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The Cost of Comfort: How Doing Nothing Impacts the Bottom Line
Does this sound familiar? “We’ve done it this way for twenty years, why do we need to change?”
You hear it in nearly every industry, but we all know that what may have worked twenty years ago may no longer be the most efficient or cost-effective method now, especially as our industries evolve.
Some manufacturers try to adapt software, such as ERP/MRP systems, to improve their operations. These systems, however, are designed for inventory-based manufacturing environments, not for service-based manufacturing environments, and fall short in important ways.
While industries vary in their approach to move into a digital age, in any case, holding onto old processes can be detrimental. This “do nothing differently” mentality and the adoption of old practices are cost-prohibitive and inefficient.
The Cost of Doing Nothing
Technology has impacted every industry. Besides making systemic improvements, technology has created efficiencies that we couldn’t dream of even a few short years ago. Doing nothing when the tech is available means you’ll continue to run inefficiently and at reduced profit margins. Mistakes will go uncorrected, and you’ll continue to perpetuate less than optimal performance.
Traditional ERP/MRP vs. Modern Processes
A traditional ERP/MRP management process provides robust tools for inventory management and often integrates seamlessly with other software solutions. However, it’s not built for manufacturing and can be especially cost-prohibitive for service-based manufacturing.
A modernized system, such as Bluestreak, functions independently or as an add-on for existing ERP systems. Since it’s built for manufacturing, it provides several benefits for manufacturers, especially when it comes to managing the information flow and production pathway.
The Benefits of Bluestreak
- Cost-efficient for smaller manufacturers
- Integrates with existing software
- Multiple modules to interact with various software
Traditional ERP/MRP focuses on inventory and basic planning, lacking a detailed insight into shop floor management. This can be difficult to manage as nonconformances are only uncovered when parts or products fail to meet testing.
Tracking the cause of nonconformance is nearly impossible with ERP systems. Shifting that inventory focus to process improves efficiencies through shop floor tracking, and real-time notifications move the focus to the process. It makes it easier to identify when non-conformances occur. Rather than waiting until the end, you can identify the problem when it happens and fix the issue to prevent it from happening again.
Over time, these efficiencies add up. If you can reduce the amount of scrapped material, for example, you’re saving time, money, materials, and manpower. The cost of doing nothing and sticking with the traditional inventory tracking represents a significant lost opportunity. Take that over weeks or even years, and you’re throwing money away.
Shop Floor Tracking
When you focus solely on the end product, you’ll only discover that something has already gone wrong. You may not even be able to diagnose where in the production pathway that the error occurred. In a simple shift from the end-of-process tracking to shop-floor-tracking, you can identify the quality issues as they occur, stopping production on that item and preventing the waste of materials.
Here’s an example. Let’s assume that a production line has seven steps, and Step 3 is having quality issues. If the full production sequence is allowed to proceed, all the materials used in Steps 4 through 7 are wasted, regardless of whether any additional issues occur. Assuming each step uses the same amount of materials, that’s 57% of wasted materials compared to stopping production at Step 3.
Doing nothing with your current end-to-end process results in the cost of that 57% of scrapped materials.
Product Pathway Management
Material traceability is a common challenge, especially for hygienic systems associated with the life science industries. Many production spaces that need full-material traceability are slowed down to allow for full tracking, which is often performed manually.
The cost of doing nothing to improve your process could impact your production capacity. Solving this can sometimes be as easy as product tracing throughout the production pathway.
Shifting to full process data management allows for all material data to be tracked at each stage of manufacturing. Throughout the shop floor, the materials that entered production are tracked and all added materials are also tracked, giving a full picture of what materials were used. This inclusive traceability provides a material traceability report for any hygienic commissioning needs.
Corrective and Preventative Maintenance
We’ve already covered the many ways that real-time notifications make a big difference, but it gets even better when you look at corrective and preventative maintenance. Traditional ERP/MRP scraps non-conforming product before distribution to consumers but suffers from investigating corrective measures in equipment handling.
Upon shifting to an in-process monitoring system, corrective and maintenance needs are identified at a specific step in the process. Tracking at this level shows when a step in the process starts to drop in performance. This becomes an indicator that maintenance is needed and allows maintenance to occur before the machine breaks down. Tracking performance of the equipment throughout production—knowing when performance is dropping and when it is running smoothly—can help shift the preventative maintenance schedule.
