By Rick Dunne, director of sales, CyFrame
Plastics processors are living in a digital world; and technology is profoundly changing the way everyone lives, interacts, communicates, works and does business. While all industries have benefitted, perhaps none are impacted quite like manufacturing. Findings here show that integrating processes, advancing efficiency and accelerating workflow generate as much as 25% to 40% return on technology investment. And that’s just the tip of the iceberg. As technology continues its rapid development, optimizing internal processes will impact efficiency, quality, throughput and profitability exponentially.
Optimization is all about getting the most reliable, accurate and timely information needed to provide the insight to achieve the desired results faster and in the least expensive and most efficient way. These days that means the integration of robust business and manufacturing applications. Conversely paying little or no attention to the widening gap between processes and optimization technologies can quietly erode the fair market value of a manufacturing company. Although the advantages are well documented, a surprising number of manufacturers, especially those in the plastics industry, are slow to embrace these new technologies.
It’s time for an analysis.
Most plastics processors probably assume that they are on solid ground. After all, the machines are running, the bills are being paid and the lights are burning. But could they be doing even better? Do they really know where their company ranks in terms of operational optimization?
This Plastics Processor Gap Analysis will help processors learn how their company stacks up against the eight most common efficiency gaps.
GAP #1 – The Myriad of Internal Systems
Many companies operate with off-the-shelf accounting-centered software packages and make use of other customized database systems and spreadsheets. While functional and perhaps critical to their individual departments, such standalone applications severely limit collaboration. Consequently, resources operate within a “bubble” and are totally inefficient at sharing vital information in real-time. The results are redundancy, duplication and a long chain of small points of failure.
All processes are interdependent and should feed into a single system. For example, order entry affects planning and purchasing of materials, inventory management, equipment and human resources. For measurable and sustained improvements, information must be shared and readily flow through each department to facilitate real time decision making, empower employees and eradicate inefficiency.
GAP #2 – Integrated Shop Floor Data
Manufacturing shop floor data, including quality testing results, often is captured by operators via handwritten documents and then transcribed into a spreadsheet and other databases. These manually intensive processes create accuracy, legibility and time delay obstructions that fail to alert staff to potentially avoidable issues.
For plastics processors, special requirements should be considered vital, such as adjusting the standard shot weight or part weight during production to the actual weight, so that the correct amount of raw material will be deducted. Also, any scrap or waste automatically should be reallocated to the “regrind” raw material number, and it is possible to change the recipe to an alternate recipe allocates deductions to the right raw material number. Finally, using PLC controls, match what is recorded at what time from the machine with what is recorded on the shop floor screen capture.
Integrated shop floor data acquisition provides on-demand access to vital information such as quality assurance statistics, actual costs versus estimated cost for product pricing, on-time deliveries, inventory tracking information (such as raw material usage and finished product counts), used to issue timely financial information as well as lot controls and product serials, often crucial to automate shipping and invoicing documents. A good measure of having accurate live production data is the ability to readily measure the company standard to actual production profitability on a job-by-job basis.
GAP #3 – Reviewing Production Results Daily
For plastics processors, generating automatic daily profit indicators from production, such as total daily dollar contribution over material costs, on-time deliveries, production speed efficiency, downtime, rejects and raw material efficiency, is essential in taking corrective actions. Contrarily, manually compiling entries and reports to generate these daily measurements is costly, redundant and often results in month-end variances.
How much more effective would management be if plastics processors posted critical performance data to live dashboards, scheduled shift reports and readily presented core data by KPI? Access to real-time, accurate, actionable, data is key to empowering employees and driving measurable improvements.
GAP #4 – Efficient Product Configuration and Maintenance
Once the basic parameters are set in a system, it only should take only a few hours or less to create a new product including its price/cost (i.e., estimated or standard) and place an order to produce it. For plastics processors, special requirements include recipes as well as alternate recipes options, shot weight for molding and pounds per thousand feet for extruders, preferred machines, line setup and startup labor time with ability to define molds and dies as well as required line equipment (i.e., robots, calibrators, co-extruders, conveyors, assembly equipment, grinder, etc.) which should be a cost component of the product because of their significant value.
Production labor time should allow for fractional labor time since an operator may run multiple lines simultaneously or line setup might involve more than one person. Packaging instructions and multilevel bill of material, as well as setup instructions and previous problem resolutions, should be documented to be properly communicated to production operators.
Maintaining product files can also become overwhelming which can add significant costs to an operation. An automated approach to cost recalculations is critical to control costs and prices. Because of the wide fluctuation in price, only one raw material component of a plastic recipe can affect a significant increase of let’s say a few products but not the other products. Finally, if the system is cumbersome, the internal cost to do proper product maintenance can affect profitability.
