DEMAND VALUE BALANCING – THE CONCEPT OF INTER AND INTRA MANUFACTURING ENTERPRISE ECONOMY B

DEMAND VALUE BALANCING – THE CONCEPT OF INTER AND INTRA

MANUFACTURING ENTERPRISE ECONOMY BALANCING

Dr. Lim See Yew

Gintic Institute of Manufacturing Technology

71 Nanyang Drive Singapore 638075

Mr. Goh Yuan Sheng Victor Mechatronics Department, School of Engineering, Temasek Polytechnic,

21 Tampines Avenue 1, Singapore 529757

Tel: 65 780 5502, Fax: 65 787 4958, Email Address: gohys@tp.edu.sg

ABSTRACT: Manulogistics inefficiencies and non-value added activities within an enterprise have always been the twin engines of concerns. In attention to continuous process improvement both on applications and strategic levels, the world has seen many advents of methodologies and systems that attempt to streamline the value chain process. Advance technologies in the boundaries of supply chain management, data warehousing, product data management, E-commerce, manufacturing execution system and enterprise resource planning are some of the ’90s fundamentals that promises to be the bedrock of optimal waste management, i.e., strategic management of inventory, manpower, and manufacturing. However, these improvement schemes are canonically structured on an intra-model, although some of them have gap routes management on an inter architecture. The motivational thrust of any organization to adopt the manulogistics and management systems lies in bottom line driven aspiration. To that end, the issue of balancing supply and demand comes into play. The concept of Demand Value Balancing, hereafter referred to as DVB, attempts to provide control and responsiveness not from the supply or demand chain management consideration, but from the inter-responsive load balancing between the inter-value chains between companies. DVB is presented in this paper both conceptually and as implementation via economies agents that addresses load replenishment in the sense of allowing both an enterprise and clients economies to simultaneously reduce the operation costs and inventory levels. By allowing the DVB agents to forecast, and load balance between the different manufacturing and inventory functions of inter-organizations, autonomous productivity re-generation will be evidence.

THE VALUE CHAIN

The concept of value chain as proposed by Michael Porter in 1985 looks into the various disparate functions within an organisation, and their collective efforts in performing strategically important activities more cheaply or better than its competitors. The value chain serves as a basis for both strategic cost analysis and cost management generally. General activities that make up the value chain for an organisation would include research and development, production, marketing, distribution, customer service, strategy and administration.

The meaning of value chain has been rapidly evolving, as more and more attention has been paid to the information that is captured about every link in the order-production-sale cycle with the intent to create a knowledge based organisation, see figure 1. This effort is ever more intense with the increasing advents of numerous information technologies leading to truly accelerated

value chain by promoting risk-taking by both producers and consumers. This arrangement results in a classical economics of money velocity.

In alignment with these innovations, aplenty applications have entered the market space that provided platforms leading towards technology-assisted primary and secondary value chain economies.

Figure 1. Analysing the Value Chain for the build up to a Knowledge Based Organisation

THE CHAIN ECONOMY

Understanding the value chain is analysing the strengths and weaknesses of a company along the stages of its product flow from raw material stage to delivery. In each stage a particular activity is performed that adds value to the product. It is important to identify those areas where the company’s strengths and weaknesses lie. In order to ascertain the total cost of the value chain and the resources which it consumes; the concept of value chain economies should be attended to[1]. The step towards this is to consider the logistics chain economy and the enterprise value chain economy as two entities working together towards a singular goal, i.e., establishing the company competitive advantage, either by operating on the cost drivers to reduce costs, or by rearranging their respective economy. Figure 2 shows a simple sketch of the value chain economies.

Figure 2. Sketch of Enterprise Value Chain Economy and Supply Chain Economy

Based on this infrastructure, the next step would be to select the best mode of communication and information mining, so as to decision devolve the rate of decision making within a firm [2]. Currently, the locale government in Singapore has initiated an Electronic Commerce Master plan that aims to cradle an internationally linked e-commerce infrastructure in Singapore. The concern is directed towards encouraging thrive in consumer-business and business-business electronic transactions. This inception serves an ideal opportunity to explore internet-related technologies in ascertaining Internet value chain economies.

