Seamless systems

Adjust font size:

Magazine Article, Source : The Manufacturer
Zone : IT in manufacturing
Published : September 2006

Brian Davis reports on the changes in IT infrastructure that are needed to manufacture to demand

Tim Horton, IT manager at Kingsland Wines and Spirits reckons that: “Demand management is all about accurate forecasting. Though forecasts are often guesses and nearly always wrong!” Effective demand management is a priority for own label drinks manufacturer Kingsland, and for many other firms faced with increasing pressure to manufacture-to-demand rather than keep stacks of inventory.

Manufacturers typically need to address four key factors: improving customer service to ensure availability of goods and services; reducing operating costs and improving revenues by producing what is needed when needed; reducing inventory and obsolete stock; and improving information visibility. The manufacture-to-order paradigm shift doesn’t simply mean adoption of new and more integrated ERP systems. It also needs closer working with the customer and supply chain to achieve an improved demand pull scenario.

Initially, Kingsland replaced a Promix MRP system with Infor System 21 under a £300,000 investment programme. “However, implementation is an ongoing process which is never complete,” says Horton. True enough, Kingsland recently spent another £100,000 on hardware and upgrades including a new IBM iSeries server to handle up to 100-fold increase in transactions.

Traditionally the firm held two days of safety stocks, whereas the new MRPII system is geared towards just-in-time production, purchasing and delivery. The system uses vendor schedules and provides plans and forecasts for the Manchester bottling plants, with manually keyed works orders used to generate demand for packaging and bulk liquid items, while raw materials are reordered as required via kanban. ERP implementation was carried out in a staged approach, using Infor’s System 21 software because of its customs and excise/bonded warehousing capabilities. The firm expects to save £50,000 in reduced stock holdings, reducing lead times from 24 hours to 12 this year.

Horton evaluated several different demand forecasting techniques and their potential impact on inventory and order satisfaction. “We positioned ourselves on the cost versus performance curve, balancing the time frame of the forecast versus the level of detail required.” As a result, Kingsland uses the i-Route tool to extract data from the core ERP system for spreadsheet analysis, then adjusts the system accordingly. Linear regression models are used to perform statistical analysis of sales history with weighted averages and standard deviations, in a deliberate move from ‘finger in the wind’ supply chain management and biased forecasting.

Kingsland now has a demand chain which isn’t simply based on capacity and inventory, but is geared to customer expectations and carefully measured and monitored supply chain performance. The suppliers have gained accurate visibility of forecast demand, which in turn allows them to be more agile, with a JIT reduced cost manufacturing model, even with bulk liquids shipped from across the world with many weeks lead time.

Butcher’s Pet Care wanted increased visibility and seamless connectivity between sales, production and warehousing to support customer service and 24-hour processes, five days a week. “Customer orders are usually placed at short notice,” explains project manager Jeff Martins. “As a demand-driven sector, fulfillment requires an efficient supply chain that delivers the correct amounts of right product to the stores, on time and fully compliant with shelf-life specifications.”

Traditionally, production planning was based on historic sales, supported by company marketing crunched strategies. Little information was available from the customer until the order was placed, and forecast and demand planning required complex judgment serving a highly competitive market.

Butcher’s had a basic stock-warehousing system, with financial ledgers and customer sales order processing capability, and a simple forecasting system supported by Word and Excel spreadsheets. “Nothing was linked and information was often re-keyed and duplicated,” says Martins. What’s more, transferring a sales forecast into a production plan was time-consuming and unreliable. The original system was actually designed for meat processing and didn’t support Butcher’s manufacturing operations.

The Northampton firm sought a more unified business management system, to suit requirements for manufacturing, forecasting, capacity planning, payroll, sales order and purchase order processing, and warehousing. Introduction of several new brands and formats made new system selection a priority. The firm looked at 15 systems and narrowed the list down to four, which were benchmarked against a scorecard in two day demos. “IFS was the unanimous choice, increasing scope for better demand planning and more flexible manufacturing,” says Martins.

