Business To Manufacturing Integration Technologies

that Provide for Manufacturing Independence

Dennis Brandl

Director, Enterprise Initiatives

Sequencia Corporation

15458 B North 28th Ave.

Phoenix, AZ 85053

KEYWORDS

ERP, Integration, Manufacturing, XML, OAG, Supply Chain, Standards

ABSTRACT

In the modern world of mergers and acquisitions, there are many valid reasons to treat manufacturing as an independent entity. Factories are being bought and sold as independent company assets with large international companies averaging one new factory every four weeks. These factories must be quickly integrated into the parent company’s supply chain and must be setup to produce the parent company’s product. The integration requires that the capabilities and the capacity of the factory must be available to corporate planners. The emerging technologies for structured Internet information exchange, using XML, and the S95.01 standard make this possible. The new factories must also be integrated into the production chain, without requiring extensive IT projects and production shutdowns. This requires an implementation independent method of defining production requests, product definitions, and production responses; all elements described in the S95.01 standard. This paper defines the business reasons for treating manufacturing as an independent entity, shows how this also helps in out sourcing manufacturing, and defines the primary interface points to make this happen.

INTRODUCTION

There is an attraction to centralized knowledge and total information integration in manufacturing companies. There is also an expectation that if we can just be smart enough and just be integrated enough, then a single system will provide high efficiency, minimal waste, maximum asset utilization, and ultimately higher profit. The term system does not imply a computer system, but applies to organizational systems, administrative systems, or any combination of systems. The allure of centralized control and completely integrated systems is not unique to manufacturing companies. Entire countries have tried this method, only to ultimately fail to deliver any of the expected benefits.

Most companies that have attempted complete centralized control have also failed, unless very specific conditions are meet. The reason for the failures lays, not with the concept of integration, but instead with the ability of centralized integrated systems to rapidly respond to changes. There are continual changes in most businesses. These include changes in products, changes in manufacturing processes, changes in product demand, and changes in customer requirements.

Experience with organization systems has demonstrated that centralized planning and coordination only works when 1) there is complete information needed to make the correct decision, and 2) the information is available and the decision can be made in a timely manner. We only need to look at large organizations, such as federal governments, to see the failures of timely decisions, or bad decisions made on incomplete information. Consider the case of air traffic control (ATC). There are multiple autonomous centers scattered around the country handling local situations. This allows the local systems to quickly react to changing local conditions, reduces the impact of failures, and allows individual contact with planes for complete information. A continent wide ATC could be neither as responsive or as aware of local conditions. Unfortunately the lessons learned in one field do not always carry over into manufacturing companies. The expected benefit of using completely integrated computerized systems, based on ERP backbones, coupled with powerful decision support systems and advanced planning and scheduling, is a lean and efficient organization. The end result in manufacturing companies that have attempted complete manufacturing to business integration has rarely been either lean or efficient. One of the main reasons for the common failures is that centralized systems are rarely designed to handle continual change, yet in the world of manufacturing change is inevitable.

MANUFACTURING ORGANIZATION

Manufacturing companies have been in a continual state of flux though mergers and acquisitions, spinoffs, new technology developments, and an explosion in the number and variety of products the average company manages. Mergers and acquisitions have been a major news item in the pharmaceutical, biotechnology, specialty chemical, and bulk chemical markets. Companies are acquiring manufacturing plants with the expectation that they can be used to make new or different products, and become part of the corporate supply chain. One example of this is BASF, Germany. During 1999 BASF averaged the addition of one new factory site per week through acquisitions. In the USA in 1999, Rohm and Haas acquired Morton Salt’s chemical divisions, doubling the number of factories they must manage and coordinate. Spin-offs of manufacturing assets are also occurring, where companies are separating their R&D, sales, and marketing arms into one organization and their manufacturing into another. This is a common occurrence in electronic products, semiconductor manufacturing, consumer goods, and food products. The brand owners and companies with publicly known names are often not the manufacturers of all of their products.

The Changing Model For Manufacturing Companies

In this changing environment centralized control and tight integration of manufacturing and business systems can be a never ending process. This does not mean that manufacturing should not be an integrated part of the company’s value chain, just that complete integration may be an unattainable goal. Instead of complete integration, manufacturing entities in an organization can be handled as if they were independent entities, at least as far as planning, scheduling, and production are concerned. Handling your manufacturing as an independent entity means that the details of the manufacturing, maintenance, and quality are hidden from your planning and scheduling systems. Independence mean there is a purposeful split between business processes and execution processes (manufacturing, quality assurance, and maintenance activities).

The main reasons for treating your manufacturing as an independent entity are:

  1. The fundamental economic driving forces for manufacturing (efficiency, long production runs, minimal changeover, cost reduction, maximum asset utilization) often run counter to product ownership (rapid change, customization, small order fulfillment).
  2. Your manufacturing facility may be an independent entity in the future.
  3. You may not own the facility yet, but you are planning on its production.
  4. Your facility may already be an outsourced manufacturing facility for someone else.
  5. You can modify your business processes independent of the manufacturing execution processes.
  6. It makes planning both internal and outsourced manufacturing consistent and easier to manage.

