Business Process Unification: CMM Gets Real

By Greg Gorbach, Robert Mick
ARC STRATEGIES
NOVEMBER 2003
Business Process Unification: CMM Gets Real
Executive Overview .................................................................... 3
BPU Helps Achieve Real-time Performance Management................... 4
The CMM Model and BPU ............................................................. 6
Lean Manufacturers Benefit from CMM..........................................10
SCOR and Design Chain Reference Models ....................................11
The Enterprise Operations Platform..............................................13
Collaborative Supply Networks ....................................................14
Regulatory Issues......................................................................16
Recommendations .....................................................................18
THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN

ARC Strategies • November 2003
2 • Copyright © ARC Advisory Group • ARCweb.com
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Complex, Interoperating Processes Demand a Unified View for Achieving
Real-time Performance Management (RPM)
Business Process Unification Links Operational Processes and Systems

Copyright © ARC Advisory Group • ARCweb.com • 3
Business Process Unification refers
to manufacturers’ use of new
platforms to transform existing
processes and systems to support
new business initiatives or enhance
performance. BPU also refers to the
fusion of technology platforms and
applications by suppliers.
Executive Overview
Flexible. Adaptive. Responsive. These terms and others like them are
commonplace in suppliers’ marketing presentations, but they also present a
distinct irony for IT managers in most manufacturing companies. True,
these are much-needed characteristics for manufacturers who compete in
today’s demand-driven marketplace, where global outsourcing, increasing
regulation, supply network competition, shorter lifecy-
cles, and customer-imposed technologies create
challenges. But the reality is that legacy systems are
inflexible, and manufacturers’ efforts over the last few
years to build out business processes within applica-
tions, and knit together processes that span business
and application silos, have usually created yet another
inflexibility that IT must somehow conquer as business
needs change.
It’s time to address this problem head-on. There is a revolutionary change
coming in IT technology, and it is already beginning to help. The emer-
gence of Business Process Unification solutions based on Service-Based
Architectures will not only change the way manufacturers approach their
IT strategy – it will eventually change the dynamics of the software market
and shake up the existing platform supplier/application supplier/system
integrator market structure.
Early evidence of the coming change can be
seen among the software behemoths as SAP
morphs from a monolithic application com-
pany to a platform company, and in parallel
begins to target SMB customers, while Mi-
crosoft extends its platform and adds
business applications. The impact on
smaller software suppliers, automation
companies who provide software and sys-
tem integrators is harder to determine at
present, but it is clear that they are likely to
face substantial changes in their business
and technology models as the large new ser-
vice-based platforms proliferate among their customer base, driving new
expectations for applications and systems.
Achieve
Business Goals
Systems and
Architecture
People,
Processes, and
Organizations
Achieve
Business Goals
Systems and
Architecture
People,
Processes, and
Organizations
CMM Unifies Business Goals, People and
Processes, and Technology

BPU Helps Achieve Real-time
Performance Management
CMM models a real-time enterprise that combines advanced technology
with a focus on business processes. Business Process Unification refers to
the fusion of technology platforms and applications by suppliers, and to the
use of these new platforms by manufacturers to transform existing proc-
esses and systems in order to support new business initiatives or enhance
overall performance.
Achieving business goals increasingly depends on the ability of an enter-
prise to link business processes end-to-end, together with operational,
management, design, and support processes. Business Process Unification
provides the technical means to integrate the business processes, link them
together as appropriate, present them to involved users, and manage and
maintain them. A real-time enterprise also needs the ability to quickly
adapt to market changes. This drives the need to be able to quickly, clev-
erly, and flexibly create, link, and change business processes, because the
execution of the busi-
ness processes directly
impacts the creation of
value for customers. In
addition, the processes
must be enabled to run
in real-time, and must
span all of the value
chain, not just certain
segments or bottle-
necks.
Business Process Unification (BPU) turns the CMM concepts around and
looks at the whole underlying collaborative system from the point of view
of an individual employee. From this standpoint, a single unified work-
space, supporting individualized work processes and connected to the
whole of the enterprise, allows each user to become one with the goals and
processes of the enterprise. Business Process Unification component appli-
cations combine previously independent processes to improve both
individual performance and management control. These applications will
eventually provide a means for companies to quickly innovate, adapt and
change their processes, in order to be more competitive — without large
BPU Component Applications within the Service Based Architecture

