Imagine the reduced warehousing, more efficient use of labor, increased customer satisfaction, and ultimately greater profit margins achievable with perfect, just-in-time delivery.
But while 100 percent JIT rarely meets reality except for behemoth-sized manufacturers, those of lesser stature now stand a chance by embracing enterprise resource planning (ERP) software systems as a means to accurately track the entire manufacturing process. Given the recent availability of like-sized ERP packages for small to medium-sized manufacturers, the losses stemming from misplaced inventory, interrupted WIP and missed delivery deadlines can be significantly abated.
“Our inventory accuracy went from 70 percent to over 98 percent when we switched to a new ERP system,” says Mike Britton, vice president and chief information officer of La Marche Manufacturing, headquarted in Des Plaines, Ill. “The Rover Data system we use enables us to deliver 96 to 97 percent of our product on the day that it was scheduled to be delivered because it provides the tools to improve the on-time performance of the entire supply chain.”
Tustin, Calif.-based Rover Data Systems’ Millennium III application is a flexible, open, customizable ERP system that includes modules for sales and marketing management, finance, engineering, manufacturing and production management, CRM, and inventory control. Like others of its ilk, it helps small and medium-sized manufacturers get a bit closer to the lofty JIT ideal.
J-I-T not particularly E-A-S-Y
Just-in-time delivery has been a long-standing goal for ultimately improving the bottom line for manufacturers. Yet, achieving JIT comes with its own set of challenges.
For one thing, only the largest of companies – giants like Walmart, Ford or GM – who have significant control over their vendors can realize 100 percent JIT. The rest can’t begin to exert that kind of leverage.
Further hampering many mid to small-sized companies is the holdover of separate accounting, manufacturing and executive-information applications. While rudimentary inventory reporting aspects often get included, they usually fail at tying the whole manufacturing process together.
“Inventory accuracy was only 70 percent, partly because the computer system we had was not well integrated, having been pieced together by a number of different companies,” says La Marche’s Britton. ISO 9001, 2000-certified La Marche has been designing and manufacturing power conversion products¾such as industrial battery chargers, rectifiers, power supplies, and inverters¾since 1945. “Some of our product didn’t even show up in the system, but would sit in the warehouse with a physical tag on it. It made doing the inventory a constant mess.”
Shortcomings of this nature act to affect the bottom line of too many small manufacturers.
“When your inventory is inaccurate, it costs you a tremendous amount of money because you’re constantly placing orders to replenish something that you really already have, but just don’t know it,” explains Britton. “Or, you’re counting on having something in the plant, and you go look for it but can’t find it. This contributes to poor utilization of your dollars as far as inventory use goes.”
ERP to the rescue
By using a single solution designed from the ground-up to cohesively coordinate various areas of functionality such as finance, marketing, engineering, purchasing, production, sales, distribution, field service and even CRM, a manufacturer can significantly reduce opportunities for error and better track the entire manufacturing process from start to finish.
ERP’s accuracy stems from the fact that it acts as a single entry system. If someone, say a salesman, enters an order, it immediately drives demand down to the planning side of the house without having to re-enter it anywhere else.
“ERP integrates all the pieces very nicely, making it easier to manage when the MRP, the inventory files, and the shop floor reporting all ties in,” says Britton. “A complete ERP system goes beyond that, helping to manage internal resources such as manpower. That’s where our Rover Data system aids us the most. It guides us on how to redistribute our cross-trained workforce to best accomplish what needs to be done.”
“One of the more cost-saving things that the Millennium III system does is to employ a classification of ‘inv locs’ (inventory locations) to identify exactly where inventory is at all times,” adds Britton. “For instance, older systems forced you to physically set aside ‘safety stock,’ which ties up your dollars in idle inventory. But the new ‘inv locs’ can even keep track of inventory that’s being tested in the lab. It’s so accurate that we no longer need to do any cycle counting.”
While enabling improved inventory control, at minimal expense, the modularity of today’s ERP systems also helps manufacturers meet future business needs by permitting customization in response to changes in the market. Tailored to meet the demands of small to mid-sized companies, such ERP systems also prove easier to operate.
“Millenniums III’s ability to easily create custom menus for us offer procedures specific to shop floor reporting on the computers located there, and the use of bar code readers to eliminate data entry errors all helped improve operations for us,” says Britton.
At the same time, modestly-sized ERP systems often come at modest prices.
“Our previous software required higher annual licensing costs, and it also required one full-time PICK (D3) programmer and one contract PICK programmer,” recalls Britton. “But our new ERP system allows the easy generation of custom reports by practically any user in the building. The money we saved allowed us to install extra desktops and data collection devices to improve operations.”
E-R-P spells S-U-C-C-E-S-S
By improving the control of inventory through any manufacturing process, and improving delivery date accuracy of finished product, today’s targeted ERP packages help push more “black ink” to the income side of the ledger.
“Upping our inventory accuracy from 70 percent to over 98 percent saves us a tremendous amount of money because it almost completely eliminates the risk of placing orders to replenish material that we already have but just don’t know it,” says Britton. “Nor do we waste valuable time looking for something but can’t find it.”
“Profit margins have been more dramatically improved by introducing labor reporting for all manufacturing operations,” continues Britton. “This has provided an abundance of data pointing to inefficiencies that have driven cost cutting design changes.”
Ultimately, helping small to medium manufacturers approach JIT also improves customer relations.
“Under the old system, our lead times were typically anywhere from 6-12 weeks,” says Britton, “but since we switched over to Rover Data’s ERP system we are now delivering 96-97 percent of our product on the day that it was scheduled to be delivered, with only a three- to four-week lead time.”
“What we have now is an ideal situation, because we can manufacture and assemble ‘to order,’” continues Britton. “It’s been a tremendous tool and it really helped gain the confidence of the manufacturing representatives we work with. They tell their customers that when you deal with La Marche, they will always meet the deadline.”