks in China, ship them into Los Angeles or Oakland, truck them to regional distribution centers, and get them on store shelves in time for a back-to-school sale. The only thing missing in this transaction is actually making them.

Today's supply chains seek real-time control of inventory — from raw materials to warranty returns. They avoid that part in the middle where we take raw materials and add the value.

It'd be a stretch to say the problems we face in American manufacturing result from our failure to integrate production with the rest of the supply chain. But is it plausible that there's a correlation?

Think about your own operations. You can probably find at least one example where disconnects between the plant floor and other operations are hurting your business. In the case of Vanamatic Co., covered in Jim Benes' feature this month on Enterprise Resource Planning (ERP), the issue was clear: A large customer was getting strict about the accuracy, packaging, and bar-coding of incoming shipments. This is classic supplychain management.

But handling this part of the job was becoming harder for Vanamatic Co. than making the parts in the first place. The solution was to overhaul software and integrate packaging with the manufacturing function. It was no small job and no small expense, but a constructive necessity.

That's life in somebody else's supply chain. It's not an easy place, but now it's inescapable, no matter how large or small your operation.

Bob Rosenbaum, publisher of AMERICAN MACHINIST, is co-author of "Supply Chain Excellence: A Handbook For Dramatic Improvement Using the SCOR Model," published in 2003 by Amacom Books.