Internet related technologies if use correctly, will enable putting together a competitive product, from the raw material, to the process for manufacturing with highest possible quality for the lowest possible cost and just in time for the customer’s purpose. Further, the exporter would be aware of the value added to the product right from raw material procurement and its subsequent modifications till it reaches the hands of the customer. Likewise, the customer would be able to keep track, the order flow of the product dynamically. As a consequence of this flow, more efficient marketing, and sales can result in support of media marketing via Internet ordering, advertising, and pervasive customer support.

The Logistics Chain Economy

In the traditional tangible value chain, logistics management economy is characterised by a number of specific activities. a. Logistics in are associated with receiving, storing, and disseminating inputs to the product. They also include material handling, warehousing, inventory control, vehicle scheduling, and return of received goods to suppliers. b. Logistics out are associated with collecting, storing, and physically distributing the product to buyers. This may include finished goods warehousing, material handling, delivery vehicle operation, order processing, and scheduling.

In today's fast-changing competitive environment, effective supply –demand management, supported by Internet enabled technologies, and joint logistical reviews with trading partners, enables automated ordering. This hence permits retailers to respond much more rapidly to shifting consumer demands while simultaneously reducing both operating costs and inventory level[3]. From that perspective, in additional to the buying and selling model, i.e., refer to as the “Transaction Model”, it is imperative that developments have to be directed towards the “Process-centric “ logistics economy and then finally the “Knowledge” logistics model, see figure 3.

Figure 3. Knowledge Based Supply Chain Economy

THE ENTERPRISE CHAIN ECONOMY

Managing the value chain of an organisation well, therefore, requires concerted action to maximise added value consistently within minimum time frames. Traditionally, businesses are organised into functions - salesmen sell, production makes, purchasing buys and so on. Logistics management focuses on key business processes such as product change, or inventory planning, or order and stock management, all of which contribute to overall customer service, revenue and profitability. However, to ensure that an organisation internal business processes integrate in alignment with the supply economy, fundamentals set of actions, decision points, data requirements and information flows are needed to achieve the objectives of the company. Figure 4 shows a broad view of these processes.

Figure 4. Broad view of a firm business process

DEMAND VALUE BALANCING

The concept of establishing a demand value balancing mode by and between the enterprise and logistics economies on the net makes sense for the very largest companies that have highly vertical integrated manufacturing and distribution functions. Large MNCs have tremendous resources at their disposal and relatively sophisticated personnel managing their functions to accomplish this task.

However, the costs of implementing these internet structured value chain economies are quite significant, hitting $500,000 and even up to $1 million per installation. Additionally, the installation of these systems may require radical changes in a company’s structure, and can take a year or more to install. In short, this is fine for the \"big boys\sized companies, in Singapore; or any other parts of the world.

Being proponents for the manufacturing industry, we are faced with the complexity that comes whenever the task of producing a product is at hand. In our relentless effort to ensure productivity and low cost of production, we have to, from day to day, push our technology development towards new limits. Understanding a business value chain is analysing the strengths and weaknesses of a company along the stages of its product flow from raw material stage to delivery. In each stage a particular activity is performed that adds value to the product. It is important to identify those areas where the company’s strengths and weaknesses lie. In order to ascertain the total cost of the value chain and the resources they consume; the concept of consolidating functional economies should be attended to. The step towards this is to consider “.NET-ing” economies working together towards a singular goal, i.e., establishing the company competitive advantage, either by operating on the cost drivers to reduce costs, or by rearranging

their respective economies, dynamically. In short, value chain balancing. The implementation of the system is via knowledge-based agents [5].