additional investments to modify existing software applications. Instead,
they will build new cross-application integrations.
Business Process Unification component applications are built around spe-
cific business processes, and leverage the newly available platform
functionality and emerging composite application technology. They will
improve business agility, efficiency, and productivity. BPU typically re-
quires data from multiple domains, but it needs more than data integration.
Process-level synchronization is the key. Because this new class of applica-
tions focuses on those business processes which span multiple traditional
application spaces, implementing certain of these applications will require
support from System Integrators or others capable of dealing with the cul-
tural/behavioral as well as technical/system aspects of automating
business processes.
BPU Component Apps are dif-
ferent from traditional
applications which provided
either a generic functionality,
such as document or database
management, or specific busi-
ness functionality such as ERP or
SCP. These new applications cut
across departmental and enter-
prise boundaries, provide
functionality within a unified,
end-to-end business process con-
text, and typically tap existing
applications. They leverage a
portal for integrated presentation to the user, a service based architecture,
and Business Process Management.
Companies such as SAP, Microsoft, IBM, PeopleSoft, Siebel Systems,
Ramco, Invensys, and Apriso are strong early players in providing BPU
platforms or platforms and component applications. Other companies are
building individual component applications using these platforms. For ex-
ample, in addition to its collaborative platform, Lighthammer developed
and co-markets an xApp (cross application), built using the SAP Net-
Weaver platform, that addresses opportunity/problem discovery, analysis,
and closed-loop monitoring of manufacturing business processes.
Process Model
A Collection of Business
Processes – Operations Model
Resources Model
People, Plants, Systems, etc.
Performance
Metrics,
Targets,
operational &
costing data
ManagementModel
Business Model
Strategy Map, Financials, Shareholder
Value, Global Initiatives, Acquisitions,
Partners, Channels, etc.
Process Model
A Collection of Business
Processes – Operations Model
Resources Model
People, Plants, Systems, etc.
Performance
Metrics,
Targets,
operational &
costing data
ManagementModel
Business Model
Strategy Map, Financials, Shareholder
Value, Global Initiatives, Acquisitions,
Partners, Channels, etc.
Business Process Unification (BPU) Unifies a
Manufacturer’s Business Strategies, Processes,
Resources, and Performance Management

The CMM Model and BPU
Much of manufacturing is inherently complex. What’s needed is a unified
approach to all of the market, business process, and technical dynamics that
must be leveraged in order to craft and execute a winning strategy. ARC’s
Collaborative Manufacturing Management approach is based on a multi-
dimensional, cross-industry, multi-layered model which illustrates these
complexities in a simple, straightforward manner. It connects technology
and architecture to the business model and strategy map – the way an en-
terprise creates value for its stakeholders – as well as to the business
processes, people and other resources,
and management model that make up the
daily work of operations.
ARC’s CMM model has proven to be a
useful device for both suppliers and
manufacturers. The evolution of collabo-
rative value networks requires that
manufacturers visualize the relationships
among plant and enterprise applications,
markets, value chains, and manufacturing
nodes in order to understand the context
for planning and implementing collabora-
tive manufacturing systems. A
collaborative manufacturing network can be modeled as spheres or manu-
facturing nodes connected by material, information, and process flows. The
nodal sphere encompasses three axes: Enterprise, Value Chain, and Lifecy-
cle. Above the central plane or disc are business functions. Below it, are
production functions, now performed using a number of manual processes
and legacy applications. These will be supported by collaborative compo-
nents capable of orchestrating the designated functions in concert with the
business goals of the node and the competitive dynamics of the value
chains in which the node or enterprise participates.
ARC’s CMM model establishes the requirements for an information system
that addresses the key elements of collaborative manufacturing outlined
above. The model also recognizes the need to support internal and out-
sourced execution of all enterprise activities by defining solutions for dif-
ferent functional units and for an extended enterprise or supply chain.
CMM Model: Functional View
Lifecycle Domain
Lifecycle Domain
Value Chain Domain
Enterprise Domain
Lifecycle Domain
Value Chain Domain
Enterprise Domain
Product &
Process
Support
Internal
Collaboration
Value Chain Domain
Enterprise Domain
Business
Operations
Plant/Factory
Operations
Supply-Side
Materials
Management
Customer
Order
Fulfillment
Product &
Process
Design, N
PI

