Demand-driven manufacturing: Burn those spreadsheets

The Aberdeen Group says that 92 percent of all manufacturers use spreadsheets for production planning and scheduling. I spoke with See’s Candy, a chocolate manufacturer with about 200 wholly-owned retail outlets, mostly on the West Coast, and Wise Foods, the East Coast’s premier potato chip manufacturer, which has more than 400 potato chip SKUs. Both companies recently gave up their spreadsheets and transitioned to a single platform for production planning, packaging, and inventory management.

The changes taking place in these two companies are part of the trend toward demand-driven manufacturing; that is, pulling from the retailer rather than pushing from the supplier, to compress throughput or cash-to-cycle time.

When See’s transitioned its Northern California manufacturing and packaging plant from Excel spreadsheets to a single platform from JRG, one of the early on-demand supply chain service providers, it saved $200,000. The massive spreadsheets -- which “filled the entire width and length of an Excel workbook,” according to Eileen Dwag, director of product support -- had been locally maintained by individual managers.

Mike Kopetski, director of supply chain at Wise Foods, put it even more bluntly. “We were using tribal knowledge” to create individual spreadsheets for production scheduling, he said.

In the bad old days, when Manager Joe came on his shift, he decided what the machines had to produce per hour, per shift. When Mary took over the next shift, she might have had a different production schedule in mind. Now, Kopetski tells me, Wise has built the output capacity of the machines -- per hour, per machine, per shift -- into the data model, so that the model knows what the machines can produce at their highest levels. Scheduling that once took a full day now takes just hours, resulting in more control of the manufacturing process, lower inventory levels, and better response times.

Both Wise and See’s have something else in common: Neither one is Procter & Gamble. Each brings in around $400 million in revenue.

Dwag says See’s was not prepared to install ERP. It was looking for something that could integrate with its own homegrown legacy systems. Wise, on the other hand, was looking for an alternative to high-priced ERP solutions; JRG’s came in at about one-sixth the cost of the big guys, and it can even integrate with Wal-Mart’s DCS2000 warehouse and distribution system for replenishment orders.

Both Dwag and Kopetski went with JRG because it offered Web-based software as a service. However, the impact on IT for companies that prefer a behind-the-firewall solution may be significant.

“Much of the application infrastructure to support manufacturing will have to be replaced,” says Dwight Klappich, vice president of technology research at Meta Group. Also, he says, as demand-driven manufacturing matures, interenterprise collaboration becomes more real, and companies must support collaborative commerce by electronic means.

Demand-driven manufacturing will mean improved visibility across the enterprise, reduction of data entry and spreadsheet maintenance, lower inventory levels, faster throughput, and quicker cash-to-cycle times. The choice is clear: Keep your cozy spreadsheets or move on. As Dylan warned, “You better start swimmin’, or you’ll sink like a stone, for the times they are a-changin’.”