An integrated ERP system, supplied by McGuffie Brunton, has enabled specialist manufacturer KnitMesh to create an effective and far more efficient operational environment, which incorporates five distinct businesses on a single site.
A main outcome of British manufacturings ongoing efforts to remain competitive has been the merging together of many smaller businesses, and the consolidation of production onto single sites. This integrated approach potentially offers significant efficiencies and reduced costs, but only if effective control mechanisms are in place to manage the resulting product variety and operational environment. One company that has faced this common problem and is solving it through a mix of lean based internal reorganisation and the introduction of a SYSPRO ERP system, is KnitMesh Ltd.
The company, which was formed in 1957, has established a global reputation for the design, manufacture and supply of process separation, safety and specialist engineering materials, and is now one of
While the KnitMesh business has grown and developed organically since the 1960s, consolidation within the industry has also seen KnitMesh acquire the other major
As the company began its own consolidation process towards the end of 2001, it soon became obvious that as well as introducing new practices, and production equipment, the factorys existing management controls needed to be significantly updated. In fact, the old business system, an outdated combination of a Nixdorf manufacturing system and a Sage finance package - which were far from integrated - was just no longer up to the task of controlling the expanding operation, with its increasing variety of products, and managing all the distinct businesses. Therefore, the company turned to McGuffie Brunton, and by May 2002 a 35-user SYSPRO 6 ERP system, providing fully integrated sales, finance, manufacturing and distribution functionality across all five businesses, had been implemented.
This was by far the biggest single recent investment in the facility, but one that has already paid major dividends, claims Simon Nichol, KnitMeshs finance director and company secretary.
He adds, In all areas of the operation, from sales and finance to manufacturing and inventory control, the integrated nature of the system, and its ability to provide clear and timely management information, is enabling us to control the individual businesses and the overall company far more effectively and efficiently.
For instance, for the first time the management team has ready access to results by business unit. Also, for KnitMesh in particular, the system has enabled the company to fully establish individual product costs, and better understand business unit labour efficiencies. Improved controls have ensured far more accurate stock management, which has lead to the need for less inventory. The ability to accurately monitor scrap has also meant more effective scrap reduction policies. As a result of these benefits, the company has been able to take significant cost out of the KnitMesh businesses.
Similarly, better structured transactions, and the integrated nature of the SYSPRO system, have reduced the processing time for many activities, including quoting and sales order processing, purchasing, creating works orders, so this has reduced overall internal process lead times. When required, KnitMesh can now respond to a customers request to produce and dispatch a standard product within 24 hours; previously just through administrative processing time this would not have been possible. Also, improved access to core accounting data has enabled improvements in the management of working capital. For example, the company can now easily determine and chase up late payments, which has lead to a reduction in debtor days by 15%.
We are no longer managing in the dark, and this has to be a major advance for any business, states Nichol.
Clear and Timely Information
More specifically, the SYSPRO system is now providing all users, from senior management down, with visibility as to what is happening within their area of control. At a top level, there are essentially different branches within the system for each business, and so it is now possible to produce monthly accounts for each of the five businesses, within just five days of the month end. Also, in finance management terms, the system provides at a glance queries that show daily receivables and accounts payable information. In comparison, the old system could take up to a month, after the month end, just to produce accounts for the KnitMesh business as a whole, and getting daily updates on anything was just impractical. This new capability enables management to regularly track and monitor how well each business is doing, as well as the combined company, and provides the chance to react to specific business issues, in a timely manner, not weeks or months after the event.
Moreover, having completed the creation, within the new system, of the BOMs and routings for all of KnitMeshs various products, this now enables, again for the first time, the full assessment of actual cost at individual product level. This major new insight is leading to some significant changes, including the altering of the charging structure of some products, which have been found to be much more costly to make than previously thought. Similarly, the data is now easily available to better assess labour efficiencies in each of the different units, and this will be key in helping to develop more efficient processes and practices.
We now have the financial rationale from the system that enables us to effectively take cost out of the business, and this is what we are doing. claims Nichol.
Inventory and WIP is another area where greater visibility is helping drive through improvements. In this case this is achieved through process and system change. In terms of practice, production flow layout through the factory has been introduced for each of the KnitMesh businesses. At the same time the centralised raw material store has been replaced with line side storage for each business. Also, each unit manager is now not only responsible for their own stores, but has specific targets and responsibility for working capital management. As regards system support, while the line side store approach does provide the benefit of direct visual management, one of the many SYSPRO reports that have been set up, enables each manager to rapidly and easily access up to date inventory data, such as number of days of stock, receipts, issues, etc.
Additionally, the use of the systems WIP module, the ability to back flush material usage down through the BOMs, the creation of notional finished stock warehouse for each business, and even the return to vendor functionality - which automatically removes from inventory items that have failed goods-in inspection, - all combine to help provide much greater control over materials and stocks.
As Nichol observes, The necessity of monthly stock checks, which were vital with the old system, are now just a habit that we intend to stop, as the differences between system and actual have reduced to a minimal level.
A less obvious, but equally important benefit from the SYSPRO implementation is that the integrated nature, and widespread access to the system has also reduced the islands of information that used to exist within KnitMesh. Previously, the sales people used to keep their own quotation databases, but this data is now held within SYSPROs quotation system. Similarly, specific product packing data was kept separately, but again this is now held on the system and directly related to product codes, so that all who need it can easily access it.
There are also plenty more benefits from the ERP system that have yet to be gained, as Nichol notes. The introduction of SYSPRO throughout all the businesses is still ongoing, and we know that there is still far more potential within the core system, and through extra integrated functionality, which we need to tap into.
For instance, the integrated product configurator module is being introduced to help manage both the front-end sales process, and improve manufacturing efficiency for the KnitMesh products. This will make a big difference in helping ensure that quotes for new product variants are accurate, and that they are as close to a standard product as possible. Similarly, the integrated CRM module is also being implemented.
Finally, e-commerce is another major step forward that the company can now contemplate, due to the capability inherent within SYSPRO 6 and SYSPROs e.net solutions. While we have EDI capability, this is limited to just a couple of major customers and is limited in the information transfer. Our intention is to provide the facilities that will enable a wide range of customers access to order data and on-line ordering, says Nichol.
He concludes, The introduction of the SYSPRO ERP system has provided an integrated management backbone that is now enabling us to effectively control and manage all the businesses. From closely monitoring sales to helping drive out cost it has delivered key benefits that in the present economic climate have proved crucial. Moreover, now that the major task of internal consolidation has been completed, the system is also providing a platform on which to take the company forward.