Butcher’s gained full traceability where previously there was a black hole. Production control has changed from simply keeping stocks at a specified level, to satisfying different customer requirements more effectively by manufacturing ‘the right products at the right time’. Overall cost including consultancy and implementation over a six month period was £250,000. The system went live across all areas in April 2005, except warehousing which had a temporary setback caused by a faulty network connection.

“We now have a more structured approach to new product development, bill of materials and supplier lead time calculations. Better report capabilities impact on KPIs across the business. Shortages and wastage have been reduced, and the next stage will address stock level reduction and quality,” comments Martins.

Dales Pharmaceuticals handles over 200 product lines and has tripled in size in the last five years. The Skipton-based company is implementing Oracle IIi e-business suite, moving from paper-based batch documentation with a bespoke AS400 system which handles MRP, stock and purchasing operations, while finance operates Sage Line 100.

“We considered systems from Sage, IFS and Axapta, but chose Oracle because we wanted an FDA compliant system which could handle worldwide markets,” says managing director Michael Annice. Equipped with 45 licenses of Oracle e-Business suite Dales Pharmaceuticals anticipates significant efficiencies, cost savings and better information sharing across the board.

Full go-live of the £500,000 system is set for October, “but we have already made significant improvements towards a more agile operation,” remarks Annice. Admittedly it’s an ongoing journey and lots of analysis is still done on spreadsheet. “Oracle’s functionality and flexibility will allow us to grow the business avoiding certain costs, and developing compliance in line with new quality specifications, regulations and IFRS financial validation.”

The Authentic Food Company is a family owned business that employs 180 in a Manchester plant, supplying international cuisine products to foodservices and retailers across the UK and Europe in a fast moving environment. “Demand driven manufacturing is vital as we grow the business. We have a finite capacity to work with, so the more our customers can feedback into our systems in terms of projections, forecasts and product lifecycle, the easier the manufacturing becomes for us,” says business controller Parminder Basran.

“Many of our lines are reconfigured for customers, and many of our lines produce bespoke recipes for individual customers based on their target market and delivery mechanisms. Setting these systems will allow us to lift the blueprint into other sites when we expand.” Consequently, Authentic Food Company has adopted several tools including sales forecasting with information generated from internal and external process, with AS2 linked directly into a SAP suite.

Having relied on a simple Sage system originally, Basran looked at three systems – SAP, EDS Sov Man and Microsoft’s Navision. “SAP gives us the technology infrastructure to grow our business extremely quickly without constraint,” says Basran. “Our key criteria were useability, accessibility of information, good fit with our business processes and need for time savings on key tasks. Most important, we required one central system to handle the whole business.”

Basran admits: “We are yet to see major benefits of decreasing stock levels, and integrated manufacturing management, as the implementation is still being rolled out. Our version of SAP requires more work on the manufacturing module, and we could also do with more functionality in certain areas, but we find that SAP and the reseller respond readily with feedback to enquiries.”

Fifty users are licensed in a variety of functions including accounts, sales, new product development, HR and manufacturing. Implementation of the £250,000 system, including ancillary costs, is underway in bite-sized chunks. “Remember, to get useful information out, you need people to put it in and experts capable of implementing the system,” he says. “As a result, we created a new supply chain function. We still have a long way to go to integrate SAP with other systems in the business. Our ultimate aim is seamless information exchange internally and along the supply chain, but that’s far on the horizon.”

Abacus Lighting of Sutton-in-Ashfield employs 200 in the UK and 60 in Shanghai, with customers in local authorities, business and retail parks, sports grounds and the rail network. Abacus replaced an IBM MAPICS2 system with SAP in the run-up to 2000, “because we wanted a future proof system this time round,” says finance director Andrew Morris-Richardson. The SAP system links 115 people across the business from sales to manufacturing, finance and stores, with a shopfloor data collections system that feeds into the SAP system.

The £1 million investment took six months to implement. The biggest challenge was change management, explains Morris-Richardson. “But we’ve seen huge improvement in order management with lead time reduction of 50 per cent depending on the product. Stock turns have also improved, and reduction in lead time has enabled us to win more business in a competitive international market.”

Comments on this story

click here to add a comment

You must be registered & logged in to add comments
Please register

already have an account and just want to login?

email address
password
remember me