Win with Game-Changing Technologies
Technology has played a huge role in increasing manufacturing productiv-
ity and will undoubtedly play a growing role in responding to business
drivers. Web services, business process management, mobile computing,
and RFID are likely to be among the technologies that “change the game”
over the next several years by radically changing the competitive possibili-
ties: faster to market, lower cost, better features, better available
information, better packages of products/services delivered through vari-
ous channels. But it is important to create a structure and approach that
will ensure process flexibility, because business processes change. In doing
so, the infrastructure must also provide for controlled migration from leg-
acy systems, often using an Embrace, then Replace strategy. The
underlying technology should also be capable of supporting philosophies
and best practices such as Lean Manufacturing and Six Sigma.
Enterprise Level Performance and Control
Many manufacturers are embracing the dual strategies of Specialization
and Collaboration. These strategies go hand in hand, because great effi-
ciencies can potentially be gained by specializing in a core competence and
outsourcing the rest. However, these efficiencies may only be achieved if
sufficient attention has been paid to creating the connectivity and business
process collaboration that enables the manufacturer to take advantage of
the new order. Globally distributed manufacturing operations that par-
ticipate in both localized and global competitive supply networks can
benefit from BPU. Manufacturers who are part of a multinational company
or an independent partner in a separate collaborative value network use
BPU to maximize their versatility and Real-time Performance Management
(RPM), and to enhance their competitive position.
Collaboration at the Shop Floor and Plant Floor Level
Collaborative manufacturing is a competitive strategy that leverages Inter-
net technologies, fosters collaboration with value network partners, creates
electronically driven workflows, and promotes a focus on core manufactur-
ing competencies. This creates an environment for manufacturers to
compete as a highly flexible and responsive operation that can meet the ex-
pectations of customers and value network partners, but it also demands a
high level of integration. Today’s shop floor and plant floor systems must
integrate with plant floor control systems, business systems (ERP and sup-

ply chain), engineering systems (PDM and PLM), and maintenance systems
(EAM and PAM).
Collaborative manufacturing lies at the intersection of the enterprise’s
Value Network and Lifecycle dimensions, and shares certain business proc-
esses along each dimension.
Optimize the Value Network
A manufacturer’s value network extends along the supply chain “from the
supplier’s suppliers to the customer’s customers.” It is useful to consider
this continuum in three segments: supply side, internal manufacturing and
logistics, and demand side.
Supplier-facing processes include Supply Network Planning, Sourcing,
Purchasing, and Inbound Supply Chain Logistics, including Transporta-
tion, Warehousing, and Distribution Management. Manufacturing or
operations-centric processes include materials storage, handling and stag-
ing, plant and shop-floor production, production management, quality,
automation, and packaging. Customer-facing processes include demand
and forecast management, sales, order, and revenue management, and ful-
fillment, outbound logistics, and transportation, warehouse and
distribution management. Today, a globally distributed supply network
can deploy technology to unify processes linking all three of these segments
and the rest of the manufacturing enterprise to dramatically tilt the com-
petitive balance in its favor when facing networks built on a traditional
business model.
Effective Product Lifecycle Management
Designing new products and their manufacturing processes is collaborative
in nature, and new BPU-based tools will emerge to support these activities.
As manufacturers adapt to the broader emerging collaborative environ-
ment, these systems will enhance their ability to provide quick and effective
responses to demand changes and accelerate time to market for new prod-
ucts.
For discrete manufacturers, this must include the management and collabo-
ration of specification and product development information, as well as the
design and collaboration on manufacturing processes across multiple spe-
cialized contract manufacturers. Collaborative systems must support a

