What is not an item?

My earlier blog entry on the topic “What is an item?” created a good level of conversation. And since we are talking about engineers, the more interesting question turned out to be, “What is NOT an item?”

We shall use the English term “item” in this context. The Swedes usually talk about articles (artikel). Of course, there are no scientific definitions on the topic (yet) so we shall ponder about this on laymen’s level. Just for giggles, I checked an online dictionary to see how they define “item”:

1. It is quite extraordinary how many rare items some collectors have. An item of clothing, French items on the list were shipped to Brazil.

2. The next item on the agenda, the first item on the programme

3. A newspaper item

The word “itemize” is also there:

“itemize [‘aɪtəmaɪz] (also itemise) to create a detailed list, I asked him to itemize the price. Steinburg itemised 32 design faults in the reactor.

We can easily see that there is no ready-made technical glossary that specifically understands companies’ material items but that’s a story for a later time…

A drawing is not an item
In any case, this definition is very close to the point. So, an item in the product data management framework refers specifically, with the indefinite article, to a certain concrete thing (not necessarily only an object) that can be a material, an assembly of parts, an end product, a service product, a software product, an electronic component etc. At this stage, I have always stated that a drawing is not an item. It is a document that usually depicts how an item is manufactured. So, can we conclude that a document is not an item? Well, I wouldn’t be quite that strict…

A variant is an instrument
A customer once asked whether a variant is an item? I said not in my opinion, which of course led to a long debate that might or might not have ended in a tie. The same person told me that their whole product portfolio is described using one variant item from which customer-specific deliveries are made by using order-specific attributes. Future generations will only get hold of a list of sales attributes instead of a top-level item. I still maintain that an item is always an unambiguous description of its target. In that sense, the online dictionary’s “to create a detailed list” is a good definition for “itemize”. In an item, all the definitions or attributes describing its features are always itemized in an unambiguous manner. A variant can be seen as an instrument with which it is possible to easily manage a group of different items. (I hereby refer to my old blog entry, “Death to code keys”)

Is an individual serial number an item? A serial number in its unique concept is not an item. However, it does represent an item.

Is a spare part an item? What an interesting question. According to one definition, an item becomes a spare part as soon as the item information is linked with its application and of course information on whether the part in question has been defined as a spare part. It is the application that dictates the spare part feature, not the item itself. In practice, a spare part is an item but an item is not a spare part.

A document is an attribute
Let’s return to the document. Why would a document not be an item? Or what is it for example in conjunction with the item of “pressure vessel”? A pressure vessel that has a certain capacity, material information, ability to withstand pressure, etc., is simply an item. However: for this pressure vessel item to be approved in a PDM system, the related documentation by authorities must be approved. In other words, an item cannot exist without certain documents. In this case, a document can be seen as an item’s attribute.

If you are creating structural maintenance documentation in which a document is compiled according to the end product’s product structure, and in which each product module is linked with its own document section, these document elements can very well be called items. And because the maintenance log is an organic part of customer delivery, it is its own item that, in the best case, even has its own price.

I have now conveniently filled a page. Readers, grab your keyboards and continue to ponder from here on. Like I said, no scientifically approved definition exists. Dissertations have been written on less significant topics so some academically aware person could grab the ball…

– PDM Preacher

MasterData is dead…

I went to listen to a presentation by ICT Standard Forum – Data Administration Model 3.0. It was a massive package of data administration jargon but there was a lot of useful information as well. Personally, I was mostly interested in the role of data and especially product data in this entity.

“Master Data” as a term has become convoluted ages ago and no one really knows what the term really means. The word “master” easily makes your thoughts wander and it is therefore used to squeeze any kind of information in Master Data projects. In practice, the maintenance of Master Data is left to IT people and the world-embracing definitions will not be realized simply because this kind of virtuoso cannot be found anywhere. This person would have to master, at the very least, any possible piece of information related to items – from the functional attributes to warehouse locations and from different countries’ value added details to customs codes. Juha Huovinen and his team have gone through a topical reformation and Data Administration Model 3.0 discusses Core Data instead of Master Data.

