1. Iyno Advisors
Information Flow for Agility, Compliance
and Performance in Project Manufacturing
By Jeffrey Hill and Julie Fraser
Iyno Advisors
Sponsored by Deltek
Q4 2012

2. Information flow for Agility, Compliance and Performance in Project Manufacturing
Executive Summary
Prolonged weak economies around the world mean that governments and
some commercial businesses have been cutting budgets. For many projectbased manufacturers, this presents a challenge. Companies cannot continue
to operate as they have in the past and expect to perform as well. Project
manufacturing has never been easy, but in these conditions, the pressure is
on to become more agile and streamline operations to improve financial
performance.
Project manufacturers do not have the luxury of riding up an experience
curve for high volume product offerings year after year. Instead, they must
learn from similar projects, and then extrapolate, as they often build complex
product offerings from “scratch”, or modify and improve designs with low
volumes at each stage of the learning curve. Many of these products are built
under government contracts, which impose regulatory requirements and
oversight which differ substantially from high-volume manufacturing.
Business and manufacturing software applications designed for volume
manufacturers don’t fit the requirements of project manufacturing, so many
companies resort to using manual systems to manage planning, production,
and reporting. Using manual methods to manage projects only increases the
management burden and can increase the chances of production delays and
errors. Companies that integrate plant information into the enterprise
information flows can overcome these challenges and show drastic
improvements in overall manufacturing performance and financial results.
The main way companies do that is by
implementing plant-wide manufacturing
execution systems (MES) and
integrating them to ERP.
Figure 1 shows data from a study of all
types of manufacturing companies,
comparing those who use MES to
others’ ability to improve in key financial
performance areas.
60%
50%
40%
30%
20%
10%
0%
Increased ROA/RONA
3% or more
Increased Net Operating
Profit
3% or more
MES provides data to those in the plant,
and provides status updates on progress
Source: Pursuit of Performance Excellence,
© 2012 MESA International and Cambashi Inc.
to managers. This timely and integrated
information flow allows companies not
only to streamline regulatory reporting and compliance, but also to focus on
metrics, efficiency, and improvement.
MES/MOM Users
© 2012 Iyno Advisors
Others
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3. Information flow for Agility, Compliance and Performance in Project Manufacturing
Project Manufacturing Challenges
Project manufacturing is characterized by variety, in both manufacturing
processes and tasks. Even products that have been manufactured in the past
are likely to be subject to revisions and improvements. For example,
airframes are built to order, but usually have a production life of many
decades. A new order for a particular model needs to incorporate design
changes, improved materials, more efficient assembly practices – all of the
accumulated progress since the last time the model was produced.
Project manufacturers have highly specialized needs:




Tracking labor time and materials – whether contractual or simply to
quote accurately on future projects and protect profitability
Readiness for regular and stringent audits designed to ensure all
contract terms are met
Traceability requirements that extend to every item produced and
every component in each item
Compliance with government regulations such as FAR, CAS, and
DFARS
If that’s not challenge enough, contracts are different for every project, and
several contracts may cover different parts of the same project. Projects are
often grouped into programs.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Project management in this kind of environment requires a painstaking level
of detail, whether the customer is a government or commercial enterprise.
Unlike volume manufacturing,
project manufacturing can be
chaotic, a mix of unfamiliar
Planning
processes and tasks that are
to buy in
next 1-2
unique to each project. This
years
means that project manufacturers
Some
need to be adept at transitioning
use or
pilot
from one project to another, or
running multiple discrete projects
Widely in
that may have no relationship to
use
one another.
ERP
MES / MOM
Source: Pursuit of Performance Excellence,
© 2012 MESA International and Cambashi Inc.
Figure 2: Fewer than half of manufacturing companies
have MES in wide use now, compared to
the majority with wide use of ERP.
© 2012 Iyno Advisors
2
Software can help, but Figure 2
shows that only about a third of
all manufacturers use plant floor
manufacturing execution systems
(MES) widely in their enterprises,
considerably less than report
using ERP. It’s not as easy as just

4. Information flow for Agility, Compliance and Performance in Project Manufacturing
implementing software. Business and manufacturing applications for highvolume manufacturing companies don’t fit the project model of production, so
planning, production, plants, and reporting are often managed piecemeal or
with manual systems.
Many companies resort to using Excel spreadsheets to manage projects
through production. Applications like Excel don’t have built-in revision control,
which is necessary to ensure that project documents are up to date, or a
mechanism for sharing project information between design, production
planning and the shop floor. So, many companies use manual means to
manage production information, often using paper documents. Manual
workflows can introduce problems into the production process in several
areas:





