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Jan 19 2011

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A Perspective on how Globalization has Transformed the CPG Manufacturing Industry

Globalization has obviously had a tremendous impact on the way we live our lives as well as the way we do business. The world is steadily becoming a group of interconnected buyers across continents, cultures and climates. This transformation has not been missed by the Consumer Packaged Goods (CPG) industry. In fact, it has probably been one of the most impacted industries, given the seemingly never-ending appetite for the latest and greatest gadgets and housewares.

From a manufacturer’s perspective, this change has been difficult and at times painful. Production became centralized in big production hubs. Suddenly, factories have had to grow their capacity, product complexity, SKUs and packaging in order to serve multiple countries, markets and consumers. Some of the previously well working processes are now inefficient.

I personally witnessed this manufacturing transformation while performing work at a CPG company between 2003 and 2008. During this time period, their hub facilities grew in capacity by 2-3 times; SKUs increased by a factor of more than 50. These circumstances caused big challenges in inventory management, including a few sleepless nights!

Paper-based Systems Simply Don’t Work
With such a high number of SKUs and business processes that at times seemed to change monthly, the concept of trying to track inventory with paper soon became ridiculous. Mistakes and lack of visibility to perform changes or adjustments quickly dictated the need for a new approach. Paper based traceability processes generated even more papers, with data that was impossible to locate or validate. Added together, it led to increased safety stock and significant risk for brand quality and customer satisfaction.

It was about this time when we implemented Apriso’s Manufacturing Execution System and Logistics Execution System, as a way to address a steadily challenging and escalating problem.

The Need for More than MES
It became clear that implementing a Manufacturing Execution System or MES was just the start. We had addressed the most pressing issues by replacing the paper-based system. Or, using analogies to the transportation industry, we now had horse drawn carriages, which definitely beat walking. Now, it was time for the next step – motorized vehicles.

With a dynamic production environment and business processes, real-time visibly was needed to achieve synergy and collaboration across all departments. Information had to be readily shared across locations and functions, offering many benefits to the entire organization. Let’s take a peek at a specific example – material replenishment.

Achieving Material Synchronization
When a factory warehouse provides dozens of components to each production line and these components change from shift to shift, the chance for error increases, especially when manual processes are involved. Our implementing a combined Manufacturing Execution System and Logistics Execution System was able to better control this process at every step, ensuring it ran smoothly and safely. The list of performance improvements included:

  • Dispatching and monitoring production orders
  • Ensuring material availability, so replenishment orders can be automatically generated and executed
  • Assisting machine operators with material verification and traceability
  • Tracking material consumption against production orders in specific locations
  • Generating incremental replenishment orders for previously consumed components
  • Triggering return orders for leftovers and assisting inventory handlers with leftovers picking and put aways
  • Adjusting inventory levels in ERP with an appropriate frequency

Individuals involved in these processes typically work in different departments. Once you realized that replenishment can be executed every 1-2 hours and you multiply that by the number of machines and components, than it’s easy to understand the value of synchronization. Manufacturing operations management solutions give permanent visibility and control into the demand (production orders) and execution (material availability, replenishment status).


Figure 1: An Integrated Approach to Material Replenishment
Figure 1 offers an example from the CPG industry, but the concept applies to other industries as well. The ease of adjustment throughout the manufacturing process for those companies that have embraced this “next generation” approach has brought greater efficiency, improved operational performance as well as competitive advantage. Replenishment times have been significantly reduced, resulting in less idle inventory and reduced obsolescence or spoilage.

Having recognized firsthand the incredible benefits from such a collaborative, integrated approach to manufacturing operations, I can’t imagine operating a factory without it.

Permanent link to this article: http://www.apriso.com/blog/2011/01/a-perspective-on-how-globalization-has-transformed-the-cpg-manufacturing-industry-2/

2 comments

  1. Alan

    Very interesting. Do you have a facebook or twitter page I can follow you on?

    1. Gordon Benzie

      Alan, thanks for asking. We are on Facebook here: http://www.facebook.com/pages/Apriso/111072738627, Twitter here: http://twitter.com/apriso and LinkedIn here: http://www.linkedin.com/company/apriso.

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