Volume 6 Issue 8 September 2005
Technology: A Necessary Evil
by Craig Yamauchi
Similar to most manufacturing industries in North America, door and window manufacturers have continued to invest in capital equipment to automate their manufacturing process, realizing many of the tangible financial and production benefits immediately. However, unlike their peers in other manufacturing industries, the vast majority of door and window manufactures have lagged in their investment in technology (software) and the resources required to leverage technology that would allow them to maintain and expand their competitiveness in their respective markets.
Ignoring the Software Component
During the industry’s building boom, many manufacturers simply added resources to accommodate their growth in sales, maintain acceptable service levels and meet competitive production lead-times. Yet, due to increasing material and labor cost as well as significant pricing pressure, overall profitability has not increased proportionally for the manufacturers; thus, bigger has not always resulted in better profits for the owners, employees and investors. It is estimated that more than 75 percent of door and window manufacturers have legacy software systems. They are running their businesses without the functionality required to meet the changing demands of dynamic markets and customers. These new legacy applications have the modernized tools to ensure increased profitability with any future market growth or any contraction in the years ahead.
In the 1980s and 1990s virtually all of the software systems available were designed for manufacturers of standard products, with most being developed around a traditional Manufacturing Resource Planning/Enterprise Resource Planning (MRP/ERP) foundation. In this same period, demands of the customer for doors and windows have shifted dramatically from requiring standard products to demanding customized products in all shapes and sizes. When the nature of demand changes (more custom designs, for example), or when there is a transformation in the methods of demand capture (e.g., dealers wanting to enter specifications directly through the Internet), legacy systems have been unable to accommodate these changes easily. This has required the manufacturer to make dramatic alterations to its existing software systems or operate the enterprise on several different, general non-integrated systems.
There are other industry challenges that cannot be addressed adequately by continued expansion and investment in existing legacy technology. These include:
Increasing Product Complexity. Changing market conditions have dictated increased product options; architectural shapes, frame styles, colors, special glass types and custom grid styles. Complex, time-consuming and expensive coordination across all departments is required to maintain the existing product lines and roll out product changes effectively and new product lines as required.
Shorter Lead Times. Competitive pressures are forcing the overall order fulfillment lead-time to be reduced. The actual production lead times are a relatively fixed part of this overall lead-time, forcing attention to other areas of the business to achieve lead-time reductions and increased efficiencies. The pre-production lead-time is the most critical factor here–getting sales orders into the system quickly and accurately. Non-integrated software systems cannot support the sophisticated production and backlog analysis required to accurately promise orders. Integrated constraint based production scheduling tools ensure the production lines are operating as efficiently as possible.
Electronic Quoting. Increased access to technology within the established customer base has put pressure on window manufacturers to automate the traditional price book method of quoting products. Customers demand quicker quote turnaround, accurate prices, validated product specifications and professional output documents to communicate the quote to their customers. Online order tracking and customer information is now a minimal expectation, with automated quoting and order tools rapidly becoming a de facto requirement.
Operations Expansion. Organ-izational growth, whether organic or as a result of acquisition activity, requires systems that are able to accommodate custom manufacturing activities seamlessly across multiple facilities. Multiple manufacturing sites, producing complementary or supply-chain support products need to be integrated into the entire order fulfillment management process from quoting lead-times to a customer through real-time manufacturing order management.
As with all manufacturing sectors, the winners and market leaders of tomorrow will be those manufacturers that leverage technology most effectively to meet the new market demands. It will no longer be solely the product innovators or those with the lowest price or best quality that sustain growth. In our new competitive marketplace, manufacturers will be challenged by the realities of the new digital marketplace domestically and internationally. There will be persistent market consolidation, increased competition for customers and significant leveraging of the Internet, which is already changing the pace and manner of how business is being conducted. Manufacturing executives can no longer view their information systems department as a cost center, but as their strategic informational profit center with the highest return on investment. The paradigm shift that must be realized by executives of the door and window industry is that there has been an on-going value shift towards not capital, land, or labor, but information itself. Investing in the modernization of technology is the necessary evil of the future.
Craig Yamauchi is the president of Friedman Corp. in Deerfield, Ill.
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