Unless we’re talking about avowed technological atheists, the majority would concede that the process-transforming tendrils of IT technology are far reaching.
But truth be told, IT rears its head in some sectors more than others. When it comes to the manufacturing and oil/gas sectors one might (wrongly?) evoke images of manual production and paper-based processes. On top of that, Canadian companies have long been accused of hiding behind the false prophet of our low exchange rate when competing in the global economy, at the expense of internal technology investment. That won’t cut it anymore.
But it’s not easy transferring over to a new IT architecture in the midst of ongoing production cycles. Or integrating ERP and its cousins BI, CRM and SCM. Or changing a labour culture used to doing things the old way. Or dealing with new organizational and information challenges. But the sector is slowly but surely getting up to speed; Canadian companies are embracing new technologies and new processes in the name of competing in a global economy. ERP integration, Web-enabled applications and future technologies such as RFID and wireless telemetry are all avenues that the successful enterprise will consider. The road to manufacturer’s Mecca is a rough one. Those wishing to make the journey may just be rewarded.
the first few miles
Canadian manufacturers are constantly striving to win in a very aggressive global marketplace.
Lisa Kissick, director of IT at BPB Westroc, a Mississauga, Ont.-based manufacturer and marketer of interior wall and ceiling products, said the challenge wasn’t so much the culture shock of new IT processes – the training and implementation of a J.D.Edwards ERP solution went smoothly – the issue at hand, was to implement IT concurrently with a new product line.
Rob Antonioni, manufacturing sector manager for IBM Canada Ltd. in Markham, Ont., said that within the sector, this has been the challenge for IT.
“Years gone by,” Antonioni said, “a plant floor was traditionally all manual – so if you ever had to make a change on a new order coming in, you really had to try and schedule for that,” he said. “Technology has a profound effect – it affects how we design, how we build things, and how we manufacture things.”
Like any other industry, the manufacturing sector has to take a look at what and how they’re implementing, Antonioni continued. “How you really leverage technology, is by making sure your IT strategy aligns with business goals. Once you see what that is, then you start deploying technology to help fill those gaps. Take a look at new product development. Years ago, you had a two or three year competitive advantage before someone was able to come up with something similar. Now the development cycles are shrinking and the product lifecycles are shorter. You’ve really got to continually invest (in technology).”
Antonioni’s sentiment isn’t lost on Larry Coe. The business systems analyst for McNairn Packaging, a manufacturer and distributor of food packaging products, needed to better manage production and distribution, maintain customer and raw materials inventories, and analyze costs and pricing. The Whitby, Ont.-based company also needed to integrate a variety of customer interfaces, including electronic data interface (EDI), through an ERP system.
“It’s a matter of survival,” Coe said.
Using an IBM Corp./CMS Manufacturing Inc. joint solution, McNairn opted for the CMS/400 application running on iSeries eServer. The CMS/400 offers an ERP platform with an integrated suite of modules including EDI and release accounting, serialized bar-code labelling, real-time shop floor reporting, materials and logistics management and financial management. The company was better able to consolidate data, Coe said, adding McNairn was better able to make and meet production commitments to customers demanding shorter lead times.
“I think that a good ERP system should kind of break down the silos or have access to the information,” Coe said. “At one point in time, six to eight weeks was fine for lead time. Now it’s almost as if the customer expects you to have the product in their hands while ordering it. You try to meet those demands – if you can’t do it, somebody else will.”
Most companies embraced IT because they see it as a way to remain competitive, according to Dan Halverson, director of information management for Calgary-based oil and gas producer Nexen Inc.
Not only does the Calgary-based firm deal in the exploration, development, production and marketing of crude oil and natural gas, it also manufactures and markets sodium chlorate and chlor-alkali products. Add over 2,000 international employees into the mix and Nexen was faced with numerous technological and business challenges. The company was looking at disparate systems and trying to standardize across the organization to have a consistent way of looking at things, Halverson said. Using an SAP offering, Nexen was able to reduce operating and administrative overhead, while expanding operations.
Wayne Regehr, vice-president of field operations for SAP in Calgary, said the oil and gas industry is facing both deregulation and consolidation.
“When you get manufacturing at this level, there are a lot of things that are specific to the oil/gas industry that are different to others. The name of the game is really getting clarity on your whole cost structure – so using technology to drive the leading edge,” Regehr said.
bumps up ahead
According to experts, the biggest challenge for IT in this vertical will be the implementation of technology solutions that will deliver both a positive return on investment (ROI) and a lower total cost of ownership (TCO). Manufacturers tend to be close to the front of implementing enterprise applications solutions that have an impact on operational efficiency, noted Warren Shiau, an analyst at Toronto-based research firm IDC Canada Ltd. Most are close to the forefront when it comes to technology. “You can’t have a plant going down because you’re trying something new. Manufacturers tend to be close to the front of implementing enterprise applications solutions that have an impact on operational efficacy. They are the most logical places where you would implement something like supply chain and ERP-type software.”
In an August 2001 Statistics Canada report, the Canadian manufacturing industry is shown to have several barriers to adoption of advanced technology.