Core Data

… Long live Core Data

As the name suggests, Core Data is the smallest common denominator with which data is integrated to various business environments (Domain Architecture). Different functions refine data as per their own needs. Also, let’s not mix up transaction data and static data. Core Data, at a minimum, is a unique identifier that is utilized by various systems. Regarding item data, I would add not only the unique identifier – or item code – but also a standardized and language-supported description into the Core Data of a Good Item. Moreover, I would add functional classification data that would describe the item as an independent entity. Application-specific classifications, such as purchase categories, belong to the application-specific layer.

Customer on the outer edges

All in all, the Data Administration Model is a good framework for all actions and development activities and even though the target group clearly consists of extremely large companies (>10B€), I’m of the opinion that every section takes into consideration the needs of companies of various sizes by providing very distinct recommendations.

If any negative feedback can be given about this Data Administration Model, it relates to the quite massive and egoistic praise for IT functions, as I mentioned in the beginning. By the way, it has been a long time since I have seen a presentation where the customer and product data ended up on the outer edges of the slide.

ED_Enterprise_Development_Responsibilities

Well, to be honest, this picture contains a good idea but on the other hand, I heard this complaint several times at the event: “Management does not understand IT.” Maybe this could be turned upside down to portray a complaint by management: “IT does not understand business.” Even though IT will play an increasingly important role in the future, the actual purpose of businesses is to create value to its customers via products and services. I might later write more about this egocentric view of the world where no one ever fails to place their own functions in the middle.

– PDM Preacher

Faster horses?

I’m sure everyone has heard the story about Henry Ford and his product development philosophy. Back in the days, Ford stated that if he had started to ask his customers what features they wished to include in his products, they would have said, “faster horses”.

I thought of this again as I was reading the annual reports of Finnish metal industry companies. Every single one of them – whether a listed or a private company – had a CEO declaring “our product development is solely based on customers’ needs”. I was not going to compare by clichés, such as Apple and its iPads, iPhones or iPods, but I decided to take a different approach.

Products or output
I have written about this before and stated that Finnish companies have grown around the world and distinguished themselves from international mega brands specifically due to flexibly creating customer-specific products. Now we can start philosophizing on whether deliveries to customers truly are products or outputs of customer projects.
Having closely followed Finnish engineering over 25 years, I dare to claim that there are quite a few pure product development organizations or product-based industries in general in Finland. If we use Porter’s value creation strategy and its three options (of which you may only use one) as a framework: product and technology leadership, operational excellence, and customer relationship management – very few companies can confidently say that they’re a product leader. We do have some technology leadership companies for example in the paper and mining industry but these businesses are even further away from products. Out of the options provided by Porter, customer relationship management is the strategic focus for the overwhelming majority of companies.

asiakashallinta[1]There is nothing wrong with customer relationship management. Quite the contrary, it is the only sensible model for globally small players. Now, IT guys will start immediately pondering whether the CRM system should be in the core of architecture – well, basically yes.

Let’s look at the currently available CRM systems. I’m not going to work up a chart on systems (sorry) but ready-made systems are definitely aimed at telemarketing companies that have tens of thousands of potential customers and almost the same number of sales people. Funnel management gets taken care of and reports are created for prospect follow-up and if one customer gets several Christmas cards, it’s not a big problem.

Where to find a customer solution management system
But is this the environment that supports the activities of a Finnish company that delivers customer-specific solutions in the global markets? Not likely. If PLM systems have been developed elsewhere for the product development needs of companies that deliver standard products, the Finnish industry has a problem: suitable IT systems are not available.