Currently, demand value chain balancing system developed allows a low production/reseller company to allow her customers to access general and can log on to the company’s website and query orders they had placed. The query would return order numbers, purchase order numbers and order status information. The value-added contributions of this application comprise of; a. Inventory checklist and availability b. MSDSs(Material Safety Data Sheets) c. Requests for quotations d. Customer specific recommendations e. Product application guides f. Technical data sheets g. Commercial office addresses h. Involve customers in R&D process i. Conduct customer satisfaction surveys j. Receive inquiries, taking / confirming orders, order tracking, invoice

payment k. Marketing prices for commodities l. Customer requests for sales manuals or technical information

This architecture is only the first phase, other value chain management that would be implemented in later stages to lower the Total Cost of Ownership for the company include plan to add on-line ordering capabilities, sample order processing and the ability to co-ordinate orders with credit instruments such as letters of credit or corporate purchasing cards.

THE DEMAND VALUE AGENTS

The demand value agents are derivatives of the demand chain agency. These agents[6] forms a rich and robust information infrastructure that work in unison towards demand value balancing. A process evaluator and Manufacturing evaluator will share the same production database but different rule bases. The former concentrates on the manufacturing execution system requirement target at both the shop floor management and line balancing whilst the latter concentrates on Part and Group Technologies process definition in aid of easy metal and plastics parts production. The collated data and knowledge set out then serve as the cellular dynamic database and knowledge bases. The demand chain agency will resolute the necessary inventory timeline and cost required for production. A manufacturing evaluator will define the production schedule with a tabulated list of machine usage timings. Based on these shared data set, a series of Line evaluators will be generated that work collaborative with the different production line. These set of data streaming off the Line evaluators will be reported back to the central demand value agency for real time observatory control. The collection of all the information system can be linked via appropriate APIs to ERP systems. By adopting such a widespread utilisation of such an approach, the root of deadlock problems that usually arises from the fragmentation of the resources necessary towards the built of a manufacturing plant will be substantially reduced.

CONCLUSION

Being proponents for the manufacturing industry, we are faced with the complexity that comes whenever the task of ensuring that cost effective ratio of the quotation to delivery cycle is positive. In our relentless effort to ensure productivity and low cost of production, we have to, from day to day, push our research towards new limits. In the control and optimization of production parameters, reproducibility is always a consideration for which we must address to meet market and production schedules. The proposed demand value balancing with the proposal

Figure 5. Architecture of the demand value balancing scenario

of considering inter-enterprise activities as economies is but one of the many techniques that manufacturers, suppliers and logistics companies can use in support of ensuring process efficiency.

The authors are currently in the process of deploying this system for the value chain economies from manufacturers to logistics companies with target attention on the available to promise aspects. It is intended that by balancing the different economies between the two companies, the time delay and inventory management needed towards the production and delivery of supplies and end-product will be greatly reduced and consequently also create the Just-In-Time work environment in lieu of the fast turnover of the flow of value chains.

REFERENCES

1. Hammer, H. and J.Champy, 1994, “Reengineering the Corporation”, Nicholas Brealey

Publishing. 2. Chase, R.B and Aquilano, N.J., 1992, Production and Operations Management : A Life

Cycle Approach, Sixth Edition, Richard D Irwin. 3. Lim S.Y., Victor Goh, IEEE Conference on SMC, 1997, Evolutionary Systems Dynamics

in Enterprise Modelling. 4. Lim S.Y., International Conference on Computational Intelligence and Multimedia

Applications, 1997, “A lamarckism virtual product definer for CIM”. 5. Lim, S.Y., The Design of a Second Order PID Knowledge Base Management System for

Process Control, Conf. Proc. Of ICRAV,92, Singapore, C.O.7.4.1 – CO. 7.4.5, 1992. Top twenty papers award. 6. Lim S.Y., The Quantum Behavior technique (QBT) to intelligent control, International

Conference on computational intelligence and Multimedia application, 1997.