number of processes, including assembly sequence planning, constraint-
based design, distributed process planning, and layout. In addition, they
must be integrated with plant business systems.
After the initial product and process de-
sign and documentation, collaborative
systems must support new product intro-
duction, ramp to volume, local process
optimization, change management, and
manufacturing improvement projects such
as throughput reduction, cost reduction,
and automation. Hybrid and process
manufacturers have an analogous situa-
tion in the development and deployment
of recipes and manufacturing processes.
Collaborative solutions for these chemical,
food, and pharmaceutical plants should
support recipe-related business processes
in R&D, manufacturing, and marketing.
They must ensure consistent recipe main-
tenance across enterprise boundaries.
Plant and Asset Lifecycle
Management
Special attention must be paid to processes
involved in plant and asset lifecycles,
which occur in a different time scale than
product lifecycles. These processes in-
clude plant and asset design/engineering,
simulation, startup, operation and sup-
port, and eventually, decommissioning.
The future clearly involves a closer integration of in-house and OEM ser-
vice organizations. Rather than managing staffs of technicians and stores of
spare parts, modern service managers will have to learn to manage “service
networks” that include multiple sources for service personnel, parts, and
information. Service activities are always considered time- and cost-critical
since they involve assets being unavailable for use. Even when the focus is
on a single machine, the entire production line is often affected. Manufac-
turing improvement initiatives, like lean manufacturing, are further
Function Typical Applications
Business
Operations
ERP, MRP, Financials, Cost Ac-
counting, HR, Strategic Enterprise
Management (SEM), Business In-
telligence, Analytics, Decision
Support, Capacity/Resource Plan-
ning, Value Network Design,
Portfolio Management
Supply-Side
Materials
Management
SCM, SCP, SRM, BPM/SCPM, Pur-
chasing, supplier scorecarding,
supplier performance monitoring,
sourcing analytics
Customers &
Order
Fulfillment
CRM, SFA, Demand Forecasting,
APS, TPS/TMS, BPM, Distribution
Planning, WMS
Product &
Process Design,
New Product
Introduction
(NPI)
PLM/D, PDM, Formulation Manage-
ment, Specification Management,
CAD, CAM, Line Design & Simula-
tion, Plant Design & Simulation
Product &
Process
Support
PLM/S, CALM, EAM, MRO,
CRM/Help Desk, PAM, PSM
Plant/Factory
Operations
Production Management, CPM,
LIMS, Plant Services Connector,
CPAS, CDAS, APC, PAM, AMHS,
Production Planning & Scheduling,
Tool Management, Batch, Energy
Management, Waste Management
Internal
Collaboration
BPM, KM, Portals, Enterprise Inte-
gration, Plant Data Services,
Change Management, Document
Management
CMM Applications