Delays in communicating essential information between production
management and the shop floor
Handoffs between various parts of production can be slowed or stall
while the paperwork “catches up”
The wrong paperwork can hit the floor, with incorrect specifications or
standard work, resulting in at least paper re-work and sometimes
production re-work as well
Cumbersome processes to check production status and materials
status and materials location
Time-consuming reporting processes that require additional labor
As a result, manufacturing has little visibility or control over production
outcomes. This, in turn, can hurt overall production schedules and outputs.
Information Flow from Plant to Enterprise
Information is the key to managing production effectively, but information
needs to flow in all directions, so that all of the parts of manufacturing can be
informed. For example, production scheduling needs timely information from
the plant floor on the status of current tasks so that production management
can build accurate schedules for future production. The same information
needs to be available to purchasing so that materials or components that are
needed for production will be available when they are needed. Production is
© 2012 Iyno Advisors
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5. Information flow for Agility, Compliance and Performance in Project Manufacturing
Product
Lifecycle
Time to market
pivotal to maintaining the
product lifecycle and
supply chain, as Figure 3
illustrates.
Market and
product
planning
Product
development
Manufacturing
engineering
Ramp to
volume
Supply
Chain
Sales
Planning
Procurement
Time to Customer
Production
Planning
Production
In-service
market and
product
development
Delivery /
Service
Successful companies
recognize the value of the
management maxim: “you
can’t manage what you
don’t measure.” For any
organization, developing
metrics to assess progress
and measure performance
is a critical part of process
improvement, but it is
especially important in
manufacturing. Some of
the reasons metrics are
essential in manufacturing
include:
 Measuring
production processes
allows companies to
understand the relative
efficiency and effectiveness of those actual processes when measured
against baselines or work standards.
Metrics can be invaluable in identifying the root cause of production
bottlenecks which can affect both profitability and on-time
performance.
Along with profit and loss variables, manufacturing metrics can be
used when pursuing new business opportunities.
Metrics enable organizations and their customers to compare
performance with industry averages as well as competitors’
performance.
Figure 3: Production sits in a critical point of both the
product lifecycle and the supply chain.



Managers should consider carefully which metrics best represent production
processes, especially if results are going to be used for sales or comparison
purposes.
Manufacturing Execution Systems (MES) present an effective alternative to
manually managing projects because MES systems can support
manufacturing with the information to make better decisions in all of parts of
the production process. MES systems can provide tools for document
management, revision control, operator guidance and consistent collection of
the data needed to support both reporting and performance metrics.
© 2012 Iyno Advisors
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6. Information flow for Agility, Compliance and Performance in Project Manufacturing
MES can also move data bidirectionally into and out of
enterprise resource planning
PROJECT
(ERP) systems. Figure 4 illustrates
DATA
ACCOUNTING
COLLECTION
some of the major processes and
information flows in which MES
can play a major role. This
REVISION
PROCESS
CONTROL &
PLANNING/
means, for example, that a
MES/MOM
ENGINEERING
ASSEMBLY
CHANGES
project’s current progress is
available to all of the stakeholders
in the enterprise. Information
PARTS & SUBQUALITY
ASSEMBLY
from the MES system can be used
CONTROL
INVENTORY
in such areas as project
accounting, costing, purchasing,
PLANNING &
SCHEDULING
and customer service. When MES
is coupled to ERP, the business
Figure 4: MES provides critical information in a number of
can benefit even further. This
business processes, informing both
information flow between the
plant and enterprise decisions.
plants and the
enterprise
ACCOUNTING &
FINANCE
presents an
CONTROL
PROJECT
INVENTORY
MANAGEMENT
integrated
Full Traceability
approach to
managing areas
MATERIALS
PRODUCTION
MANAGEMENT
such as business
INTEGRATED ENTERPRISE
INFORMATION SYSTEMS
development,
ASSET &
Plant/MES
Business/ERP
materials
PROJECT
MAINTENANCE
MANAGEMENT
MANAGEMENT
management,
project
Comprehensive, timely business views
management, and
QUALITY
DELIVERY
MANAGEMENT
BUSINESS
financial tasks, as
RECEIVING
DEVELOPMENT
Figure 5 shows.
COMPLIANCE
& DOCUMENT
MGMT
Figure 5: Having accurate and timely plant and enterprise information
flowing in an integrated system feeds every aspect of the business.
Performance Payoff from MES
MES systems provide the right set of tools to manage all aspects of
production in the highly variable manufacturing environment that is common
to project manufacturing. MES solves many of the issues that are
characteristic of project manufacturing:

