The company as information system

Modern companies are predominantly information-processing systems. It can be assumed today that more than half of value-added costs flow into the production factor of information. Production itself is losing strategic importance more and more rapidly. This manifests itself in, for example, the fact that companies are relocating their production abroad for reasons of cost or are reducing vertical integration without losing their competi-tiveness or even actually improving it. This is also confirmed by a survey conducted by the VDMA which revealed that a vertical integration of al-most 50% in 1998 had shrunk to nearly 40% in 2004, coupled with a si-multaneous improvement in position in international competition.

Production is being increasingly replaced by the service capability of of-fering the market a wide range of product variants to suit customers’

wishes while at the same time ensuring a high quality of products and ser-vices as well as an excellent delivery service. The features listed here, such as conformity with customer wishes, services, quality, range of product variants, delivery service, are none of them properties which can be se-cured via the traditional concept of production and thus to be pinned to the product in a measurable manner. They are primarily based on information processing and the ability to have the required information available at the

“right time”, in the “right quantity” and at the “right place”. Command of information management along the value chain is becoming more and more important for the competitiveness of companies whether they now manufacture physical products, such as the capital goods industry, or vir-tual products, such as for example the software industry.

The more the value creation of a company for the customers consists of combinations of products and services (with services taking an ever greater share), the more productivity a company will have to invest in its informa-tion processing and thus in the deployment of supportive software. This does not mean however that investment in software will automatically add benefits in productivity, flexibility or transparency. A large number of

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examples spring to mind in which a half-hearted and unsystematic use of software tended to bring disadvantages with it instead. Software alone does not bring added value – not until software is installed in the right environ-ment and used systematically will added values be achievable.

3.1.2 Re-engineering and integration

When you examine the value-adding processes in a company, what they all have in common is that they are accompanied by information which on the one hand documents the status of value generation and on the other hand describes the performances which still have to be carried out. Information is thus the real process driver and in this way controls operational se-quences in the company. One obstacle to fluid processes is, however, forms of organization which are oriented by performance which hinder and slow down the processes on the basis of departmental boundaries. A fur-ther obstacle to fluid processes are the innumerable media discontinuities which cut up the information into large numbers of individual parts. This makes it very difficult to track, control or direct these processes.

There is no doubt that overcoming a conventional, Tayloristically biased organization structure is a management task which goes hand in hand with considerable changes in the culture of the company. If information proc-essing makes up the greater part of value generation, rationalization will have to be applied to the information processes. That is the idea behind re-engineering. Re-engineering aims at a restructuring of the information processes with the objective of obtaining control over increasingly greater demands with regard to quality, service, flexibility, costs, target dates and delivery times. The decisive changes will take place in the future not in the field of technology but rather in the definition of and control over informa-tion processes. The preveninforma-tion of media discontinuities is, on the other hand, a task which can be carried out with the aid of technical tools. Here the control and processing logic is mapped into the software. When inter-nal and exterinter-nal data networks are used, the information can be passed on in real time over departmental and corporate boundaries. It is of decisive importance here that the systems involved actually understand each other.

The situation should not be permitted to arise whereby the information is being exchanged digitally but nevertheless, due to a lack of or incompati-bility in data interfaces, a human agent must actively step in as a mediator of information.

These two aspects – modernization of the company organization by re-engineering and optimization and software support for information flows – must go hand in hand if a sustainable improvement in the value processes is to be achieved. It cannot be pointed out too often in this regard that

3.1 The company as information system 63 management is required here to involve itself actively in the successful realization of the corresponding systems. Many projects come unstuck because management only feels itself responsible for allocating means and resources and the persons in charge of the project fail not in the technical implementation but rather in the necessary organizational and personnel-related design work.

3.1.3 Information processing in production

If a comparison is made of progress in information processing in the vari-ous functional areas of a company, it will become clear that production in particular is still frequently suffering from deficiencies in information processing and networking. Production steps are characterized by an in-creasing complexity which is caused or at least influenced by high product variance and customer-specific implementations of the products. This impacts especially on the capital goods industry whose particular chal-lenge is the economically efficient production of a batch size of one. Mas-tering complexity while simultaneously securing productivity represents precisely the ideal typical conditions for the use of modern information processing.

It is astonishing in the light of this that a paper-based exchange of in-formation is still prevalent in the production departments of a large number of companies. Paper-based collection of data for machine run times, ma-chine availabilities and OK parts from actual production in progress is a living anachronism which is still a routine sight in industry. These activi-ties are amongst the most cost-intensive, non-value-adding activiactivi-ties in the production environment which industrial companies still indulge in today.

This way of working is, however, not only extremely inefficient but it ac-tually encourages errors and inaccuracies. Furthermore, it should be noted that the employees are also measured and judged by the data and informa-tion arising in the producinforma-tion process. Payments systems based on the evaluation of the quantities of items produced will automatically bring with them the danger of people trying to manipulate them.

It is not only operations planning which is brought into confusion by the errors which can occur in manual data collection. Even today machine-hour rates are used as the basis for calculating selling prices. If, in spite of all its known deficiencies, this method which takes the machine-hour rate as the basis of costing is still used, at least every effort should be made to prevent the corresponding information from being falsified by human error or weakness.

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3.1.4 Machines as information-processing systems

The theme of information processing primarily brings to mind software running on classic IT hardware such as mainframes, servers or PCs. How-ever, in parallel with this world of company IT, a world also exists of automation technology and machine-oriented software. Machines and in-stallations or the automation technology used in them are themselves in most cases complex information-processing systems. Technical functions in machines and installations which were once implemented by means of mechanical and specialized electrotechnical components are today more and more often based on software and standard IT. In this way software, via digital sensors and actuators, regulates and controls the movements and operations of the machine while industrial-grade PCs serve the machine operator as a communications interface with his machine, with higher-level software systems or, via the internet, with the outside world. With modern information-controlled components or machines, the part of unit costs made up by the software can easily be as much as 25% to 40% or sometimes even more. Nor is it a rarity for software development spending to amount to 30% or more of total development costs – something which is also reflected in the constantly increasing number of software developers employed in companies.

The primary reason for the growing proportion of software not only in capital goods but also in consumer products such as cars, entertainment electronics, telecommunications is to be found in the fact that software allows the products to be tailored much more simply and flexibly to the specific requirements of the customer and is also able to offer additional new services and features. Even with traditional products, the use of soft-ware is therefore more and more becoming a competitive factor, the basis for customer-oriented added value.

From the view point of the MES a considerable problem existed in the past in that information processing in automation had developed independ-ently and interfacing with machines was both complex and product-specific. The special requirements applicable in the automation environ-ment, such as real-time processing, safety, availability and even costs, have resulted in special, mutually incompatible controllers, bus systems, operator terminals, data storage facilities and programming languages. As standard IT and software is used more and more often, even in automation, interfacing problems between the two worlds of the company are declining and this is making it possible to implement standardized and considerably more efficient information and communication processes.