aggravating this situation by tightly coupling all manufacturing stages.
Managing even the most basic service activities today requires sophisti-
cated planning and flawless execution. At the same time, supplier and
customer relationships must be continuously nurtured. While site support
for installed assets is the most pressing responsibility of any service organi-
zation, close management of spares and off-site repair operations can be
equally important to maintaining overall effectiveness and achieving ser-
vice cost/profit goals.
Lean Manufacturers Benefit from CMM
In recent years, many large discrete manufacturers have devoted significant
energies to achieving a lean enterprise. Lean manufacturing started as the
Toyota Production System, and found early acceptance in manufacturers in
the automotive industry. Typified by its emphasis on core competencies,
just-in-time (JIT) inventories, error-free production, and continuous re-
moval of waste, a successful lean manufacturing strategy turns on the
ability to apply the right resources and the right tools in an efficient and
coordinated fashion. Companies moving to Lean can benefit through im-
provements in cycle times, inventory reduction, throughput, cost reduction,
and quality. Although the practice of Lean manufacturing does not re-
quire special software, most manufacturers today are comfortable with the
idea of using appropriate software to support operations.
Lean Design
Lean manufacturing is often thought of as flow manufacturing or produc-
tion lines and cells, with a goal of minimizing inventory handling and any
activities that do not add value to the product. Changing products may
require cell design or redesign, line balancing and production leveling.
Lean Production
A key mechanism for gaining the benefits of Lean manufacturing often de-
rives from the change from the economies of scale of large lots/few
changeovers to small lots produced only when needed. In practice, this
requires an manufacturing operation based on speeding decision-making
and problem resolution with real-time process control, dynamic, pull-based

scheduling, process visibility through portals, inventory techniques such as
kanban, and event management and alerting so that problems are quickly
addressed and resolved as they occur. Systems that build quality manage-
ment into the process are also important.
Lean Material Supply
Successful Lean manufacturing requires that the Lean concepts extend be-
yond the four walls of the plant. Demand based delivery signals, release
against purchase orders, supplier visibility into production and demand
forecast data, parts sequencing, and vendor managed inventory techniques
may be required to extend Lean to the supplier network.
Lean Demand
As manufacturers face increasing pressures from customers for lower
prices, faster turnarounds, smaller order sizes, more customization, and
more information to accompany the product, they look for ways to differen-
tiate themselves. Excellent product quality, excellent service, automated
replenishment, and short lead times are examples of potential customer
benefits from a manufacturer’s move to Lean.
Lean Management
Executive support is critical for successful Lean programs, but specific
techniques such as tracking/managing the cross-training of the workforce
and using a structured approach to continuous improvement can help in-
crease yield and reduce scrap.
SCOR and Design Chain Reference
Models
CMM and the SCOR model differ substantially, but they are in general
agreement in their view of the Supply Chain or Value Chain dimension.
CMM explicitly connects technology and architecture to the business model
and strategy map – the way an enterprise creates value for its stakeholders
– as well as to the business processes, people and other resources, and man-

agement model that make up the daily work of operations. SCOR focuses
on processes and benchmarking.
Supply-Chain Council
The Supply-Chain Council has developed and endorsed the Supply Chain
Operations Reference-model (SCOR) as the cross-industry standard for
supply chain management. The process reference model integrates the
well-known concepts of business process reengineering, benchmarking,
and process measurement into a cross-functional framework. As the name
suggests, the SCOR model’s strength lies in its coverage and modeling of
extended supply chain processes. It explicitly does not attempt to cover the
Product and Process Design functionality, and in practice, it tends to fall
down a bit in the MAKE area, which often gets treated as an afterthought.
The SCOR model is intended to cover all supplier/customer interactions,
from order entry through
paid invoice; all physical
material transactions, from
your supplier’s supplier to
your customer’s customer,
including equipment, sup-
plies, spare parts, bulk
product, software, etc.; all
market interactions, from
the understanding of ag-
gregate demand to the
fulfillment of each order;
and returns.
SCOR intentionally does
not include sales admini-
stration processes, technology development processes, product and process
design and development processes, and some post-delivery technical sup-
port processes.
Design Chain Council
At this writing, a new industry group being formed to develop and imple-
ment an open standard operations reference model for managing the
design chain in product development and engineering. This promises to be
a valuable activity, particularly if the group visualizes the models they de-
CMM Positions the Enterprise within its Value Networks and
Includes the Product and Process Lifecycle Dimension;
SCOR Focuses Strictly on Supply Chain Processes

