07 August 2012
Lean thinking is very effective at streamlining shopfloors for efficient and cost-reduced demand-driven manufacturing, but sometimes at the expense of flexibility. Brian Tinham examines the differences IT can make – and what might make sense for your operations
Walsall-based zinc and aluminium pressure diecaster BSC (Diecasting) has invested more than £100,000 in a new ERP system, as part of a three-stage programme aimed at doubling turnover over the next three years. Why is that interesting in the context of so-called demand-driven manufacturing? Because three short years ago this mid-sized contract manufacturer was just two days away from closure, yet most recently it posted profits of more than £280,000 for 2011. Now it has announced a raft of new contracts worth £2m. So it's doing something right.
And much of this 'something' is about ensuring that internal and external operations dance to the tune of customer demand – by harnessing the new ERP system to underpin a massive upgrade, in terms of efficiency, responsiveness and communication. Indeed, company chairman Mark Nunan describes the firm's major investment in IT as central to its turnaround and critical to its growth target – alongside cutting costs, investing in new machines and focusing back on what the company does well.
Nunan, a banker turned entrepreneur, agrees that there are no new ideas here. He also concedes that aligning activities and material flows with customer demand – not just improving customer service – has always been important for manufacturing companies. However, it's particularly so now, he says, in these ultra-competitive and economically challenging times – and it was especially the case for BSC, if what was a seriously ailing company was to have any chance of survival, let alone eventual prosperity.
"Business is simple: it's only people that make it difficult," quips Nunan. "There are rules you have to follow. You need money, people who know what they are doing, systems to support them, and marketing and sales to bring the business in." But when he took over the firm (which was the subject of a failed divestiture) back in June 2009, he found a nightmare scenario, with wages unpaid for three weeks, creditors losing patience and monthly losses going from bad to worse.
"We had to cut back on costs and lose 30 people from a workforce of 110. We also had to buy new machinery capable of revolutionising our ability to achieve quality first time, and we had to go out looking for new customers,"
comments Nunan. In fact, the firm spent more than £620,000 on new plant and machinery, and £80,000 on marketing support, in a bid to break into new markets and territories. Just as important, though, the business itself needed significant surgery.
"Our processes were a disaster zone. We ran a survey of all our customers and found that while quality came out well, communications with customers were shocking – and the same was true internally." And it wasn't surprising: "We were running four different systems, so data existed in quadruplicate; costings weren't being done correctly; routings weren't understood properly; and the reality was all departments were operating more or less autonomously."
The result: not only were costs artificially high and the scope for inefficiency immense, but getting information out of 'the system' was time consuming and prone to errors. And hence the new ERP software – Priority, from eMerge. "We had brought in a lean consultant early on to look at our processes and workflows, and, following discussion, decided to take our IT from the 1960s to 2020s, with an integrated system covering everything, from accounts to CRM, costing, tool management and production scheduling," says Nunan.
BSC managing director Les Dudley takes up the story: "This system has been a huge step forward and something I never thought we'd be able to take advantage of a few years ago... ERP is often seen as low priority, but in this day and age you need to be efficient, transparent and accountable at every stage." Now, he says, from the first customer enquiry to the final invoice, the system manages the entire project lifecycle, streamlining operations and generating real-time accountability. What's more, Priority ERP's ability to schedule production and optimise the sequencing of resources – cementing in routings, operational parameters and improvements – means lower costs and greater flexibility.
Additionally, the introduction of barcodes on pallets means the technology can track products as they move around the foundry.
Most importantly for Dudley, the system implementation and its associated business process review has also revolutionised the way customers and suppliers interact. It now allows, for example, clients to place orders directly into the system, monitor production and track deliveries remotely – while internal processes are automated and optimised to minimise material and operations costs, and expedite OTIF delivery.
Nunan agrees, citing everything from sales processes that now take a small fraction of the time, to one case where a change of buyer at a customer led to an order for parts that BSC's new system flagged as normally ordered with tandem components. The buyer concerned declined advice from BSC, which made the additional parts anyway – and was subsequently able to fulfil the predicted 'emergency' order. "That just wouldn't have been possible before," he comments.
But behind the scenes, the driver for responsiveness is the system's adherence to continuously enforced rules. Nunan explains that tooling is now automatically scheduled for servicing and arrival at the right machines on time for work orders hitting the shopfloor. "That alone stripped out a whole range of problems," comments Nunan. "Some of these tools are massive, so changeovers can take a long time. The last thing you want is to put them on and find they're not working." And he alludes to the obvious impact on customer service and OTIF. "Now, everyone knows what's required as soon as we get an order – to the point that the CNC machines are ready as soon as the foundry is finished producing."
The bottom line: "We've taken turnover from £2.1 million to £6 million already by focusing on the basics. That's a threefold improvement with 20-30 fewer people, partly because of our new Frech diecasting machines but also as a result of introducing proper systems. Also, quality has improved immeasurably and so have our costs and OTIF figures. Before, we never delivered anything on time or in full. Now, there are no customer problems at all."
Small is beautiful
So much for phoenix risen from the ashes. For the majority of manufacturers not quite staring over the precipice but needing to improve their ability to respond effectively to changing demand, what might best advice look like? Darren Dowding, formerly head of manufacturing at aerospace and motorsport engineering specialist Cosworth, now running Darwin Business Solutions, suggests that much depends upon just how demand-driven you want to be. Are we talking merely responsive to existing customers and markets, or wanting to follow opportunities and money, almost wherever they might lead?
If it's the latter, he believes that when it comes to manufacturing and business systems, small is beautiful. "Lean production line thinking tends to lead you to ERP systems that are rigid: you spend a long time getting them right and then leave them alone," he asserts. "But if you want the company to be driven by demand, your systems need to be flexible – which probably means avoiding big ERP, and looking at small specialist systems, such as MES and scheduling systems, that are very flexible, very configurable and open to specialist industry applications."
Dowding concedes that in his former life, he managed a significant business expansion and change of direction with the biggest system of them all, SAP. "But it was quite cumbersome. Different market sectors require different features and sometimes the functions you need have been switched off. Then it's difficult to switch them on – and when you do, you have to worry about what impact they might have on the rest of the business. With a smaller system, the functionality is either on or it's not there at all."
Almost inevitably, however, going for small, specialist systems means confronting the challenge of integration. But Dowding insists that if you elect to constantly review opportunities to chase profit, then you should also have bought into the fact that you'll need to review your business processes and IT. "So you also need an integration partner you can rely on, with related experience, to avoid the finger-pointing when things go wrong."
That said, Dowding's key system suggestions are in no way radical. "You need to be very nimble on your demand profile, so that's about keeping on top of the data," he says. But thereafter he would specify capacity planning and scheduling, underpinned by data collection for early detection of winners and losers, in terms of profit, as well as a good shopfloor planning system. Beyond these, he agrees that, if engineering design is in-house, then effective new product development and project management tools, such as Microsoft Project and Primavera, will be right up there.
As for forecasting systems to drive planning, Dowding is circumspect: "They have a place for some companies, but not all. It depends on the size of company and profile. If you're managing hours in a machine shop then forecasting is only useful for assessing the impact of changing shift patterns versus buying more equipment. For larger manufactures wanting to understand stock positions, cash positions, etc, it's different."
Infor's Pieter Leijten, vice president of supply chain for EMEA, takes a slightly different view of the latter, making the point that manufacturers – and particularly those in a demand-driven world, where there's nowhere to hide – need a longer-term picture of demand in order to anticipate
Darwin Business Solutions
Emerge IT Ltd
SAP Business Objects (UK) Ltd
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