High-volume production, razor-thin margins
Global rollout of intelligence solution shaves cost per can for packaging vendor
By Malcolm Wheatley, senior contributing editor -- Manufacturing Business Technology, 4/1/2006 7:00:00 AM
With 23,000 employees, $5.6 billion in revenues, and no fewer than 90 plants in 22 countries, Rexam is one of the largest manufacturers you've never heard of. The reason for the London-based company's relative anonymity isn't difficult to discern. It's in the packaging business. So without knowing it, millions of consumers touch its products likely several times daily.
Yet size is relative. Rexam is the largest beverage-can maker in Europe and South America, but only the second-largest in the Americas as a whole—and merely the No. 3 player in the important U.S. market. This is so despite that 43 percent of its sales are in the Americas. In other product areas—pharmaceutical, food, and cosmetics packaging—Rexam is even further from market dominance.
More telling, Rexam is dwarfed by its top 20 customers—international giants such as Coca-Cola, Unilever, Red Bull, Heineken, Anheuser-Busch, Pepsi-Cola, and Carlsberg, which account for 60 percent of sales.
Winning business from customers like these calls for high-volume production based on razor-thin margins. Business can be lost to a competitor delivering a can just a fraction of a cent cheaper.
That's why a metrics-driven approach to improving operations efficiency is deeply ingrained within Rexam's plants. It's also behind the global rollout of Acumence's plant-level manufacturing business intelligence solution for real-time insight to plant productivity.
Eighty percent of Rexam's revenues come from beverage packaging, and it owns 23 percent of the global market for beverage cans, with 17 U.S. plants, 15 in Europe, seven in South America, and one in China.
"Everything we do to make our equipment run better delivers value to our customers," says Rexam CIO Paul Martin. It's part of the company's strategy. Growth comes from delivering "exceptional customer value." This, in turn, is best achieved through world-class business processes and operations efficiency.
Acumence's Plant Analytics Server creates a record of plant performance—including high-resolution data from equipment—while associating context with it, such as which manufacturing order was running, which operator was manning it, and what the running speed was. It tracks downtime and quality-related events, making available highly granular machine-level business intelligence. Delivered by means of Acumence-generated alerts, reports, dashboards, and ad-hoc queries, gathered intelligence drives productivity gain.
Intelligence basics
Many of the basic technologies needed for better manufacturing intelligence have been around since the 1990s. Where the Acumence solution differs, says Chris Chandler, company cofounder and VP of operations, is that recorded data is published to lend itself to efficiency improvement for a wide variety of roles: operators, manufacturing engineers, shift managers, and plant managers, for example.
"We don't just capture data from programmable logic controllers and time-stamp it. We contextualize it, and it's available in a user-friendly format that's easy to leverage to boost productivity," says Chandler.
Better still, adds Joe Jablonski, fellow Acumence cofounder and president, the Acumence database acts as a single version of the truth.
"It transforms meetings from 'discovery sessions' to 'action sessions'," he says. "There's no time wasted in fact-finding or disputes. Meetings aren't debates about what happened: you begin with a minute-by-minute breakdown of what you know happened—and can see right away how to prioritize improvement actions."
A small raft of software vendors have emerged with products based on cheap computing power, Internet standards, analytics, and portal technology to deliver plant "intelligence" or "performance" packages based on data aggregation and information dissemination. Acumence is focused on high-speed, continuous, or discrete manufacturing. In contrast, Parsec Automation has pharmaceutical industry experience, while Activplant is found primarily in automotive.
Must be top-down
World-class business processes are imposed from the top down. Rexam, in recent years, replaced legacy systems with SAP, augmented by reengineered order-to-cash, procure-to-pay, and demand-to-supply business processes.
But operations efficiency, more vexingly, is very much a "bottom-up" affair. Every machine in every plant contributes to it. Worse, machine productivity is impacted by external influences—including maintenance and quality-management practices, as well as day-to-day operations management.
It's this susceptibility to external influences that had significant impact on Rexam's rollout of the Acumence technology and its Plant Analytics Server.