© 2012 Iyno Advisors
Project variety. MES systems are designed to manage multiple
projects at the same time while maintaining effective control over
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7. Information flow for Agility, Compliance and Performance in Project Manufacturing
production for each project. Figure 6 illustrates that manufacturers
using these systems are far more likely to be able to increase the
variety of products through the plant. Their memories simply are not
overtaxed by that as people and paper
80%
systems are.
70%
 Changes. Project
Increased #
manufacturing is characterized by
60%
of variants /
period 1.1%constant changes and revisions to
50%
3%
product design and assembly. An MES
40%
system enables manufacturing to keep
30%
track of all of the variables for each
Increased #
20%
of variants /
unique project, as well as for multiple
period over
10%
3%
projects.
0%
 Traceability and
MES/MOM Users
Other
accountability. Many products built
by project manufacturers require
Figure 6: A much larger portion of manufacturers
accountability for costs and labor, as
using MES were able to increase the variety of
well as the requirement to trace
products through their plants.
components or parts from supplier
through final assembly. This is true for most commercial as well as
government contract project manufacturing.
 Reporting. In manual project management, reports can be difficult
and time-consuming to prepare, but MES systems can provide reports
on nearly any facet of production. Reports can be tailored to specific
roles within the organization, so that users get only the information
they need.
 Monitoring production anywhere. In response to the increasing
business use of mobile devices, MES systems are incorporating the
ability to monitor production processes at any time and place.
 Consistency in processes. MES systems provide a consistent
framework for defining and managing processes throughout
manufacturing.
 Product quality. MES enables quality improvements. Companies
achieve tighter control over product
30%
quality by ensuring that parts or
components used in assembly have
25%
the right revision level or certification.
20%
The system can also ensure that
15%
production personnel use the correct
10%
revision of production drawings and
5%
assembly procedures. Figure 7 shows
0%
that these features have an impact on
MES/MOM Users improved Others improved cost of
cost of quality 10% or more
quality 10% or more
the cost of quality as well.
 Efficiency. By reducing
Figure 7: Manufacturers using MES were more likely
paperwork and smoothing handoffs
to make dramatic improvements in cost of quality.
between the various areas of
© 2012 Iyno Advisors
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8. Information flow for Agility, Compliance and Performance in Project Manufacturing


Time to make
changeovers or
transitions
improved >10%
per year
production, MES helps to increase overall production efficiency, as well
as reducing production errors.
Ability to manage growth. Companies who use manual systems to
manage production will find it increasingly difficult to take on
additional projects without threatening current projects. MES allows
companies to manage multiple unique projects at multiple locations
with a consistent, structured approach.
Financial results. The use of MES to manage production leads to
increased efficiency in all parts of
manufacturing which will have a
salutary effect on profitability.
MES /
Figure 8 shows examples of both
MOM
operational and financial benefits.
User
Other
Average unit
contribution
margin improved
>10% per year
0%
50%
100%
150%
Average of Responses
Figure 8: Those using plant-wide manufacturing
execution systems (MES) were better able to improve
operational and financial performance than others.
The common element among these
issues is the need to control costs,
improve processes, and maintain or
enhance quality to differentiate in a
highly competitive environment.
Companies need production
information to thrive, and MES
provides the most efficient way to
manage project manufacturing.
Flowing Information Feeds Competitiveness
MES is proven to increase the overall efficiency of production operations, but
when MES is used in project manufacturing, it can be a powerful tool for
managing projects through all parts of the organization. The bi-directional
flow of information between plant floor and ERP informs all of the enterprise
about the current status of every project. With this increased visibility
companies can to exert full control over every aspect of a project from design
to manufacturing to the customer and through its lifecycle.
MES provides a new level of accountability for production planning,
scheduling, process control, and production and supplies the right information
to eliminate production bottlenecks and manual systems. It can also support
continuous process improvement even on very low volume products.
By making information flow, MES enables companies to tame the chaos and
complexity inherent in project manufacturing. Companies using MES
integrated with ERP find that projects flow much more efficiently. The result
is that customers gain a better view into the status of their projects and a
higher level of confidence in the manufacturer. Thus, the manufacturer’s
revenues and cash flow improve as well. In challenging times, this can be the
key to not only surviving, but thriving.
© 2012 Iyno Advisors
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9. Information flow for Agility, Compliance and Performance in Project Manufacturing
About Iyno Advisors
Iyno Advisors is an independent advisor on how
manufacturing and production companies can best
benefit from software applications. Julie Fraser,
the Principal, has 25 years of experience and
passion in driving healthy understanding of
opportunities that can drive added profitability and success. Associate Jeffrey
Hill has a similar length of career in IT and as a writer and industry analyst.
Our team is experienced enough to add significant value and insights to the
projects we undertake.
Contact Julie directly at Julie@iyno.com +1-508-362-3480
About the sponsor:
Deltek
Deltek is the leading global provider of
enterprise software and information
solutions for professional services firms and government contractors. For
decades, we have delivered actionable insight that empowers our customers
to unlock their business potential. 15,000 organizations and 2 million users in
over 80 countries around the world rely on Deltek to research and identify
opportunities, win new business, optimize resources, streamline operations,
and deliver more profitable projects. Deltek – Know more. Do more.®
www.deltek.com
800.456.2009
© 2012 Iyno Advisors
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