“The best solutions” is a competitive factor in the customer relationship management strategy. The customer solution includes product configuration as well as services before and after the delivery, not to forget contact with the customer. There are not very many workable solutions in today’s IT system solution reserves (PLM, CRM, ERP) to support the customer solution business, and the whole entity has to be constructed using several individual applications. (Well, luckily there are IT service companies that listen to customers’ needs.)

Small is beautiful
systeemikartta[1]If and when you still want to develop faster horses, you should really think about the total architecture based on these needs. One system will not solve problems but on the other hand, the more systems there are, the more complex the whole solution is and the more expensive it gets to maintain it. But when the most important aspects (in other words, the offering and customers) are handled in a smart manner and when you remember that financial reporting has to be completed quickly, you will end up with a good solution and it does not necessarily cost much.

– PDM Preacher

5% or 900%

The government of Finland has been preaching about cost savings of 5%. To achieve this, they managed to push through their proposal with efficiency and fairly loud opposition on September 9th. This 5% overturned the social contract and the next thing we knew, there were threats of a general strike. I have pointed out in my earlier blogs that a productivity increase of up to 900% is possible when we focus on the right things.

Over the past couple of weeks, I have heard several presentations pondering the more effective form of communication: sell profit and opportunities or the fear of loss, if nothing is done. In any case, the word of the day is infographics that are used in an attempt to visualize and specify one’s own value creation message.

Do we want to lose 605 billion euros?

At the Industrial Digitization seminar, VTT’s Research Manager Heli Helaakoski presented tough figures regarding opportunities in digitization: Europe alone expects to see opportunities worth 1.25 trillion euros and, on the other hand, if attempts are not made to achieve this mega trend among the first pioneers, there will be losses and adjustment activities that will amount to 605 billion euros. But these figures are so large that Members of Parliament easily fail to understand them.

digitization threat

For comparison purposes: A one-centimeter thick wad of €100 bills holds €10,000 -> a one-meter high stack of hundred euro bills equals a million euros. The height of the Näsinneula Observation Tower, in Tampere Finland, is 124 meters. A stack of bills of that height equals only 124 million euros. To get to a billion, we would have to stack eight of these towers on top of each other.  A stack of bills from the Earth to the moon holds 384 trillion euros so there is no need to reach the moon to stack the lost money.

Three different development paths have been envisioned for Finland: become the Silicon Valley of the Internet of Things, be an agile adapter or be completely left behind. The last scenario predicts that from now on, we lose 80 jobs per week at least until 2019. However, the recent news suggests that the loss of jobs may actually occur at a faster rate in reality.

Everyone can win

Selling applications related to the Internet of Things still seems to be very cumbersome. There are plenty of ideas, prototypes and wild scenarios but practically no one has turned them into business opportunities. In my view, this is quite logical – capitalizing on digitization practically means even radical changes to approaches and the demolition of existing structures. If a societal view is carefully adopted: while declaring that the digitization of some services takes away 1 000 working years, it would be beneficial to think what to do with these replaceable 1 000 people in order to move a good thing forward.

We have first-hand experience of a project that previously needed 20 people for customized designs. After implementing product architecture, itemization and the modulization project, they only needed two designers. But in this case, the other 18 designers were re-tasked to design new products. Productivity improved by 900% in the order-delivery process and, at the same time, the competitiveness of the company’s products improved significantly, which tripled the turnover. Everybody won!

900pros

Productivity growth of 900% is real

According to studies, good product data doubles sales in e-commerce. Productization guru Jari Parantainen claims that there are cases where sales increased up to 600% compared to other comparable companies.

Quantum leaps can really be achieved by the means of product management – even quite easily. A general cost decrease of 5% is not quite a leap in productivity but it might be the required external push that is needed to wake up from slumber.

Finland for the win!

-PDM Preacher

Corrupted information = wrong decisions?

In this post, I ponder the information systems (ERP, PDM, etc.) used in companies and their ability to serve the information/control needs of business operations. What happens to capability when the company attempts to adapt to the changes occurring in its business environment? Especially the global use of systems exposes companies to the phenomenon observed here but it is not a foreign phenomenon even in local implementations.

