How will companies justify their new technological purchases? SAP BusinessObjects Planning & Consolidation (BPC) may be able to provide the answer.
There is currently a lot of talk about Smart Factories (Industrie 4.0) and how this is the way of the future for manufacturing, which I fully support and believe will slowly become the norm. Whilst this is an exciting new topic (not so new for some of the pioneers), it is going to involve a significant amount of capital spend. If I was one of the engineers wanting to implement some of the new tech – wanting a Robot – a justification will be needed. So the question is, how will companies manage and track all of these new enhancements to their businesses?
Recently, I worked with a client who, as all great manufacturers do, has a constant improvement program. As part of the process each person wanting to make enhancements needs to submit a proposal which outlines the investment and the potential savings from this project. All of the proposals are reviewed and, according to the budget available, the top ROI projects are chosen to go ahead. Bluefin was asked to provide a solution which allows department heads to enter these ‘improvement’ projects into their planning system in order to run reports to see the effect of implementing a project(s) on the overall forecast for the upcoming years. The projects needed to bring benefits to the company and these often fell into the following categories:
- Cost savings
- Improving efficiency (which usually involves cost savings)
- End of life replacement
The advantage they got from this exercise was the link between capital spend and savings on particular aspects of the P&L, especially as they are extremely labour intensive, they could model savings from an FTE perspective on particular processes.
So how does this assist the engineer wanting to improve his process? Well, with the use of BPC we managed to link the operational drivers (how many products need to be made) with the variable costs associated with their output (labour, utilities, material etc), along with the overall fixed costs. This enables companies to model new projects with the direct cost saving implications brought about as a result of the engineer’s enhancements.
The advantages to doing this in BPC are numerous:
- All the information is in one place and can be easily consolidated;
- The same calculations and drivers can be applied to both business planning and project planning to ensure continuity;
- Actuals can flow in from SAP PS (or other project systems) and spend can be tracked against plan;
- Projects can be compared to one another and prioritised;
- Ease of analysis between scenarios which exclude or include projects to see ROI;
- There is an archive of all proposed projects which can easily be modelled to see if they can still bring benefits.
Smart Factories (Industrie 4.0) will bring a vast amount of new technology to the manufacturing world. To make accurate business decisions first time, every new piece of technology will need to be reviewed on the tangible benefits it delivers. This evaluation will be predominantly based on cost savings, efficiency improvements and end of life replacements. In the future, the majority of these types of projects will require a way in which to track and manage them – it is going to be crucial. So, having a system in place to do so will prove to be invaluable.