Furnishing a flexible business solution

Few businesses escape change, but some see more than others. The Furniture Factory, which is one of the UK’s largest producers of flat pack office and home furniture, has seen more than most. This is the story of how it faced down a serious shift from big batch, long lead time, big customer, make-to-forecast management, to few days lead time, small batch, make-to-order production, also accommodating a growing direct mail order business. It’s also about how it did so while cutting costs and with minimal IT investment. With customers like IKEA, MFI, Argos, Littlewoods and Staples, 1,000 orders a day, £1 million a month, 450 employees and five manufacturing operations around the UK and in Holland, this isn’t a small undertaking, so change wasn’t going to be trivial. The company had to consider, at one level, how to make its internal production operations more efficient and responsive, but at another, how to change and enable its disparate units to work better together – effectively running two quite different businesses. “We used to do a lot for MFI which meant we could just produce and let MFI know when we wanted to deliver – the customer was doing the forecasting,” explains IT manager Rob Fabian. “With the scale of change, we’ve had to move to do the forecasting and planning and scheduling ourselves… And batch sizes are much smaller: whereas we were producing batches of 1,000 to 2,000, now we’re down to 100 to 250.” Initially, to help meet these challenges while also reducing lead times and managing stocks for faster response but minimum cost, a number of the factories implemented revised production strategies. Fabian says that in production terms it was all about improving scheduling, reducing change-over times and optimising for better resource utilisation. And it is slick. For example, he says: “We only hold stock for what we’re producing now.” Meanwhile, at the top level, the company implemented a decentralisation strategy. 18 months ago, Furniture Factory was organised around a head office providing all management and accounts. Now it’s transferred much of the operational management down to the manufacturing sites, and set up two semi-independent businesses, comprising two factories at Bristol and Redditch and three at Teesside, Westbury and in Holland. “We needed to move our production operations much closer to the customers,” says Fabian, and that’s what was achieved. This was not merely a paper exercise: all the changes have been reflected in the companies’ processes and their core ERP systems. Previously, HQ received sales orders, mostly via EDI, determined production requirements and placed orders on the factories. These would build and ‘sell’ goods back to HQ, sending them to a central warehouse, from which HQ managed despatch and invoicing. Customers looked after their own stocks, and production operations were fairly relaxed. Now the businesses have to manage their own sales orders and accounts. Not only did this mean introducing new procedures, but also new integrated system functionality at the sites. For example, EDI links had to be installed on the customer-facing side, while the factories had to be connected and the ERP infrastructure reorganised so that they could run operations individually yet see each other’s data. All that happened fast. Says Fabian: “In December 2001 we were a centralised business. By March 2002 we had two separate business operations, and we had managed to transfer all functionality down to the manufacturing sites.” And he attributes some of that success to the choice of core systems. Original system Furniture Factory’s ERP is Impact Encore (now Syspro) from McGuffie Brunton, implemented about five years ago at version 3.0, and having been through all the upgrades – now with the latest Syspro v6 looming. The firm originally replaced non-integrated bespoke database systems with Pegasus accounts on top, plus one site on DOS Kewill Micross, with what was then a 32 seat company-wide Impact implementation, providing independent but integrated systems running on a Windows NT client-server network. Benefits came straight away, says Fabian. “The system brought standardisation and data commonality across all our operations … from stock control to accounts… For example, every supplier in the group got the same supplier code, product codes and so on. That meant we could look at data from the various sites. It gave us the ability to bring together the information from each operation.” He emphasis the importance of linking everything to a single database. “A lot of companies have different accounting, manufacturing and sales systems. The key is to get them all in one.” And he reminds us of the value of ODBC here, which he used to link from Impact’s SQL Server database in the early days to Crystal Reports and Access for management reports. Incidentally, it’s worth just noting a couple of specific complications that helped with the original choice. The system had to handle the fact that Furniture Factory sells not just products, but sets (bedrooms, desks), each with their own product codes and pricing. So the system had to be set to link sets’ top level product codes, through the BoMs (bills of materials), to those of individual items for stock reconciliation, MRP and so on. Then in BoM management, materials are largely bought in different sized panels, and the order mix determines which size board is used. Usage had to be reflected in the BoM, and WIP (work in progress) systems. Virtual Business Returning to the reorganisation, Fabian reckons the system helped basically because it’s easy to configure and use and very flexible. He claims, for example, that the firm has never needed to use McGuffie’s consultancy, and he says he wasn’t surprised that the business changes didn’t require major system investment or training. In fact, the firm upgraded to Impact 5.0, with one site hosting the others for each business unit. Sites were first set up to communicate using ISDN, but subsequently upgraded to secure VPNs (virtual private network) on leased lines using NetPilots, and now, since availability of low cost broadband, to ADSL. And that’s a worthwhile point. Says Fabian: “The VPN cost around £6,000 per year for a 256k line and was the right decision at the time, but ADSL is £140 and it’s much faster – 2Mb – and locally administered… There have been no problems, and that’s a huge cost advantage.” His attitude to the rest of the IT and network infrastructure is equally pragmatic. “We’re all on CAT 5 with fibre for dispersed buildings [but] I’ll be putting in wireless networking on the office side because it’s much better.” Beyond that he uses Netgear switches because they’re cheap and adequate, and for the IT he’s gone for Dell PCs and servers for similar reasons. Against that, on the office side, the corporate decision has been to remain a Microsoft shop. The point is that it’s all slick and has generated the looked-for process improvements and benefits. Fabian says that, although it’s difficult to quantify, overall raw materials holdings are down 25%, lead times have been slashed and responsiveness targets met. Also, admin costs have been cut dramatically, and since the sites have been sharing the same data “there have been noticeable improvements in efficiency and reduced errors.” Now the company’s looking at upgrading to Syspro 6, partly because of its usage-based licensing, but also because of the web commerce functionality. He mentions moving to XML-based e-commerce with major customers as it grows in popularity. Then on the supplier side, “suppliers will see into Crystal reports over the web. They’ll see accounts, order listings, stock positions – but not production. We’re looking at revamping purchase orders too, and moving key suppliers to call offs.” His final words: “There’s only one key priority in business today and that’s to cut costs…” And by that measure this is a continuing success.