Aug 28 2013

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The Competitive Advantage of Global Traceability

global_traceability_competitive_advantageIn 2009, Toyota faced an event that every manufacturer aims to avoid at all costs: A recall. The incident caused unexplained acceleration in Priuses, later attributed to pedal entrapment from a faulty floor mat. The situation triggered a recall of about 9 million vehicles worldwide, which, according to estimates from industry experts, resulted in a revenue loss of about 13% year-over-year for the automaker. More importantly, it has taken the company a few years to rebound.

When such serious circumstances occur, it forces a company to evaluate existing governance and processes around traceability. And, once embarking upon such an exercise, manufacturers quickly realize that traceability runs deep into the shop floor, across multiple plants and wide across the supply chain. Many components, assemblies, and ingredients (depending upon the industry) flow across a global network of plants and partners which are then distributed to customers in different regions. Each touch point has a physical and a digital fingerprint. It is important for a company to have the ability to trace back across them both. The question is, how?

Toyota responded to its recall by focusing on its roots of Lean manufacturing, and then applying Lean’s practice of simplicity and reuse to its engineering processes – which included moving to a common platform to enable the re-use of engineering modules and restoring emphasis on quality. Toyota also decided to decentralize the management structure to allow local leaders to have more autonomy, responsibility, and decision-making vs. funneling everything through the corporate headquarters when local events occur, and losing precious time.

Toyota’s initiatives facilitated speed in product design, manufacturing operations, and customer responsiveness. Steps in the right direction, said Matthew Littlefield, president and principal analyst at LNS Research, during a recent webcast. But companies like Toyota also need to start implementing a proactive platform approach to traceability. Such a strategy would include building a business case around global traceability and containment. It should also include brand protection, revenue sensitivity, awareness of the entire customer experience, as well as risk and regulatory management.

In this IndustryWeek Webinar, Littlefield and I outlined some steps to execute such a plan. The duo also answered questions from companies struggling to sustain a market-leading customer experience while reducing the risk of a major quality or safety issue.

For LNS, which consults with enterprises on this very issue, the first thing to look at it is the overarching objectives of the firm. Specifically, focus on the alignment of the finance and operations teams. “Is the VP of quality looking at the same things as the CFO?” Littlefield pointed out. “And is it supported by the CIO?”

Collaboration between IT, manufacturing, and quality/compliance is also imperative, as is establishing governance up front: “It’s important to know who owns which processes, and to have a vision that is established upfront,” said Littlefield.

That vision should address the following five points:

  1. Improve ability to deliver new products
  2. Improving customer experience and protecting brand
  3. Reducing non-conformance in manufacturing
  4. Ensuring compliance
  5. Enabling better management of operational risk

Once the priorities are aligned, the next thing to evaluate is whether or not everyone is using the right metrics, and if they are measuring in an effective way, be it role-based, the right frequency, and at the right granularity.

To that end, “It’s important that the solution help harmonize business processes, as well as facilitate root cause analysis, and that it avoids rip-and-replace while leveraging existing investments in manufacturing IT,” Littlefield said.

That sparked a couple of questions from the audience around existing manufacturing operations management and ERP systems. Here’s the abbreviated Q&A:

Q: Isn’t traceability something I automatically get with an ERP or MOM solution?

Littlefield: Yes, the data is there, but it doesn’t often have the level of granularity or the tools and ability to access it with the speed needed. What is needed is something that extends and builds upon the capabilities that are already there.

Q: We struggled for years to get a common manufacturing system into place, so how do we implement global traceability without replacing all of these manufacturing systems?

Berkley: It’s not necessarily easy, but we have a straight-forward and well-defined approach. First, understand what data is needed and from which systems. Harmonize the master data to make sure serials and lots are unique within the system; and, we have a strategy to incorporate business rules to help you do so … And, then use web services to coordinate containment activity between plants and the central system … A central traceability repository captures all events in one location, and collaboration is critical when an adverse quality event occurs.

To listen to the entire webcast, click here: http://www.apriso.com/library/video/Go_Beyond_Traceability_Protect_Shareholder_Value.php

Jordan can be found on Google+

Permanent link to this article: http://www.apriso.com/blog/2013/08/the-competitive-advantage-of-global-traceability/

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