ARC WHITE PAPER

By ARC Advisory Group

FEBRUARY 2010

Operations Management: The LOral Way

Executive Overview ................................................................... 3
How to Successfully Implement Operations Management ............... 4
Objectives .......................................................................... 4
Approach ............................................................................ 5
Vendor Selection ................................................................. 6
The Project: Pilot and Roll-Out ............................................. 6
A Typical Work Process on a Site Using ISIS ........................... 8
Benefits .............................................................................. 9
Conclusions ..........................................................................10

THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN

ARC White Paper February 2010

SAP

Reception

Handling
Terminal Terminal
Portable PF Shipping

AC storage

Administrative
Receiving

FlexNet

FlexNet

Physical
Reception

Reception

MP storage

FlexNet

Processing Station

Weighing Station

Weighing
SAP

Quality

FlexNet

Line Station FlexNet

Processing FlexNet

Quality
Qualit
Lab Station

FlexNet

Line Station

Slide 2

detail of supply

Staff Station

to block

Packaging FlexNet
Planning Station

Staff UP

specific HU

FlexNet

FlexNet
& SAP

Planning
SAP

Functional Footprint of the Integrated ISIS

Operations Management Solution

Enterprise/Business
Operations
Inbound
Supply Chain
& Logistics

Product/Plant
Design

Customer
Relationship
Operations
Operations
Management
Management
Systems

Outbound
Supply Chain
& Logistics

Production
Plant/
Equipment &
Manufacturing
Automation
Automation
Engineering

Systems

Collaborative Production Systems for Highly Flexible Manufacturing

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ARC White Paper February 2010

Executive Overview
LOral, the world leader in cosmetics, is well underway in implementing
an integrated operations management solution across all its factories
worldwide. LOral feels this positions the company as a leading global IT
user, both in terms of technology and user-friendliness. To reap benefits
early, while reducing risk and cost, LOral has implemented both ERP
(SAP) and OM (Aprisos FlexNet) in an integrated manner, site by site, using a common core model.
This model allows LOral to capture best prac-

Terminology
The somewhat dated term, MES
(manufacturing execution system), refers
to a limited subset of functionalities
defined within the ISA95 standard.
At LOral, manufacturing and industrial
logistics operations are modeled in and
automated by a more comprehensive
operations management solution, with the

tices in supply chain management (including

operational logistics), production management,
and quality management and drive operational
excellence uniformly through the organization
by implementing both the applications and the
practices on each site worldwide. Best practices
are owned by business owners who provide a
business diagnosis at sites, helping each define

business operations modeled in and

and implement the required process changes.

automated by the ERP. At LOral, both

Management and personnel at each site take

are part of the same Operations

organizational unit.

ownership for the implementation of their new

processes. This rigorous change management
program, sponsored at a high level by LOrals

VP for Operations, has been crucial to the success and acceptance of the solution.

Cross-functional teams composed of both operations and IS

personnel perform each implementation. IS is an important component to

the success by bringing its competence in system design, implementation,
management, and support to bear on the solution.
As a result, the sites that use the system can rigorously apply the production procedures that optimize product quality and traceability, while
virtually guaranteeing personnel and client security. Traceability and
supply chain information are available in real time throughout the organization, providing additional agility.
Aprisos FlexNet operations management solution provides a flexible platform that lends itself to the core model approach, while providing the outof-the-box, real-time warehouse, logistics, production, and quality management functionality that LOral requires.

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ARC White Paper February 2010

How to Successfully Implement

Operations Management
Virtually everyone has heard of LOral or used their products. Less well
known, is the philosophy that makes the company so successful and also
helps make their integrated operations management implementation such a
great success. LOral believes that everyone aspires to beauty, so they define their mission as to help men and women around the world realize that
aspiration, while fully expressing their individual personalities. LOral
consistently applies these principles, not only to their customers but also
their employees, society, and the environment. If you sell well-being, you
need to be part of the well-being of the planet, said Jacques Playe, LOral
CIO for Operations. All operational objectives naturally derive from this
philosophy:

LOrals Values
LOral applies their principles,
not only to their customers

ronment

Guaranteeing perfect product quality

Being innovative in processes and packaging

Guaranteeing an excellent level of service and shorter

but also to their employees,

society, and the environment.
If you sell well-being, you
need to be part of the wellbeing of the planet, said
Jacques Playe, LOral CIO for
Operations.

