Mark Young revisits caravan and motorhome maker Elddis to find out the nuts and bolts behind the supply chain improvements which are keeping the wheels of this County Durham manufacturer well greased.
At the beginning of last year, TM talked to caravan and motorhome manufacturer Elddis to get feel for this staple company of roadbased holiday-making. We’ve now gone back to Elddis to find out more about the supply chain improvement measures that have been a key factor in keeping the firm on the right track.
Firstly, to update on Elddis: this financial year 2,800 touring caravans – or ‘tourers’ – and 1,100 motorhomes will be manufactured at the company’s County Durham factory. Elddis had initially forecast production of less than 500 of the latter but strong demand, led by a requirement to replenish retailers’ forecourts after destocking activities last year, has meant that figure has more than doubled. The company expects a turnover this year of around £46m, from £35m last year.
As we regaled last year, Elddis’ products are consistent industry award winners, year after year. Recently the company scooped the ‘Best Caravan for Large Families’ for its Xplore 596 triple bunk at the Practical Caravan Awards 2010, while its uniquely laid out Crusader Tempest won Best Family Caravan over £13,500 in the 2010 Which Caravan awards. This doesn’t mean Elddis is resting on its laurels, though. The company continues to innovate its product range and its work has been well received by the market. The Xplore 302, released in February and marketed as the smallest and lightest caravan on sale in the UK, is already the company’s third best selling product this year – and associate director Gary Jones says it would have been number one had it been available from the beginning. The Xplore 302 itself set an unprecedented standard as double category winner in the Caravan Club Design Awards and Caravan Club Lightweight Leisure Awards this year.
In addition to the Xplore 302, the Avante range has gone through a complete redesign in response to qualitative market research among customers and retailers and carried out by associate director Angela Wallace and the Appeal Team.
“We’re going to be presenting the newlook Avante range to the market in the next couple of weeks,” says Jones. “It’s more functional, it’s lighter and I’m going to say it’s sexier.”
Oiling the chain
So on to supply. Elddis has worked extensively in recent years to improve all aspects of its materials handling, from the way it works with its suppliers, throughout the manufacturing process, to the way it delivers to its end customers. The improvement process that the company now describes as its journey was kick-started by a scheme initiated in 2005 which was funded by what is now the Department for Business, Innovation and Skills – the then Department for Trade and Industry.
This saw four Elddis employees join representatives from nine of the company’s key suppliers in embarking upon a two-and-a-half year National Supply Chain Project. Together they trained in the tools and techniques of supply chain improvement and cooperation in order to streamline their operations, both individually and in relation to each other. Each company identified a pre-diagnostic focus area, which was made the focus of weeklong workshops with additional follow up days afterwards.
“In my opinion that was tipping point for myself and my team, because all of the tools and techniques opened everybody’s eyes to a different way of doing things,” says Jason Thompson, Elddis’ product services manager who has responsibility for materials management and supply chain from purchase order processing to delivering parts to the assembly lines and the retail network.
One of the first things to come out of the supply chain programme was the introduction of a vendor-supplier performance measure to check metrics based around the ‘7 measures of QCD’: quality, cost and delivery. “That was a fundamental objective of the project,” says Thompson. “To develop a system that we and they could use to rate the performance of services and check whether the trends are going the right way. The data behind that allows us to see what products are arriving on time.
It’s a web based system so the suppliers can see what they need to be working on within their own business.” This focus on better communication links throughout the supply base was then extended to the introduction of an automatic ordering and replenishment system through Epicor’s Avante ERP software. “Some of our suppliers are now working with us to providing ID labelling and barcode functionality so that it’s a seamless process from them dispatching all the way through to us manufacturing,” says Thompson. “As we use and consume products we’re using barcode functionality to send orders directly via email to the supply base.” Before, the company would order all the parts it required six weeks in advance of production. It now orders parts as it needs them, typically on a weekly basis, and has thus pushed its stock holding back into its supplier. It encourages the companies it orders from to do likewise.
From push to pull
Next it was time for Elddis to improve the way it supplies to its line. “At that time our business was very push orientated so we were building things in batch sizes of around 50 to 60 at a time and we were buying in and delivering to the line the same number of items at a time,” says Thompson. “All of the operations within the business were operating on an ethos of ‘the bigger the batch size the better’. Now, we build in batch sizes as small as two and in making this change the business has become much more flexible in reducing lead times and our ability to deliver products to end-customers quicker and to a better quality.” Historically it could take up to sixteen weeks to for a customer to receive their order, as they would have to wait for the product cycle to get round and a vehicle to be available from stock. Now the company avoids building for stock and instead builds to order. Lead time is down to six weeks.