GAP #5 – Excessive Manual Work
One-off exceptions aside, recording core company data or performance via paper or even spreadsheet is an indicator that technology is not being implemented to satisfy the needs of the business. This often points to data not shared or leveraged that could significantly improve management decision-making.
Do company employees physically create shipping documents such as packing slips, bills of lading, commercial invoices, ASN notifications or material certs? Are shipments scanned? Do invoices auto-generate? While largely a thing of the past, many plastics processors remain tied to manual processes such as sending emails as part of the order confirmation or execution process or even scanning postproduction documentation. This is an indication that the system doesn’t possess email communication capabilities integrated as part of the core process and likely results in reduced customer service capability with an elevated cost.
Similarly, frequent physical inventory counts are a clear sign of a lack of reliable material deduction and control. Plastics processors contend with recipes, alternate recipes, regrind usage and sometimes complex co-extrusion or multi-layer recipes adding further complexity. The automation of material deduction on the line provides reliable visibility into material on hand. Additionally, the use of inventory by location systems will track inventory quantities by precise serials and sub-location automatically, saving time and providing accurate sound financial, purchasing, shipping and invoicing information.
Things can fall between the cracks. Does the team ever forget to invoice? Customer-facing documents should be automatically generated and sent to customers directly from the system. Manuel disintegrated tasks and operations hurt the company’s ability to scale up, make training new employees unnecessarily difficult and sit at the core of inefficiency. Similarly, the ability to readily access raw material and finished goods system data is crucial to measurably improving order confirmation response times, overall machine optimization and reducing downtime while improving on-time delivery.
The bottom line is: Manual tasks steal resources, are error prone and increase overhead. All processes should feed into an integrated workflow. Everywhere elements are found that rely on manual human input are only not a source of inefficiency detractive from the ability to make accurate decisions but also are a critical point of failure.
GAP #6 – Long Month-End Closing Procedure
Automated GL accrual entries, such as material received and not yet invoiced by suppliers, as well as bank reconciliation and sub-ledger control accounts are vital to a quick month-end. And, this naturally requires a good inventory system. Effective monthly closing procedures are crucial for ensuring the accuracy and timeliness of financial accounting records and are paramount to ultimately support more informed decision-making.
Best practice is that financial statements should be generated within five working days of the month’s end.
GAP #7 – Scheduling and Planning Production
Using whiteboards and spreadsheets might do the job but they are very time-consuming, and a poor way of sharing planning information with production and customer service teams. Although functional in smaller molding and extrusion facilities with good management controls and personnel, manually planning production in a silo rarely contributes to scaling up the business volume. This is even more rare in a three-shift, 24/5 or 24/7 environment when the business is focused on optimizing machine utilization.
Such methods fail to take into consideration industry specific factors such as tooling efficiency by machine, actual performance, overruns and its impact on downstream equipment, resources and material. Any mold, die, line equipment or machine scheduled to be under maintenance should automatically be flagged by the production schedule to avoid conflicts and optimize the production schedule.
GAP #8 – Determining Internal Improvements
Arguably, the most important gap among plastics manufacturing companies is the lack of a continuous process improvement plan. This can be achieved by assessing current systems and processes to identify areas of inefficiency and improvement opportunities. Through data analysis and process mapping, teams can identify key bottlenecks and implement targeted solutions.
Industry-specific ERP management consultants should drive this assessment as part of a discovery process, supported heavily by industry experience and best practices. This provides the needed structure and expertise rarely found within the manufacturer’s management arsenal. Moreover, this helps to build the capacity and capability of employees to sustain process improvement over time.
Improvement plans should be developed with input from key experienced members of the team, assisted through external expertise that can provide insight into best practices that can increase efficiency, reduce costs and improve overall performance and how to properly implement them.
Where Do Processors Stand?
While it’s likely that processors only may experience some of these above-mentioned technology gaps, it’s essential to understand that all deficiencies take a toll on the business. It’s increasingly critical to recognize the benefits that integrated, plastics-specific, systems and processes deliver and to strategically leverage those improvements, either in the short or medium term to strengthen the overall operation, from end-to-end.
When embraced and properly implemented, today’s digital technologies are delivering significant results. But, these technologies aren’t a one-size-fits-all proposition. For those getting started, the first step is to work with a plastics industry ERP consultant to help select and implement the system that fits each company’s specific needs and budget.
Rick Dunne is the director of sales and partner at CyFrame. He has dedicated his career to helping plastics manufacturers identify and resolve inefficiencies in their operations in order to scale for growth. CyFrame is the leading international provider of best-of-breed ERP business and shop floor software solutions dedicated to improving productivity and profitability exclusively for the plastics manufacturing industry.
More information: www.cyframe.com or email [email protected]