Ensuring the safety of people and protection of the envi-

time-to-market

Minimizing production and logistical costs and invest-

ments
Objectives

Rather than just defining requirements of an operation management system, LOral used a holistic perspective to define their specific requirements
for operations. These included the changes and improvements needed to
be made and how an integrated ERP-operations management solution
could be used to drive excellence through a global company in a sustainable homogenous manner. Specific requirements defined included:

Provide an IT infrastructure including an integrated solution built upon

a platform that guarantees the worldwide consistency of the operations

model
Provide real-time visibility and traceability throughout operations to
manage manufacturing,

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First Optimize the Process

LOral first optimized the
operations processes, and
then determined how these
could be supported by an
integrated solution.
Too often, inefficient processes
are automated.

Ensure flawless production and logistics operations to

guarantee quality and compliance with the ISO 14001 certification and regulations
LOral called their solution, ISIS, which is both the name
of an Egyptian goddess, and the acronym for Integrated
Solution for Industrial Systems. A logo was developed to
serve as a symbol for integrity and completeness and
represent the solutions capacity to collect dispersed infor-

mation into a coherent system. Values associated with ISIS are: Innovation,
Simplicity, Integration, and Support.
Approach

For each major business process, a process business owner (BO), part of
the LOral operations management team, defines the requirements for the
process. Regional business owners (Zone BOs) support the BO. In an iterative process, the BO or zone BO conducts a business diagnosis on a pilot
site, and, working together with site personnel and management, makes
lists of action item defining the improvements
needed.

Where multiple processes are in-

volved, discussions are sometimes necessary to

determine the overall process corresponding to
all BOs requirements. The site management
takes ownership to implement the changes.
Stphane de Peyrelongue, ISIS implementation program manager, and M.
Playe, jointly insist that the project was largely one of change, referring to
changes in both the processes and in the habits of the employees.
Additionally, the global interaction and sharing among European and
North American project team members has allowed for stronger implementations. Weekly status review meetings offer a venue for discussion on
lessons learned, states Morris Lenczicki, North America Project Manager.
By having this robust interface, it is possible to better focus on the change
management aspects of the project implementation.
Significantly, the specifications for the operations management solution
were derived from the specific requirements of the process design.
During implementations, site management and local key users (LKUs) support the BOs and Zone BOs. This chain facilitates change management,
continuous improvement, and information exchange: the sites are trained in

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ARC White Paper February 2010

corporate practices; best practices identified by sites are incorporated into

the corporate standard; and the LKUs observations and concerns are quickly addressed.
Vendor Selection

LOral had previously selected SAP for corporate business processes, including supply and demand planning, human resources (HR), and finance.
For operations management, LOral wanted a system that would be easy
for operators to use, while effectively supporting the corporate functions of
the ERP. Following a formal vendor selection process, a well-known MES
provider was chosen, mainly for its production management functionality.
To maximize benefits, LOrals strategy was to implement the integrated
ERP-OM solution, site by site.
LOral had initially assumed that the warehouse management (WM) function would reside in the ERP. However, the central servers could not
ensure 24x7 availability and LOrals dynamic supply chain requires realtime visibility and flawless material movement that requires continuous,
nonstop communications between the warehouse management systems
and the rest of the operations management.
A Dynamic, Global Supply Chain
For LOrals dynamic global supply
chain, warehouse management
needs to be close to real-time and
at least as available as the
production management system.

To eliminate errors and ensure that the supply chain

would not get locked up by contradictory instructions,
it was concluded that -- rather than residing in the corporate

ERP

business

system

--

the

warehouse

management function should, in conjunction with the

operations management system, reside at the local sites
and run in a real-time platform with 24x7 availability.

Upon evaluation, it was determined that the operations management supplier originally selected could only provide this functionality with custom
developments and, thus, the vendor selection process was reactivated. This
time, Apriso was chosen based on its capability to deliver a wide array of
functionalities out of the box, based on a real-time platform that would allow the desired central development and roll out of configured best
practices. Today, LOral uses Apriso FlexNet to manage on-site production, quality, traceability, material movement, and warehouse operations.
The Project: Pilot and Roll-Out

For operations management, one server is used for development and a

second for production. This guarantees the integrity of the source. The
same principle was used for the global ERP development and roll out.