Traditional ERP/MRP follows a predetermined schedule for preventative maintenance. Shifting to in-process focus, the output from each piece of equipment can indicate when preventative maintenance is coming up before it impacts the quality of the product.
For example, traditional manufacturing procedures may indicate quarterly maintenance of their equipment. This maintenance may require a multi-day shutdown. As tracking equipment performance starts, you can track the performance and look for indicators for maintenance needs. You might discover that your equipment can run smoothly for five or six months, rather than three. This brings your shutdown windows from four times a year to possibly two.
Half the shutdown time = more production time (and more revenue from production)
Half the shutdown time, half the maintenance, half the manpower, half the materials—it all adds up to significant savings.
In this instance, the cost of doing nothing can result in days of lost production and excess materials. Incorporating shop floor tracking software prevents excess work.
Audit Trail for Equipment and Products
Traditional ERP/MRP systems require manual input data for material tracking and manual input for equipment maintenance and repairs. A more intuitive tracking platform provides real-time data that is helpful in so many ways.
Audits are not fun. They take time and tie up personnel. They may shut down production at times. Bluestreak creates an automated audit trail that can cut the time to complete audits by as much as 50%.
By shifting to full-shop floor-tracking that provides step-by-step audit documentation for materials and equipment used, you can see what equipment is being utilized, what materials are loaded, and where parts are in the production process at any time. If materials are changed mid-production, the new material traceability documents are included in the real-time tracking and reporting.
Complete reporting from start to finish of a product creates exceptional audit trails that don’t need to be hunted down when an audit does occur. Simply pull the documents based on the date range, and include everything from incoming products, materials, equipment, and staff to inspections performed. Having the documents at your fingertips at a moment’s notice saves time and effort and makes audit a breeze.
Capacity Planning and Equipment Utilization
Capacity planning with traditional systems often looks rather bracketed and doesn’t typically incorporate intuitive planning for maximum production.
Intuitive planning should incorporate the most efficient production speeds for each piece of equipment. Just because a piece of equipment can run at 200 pieces an hour doesn’t mean it should. If the quality of the product suffers at maximum speed, the real production rate should be much lower.
With Bluestreak’s tracking software, you can do more than track equipment efficiencies—you can plan around them. As you discover the production rate that yields the highest turnout within quality parameters, you can make plans accordingly.
The cost of doing nothing is scrapped material and additional wear and tear on the equipment. If you take these metrics a step further, equipment utilization can be reviewed from the shop floor data and manufacturing efforts staggered to increase overall production across all pieces of equipment.
As a client requests design changes, the process typically follows drafting, modeling, mocking up (prototyping), testing, reviewing, and repeating until it’s exactly what you need.
For each of these iterations, modifications to the equipment need to be incorporated as well. Traditional manufacturing is slow to adopt design changes, which increases waste and expense for each iteration. A design change in traditional manufacturing might take weeks to implement.
The cost of this outdated model is drastic in time and money. It raises your cost of production and lowers your profit margins. If you’re not careful, it can make product costs so high that you can’t make money off a job, or the price you have to charge is too high to be competitive.
When a competitor is already implementing Bluestreak’s extensible platform, the process is much more streamlined, faster, and less expensive. They’ll have a significant advantage in the marketplace unless you can match.
Design and modeling can be implemented without changes to the equipment setup. It just requires programming. A real-time tracking platform to monitor progress through design changes and manufacturing mock-ups is a great example of utilizing technology to improve and simplify an outdated process.
When a customer asks for a prototype, the last thing that you want to do is clear your shop floor, modify equipment, and spend several weeks creating it. It takes time to design, produce prototypes, and make modifications to provide a prototype that they may not even purchase in the end.
With traditional ERP software, planning and strategy are greatly defined. When the prototype doesn’t come out as anticipated or fails operational testing, traditional ERP fails in helping to identify and isolate where process changes or improvements are needed. Bluestreak goes beyond the predetermined quality checks in the traditional ERP systems and tracks progress throughout, allowing for faster identification of needed adjustments.