Generally, it could probably be stated that the implementation of any information system is related to some kind of an operations development project within a company. A company changes or develops its operations and then the company needs a new tool (= a file system or something similar) or a more developed version of the tool already in use to support the new operational model. Usually a lengthy definition period occurs before implementation. During this period, the implementable system’s functionality and the parameters guiding the functionality are defined. A kind of requirement specification is created. This is done to ensure that the required business transactions can be entered into the system and that based on this entered data, the company can use the information needed to direct business operations. The functionality and parameters of the system represent the current situation of the company’s business environment.
The life cycle of critical business systems has been reasonably long, several years if not decades. During this kind of period of time, there usually are also such changes in companies’ business environment that have to be responded to by changing own operations. At the same time, the information needed to direct business operations changes.

How do information systems survive these kinds of changes? It has been said that for instance ERPs make a company’s course of action concrete. What might this mean in practice?

  1. Is it a question of systems themselves being so inflexible and difficult to adjust that making even small changes is expensive and time consuming and therefore no one wants to do anything about it? Or is there simply no “room for adjustment” at all in the systems?
  2. Or is it a question of the company not being willing to make an investment to acquire the required know-how for the company to adjust the system even though the system itself could make these adjustments possible?
  3. Or is it that there is no ability to manage the information that is used to lead the company?

Whatever it is, the quality of information produced by systems weakens and deteriorates over time as a result of this kind of development. Companies’ efficiency suffers when reliable information to guide business operations is not directly available. Information must be completed and its quality has to be verified from other supplementary information sources (Excel ;-)). This combined with the amount of information, increased over time, puts the company in a difficult situation – the company holds a vast amount of data but it creates guiding information that cannot be relied on.

Technology vs. content
How could we begin to change this culture of leading by information?
Let’s play with this thought: What would happen if the information used to direct the company, its management and maintenance of utility value were treated like the company’s manufacturing machinery and equipment? Manufacturing companies have maintenance organizations that are responsible for the company’s manufacturing machinery being built to work and that it works in accordance to the company’s strategy. The maintenance organization may belong to the company or it may be outsourced (acquired as a service, purchasing services, service descriptions, service contracts, SLA). However, the company always owns the management of the maintenance organization.
Of course, it could be thought that the information management organization, or at least a part of it, would play this role in companies. However, my view is that currently companies’ information management organizations much rather focus on anything else besides the information needed to direct the company and the tasks related to managing the information and maintaining its utility value. Technology has developed much faster than software – it is fun to play with technical gadgets. It is fashionable and fun to immerse yourself in the depths of the mobile world. You also have to focus on fighting viruses and malware. There’s SoMe and clouds and who knows what. There is no time to think about the information used to direct the company. At least if no one knows to demand it.

What if we made company information as important as it should be in the organization and what if we founded a separate company information maintenance organization in companies? It would then be responsible for the information used to direct the company, as well as tasks related to the quality and management of information and maintaining its utility value.

Below a picture that summarizes at least part of this story:wrong decisions

The story continues (who knows?) and the viewpoint becomes more focused thanks to the feedback on the article. So let’s keep pondering and let’s share thoughts. Thank you for your time!

-IsmoK

Cloud, cloud, cloud

I had just finished reading Risainen elämä (Tattered Life) by Juice Leskinen (a famous Finnish songwriter), when I attended a Digibarometri 2015 seminar. I could not prevent the ear worm that started to repeat the song in the title. An interesting study based on data from Google Trends reveals the harsh reality that still in 2010 (only five years ago), the concept of “cloud” was considered to be as high as Juice when he clashed with the authorities clad in blue. However, the number of cloud-related Google searches exploded in Finland after mid-2010 and reached its peak in the autumn of 2014. Respectively, the relative peak in the USA was reached already in 2011, after which it became “business as usual”.

source: Digibarometri 2015

Interest towards cloudservices in Finland, Sweden and USA, based on Google Trends data.