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On the pilot site, following the business process analysis and optimization,
the process was divided into tasks and the system configuration specified.
The majority of the pilot was developed on site by a cross-functional team
composed of operations and IS personnel and led by the program manager
from IT. According to LOral, having both IS and operations in the same
location allow issues and questions to be sorted out in the shortest time.
The company perceived that this mode of operation accelerated the pilot
development, which took only nine months (including the vendor change).
On average, the project consumed 70 resources, of which 30 were dedicated
to FlexNet. This included personnel from operations, application development, documentation, and training. Every two weeks, both the application
itself and the implications for the process were reviewed in project meetings. LOral managed progress in a classic fashion based on deliverables
by bi-weekly milestone. Project quality control was done by peer review
for each deliverable, followed by a second validation by the BO or Zone BO.
LOral used a beta release for the site to test and become familiar with the
new processes, followed by a production release. BOs and Zone BOs conducted a second audit three months before, and a final audit, just after the
release. Analogous to ERP development and roll out, the resulting FlexNet
application became the core application, applicable to a large extent to
other sites.
Developing on Site
Having both IT and operations in
the same location allows issues
and questions to be sorted out in

LOral used a similar process during the site roll out

phase. Process analysis and improvement begins three
months ahead of the application configuration. This is
necessary, since every site is slightly different and each

the pilot development time.

needs to take ownership of and allow sufficient time to

implement process changes. Site-specific configurations

Developing on Schedule

are based on the core application.

the shortest time, accelerating

By reusing the core model to

implement the solution for

take less time, just seven months on average, since they

During the first years of the rollout phase, two teams --

different sites, implementation is

one in Europe and one in North America performed si-

highly efficient.

multaneous implementations at different sites. Currently,

11 sites are live and the program is on schedule to have

60 percent of group production managed using ISIS by mid 2009. According to LOral, once a site goes live, it immediately reveals glitches in the
actual work processes, even if the theoretical process is perfectly designed.
This leads to further process adjustments and improvements. For example,
QC samples on which non-destructive tests have been done need to be in-

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ARC White Paper February 2010

tegrated into the finished goods inventory. If the system is not configured
to reflect this, the systems information on the amount of finished goods is
inconsistent with the actual amount, leading to discrepancies in accounting
and excess work-in-progress.
Following initial beta implementation, LOral completed the second
through fifth implementations at a relatively rapid pace. Since LOral was
concerned about deviating too far from the core application, user comments
and concerns were collected and evaluated. Today, a process is in place to
govern the selection and implementation of a best practice into the core
model. These versioning modifications are implemented based upon
both resource availability and validation by the BO. This process helps to
improve user acceptance of the solution and its enhancements.
A Typical Work Process on a Site Using ISIS

With ISIS, production planning is done in the SAP-APO module, complemented at some sites by a detailed production scheduler. Based on realtime information and supported by agile processes, production can be rescheduled up to three days before production. The objective is to provide
flexibility, while protecting site operations from excessive disturbances.
When primary materials are received on site, they are identified and labeled; the material composition and history, lot number and the identity of
the provider are entered. Samples are taken and tested to verify that the
primary materials quality meets specification. Once the lot is accepted, the
What the Operators Say

results are attached to a lot identifier and all information is available to operators throughout the

One operator said that she feels secure

production process by scanning the label. The sys-

because she is certain to execute the

procedures correctly.
Another says that operations are
simpler than before and that the
system saves her time. She feels
autonomous and responsible for her
work, and more comfortable.

tem chooses a location in which to store the

material, indicates this to the fork truck driver, and
manages primary material inventory.
In production, when an operator opens a production order, the corresponding recipe is displayed
and guides the operator through the procedure. The

system checks the availability of primary materials for the lot before production starts and then guides the operator through the different
production steps. When the operator scans the materials, the system verifies that it is the right material and complies with the quality specifications.
This guidance increases operator comfort level in being able to execute the
procedures correctly. This is significant when you consider that each site

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ARC White Paper February 2010

can produce products according to hundreds, or even thousands, of different recipes.

