Product proliferation. Flexibility. Cost pressures. These and other hot buttons facing manufacturers in 2005 have this in common: they are generating unrelenting pressure to perform better. The trick, of course, is to boost current performance to new, higher levels.

A good place to start is by moving to real-time operations, says Andy Chatha, founder and president of analyst firm ARC Advisory Group (781-471-1000).

"Companies are driving toward managing their performance in real time," says Chatha. "With real-time performance management, or RPM, as we call it, you are trying to manage factors such as inventory levels and equipment effectiveness in time to exploit current conditions and improve your agility, rather than looking at performance on an historical basis."

Interoperability is another top priority today, says Chatha. "Companies have all these systems—including materials handling systems—but they often don't exchange information freely. You can't have real-time performance management if you don't know what's happening on the assembly line, or on the warehouse floor."

Fortunately, advances in materials handling control systems are allowing manufacturers to improve overall equipment efficiency and promote necessary interoperability. Furthermore, strategies such as lean manufacturing and postponement are playing a significant role in improving manufacturing performance.

In fact, all of these factors are tightly intertwined. Materials handling control systems promote interoperability. Interoperability enables RPM. Meanwhile, lean and postponement are part of the agility equation made possible by interoperability and RPM. Making it all work together is going to be of increasing importance to manufacturers in 2005.

RPM may not be real time in the sense of milliseconds, but feedback and analysis is needed quickly enough to adjust operations to changing conditions, says Chatha. When it comes to materials handling, a range of technical innovations, such as Web-based portals, open interfaces to devices, and more robust programmable logic controllers (PLCs), are beginning to converge to make RPM feasible, he adds.

"A few years ago, some companies came close to RPM on an exceptional basis, but they spent more to build a solution," Chatha says. "But now, companies can achieve these capabilities at a much lower cost, and with easier implementations, than in the past."

Still, there is work to be done. Materials handling systems and equipment have traditionally lagged other systems in the drive toward RPM, says Sal Spada, ARC's director of discrete industry research. This is especially true, he says, when compared to suppliers of enterprise resource planning (ERP) and collaborative production management (CPM) systems who are more proficient in newer, "services-oriented" architectures and business process management software tools that enable easier communication between systems, people and processes.

"The materials handling system vendors have not yet incorporated services-oriented architectures, but there is clearly a push to modularize their controls software," says Spada. "It's no longer cost-effective to build materials handling applications from the ground up, or customize them to the extent that each application is different."

The materials handling control system (MHCS) is a layer of software that interfaces with and manages the equipment, sending instructions or settings down to equipment, and receiving data back from machines.

This software layer, says Spada, supports modularity because it becomes a framework for connectivity with other equipment and higher level production management and business systems. This is enabling a link from conveyors, sortation, automatic guided vehicles, and automated storage and retrieval systems, and related operations to higher level information systems. The end result is an interoperability bridge that promotes real-time operation.

In addition, better interfaces with materials handling equipment make overall equipment efficiency (OEE) measures more real time.

"People are looking to distribute information up from the equipment layer, and create more customizable views of that information, in part to make OEE more real time, but also in part to identify if the system is performing to their original specifications," he says.

Materials handling systems operate inside the four walls of the manufacturing plant. But the information collected by MHCS can share that information across a global network of contract manufacturers and distributors.

Take the emergence of low-cost manufacturing regions such as China and eastern Europe. U.S. manufacturing is adapting to these extended supply chains through strategies that include late customization of products and lean manufacturing initiatives.

"Lean really has been one of the keys to success for quite some time," says Chatha. "It started in the automotive sector, but has spread to most other industries in one form or another."

Chatha says ERP vendors and lean software specialists are coming out with applications for lean manufacturing. Food manufacturers, in particular, are looking to RPM tools as a means of squeezing more productivity from their assets.

The nature of products built in the United States also continues to shift, says Chatha. Expect U.S.-based operations, he says, to evolve to more highly complex products, and make use of postponement strategies in which much of the assembly is done overseas, while final customization or packaging is done stateside.

"RFID mandates are getting all the attention, but big retailers also want product delivered in certain packaging," says Chatha. "The desire for display-ready products, and being able to deliver those products, is just as big as RFID."

The drive toward leaner operations entails smaller lot sizes and more frequent materials replenishment, notes Spada. These factors may begin to influence the type of materials handling equipment sought by manufacturers.

"Traditionally, companies based much of their production strategy on the economic order quantity that was best for a given plant," says Spada. "But if you begin to specify and deploy equipment around rapid changeover and reconfiguration, you can now look at building in lot sizes that match the replenishment cycle in your supply chain."

To support rapid changeover, says Spada, some equipment may have special features, such as cartridges that make it easier to change to a different material by loading a different cartridge. Such cartridges, he says, are used in machinery for tire treads, and could expand to other sectors.

Another practice that supports greater flexibility, Spada says, is the use of more flexible equipment for operations that are likely to change the paths and patterns of handling goods. "It comes down to reconfigurability," he says. "When you bring in fixed equipment, you're building it to a particular business outlook at a certain point in time."

In the automotive sector, in particular, lean practices involve the delivery of components in the sequence they will be placed on vehicles in final assembly. This has caused suppliers facing sequenced delivery requirements to invest in automated storage to stage components for delivery, according to Spada.

However, Chatha points out that not all of manufacturers' answers are found in technology and practices.

"Companies need to be concerned about optimizing their human resources, and their physical assets," he says. "Supporting this, there is the concept of knowledge workers, and truly transforming your people into knowledge workers. Everyone in a company—including operators on the plant floor and in ware-houses—need to be empowered with better, real-time information and easier user interfaces. There is still much progress to be made in this area."