Finland has emerged as a top utilizer of cloud services in Europe but as we delve deeper, this means a few large companies moved their email services to the cloud. Real business applications are not used to a great extent.
We have a business problem that is craving for a solution…

My own experience supports this result. Earlier this year, I visited our western neighbor on a sales trip and I noticed what could be called a striking difference in purchase behavior. Whereas CIOs in Finland are still, for the most part, building their own architecture where the main objective is to centralise systems, I was surprised to hear a big international company’s local CIO’s message: “We have a business problem that is craving for a solution. I hope you have a cloud-based solution so that we don’t need to install anything.” I have to admit I have rarely come across that approach in my home country.

Let the product tell its own story
Another message from Digibarometri was the massive deficit of online trade balance.  Meaning that Finnish people purchase from foreign online stores but foreigners do not buy from Finnish online stores.

Some of the panellists, for example Kati Hagros, the CIO of Kone, and Google’s Senior Industry Analyst Johanna Wahlroos agreed and emphasised that the appeal of online trade is, first and foremost, born out of high-quality data, something we do not know how to utilise. Of course this has to do with analytics – what kind of products were bought, what kind of search words were used, what are the purchasers like, etc. Several different service providers circle around these factors but why should you pay Google or other search engines to increase your search ranking when you can do it yourself by improving product information so that the product tells its own story.

In the end, customers still place more trust in the information provided with the product than an ad provided by a search engine (The Forrester Wave™: Product Information Management (PIM) Q2 2014).

– PDM Preacher

What does an item cost?

First, the specifying question: “Which item do you mean?” After this, the question is answered with 100% confidence by giving either the sales price or purchase price. If you are talking about an item your own company makes, you will be a little more specific and you will add material and labor costs – some might even estimate the costs of tools for each item.

Item costs are traditionally seen only as direct costs. In the era of information systems people should understand also the fact that if an item can generally be utilized in design, manufacturing, logistics or service businesses, a significant weight for supporting the process comes from the item details – information or data with which it has been described in the various systems.itemprice

The good old Central Organisation of the Finnish Metal Industry (RIP) carefully mentioned the topic already at the turn of the 80s and 90s. Based on various types of research, they concluded that an item costs 1 500 FIM per year. This is because it exists in systems: it has a place in the warehouse which is why it needs to be inventoried, etc.

And the price increases…
In the United States, Zenger and Cafone went a little bit further in their research titled Economic Justification for Part Number Reduction During Product Design. The starting point here was DFMA (Design for Manufacturability and Assembly) and the question on whether it is more profitable to use more expensive multi-purpose components whose functionality would replace for example five cheaper components.

To add to the traditional material, labor and tool costs, they started to design a cost structure in which six cost categories were defined:

  1. Product and process design
  2. Production
  3. Transport and warehousing
  4. Quality
  5. Data processing
  6. General costs

Hence, every department estimates the cost for new items based on their own premises. Following this, a medium-sized machine shop arrived at $9,437 for the total general cost of an item. The truth is probably somewhere in between and it really depends on each company’s operation model and systems in use. Some ERP systems require 500 attributes for an item, some require less. However, this is such a significant cost that it is a wonder that there has not been any interest to manage it. Or could this be due to the lack of tools or processes?

Information is a product
In my view, the best way to approach the issue is to accept that each item in a company is linked to another item: an information item. It can be handled using the same processes as physical items: the means of traditional product management. Even information has a life cycle, acquisition and maintenance costs as well as different quality requirements. Costs live with the life cycle and when information is handled as a product, it is easier to set goals to reduce information costs. Similarly, by investing more in the quality of information, it is possible to reduce the costs of physical items.
What does this sound like, has anyone in your company thought of information as a product? Or have the costs of item information even been noted?

– PDM Preacher