Leverage ERP Investment, Improve Operational Efficiency, Reduce Inventory and Cycle Times
Industry: Engineer-to-Order Capital Equipment Manufacturer
Role: Project Manager
Number of people working on Assignment: 6 people
Duration of Engagement: 9 months
Problem Presented: Prospect contacted our firm about the need to define a “part numbering system” for a 35- year old company. Just before the initial client meeting, we learned that there were also significant issues with respect to inventory control. During the initial client meeting, the CEO identified his concern that the company had not benefited from its investment in ERP and that the use of the ERP system was really an afterthought.
Assessment and Steps: While conducting an assessment, we learned that the company had far more than a “part numbering system” issue. Here’s a snapshot of what we found:
• The ERP value-added reseller (VAR) had installed the software and conducted some remedial training on the different modules that had been purchased.
• There had been no attempt to define a business process or identify how the software was to be used in the course of running day-to-day business operations.
• There was no assessment on the part of the client or the VAR to determine “what processes and tools would need to be in place” to successfully implement the ERP system.
• The client used each individual supplier’s part number to identify a part meaning there was no uniform part numbering system.
• The inventory valuation was estimated to be off by as much as 50%
• There was no process for managing the release and changes to bill of materials once they were in the ERP system—they could be updated by anyone at any time without notice
• The ERP system was not part of the mainstream business processes—it was completely separate from the day-to-day running of the business.
Assisted the client in the following areas:
• Defined and implemented a company-wide part numbering system; assisted client with migration to new system in the ERP system as well as with a physical inventory
• Defined a release and change control process to manage data being entered in the ERP system
• Developed and implemented an electronic document control system to automate part number requests, change requests and change orders.
• Developed a business process for managing the development and release of a documentation package for the company’s highly-engineered products
• Developed business process for using each ERP module to ensure that all business activities were seamlessly transacted through the system
• Trained employees to use the systems and procedures and watched them be successful doing their jobs with the ERP software.
• Put a process in place to manage any and all issues that were encountered relative to the new processes to ensure that answers to problems were identified and documented so we could close the issues.
The company’s manufacturing cycle times for its highly-engineered custom products dropped from approximately 12-16 weeks to 4-6 weeks; the raw inventory levels dropped by 50% freeing hundreds of thousands of dollars of cash; and the ERP software is now mission-critical to running the day-to-day business. And, most importantly, the company was now more “process dependent” than “people dependent.”
The CEO of this small company also did one very gutsy but absolutely courageous thing. He could have stopped spending money with our firm after about 4 months time but chose to have us stay on for an additional 5 months to make sure the new processes and procedures really took hold in the company. When we met with him 3 years later, he expressed his delight about how successful the project had been and how much better his company was running. Everything that we had done for them has continued to persist over time.