In July 2000, when Rexam acquired Chicago-based American National Can, the Acumence solution had already been in the mix there three years, explains Martin. At the time, Martin was CIO not of Rexam, but of American National Can. But the pace of rollout was relatively slow, he adds: about one new Acumence implementation every nine to 12 months.
That leisurely pace quickened a year later when Rexam appointed Bill Barker, then president of Chicago-based Textron Fastening Systems, to run its American operations.
It was Barker, group director of beverage cans, who refocused plant managers on plant-floor productivity by supporting use of systems to deliver world-class quality management and plant maintenance—two of the three critical influences on operations efficiency.
For the third external influence on efficiency—monitoring plant-floor machinery—a solution was partially in place: the ongoing Acumence implementation. As a result, a policy of wringing every scrap of useful manufacturing intelligence that could be gleaned from it—and implementing it in those plants where it wasn't yet in place—became urgent priorities.
The road home
The uptick in the pace of implementation was significant. The Acumence solution is now in place in all 17 plants in the U.S., says Martin, and one in Mexico. And with Barker now promoted to run Rexam's beverage-can business worldwide, the rollout has gone global. Some 15 plants in Europe and Asia are targeted, explains Martin—with 10 now up and running, and the rest due live by the end of 2006.
That itself provided insight to contrasting operations approaches.
"In the U.S., there's more emphasis on how a plant is performing," says Acumence's Chandler. "It's something in the American culture that seems to crave real-time information: it's almost maniacal."
In contrast, European plants—perhaps because of less costly labor rates—run with much higher manning levels than in the U.S. "With one operator per machine, there's less need for a system like ours," says Chandler. "With one operator for 10 machines, it's probably the only way of knowing what's happening to the same degree of granularity."
Rexam's Martin points to another lesson. "Every system needs very clear business benefits and sponsorship if it is to succeed," he notes. "With Acumence, in the beginning, Rexam didn't have the right ownership of it within the business, and we didn't understand the value of what we had in terms of how it could help us improve operations efficiency."
How much has implementing Acumence boosted Rexam's operations efficiency? Quite apart from the British company's tight-lipped attitude to releasing information it regards as sensitive, it's a question with no simple answer.
One difficulty, explains Martin, is that the investment justification for the rollout was framed around a reduction in can spoilage during the manufacturing process—even though the real intent was to generate data with which to improve operations efficiency. "It was a way of providing a platform to reach our efficiency goals for the plants," he says.
As such, the Acumence solution—which delivers the data on which to base remedial actions—can't claim the whole credit. But if Acumence has been merely an enabler, the consequent improvements are in no doubt. The operations efficiency improvement program has been a major plank in Rexam's manufacturing strategy the last few years. Chandler cites local management at Rexam's Valparaiso, Ind.-based plant as reporting efficiency metrics—which were in the 70s pre-Acumence—now in the 90s.
Jane Biddle, VP of global manufacturing research for Boston-based AberdeenGroup, points to lower maintenance costs as another benefit of Rexam's use of Acumence. Prior to the investment, she notes, machines running out of specification continued to do so until failure occurred. Now, quite apart from the downtime saved, Acumence is credited with saving Rexam $3 million annually on its maintenance bill.
From PLC to SAP
Rexam also uses the Acumence infrastructure in "execution" mode, says Martin.
"The idea is to capture information coming from the PLC network within the factory and use it to get information into SAP," he says. "That way, we eliminate nonvalue-added processes."
When a filled pallet of finished cans comes off the line, for example, the same PLC network that feeds data to Acumence also automatically triggers the creation of a bar-code label within SAP, updating inventory and accounting records. Previously, an operator had to do it manually.
Yet the credit for all ensuing ROI must be shared. Without Acumence, it wouldn't be possible to piggyback on the network so effectively—but Acumence, of itself, isn't generating the actual productivity improvement. The parallel with Rexam itself is fitting. That can of Coke isn't the same without—well, the can.
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