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August 10, 2003

Analytics in Manufacturing: The Collaboration Enabler

The quest for profitability has businesses in manufacturing industries on the hunt for analytics that serve collaborative execution models. Will BI providers step up?Or will solutions come first from ERP?

by Naeem Hashmi

Despite relative economic success and recent laudatory business press attention, the BI industry is moving through turbulent waters — and without a clear leader. Even as BI providers were adjusting to a major shift in business execution models from departmentally focused processes toward integrated, enterprisewide operations, another big trend emerged. This new business execution model is about collaborative, adaptive, cross-organizational, and service-oriented operations. Thus, in the midst of finally overcoming tough enterprise challenges, BI providers have to think again.

Making this second adjustment is tougher for BI providers because they need far more up-close-and-personal insight into business rules governing collaborative processes than ever before. Can BI move beyond providing key performance indicators (KPIs), reports, and slicing and dicing into a new paradigm that fits inter-enterprise business processes over the Internet?

The new paradigm also offers inviting opportunities for enterprise application software giants — such as SAP, Oracle, and PeopleSoft — which is why these companies are focused on building integrated, next-generation, "intelligent" components using agents. The systems will drive business processes continuously, with little human intervention — and without interaction with traditional BI, data warehouses, or even SQL. Sound like fiction? It isn't. The quest for business process intelligence (BPI) is under way — and BI software providers best beware.

Profitable Collaboration

Why do companies use BI and analytics? The main reason is to increase profitability and revenue through tracking business operation inefficiencies in manufacturing and associated processes. Even with the best technology to track to everything that you have, there's always a way to fine-tune business processes: in other words, to engage in business process optimization (BPO). If after lubricating all the manufacturing processes the company is still not meeting profitability goals, many executives reach for another kind of BPO: business process "offshoring." In many cases, companies are simply choosing to move operations offshore to reduce expenses without even attempting BPO. In manufacturing and service industries, the offshore trend is quickening at an alarming rate.

The offshore movement is increasing the demand for services-oriented collaborative processing to support loosely coupled business entities strung together by service-level agreements (SLAs). Participating parties do not need nor want to know the intricacies of the various applications and databases owned by individual processes; they only care about what is exposed to the different parties. Today, SLAs are generally limited to performance specifications for business functions. But companies are now seeing that they must revisit these SLAs to cover "intelligence" content for collaborative analytics.

Thus, a whole new world is opening up for BI and enterprise application software providers to meet these challenges. First, before even addressing technology, BI providers must sort out legal issues regarding how and when their customers will share what business information. Second, they must develop service-oriented, intelligent agents — something we might view as applications built on top of existing applications and connected by business events. SAP is a good example of a provider jumping into this paradigm shift — with xApps, built on top of its new technology platform, NetWeaver.

Manufacturing Processes

Under collaborative and/or offshore business models, the role of traditional BI systems remains primarily contained within the scope of service provider operations. Service consumers and other collaborative participants might call this "business process monitoring."

Within a manufacturing organization, however, the major challenges are how to shorten the product development life cycle; and how to manage the entire cycle from conception to product retirement. The window of opportunity for most products is shrinking. It is more challenging than ever to launch a new product before a competitor does. However, no company dare cut corners on quality in the effort to reduce production costs and time. Instead, companies need to analyze and simulate the entire development process from component sourcing to final product, including process routes and operations. Manufacturers must figure out how to break down the development process into multiple segments that can be performed in parallel. It is in this effort that manufacturers collaborate with partners to build product components at a lower overall development cost.

Collaborative manufacturers need a new breed of applications to keep track of all activities — often real-time events — and use performance measures and metrics to make sure that all individual components are being built according to schedule and products will be finished on time. Companies that have established such performance measures are finding that it's difficult to know if they are measuring the right things. The solution involves getting partners to exchange product quality and process information, through Web services, in near real time. In this way, partners can view the state of collaborative performance and validate their SLAs.

Such process monitoring will need to extend beyond just the product manufacturing processes to account for product movement (transportation) from one site to another, until all products have reached their final destination. This is how companies will reduce overstocking at one partner location.