velop to extend from product and process design, through new product
introduction and ramp-up, to product and process ongoing support and
service, as envisioned in the CMM model. More information about the new
group is available at www.design-chain.org.
The Enterprise Operations Platform
Today’s supply networks are distributed around the globe. Manufacturers
need a single IT solution that can support all of their globally distributed
operational activities. A solution which can be deployed globally will have
the expected global calendars and calendar visibility, multiple language
user interface and multi-language document links, multiple media format
support, and global time stamps. An EOP goes a step further, and also pro-
vides manufacturers with the ability to ensure legal, regulatory, and finan-
cial compliance in all of the appropriate markets.
In order to adapt to varying manufacturing types, models, and vertical in-
dustries, as well as individual operating requirements, the EOP should be
assembled from components or business objects. A workflow engine, busi-
ness rules engine, and analytics engine should work together to automate,
drive, and monitor operating processes throughout the enterprise network.
The Enterprise Operations Platform must be capable of being deployed in
small targeted chunks, instead of a big-bang implementation – but must
scale up readily. The EOP will have a native Internet-centric architecture,
with web services throughout, and will utilize XML standards-based mes-
saging and integration. It will have multi language, date, and time-zone
management. It will be a scalable n-tier platform, capable of supporting
multiple servers per tier and per location. It will also support emerging
technologies such as RFID and mobile devices.
In operation, users must be able to configure the network and connect the
nodes, manage change, and easily extend the infrastructure. They must
also model and manage business processes and workflows throughout the
network. Manufacturers need to be able to extend their Lean operations by
extending the product-type and sequence-type demand pull kanban signals
from within their nodal manufacturing organization out to their network
partners.

In order to meet corporate objectives for profitability, performance, and,
compliance, manufacturers must drive their own supply network to their
best advantage. Manufacturers need an EOP that can be created, deployed,
and managed at an enterprise level, while supporting individual nodal
(plant, warehouse, etc.) requirements for receiving, storing, and shipping
material, allocating and tracking labor, deploying equipment and tools to
manipulate or move the work, and all other operational activities.
Collaborative Supply Networks
Manufacturers have always built their competitive advantage by leveraging
their expertise and know-how in finding and dealing with suppliers.
Typically, manufacturers cultivate robust relationships with key suppliers,
and understand what kind of pricing/availability concessions should be
expected in any given set of circumstances. In turn, the suppliers reasona-
bly expect to benefit from business the manufacturer wins with their help.
The Japanese kieretsu model takes this one step further, grouping suppliers
up and down the value stream
in a close working relationship,
usually physically close to-
gether as well. Today, a
globally distributed supply net-
work can deploy technology to
dramatically tilt the competi-
tive balance in their favor when
facing this traditional business
model.
By focusing on processes that touch the plant floor, warehouse and logis-
tics, and other supply network nodes, manufacturers can use technology to
enhance their competitive position by making their internal operations and
supply networks more responsive, more flexible, and less costly. In prac-
tice, manufacturers can use an EOP to link corporate goals and performance
to operational realities.
Logistics
Providers
Distributors
Retailers
SuppliersSuppliers
Contract
Manufacturers
Logistics
Providers
You
Logistics
Providers
Distributors
Retailers
SuppliersSuppliersSuppliersSuppliers
Contract
Manufacturers
Logistics
Providers
You

