Operations & Management
Plastic Components: Powering growth through automated manufacturing
By Tom Duffey Plastic Components
By Tom Duffey Plastic Components
Oct. 26, 2016 – The common understanding is that, with ever-increasing global competition, manufacturing will continue to move to countries with the lowest labour costs. This is not entirely without merit. China, for example, is seeing manufacturing operations migrate to Vietnam and Bangladesh as salaries for Chinese workers continue to rise.
However, here at Plastic Components Inc. (PCI), a global injection molder of plastic parts, we have been bucking the trend for the last 26 years. We started with one 10,0000-square-foot facility in Wisconsin back in 1989. Today, we have two Wisconsin facilities totalling 78,000 square feet, and to date, we have shipped more than one billion molded parts to our customers. Since 2009, PCI has more than tripled in size, and the company has seen a historic growth rate of 22.4 per cent over the last six fiscal years.
Central to our success has been our commitment to complete process automation to provide the highest quality parts at the lowest possible cost to a diverse range of original equipment manufacturers (OEMs). Currently, we have 60 molding cells that produce parts on a fully automated basis 24 hours a day, ranging from five to seven days a week.
The cornerstone of our operation, what I call the “nervous system” that keeps everything running the way we want it to, is our manufacturing-centric enterprise resource planning (ERP) system from IQMS.
Early commitment to ERP for automation
Back in 2001, we were experiencing strong growth. However, like many manufacturers, our information system was a potpourri of Excel spreadsheets, Access databases, and legal pads with pencils. We didn’t have a good handle on production scheduling, inventory and true manufacturing costs because data was either unavailable or inaccurate and there was no standard for reporting. We concluded that to achieve true automation, we needed to replace our multiple databases and software packages with a solution based on a single database that made centralized, accurate and relevant data accessible to everyone in the company.
After a quick review of ERP systems in late 2001, we selected IQMS, which combines manufacturing execution system (MES) and ERP functionality into a single integrated system with all the data managed by an Oracle database. We saw several advantages in its functionality, easy-to-manage user-friendly format, and the centralized control it provided over core business data.
We spent nine months getting ready for the ERP implementation and went live in October 2002. Since then, we’ve grown by a factor of 10, increasing annual sales from $3 million to $30 million. There is no question we never could have achieved this without our ERP system.
Through our ERP system, we essentially have end-to-end automation that allows us to set up the process and the job, and then run for prolonged periods of time. It starts from the minute a sales order is entered, typically by electronic data interchange (EDI) through the customer’s ERP system directly into ours. By removing the need for someone to punch keys to enter a sales order, we can pull that data directly from our system, which reduces labour and the likelihood of error.
Once the order is received, the schedule runs updates through our ERP system — a single scheduling function that recalculates demand. It builds the buckets and work orders for every job we have. Then it determines when raw material is needed based on run times and must-start dates from the customers.
All the functions are scheduled on the floor. The ERP system defines exactly how many hours a sales order will need, and it allows us to queue up the job that will follow. This lets us schedule out four weeks or more, including forecasts from customers for material demands. On a day-to-day activity basis, it tells us what needs to be running, what will be scheduled tomorrow, what materials need to be received and on-hand for that schedule to function appropriately, and most importantly, what future orders the scheduler needs to enter for the variety of raw materials we will need.
Typically, in a company our size, the functions would be handled by four to six people. However, the level of automation provided by having a fully embedded information system has enabled us to consolidate the scheduling function into a single role. We have one person who schedules 60 machines, with 10 to 15 setups per day, and all the raw material requirements needed for the day, week, or month of that run. This is no small feat given the high complexity ratio at PCI. In addition to the 60 machines, we have anywhere from 300 to 400 active individual part numbers and 120 active resins.
Driving growth with “lights out” automation
Much of our recent growth has resulted from adding a second manufacturing facility. First we expanded our original Morse Drive location from 10,000 to 38,000 square feet, completed in 2005. Then, as we approached full capacity in 2011, we added a 15,000-square-foot building on Bunsen Drive in the same industrial park.
With the new location, we wanted to do more than add space. We saw an opportunity to use our decades of experience in what worked — and didn’t — to build a facility that could literally run “lights out.” Every detail at the facility, from the lighting to the conveyance system, was meticulously planned. We hollowed the building down to the cinder block walls, and we relied on the MES and ERP functionality of our system, along with injection molding solutions from RPG, to design a facility that earned U.S. patent #8,827,674 B1. In December 2015, we completed a 23,000-square-foot expansion, and using our ERP system’s scheduling functionality, it was accomplished without any interruption to the existing production schedules and timelines.
To run the Bunsen Drive facility, we need to be directly connected with what is going on there. Significantly, the same ERP system directly connects with what is going on in both facilities, letting us know on a second-by-second basis the status of all the machines that are running. Employees at PCI can see monitor the real-time screens in their offices to see exactly what is going on at both locations at any time of the day.
As noted earlier, just one person manages the functions on our ERP system, which means one desk in one office is running two facilities, providing the company tremendous scalability. It is hard to imagine how we could achieve the high level of automation at Bunsen Drive — it’s lights out, meaning no direct employees are in that facility on an ongoing basis, and literally no one in the building 90 percent of the time — without the full and effective use of our ERP system.
Beyond automation: The power of information
While automation has been central to PCI’s growth, the information and insights pulled from our ERP system also have been valuable in helping us to operate and expand profitably. Two functions offering special value are real-time utilization data and detailed information on parts profitability.
When a manufacturing cell can cost $300,000 to $400,000, you want decisions to be based on good data and facts, not intuition. That is why having real-time, accurate utilization information is extremely important for capital allocation. However, many companies in our industry make decisions about new capital investment when they “feel like they’re getting busy” without meaningful data to support those decisions.
We spend $2 million to $3 million dollars annually on capital expenditures, and the information driving that capital allocation is the data that comes directly from our ERP system in real time. Because it uses tracking information, the system’s reports define the utilization rates of every machine on a daily, weekly, monthly, quarterly and annual basis, so we know the utilization rate for every machine in our organization right up to the minute. Consequently, if we come up against capacity ceilings, we can make decisions about new expenditures based on the regular analysis of utilization rates in our two facilities.
At the same time, it is important to regularly evaluate the profitability of inventory. Having the ability to know whether a company is making or losing money on specific parts has been the scourge of the plastics industry for a long time. Much of the challenge comes from managing tens to hundreds of parts. For example, at PCI, we run 300 to 400 active part numbers, selling parts all over the world to a myriad of customers in many markets. With that level of complexity, it is difficult to know where you are making money and where you are losing it.
Our ERP system gives us significant visibility because it provides finely detailed views in creating bills of materials (BOMs) for each part in our facility, which allow us to identify the profitability of every part we manufacture. That is important. Without the granular level of information, you will never run the business as financially effective as you should.
In the end, our ability to run a successful, profitable molding business is only as good as the quality of the information at our disposal. Opening a “lights out” facility required having complete and total trust in the information our ERP system was giving us on a real-time basis. That same requirement must hold true for every manufacturer, regardless of size or complexity. The greatest manufacturing strategy in the world will never be as effective as it could be without accurate, timely data.
Tom Duffey is president and owner of Wisconsin-based Plastic Components Inc.