Cost Model Comparison
As we dive into the pricing for various systems, we’re going to split it up into software pricing and functional pricing. Here are two questions that you need to think about first:
1. How much would it cost you to do nothing and continue using your old software?
2. What does this comfort level translate to in terms of the value of your business and bottom line?
When purchasing ERP software, it’s important to consider which modules you want and need, as they are often not included in the base subscription pricing. Once you purchase the software subscription, you have to implement it, which includes the selected modules (and maybe ones that you didn’t realize that you needed). You might also have to pay for any customizations requested, consultant fees, necessary hardware, and team training. Once you’re up and running, you might also find yourself paying for IT and customer support if your organization needs more than the basics, as well as maintenance and upgrades to keep your system up to date.
To compare, we’ve looked at ten ERP systems, the price to start, and the costs to maintain them. Various systems range from $10 per user per month on the low end, up to $400 per user per month. This covers the monthly ongoing costs, as well as implementation, consulting, or maintenance. Only one company has real-time updates throughout the manufacturing process. Only one indicated that price increases would stop for large organizations.
Of the systems compared, we’ll compare one with “Flat-Fee-Pricing” and one with “Per-User-Pricing” (SAP Business by Design). The SAP ERP system’s cloud-based software uses a pay-per-user pricing. There are unlimited licenses available, but a minimum license of ten users.
For the sake of comparison, we’ll look at the cost for facilities with three, ten, and eighty authorized users. With traditional ERP software, production management doesn’t usually exist. For our comparison, the most commonly implemented ERP software has no materials management and no sales order management, and only the production management module is for schedule.
Considering that the traditional ERP system doesn’t have the real-time production and material-tracking capabilities as Bluestreak, there is an opportunity to integrate it into what you already have and achieve better success. This next comparison is taking the traditional ERP system and feeding in modules from Bluestreak for various users.
Example Licensing Scenario
Let’s consider the eighty-user manufacturing facility. Only ten users need add-on functionality of an ERP system’s e-commerce features. The other seventy users would only need the baseline software. In this scenario, the total cost of the software is $800 per month, in comparison to all eighty users using the pay-per-user ERP choice at a rate of $12,000 per month.
With over $11,000 per month savings, the cost of comfort and sticking with your traditional software is tremendous.
Now, we mentioned that the top ERP software doesn’t do materials management (only inventory). They also don’t do production management, except for scheduling.
Whether you’re in the automotive, aerospace, healthcare, or other industries that have adopted digital solutions for efficiency and cost-effectiveness, the implementation of Bluestreak can help you save even more money than just the monthly fee. While we’ve already covered real-time notifications, we’re going to do it again because the benefit is so important, we want to make sure it’s top of mind when evaluating your choices.
The Value of Change
Your traditional ERP software provides significant benefits, but they are in areas that you don’t need in service-based manufacturing. On the flip side, traditional ERP offerings are lacking in other areas that make manufacturing successful. When you stick to the old ways, the cost of doing nothing is significant over the months and years.
As an example, we are going to look at a hypothetical product that requires a three-step manufacturing process. Each step in the process is defined by either equipment or material. This hypothetical product is hereby referred to as Product X.
Product X begins with a base Structure P worth $1.25 each.
In Step 1, $0.37 of Material A is added to Structure P. The staff and equipment cost, including inspection cost for Step 1, is $0.55. This is now Structure P(a), worth $2.17.
In Step 2, $0.80 of Material B is added to Structure P(a) at the same piece of equipment. The staff and equipment cost for Step 2 is $0.40. This is now Structure P(b), worth $3.37.
In Step 3, the final step, Structure P(b) moves to a new piece of equipment and receives $0.15 worth of Material C. The staff and equipment costs in Step 3, including final inspections and quality testing, is $1.10. We have achieved Product X at a cost of $4.62.
Material Traceability and Audit Readiness
Using traditional ERP software to track Product X, we would have inventory in for Structure P and inventory out for Product X, with a production schedule to show the flow of materials and products. If throughout the production sequence, Material B has three batches that are used, traditional ERP would not have a record of which specific items of Product X received each of the three batches. Material traceability would be done manually and typically only when requested by the client, sometimes at a premium expense.
Looking at how Bluestreak would track the same product, we would have records of not only inventory in and inventory out but also inventory at each step of the way, including:
- Use of materials
- Quality inspections and testing results
- Which staff members were operating which equipment
- Certifications of equipment and operators
This level of traceability creates an audit trail for either material traceability reports or other audits as necessary, without having to specifically plan for the documentation. These reports are available without a request from the client and cost nothing extra to execute and maintain. This is one example of having real-time notifications through Bluestreak to track what is occurring at any step.