Nodal Operational Processes
A collaborative manufacturing network consists of nodes connected by ma-
terial, information, and process flows. Nodes may include transportation
providers, distribution centers, retailers, contract manufacturers, and other
suppliers. In some cases, this network remains essentially fixed for periods
of time, while in other cases the network may come together in support of a
specific market opportunity, then dissolve and reform. While every node is
unique, each node must deal with essentially the same fundamental proc-
esses. Every stage receives, stores, and ships material. Labor is allocated
and tracked. Machines and tools are deployed to manipulate or move the
work. Value may be added to the work in production processes, or it may
be stored or moved. Equipment within each node must be maintained. All
of this is ideally done based on customer demand as reflected in the down-
stream node.
Network Operational Processes
Other processes can and should transcend the nodal processes and exist in
the network, or business-to-business dimension. Examples are Lean/Six
Sigma, or regulatory traceability, tracking, and quality requirements. With
a Lean approach, forecasts can be used for planning purposes and contrac-
tual arrangements, and demand can drive the production rate and supplier
deliver rates throughout the network. This not only potentially reduces
operating expenses and reduces working capital, but can also create capac-
ity for growth by helping the network use its capacity more efficiently,
which allows individual companies to reallocate capacity to growth prod-
ucts.
Enterprise Operational Processes
It is the manufacturer’s responsibility to create and administer a responsive
supply network which meets its needs. Doing so involves planning, de-
signing, and executing across multiple supply network partners to deliver
products of the right quality and design, in the right quantity and packag-
ing, at the right time and place. Once the composition of the network has
been determined, systematizing the network requires configuring the net-
work and connecting the nodes, and deploying the infrastructure. This can
be a challenge as the number of nodes increases. In operation, there needs
to be a central point for monitoring performance and feedback from all of
the nodal partners and for maintaining and optimizing the overall process.

Regulatory Issues
Although government regulations do not directly drive the need for CMM
systems, they do mandate certain reporting requirements as well as certain
manufacturing practices that may be difficult or impossible without these
systems. Some of the regulations which are driving manufacturers toward
a more unified approach to systems are discussed here.
Sarbanes-Oxley Act (SOA)
The Sarbanes-Oxley Act of 2002 (SOA) affects corporate governance, disclo-
sure and financial accounting. Among other provisions, it requires that
CEO’s, CFO’s and independent auditors and committees certify the accu-
racy of financial statements and other disclosures, document its existing
controls, and a management assessment of the effectiveness of internal con-
trols and procedures and financial reporting. Operational performance and
effective business process management are key impact areas for the plant
floor.
WEEE
The European Waste Electrical and Electronic Equipment (WEEE) Directive
became European law in February 2003. It sets collection, recycling and
recovery targets for all types of electrical products.
By 2007, European manufacturers will be responsible for the treatment of
waste from electric and electronic equipment. WEEE targets have not yet
been established in the U.S., but the EU precedent may be a bellwether of
how future regulations might affect the U.S. electronics industry.
These rules will force even tighter linking within already complex supply
networks. In order to establish closed-loop product lifecycle management
(PLM), manufacturers will have to design and engineer products for reus-
ability and sustainability. Many of today's business systems look
downstream. Tomorrow's supply networks will have to look backward as
well. To exploit potential opportunities from the return flow of products
and to adequately handle the increased exchange of information that WEEE
responsibility will trigger, manufacturers will increasingly need support
from sophisticated systems.

The EU has set the stage for a new integrated business ecosystem. As sup-
ply networks adjust to the return flow paradigm, the current selling and
buying mechanisms will change. This will impact the complete product life-
cycle, and will drive more process connectivity through to the shop floor.
TREAD ACT
The Transportation Recall Enhancement Accountability and Documenta-
tion Act (TREAD Act) represents a sweeping piece of legislation that will
require large manufacturers and their OEMs to report on a wide variety of
warranty, customer service, and legal data to the federal government, spe-
cifically, the National Highway Traffic Safety Administration (NHTSA).
The TREAD Act includes provisions in four major areas: 1) Tire Safety, 2)
Child Passenger Safety, 3) Vehicle Rollover, and 4) Defects Re-
porting/Non-compliances/Recalls.
The implementation of this legislation includes dashboard tire pressure
monitoring systems on consumer vehicles, warranty issues, and safety re-
lated reporting such as accidents caused by defects. However, the most
relevant issue that impacts manufacturers of either components or fully as-
sembled vehicles is the TREAD Act Early Warning Reporting clause. This
clause requires manufacturers to rapidly report information about claims
resulting from serious injury or death, aggregate statistical data on property
damage, and all incidents involving fatalities and serious injuries due to
defects.
21 CFR 820
The Quality System Regulation (QSR) is contained in Title 21 Part 820 of the
Code of Federal Regulations. It helps to assure that medical devices are
safe and effective for their intended use. The regulation covers quality
management and organization, device design, buildings, equipment, pur-
chase and handling of components, production and process controls,
packaging and labeling control, device evaluation, distribution, installation,
complaint handling, servicing, and records.
For drug development, current Good Manufacturing Practices (cGMP) are
used. These are different than the QSR and are contained in Title 21 Part
210 and 211. The FDA is currently looking at modifying these regulations
towards a risk-based approach, which will provide a more systematic ap-
proach with regard to development and compliance.

