ROI expected by mid 2007 following reduction in stocks and breakages
Kingsland Wines & Spirits, a UK own label manufacturer and supplier to the major supermarkets, has invested 100,000 in new hardware and developments to its System21 enterprise resource planning software. The investment has been made with Geac, a global enterprise software company, to help the company take full advantage of a new manufacturing and supply chain culture involving MRPII (Manufacturing Requirements Planning). Kingsland Wines & Spirits expects to adopt this new working environment fully by mid 2006. Then it expects its supply chain to benefit from substantially improved stock management, which will provide a return on the Geac investment by mid 2007.
Replacing a tradition of holding two days of safety stocks, the new MRPII-based environment will be geared towards just-in-time production, purchasing and delivery. This will be based on using vendor schedules and also providing suppliers with the production plans from its bottling plant in Manchester. This will encourage lower stock holdings as the plant will be controlled through Works Orders, and in addition, raw materials will only be reordered as they are consumed on a Kanban basis.
Improved stock management will also generate fewer stock movements in the warehouse. Reducing unnecessary pallet movements will result in less breakages and wastage. As a result, Kingsland Wines & Spirits estimates that 50,000 will be saved in reduced stock holdings and fewer breakages in the first year, generating a full return on the Geac investment by mid 2007.
Tim Horton, CIO at Kingsland Wines & Spirits, said:
Although we are mid-way through a 1 year initiative, 90% of the MRPII effort is spent right at the beginning when you need to be committed to improving data accuracy. Although hard work, it is vital as the benefits can then really start to flow. As a result of our efforts we expect our lead times to come down quickly from 24 to 12 hours in 2006, and in 2007 we will approach same day ordering and delivery. MRPII is truly that powerful.
Mike Stanbridge, a manufacturing consultant at Geac, said:
You cannot force MRPII as it requires a fundamental cultural change. Kingsland Wines & Spirits has really adopted the right approach to MRPII by adopting a methodical and gradual two year programme based on peer-to-peer training. It is vital to take your time if long term benefits are to be realised. After all, fundamental user resistance can scupper any best practice initiative.
A major part of the recent investment is a new IBM iSeries server (model 520 - replacing a model 170). The extra performance and capacity of the 520 was deemed necessary to handle an expected 50 to 100-fold increase in transactions associated with the new MRPII environment. Vastly greater data volumes are expected as Kingsland Wines & Spirits moves from pallet-level to product-level recording and lot level control over packaging.
Tim Horton explained his choice of IT:
We chose Geacs System21 ERP software in 1999 due to its excellent Customs & Excise/bonded warehousing capabilities and we liked the iSeries as it delivers the necessary disk and memory management that we need. Our new 520 has inbuilt flexibility to handle multiple operating systems if we choose to adopt them. In addition, we could also use it as our PC network server in the future if we so wish. Overall the iSeries is more cost effective than its Unix and Windows rivals.