ISIS visually guides the operator through the weighing process to match the
recipe. The actual amount of material consumed is automatically recorded
and the primary material inventory is updated. An identification label is
printed and affixed to the product. In the system, this identifier is linked to
all information on primary materials, their composition, quality, and shelf
lives for the lot.
Before each packaging operation, the system checks the availability of both
equipment and packaging materials and characteristics. The system informs the fork truck driver which materials and products to bring to the
packaging station. Upon arrival at the station, the packaging operator
scans the materials to check the procedure for the order. The system also
prescribes the quality control samples that must be taken to comply with
the ISO standard, while optimizing the number of quality checks. This too
increases operator confidence in being able to execute orders correctly. Interviews with packaging line operators confirm that the system is simple to
use, saves time by reducing the need to search for information, and thus
helps contribute to reduced stress in the workplace. The system also managed product shipping, including real-time material movement, order
management, and inventory management functionality.
Benefits

The benefits that LOral reports from ISIS correspond exactly to the companys objectives. Specific benefits mentioned include improved security
for clients and personnel; improved rigor in production and quality proceSolution Benefits

Improved security for clients and personnel

Rigor in production and quality procedures

Real-time, on-line traceability

Comfort and satisfaction for the operators

Products of irreproachable quality

dures to enable real-time, on-line traceability; a more comfortable and satisfying work
environment; and consistently high quality
products for consumers. In short, the system both monitors and guarantees the
proper production process.

According to M. Playe, Apriso FlexNet simplifies many things for LOral. From a global point of view, the diversity
of practices is reduced and practices across the global manufacturing sites
more closely conform to corporate best practices. This corresponds to the
objective of driving global operational excellence. Operations activities at
each site are simplified or reduced in number. An example is automated

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ARC White Paper February 2010

dispatching of production orders on production lines, as well as automation of many other production, quality, and warehouse management tasks.
Simplification encourages usage of the integrated ERP-OM application, and
has not only direct benefits for production, but also brings synergistic beneIntegration Benefits

Facilitates and stimulates ERP usage

Integrated ERP-OM roll-out brings

benefits earlier, reduces elapsed
time, cost, and risk compared to
sequential implementations

fits through more effective ERP usage enabled by

the OM. Examples include fewer discrepancies of
actual-versus-plan, reduced primary materials consumption, less work-in-progress and reduced
finished

goods

inventories,

reducing

waste

throughout the manufacturing process.

Obviously, the simultaneous ERP-OM implementation has brought benefits

earlier than a two-stage implementation. LOral also mentions that introducing the ERP and the OM solution separately would have increased cost
and risk. In this case, the joint ERP and OM implementation yielded combined benefits that exceeded those that LOral would have realized from
implementing each application as a stand-alone solution.

Conclusions

Successful implementations of change in an organization, such as large

IT deployments, require a change management approach that transfers
ownership for the changes to those who have to apply those changes,
such as site management and personnel. Ownership can only be transferred when the project sponsor fulfills his/her role.

IT has an

important role, as a service provider.

A core model approach is one of the most efficient ways to manage

large-scale operations management implementations. A flexible platform, such as Apriso FlexNet, allows processes and best practices to be
captured and globally distributed.

An OM solution combined with ERP can deliver greater combined benefits than separate, sequenced implementations.

To manage an integrated supply chain on a global scale that operates in

near-real-time, warehouse management and logistic functions of OM
need to be real-time applications and available 24x7, or at least according to the same specification as the manufacturing-related functions of
the OM solution. Each of these OM applications needs to seamlessly
communicate with other enterprise applications, such as ERP and PLM.

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Analyst: Valentijn de Leeuw

Editors:

Greg Gorbach, Paul Miller

Acronym Reference
For a complete list of industry acronyms, refer to our web page at
www.arcweb.com/Research/IndustryTerms/.
BO

Business Owner

LKU

Local Key User

CIO

Chief Information Officer

MES

Manufacturing Execution System

ERP

Enterprise Resource Planning

OBO Operational Business Owner

ISO

International Standards

OM

Operations Management

Organization

QC

Quality Control

Information Technology

WM

Warehouse Management

IT

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All information in this report is proprietary to and copyrighted by ARC. No part
of it may be reproduced without prior permission from ARC. This research has
been sponsored in part by Apriso. However, the opinions expressed by ARC in
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