It is the manufacturer’s responsibility to ensure that all manufacturing op-
rations comply with all applicable FDA requirements. For example, manu-
facturers must maintain a Device History or Batch Record (DHR, DBR), a
process for Corrective and Preventive Actions (CAPA), and a process for
investigating, evaluating, and documenting nonconforming products.
Formal processes are also expected for complaints, inspection, and test pro-
cedures, together with evidence that the formal processes are being
adhered to throughout the development and manufacturing activities. In
addition, there must be proof that these processes are tied to management
review and control.
The FDA audits medical device manufacturers on their ability to manage
the complaint handling process (21 CFR Part 820.198) because it provides
the FDA with a systems approach towards assuring that the manufacturer
is compliant with the QSR. Managing customer-focused quality is the most
important part of a medical device manufacturer’s existence. Not having
the best system in place to identify, solve and prevent quality problems in
the field presents a very high risk to manufacturers. Preventing and
quickly solving quality problems significantly affects a manufacturer’s bot-
tom line by eliminating costs of recall, logistics, testing, scrap, overhead and
other related areas.
Recommendations
Embrace CMM. Manufacturers should use CMM to model their enterprise
a real-time enterprise, operating within a value network, and to visualize
the interplay of systems and technology, business processes, management
control, and business goals.
Focus on Business Processes. Making business processes the focus of man-
agement’s attention can yield significant operational benefits. Managers
should begin to think about new ways of doing business.
Get experience with the new BPU platforms. If you haven’t piloted one of
these platforms, do it now.
Involve IT managers in educating business managers about the new possi-
bilities BPU can enable. Team IT managers and business managers to
create specific business visions.

Analysts: Greg Gorbach, Robert Mick
Editors: Ed Bassett, John Moore, Andy Chatha
Distribution: All EAS and MAS-D Clients
Acronym Reference: For a complete list of industry acronyms, refer to our
web page at www.arcweb.com/Community/terms/terms.htm
AMHS Automated Material Handling
System
APC Advanced Process Control
APS Advanced Planning & Scheduling
BPM Business Process Management
CMM Collaborative Manufacturing
Management
CPAS Collaborative Process Automation
System
CPM Collaborative Production Mgmt.
CPS Collaborative Planning &
Scheduling
CRM Customer Relationship Mgmt.
CSR Customer Service Representative
EAM Enterprise Asset Management
EMS Electronic Manufacturing Services
ERP Enterprise Resource Planning
LIMS Laboratory Information
Management System
MRP Materials Resources Planning
NPI New Product Introduction
OpX Operational Excellence
PAM Plant Asset Management
PDM Plant Data Management
PLM Product Lifecycle Management
(/D = Design; /S = Support)
PSC Plant Services Connector
PSM Product Service Management
SBA Service-Based Architecture
SBI Service-Based Infrastructure
SCM Supply Chain Management
SCPM Supply Chain Process Management
SEM Strategic Enterprise Management
SFA Sales Force Automation
SRM Supplier Relationship Management
TMS Transportation Mgmt. System
VMI Vendor Managed Inventory
WMS Warehouse Management System
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ARC Strategies is published monthly by ARC. All information in this report is
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