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ARC: SAP-Factory Logic marriage makes lean sense
At the recent SAP "Analyst Summit," SAP made ARC Advisory Group aware of its acquisition of Factory Logic Inc. The financial terms were not disclosed. Previously, through their SAP Ventures unit, SAP made a VC style investment in Factory Logic. Now, this has expanded into an acquisition.
In ARC’s recent worldwide market study on software for Continuous Improvement programs, SAP made a strong showing for electronic kanban (eKanban) with a leadership position. Kanban is a lean manufacturing methodology for executing work-in-process. It often provides dramatic reductions in WIP inventory with improved on-time delivery. eKanban has a direct positive effect on the balance sheet. This gets the executive attention (in a good way) that sustains their support for the program. Thus, kanban is a critical element of a lean program.
A key element of a successful kanban system is short interval scheduling to level the work load for the workcells. The lean methodology for workload leveling is heijunka. Factory Logic’s software is essentially Advanced Planning and Scheduling (APS), specifically designed for a lean environment. Heijunka is difficult in high-mix production with a large variety of products and inconsistent order demand. Factory Logic achieved success with its clients, however its small size was a deterrent for others.
Ralph Rio, ARC Advisory Group’s primary author of Continuous Improvement Systems study, stated, “The acquisition of Factory Logic by SAP is a positive move for SAP, Factory Logic and their lean manufacturing clients. SAP gets an application that strongly complements their eKanban software. Factory Logic’s prospects no longer need be concerned with its small size. Its clients using lean manufacturing can look forward to a more complete solution; particularly those with high-mix production.”
In ARC’s recent worldwide market study on software for Continuous Improvement programs, SAP made a strong showing for electronic kanban (eKanban) with a leadership position. Kanban is a lean manufacturing methodology for executing work-in-process. It often provides dramatic reductions in WIP inventory with improved on-time delivery. eKanban has a direct positive effect on the balance sheet. This gets the executive attention (in a good way) that sustains their support for the program. Thus, kanban is a critical element of a lean program.
A key element of a successful kanban system is short interval scheduling to level the work load for the workcells. The lean methodology for workload leveling is heijunka. Factory Logic’s software is essentially Advanced Planning and Scheduling (APS), specifically designed for a lean environment. Heijunka is difficult in high-mix production with a large variety of products and inconsistent order demand. Factory Logic achieved success with its clients, however its small size was a deterrent for others.
Ralph Rio, ARC Advisory Group’s primary author of Continuous Improvement Systems study, stated, “The acquisition of Factory Logic by SAP is a positive move for SAP, Factory Logic and their lean manufacturing clients. SAP gets an application that strongly complements their eKanban software. Factory Logic’s prospects no longer need be concerned with its small size. Its clients using lean manufacturing can look forward to a more complete solution; particularly those with high-mix production.”