The rise of truly independent entities has changes business processes from the early ERP centric model, to the supply chain model, and now to the supply web model. In the supply web model each link in the supply chain may have its own supply chain, including its own independent entity partners, all collaborating using Internet technologies. In this emerging model, there is a significant advantage gained from treating all entities with the same “keep the details hidden” model. This is a basic concept of the system design methodologies, such as object-oriented design, that has proven itself well in handling complex systems with significant integration requirements. In these models capabilities are public, but implementation details are hidden.

The Evolution of Business Processes

TECHNOLOGIES FOR MANUFACTURING INTEGRATION

Treating manufacturing as an independent entity requires communication that is at least as formal and well defined as those required for centralized systems. An additional requirement is also added, the communication must be public, or at least shared within among the participating parties. The best communication options are those that are jointly agreed to, and openly usable by many different systems. Many ERP companies publish their communication standards (APIs), but

  • the publishing company reserves the right to change the interface at any time and at any release causing continuous integration rework,
  • they are usually designed with the ERP system in mind, not the connecting applications, so needed information is often unavailable or cumbersome to obtain,
  • they are usually designed by the ERP vendor with little input from other users leading to inefficient information transfers, and
  • they are usually based on some transient technology that can become difficult to support over time.

Fortunately some formal integration definitions and mechanisms do not have the limitations above. There are two sets of integration definitions that can be the basis for integrating business systems with manufacturing facilities, in an independent manner, the Open Applications Group (OAG) and the ISA S95 Enterprise/Control Standard. These two definitions define different, but complementary approaches to integration.

Two Different, But Complementary Approaches to Integration

OAG

The Open Applications Group ( (OAG) is a non-profit consortium focusing on best practices and process using XML for e-business and Application Integration. It is the largest publisher of XML based content for business software interoperability in the world. OAG members have over five calendar years of experience in building an industry consensus framework for business software application interoperability. They have also developed a repeatable process for quickly developing high quality business content and XML representations of that content. XML is the emerging standard integration technology for use in Internet and intranet based systems (

The common model established by OAG enables the user community to adopt a single interfacing approach for all applications supported rather than separate ones for each vendor they implement. OAG also provides forums for users, application vendors, technology vendors, and systems integrators to discuss their needs and issues and be heard as a unified voice. The OAG common model enables a single mapping strategy for all multi-vendor implementations in the enterprise making support and maintenance easier as technologies change.

The OAG definitions cover the entire breadth of business processes. It includes invoicing, general ledger, order management, pricing, receivables, inventory, and costing. Noticeably absent is any focus on production. This lack of focus reinforces the concept that production (manufacturing) is only loosely coupled with the rest of the business processes. In fact, production is only a small part of the interfaces defined in the order management and inventory parts of the OAG models.

The OAG model defines the information to be exchanged in a Business Object Document (BOD), with a computer representation of the information in XML schemas. The OAG definitions also include transaction information, defining requests and responses. There are over 125 different transaction messages defined by OAG and these definitions are available through OAG or through BizTalk (

OAG Business Processes

ISA S95.01

While the OAG definitions are broad in scope, the definitions in the ISA S95.01 Enterprise/Control System Standard are narrow in scope but deep in content. The S95 standard focuses on manufacturing, defining eight object models, with over 50 different object definitions, of the information that must be exchanged between manufacturing functions and business logistics functions. The S95.01 standard only defines the exchanged information in general terms, but the soon to be finished S95.02 standard extends the models to include formal definitions of the exchanged objects and examples of exchanged information.

In addition to the formal work going on within the standards committee, many committee members are developing XML representations of the information. These representations will also be available on the BizTalk ( system, and are planned to be worked into the OAG structure. The XML definitions of the S95 objects extend the relatively shallow interface defined in OAG, a simple purchase order like definition, to a rich definition that allows integration with advanced planning and scheduling systems, and with inventory management and material management systems. Interfaces to corporate quality systems, maintenance systems, and personnel systems are also defined in the S95 models.

ISA S95.01 Categories of Information Definitions

There has been wide acceptance within the vendor communities of the OAG and the S95 standards. The OAG interfaces are being designed into many vendor’s business systems (such as IBM, i2, SAP, PeopleSoft), and should provide a basis for integration at the business process level. The S95 models are being used as the basis for many control and MES vendors (such as Honeywell, Rockwell, Sequencia, Invensys, and Fisher-Rosemount), and should provide a basis for integration of manufacturing to scheduling, maintenance, inventory, quality, and personnel systems.

The combination of these definitions provide a clean interface for treating manufacturing as if it were outsourced. This also allows an outsourced manufacturing company to deal with its partners in a formal well-defined manner. Business information dealing with costing, purchasing, receivables, and invoicing should follow the OAG transaction models. These will be supported, in some form, by most major business system vendors. Production information dealing with product definitions, production capability and capacity, and production requests and responses should follow the S95 information models. The S95 models will be supported, in some form, by most major control system vendors and by most business system vendors supplying scheduling and logistics systems.

In summary, these standards allow you to treat your manufacturing as if it was outsourced, allowing your manufacturing facilities to locally optimize their production processes, without impacting your business processes. They allow you to treat internal manufacturing the same as outsourced manufacturing, increasing your production flexibility. They allow you to easily integrate new manufacturing facilities into your supply web, and allow you to spin-off manufacturing, if value is added to the company.