“We concentrated a lot of our efforts how we could improve supply to the manufacturing processes. The first thing we identified was taking out the waste and trying to work much slicker. 5S was the foundation – getting the workplace organised – then we moved onto waste elimination with process mapping and the introduction of kanbans, moving away from a push towards a pull orientated system. We started out on a trial system with a Bradshaw tow tractor like you see in automotive factories in order to look at supplying the line in smaller quantities, relying less on fork lift trucks.” When the Kanban system was introduced it initially included 23 components but through a series of expansions now includes more than 600 – roughly 55% of the parts Elddis uses across its production processes. “We’ll now work on tackling the rest,” says Thompson.
“At first we were doing a ‘milk round’, delivering to the line once every four hours,” explains Thompson. “Now we deliver every 25 minutes, supplying one piece at a time to each vehicle. It’s a four ticket decoupled kanban system – there’s always one with the vehicle, one in the warehouse getting picked, one in transit and one waiting to be used.” This has allowed four forklift trucks to be taken out of the line supply fleet and be replaced by two land trains with dual-purpose trailers. The tow trucks do rounds of the factory with four or five trailers attached. These are placed line side at point of fit and then act as pedestrian operated trailers.
What you need, when you need it, where it should be
In addition to singular supply, vehicle kits are now being introduced for various groups of products such as electrical components. These are aligned to the serial number of the unit and ensure that exactly the right parts and numbers of parts are delivered; meaning batch size is reduced through sequencing, fewer goods are lost or damaged in transit and work areas are not cluttered by extraneous materials. Storage and picking cells were introduced during the reorganisation of the warehouse to facilitate this measure. The operative now only has to walk around a cell of approximately four square metres to get everything they need for one particular batch of components.
Elddis is now looking to repeat this system for the windows its uses, which are imported from Germany, they will be packaged and delivered in per vehicle format when delivered to line side.
Elddis have also introduced a defective material control process. Faulty components, which used to only be discovered at the end of a batch are registered in real time and the problem is rectified immediately.
In the warehouse, a visual management system has been introduced for a pallet based storage operation so that any location can be utilised for any product, facilitating effective stock rotation while a comprehensive knowledge of product whereabouts is retained. Picking documentation has been adapted to become barcode readable meaning item numbers are scanned rather than typed. Mistakes are avoided and time is saved. Expendable packaging has been swapped for reusable and returnable crates, boxes and stillages.
In terms of improving supply to the end customer, Elddis worked with the North East Productivity Alliance and NAConsultants. “They came in and facilitated training and helped reorganise the warehouse to improve how we supply spare parts to the aftermarket. We designed a new system which allows us visibility over where everything is and separates the ‘runners’, the ‘repeaters’ and the ‘strangers’ – the most regular movers, the intermediary items and the ones we need to reach most infrequently.” The company also looked at its transport system for delivering spare parts and now uses couriers, rather than operating its own delivery vans on a milk round basis, which means it can offer next day delivery rather than at the snail pace of four to six weeks for stock items.
Training is ongoing. Currently over 150 employees are undertaking a new nationally recognised qualification in Supply Chain Management. Elddis were chosen as one of the first companies to run this new NVQ, which is now being rolled out in automotive plants across the country. “This really fits in with what we are trying to achieve at Elddis, and we were delighted to be one of the first to run the course,” says Jones.
The end result of these initiatives is that as well as the aforementioned reduction in lead time from a possible 16 weeks from a customer placing an order to receiving their product to just six, the value of raw material inventory has been reduced from £2.6m to £1.4m and finished goods is down from 1,100 units to 500, which includes the storage facility service Elddis offers retailers whereby the latter buys stock but keeps it at the formers’ site. In terms of quality, end of line clearance has gone from 40-50% two years ago to a percentage in the high 80s or early 90s now.
Investing in the best
Testament to Elddis’ commitment to quality is the investments it is making. It recently spent £65,000 on a new machine to improve the plywood edging which go inside the caravans in motorhomes. “The machine was signed off on quality alone,” says Jones. “It isn’t faster, it doesn’t give us more capacity – it just feels better.” The installation of the machine then inspired the company to look at all aspects of its worktops and to explore how it can reduce the weight and improve quality.
Elddis has now decided to invest in another new machine for edging worktops.
“We had to make a choice between buying worktops in or making them ourselves and we took the latter option because it guarantees us that we get exactly what we want and that we’re in control of quality, cost and delivery,” says Jones. The total investment, including all of the machinery, its installation, and the adjustments to the factory, will be £310,000, with installation in August 2010.
“Overall, we’re now far more responsive to what customer wants,” he concludes. “It’s not just that we’re making things quicker and to order, retailers can now be delivered their caravans within a week of us making them because, through the changes we’ve made, we can have confidence in the quality. That couldn’t have happened several years ago.”