The study, Impediments to Advanced Technology Adoption for Canadian Manufacturers revealed that the 1990s witnessed a substantial rise in the number of plants using advanced technology with a resulting growth in productivity and market share. However “despite these advantages, in 1998, more than half the plants…did not use any individual advanced technologies connected with design and engineering, processing and fabrication, network communications, or integration and control.” The report concluded that the decision to adopt IT is often weighed by expected benefits and costs connection to its adoption. IT benefits are “far ranging,” the paper found, from “increasing productivity, to improving flexibility, to producing higher quality products, to reducing production costs.”
Ray Shepard, executive information systems administrator for Blue Bird Corp. noted that while many don’t automatically connect advanced technology with the manufacturing sector, IT is involved in all phases of the Fort Valley, Ga.-based bus manufacturer, from production to fabrication.
Blue Bird delivers thousands of school buses, commercial buses and recreational vehicles to the market each year. Using an analysis and reporting software solution from Ottawa-based DataBeacon Inc. for its executive information systems, Blue Bird performs real-time data queries without the IT department intervening.
“I wouldn’t say the industry is on the bleeding edge; we are probably just shy of the cutting edge,” Shepard said. What IT does is help the company see the future – a lot of what it actually does isn’t tangible, he added. “IT doesn’t produce the bus that someone is going to buy and we show a profit on, but we couldn’t sell a bus now without the IT. Our order system, costing system, pricing system, everything revolves around IT. If you unplug the mainframe there’s going to be trouble.”
Like most companies in his sector, Shepard said Web services doesn’t immediately factor into Blue Bird’s IT strategy but it’s something he keeps close tabs on. “We’re moving more and more to Web applications in the process of developing Web application but we still don’t want to abandon the mainframe because the sheer volume of data we have to crunch.”
further down the road
On the horizon lies technologies that could possibly change the sector, including RFID and wireless telemetry.
Radio Frequency Identification is an electronic labelling and data collection system that uses radio frequency signals to identify items without the need to separate or scan individually-tagged objects. RF-enabled packaging would enable the ability of each link of the supply chain to track the product, reducing the billions of dollars worth of lost revenue stemming from labour costs and inventory irregularities.
Once issues such as cost and standards are hammered out, Cliff Horwitz, chairman and CEO for RFID developer SAMSys Technologies Inc. in Richmond Hill, Ont., said the technology has the potential to introduce analytical BI data, reduced distribution costs and a more competitive supply chain.
Another technology is wireless telemetry technology. Developed by Toronto-based cStar Technologies Inc. wireless telemetry enables secure two-way data exchange over networks and media, including wireless WANs/LANs, satellites and landlines. The key, according to cStar president and CEO Stella Yoon, is to “make a critical bridge between the non-IT world and the IT world…real time and on-line.” She said a wireless LAN environment eliminates the cost of wireless airtime. Currently in use in the vending machine sector, the technology allows a more flexible and cost-effective adjustment of a supply chain – a vending operator en route to restock vending machines receives sales data via wireless, and can use a wireless-networked PDA to retrieve real-time inventory information. Relating to the manufacturing sector, Yoon said the technology would enable drive-by metre reading, real-time transfer of testing data, machine diagnostics and monitoring of remote equipment. “Automating processes saves both time and labour costs,” Yoon noted.
But if advanced technology is so great, why isn’t everybody on the bandwagon? Adopting advanced technology requires also changing the internal business culture, something that’s not often easy. The biggest challenge was the cultural thing, Shepard said. “There are a lot of people who have been here for a long time. A lot of people here that grew up in the mainframe environment so it’s a challenge.”
This is echoed in the StatCan report. Labour-related barriers included “shortage of skills, training difficulties, and labour contracts; organizational or strategic problems associated with difficulties in introducing important changes to the organization; management attitude; and worker resistance.”
“People are very attached, probably even more so than their family. Almost to the point where they threaten that they need it to do the job,” Halverson said. “It’s a matter of changing the business culture. To stay in the game and be competitive, you have to do these things. It’s so simple when you have a strong mandate.”
the last few miles
Halverson noted that the Canadian industry has been slower to adapt to the integrated approach.
Craig Kindleman, energy practice coordinator at Toronto-based IT consulting firm Accenture agreed. Kindleman noted that while the manufacturing sector, particularly oil/gas verticals, have been slower to adopt, real-time Web-enabled applications will dramatically transform the sector sooner rather than later.
When it comes to integrating ERP systems, Halverson said it wasn’t that long ago skeptics would say companies couldn’t possibly standardize across all divisions. “We’re saying that that simply is not true,” he said. “For us, we’re driving towards a middleware solution in tying systems together. Best of breeds are together but the key is that everyone is on the standardized best of breed. It’s about trying to standardize across all divisions.”
Overall, the impact of IT in the manufacturing and oil/gas sectors is an ongoing process. The sectors are the most logical place to implement ERP-type software, Shiau noted. Moving down the road, expect supply chain management solutions to transform the way companies do things. “It’s all about real-time,” Shiau said. Canadian adoption tends to lag in comparison to the rest of the world, particularly in areas such ERP and inventory management but “this is changing,” Shiau added.
Antonioni said what is comes down to is different segments of the manufacturing sector deploy at a different pace. “Different size companies in different industries do as well. If you’re a fairly large manufacturing customer you typically would have already invested ERP, BI, CRM supply chain management. It’s becoming more affordable and more in vogue for mid to smaller tier manufacturing companies,” Antonioni said.