The cost savings through Bluestreak can improve your profit margin or be passed on to the customer to provide a more competitive price without sacrificing the quality of Product X.
Now, let’s look at an execution error with traditional ERP software. Let’s assume that Structure P(b) was almost identical front and back, and the staff moving Structure P(b) from Step 2 to 3 loaded the product in backward (also assuming a not fully automated transfer between equipment). Being that it’s almost identical, Structure P(b) moved through Step 3 without error but failed inspection.
The traditional ERP system would note the Structure P inventory and the decreased Product X inventory, recording that there was an error, but would have no production management means to implicitly identify where the error occurred. The entire batch would be allowed to process through Step 3 before anyone knew that anything had gone wrong.
Implementing Bluestreak means you would know when the error occurred (at Step 3) and see the status of Structure P(b) before it reached Step 3, the status of the equipment in use, the Materials B and C with associated reports, and the staff working with each piece of equipment. This level of granular tracking helps quickly identify where the error occurred and the reason that it may have occurred. That quickly eliminates excess investigations and results in faster remediation to get back on track.
This time around, the cost of doing nothing and sticking with the traditional ERP software could mean days trying to solve an equipment problem that never existed. Instead, a review of procedures and quick retraining are needed. This can be identified quickly with the high level of data from real-time notifications and shop floor tracking.
With traditional ERP, the error would not be identified until potentially, the entire batch was completed incorrectly. With the implementation of Bluestreak and real-time notifications, the error would be identified within just a few Structure P(b) items instead of the whole batch, and production could be halted and corrected without wasted materials.
Assume that the batch of Product X was 300 over a four-hour batch period. If the entire batch was scrapped due to the error of misloading between Steps 2 and 3, that is $1,386 of wasted product and an even larger amount of time investigating the root cause for the error, not to mention the lost labor costs and downtime. With Bluestreak, the product error is identified four to five items in, resulting in just $23.10 in wasted product, along with a short downtime to correct the staff on proper loading of the equipment at Step 3.
That’s a $1,362.90 savings for one small error, thanks to shop floor tracking and real-time notifications.
Over a year of production in this case (50 weeks x 5 days a week x 2 batches a day) is 500 batches. If 3% had non-conformances and resulted in scrapped material like our last example, that’s over $20,000 in scrapped material—your cost of comfort by sticking with only traditional ERP tracking.
Less Scrap through Early Identification
The last example is for Product X between Steps 1 and 2. As Material A is added to Structure P, let’s say that there is a temperature error with the equipment, resulting in the compromised structural integrity of Structure P(a). With traditional ERP software and no production management capabilities, Structure P(a) would again continue through all remaining steps.
When final testing indicates that Product X has compromised strength and cannot be sold to the customer, it is a $1,386 product loss.
We can even look at this from a timeline loss. With half a day of production scrapped, an additional $1,386 of product is behind schedule. We haven’t even looked at repair costs, but an investigation into what caused the error would be additional lost time and the lost opportunity cost due to downtime and investigation.
With real-time notifications, whether identified due to equipment monitoring or quality testing for Structure P(a) leaving the step, the quick identification can stop production before more material is wasted. If five items are wasted at Structure P(a), that’s a product loss of just $10.85 instead of $1,386. Along with quick identification to prevent further scrapped materials, an equipment error is part of shop floor tracking that can lead to quick repair or calibration. What would have been a half day or more downtime can be as little as a few minutes to recalibrate the equipment.
Don’t Get Left Behind in “Costly Comfort”
We can go through many more examples that demonstrate how Bluestreak can save time and money. With these savings, you can produce more products, lower prices for a larger competitive advantage, and increase the bottom line for your company.
Doing nothing is staying with traditional methods in an industry that is anything but traditional. You can use Bluestreak to manage your production pathway or integrate it with your existing ERP system to optimize production and provide a higher quality product with less waste.
ERP/MRP systems cost far more than Bluestreak. Why pay for functionality you don’t need, and why re-engineer a solution that isn’t designed for your business in the first place?
With Bluestreak, you get the right functionality for your business at a fraction of the price of a customized ERP solution.If you’re ready to leave manual, time-consuming service-based manufacturing tasks in the past, drastically reduce your scrap and rework percentage, gain visibility of your production floor processes, and build better relationships with your customers, contact Bluestreak for a free consultation today!