It's a mixed up, muddled up, shook-up world, except for Lola

All time is now productive time." That's the difference moving up to ERP software developer K3's SmartVision has made to racing car maker Lola Cars, according to management accountant David Liddiard. And what's done it for this company in particular is a combination of average weighted costing (AWC) to fit its small batch, specialist engineer-to-order manufacturing, along with ad hoc enquiries and automatic electronic alerts and alert management. Lola, based in Huntingdon, made its debut in 1958 and quickly established itself throughout the racing world, building off-the-shelf cars for the Indianapolis 500. The firm has also commissioned designs from Formula 1 to Le Mans, as well as working with OEMs like Nissan, Ford and MG Rover. It has a 200-strong workforce and has been a long term K3 MFW (Micross for Windows) MRP user with Great Plains financials. Last year, the firm's management decided that, while the system successfully met its needs in terms of MRP and the rest, its standard costing module was not good enough for what is inevitably a changing production environment. "Standard costing requires a high level of costing data input. We wanted something that gives us close to actual costs, requires minimum data input and is self-maintaining," says Liddiard. He makes the point that with any operation having multi-level BoMs (bills of materials) that are continuously changing to reflect what's happening on the shopfloor, especially with first batches that are practically prototypes, while supplier prices vary according to quantity, standard costing difficult, time consuming and wasteful on admin. "It took a lot of work to set up the master parts records – including making judgements on costs based on whether we're likely to buy or make batches of 10, 20, or whatever when set-up times impact unit costs. So there were major inaccuracies and then we had vast numbers of price variances coming out of the old system from month end to month end. And that meant a lot more wasted time, running reports and attempting to understand where the variances had come from." Liddiard wanted an accurate costing system based more on actual, rather than standard costs. But given the problems of constantly changing apparent stock value, the firm paid K3 to develop MFW's AWC module – then only at the purchasing level – to its specification for WIP (work in progress) and production on the SmartVision ERP system. "That way, we'd be able to accommodate changing costs for materials and labour all the way through manufacturing, with all the variances wrapped up in the total cost of the car – and that's what they've done." Focus on what matters In April this year, Lola went live on SmartVision. "K3 did a good job," he says. "Costing now takes care of itself and we have saved an enormous amount of time as the system is self-maintaining. AWC reports transactions that have actually occurred rather than what the BoM says should happen. And we don't have to make judgements in terms of estimated costs and standard labour hours. Instead, the system takes the cost from the purchase order at the point of receipt and averages it based on the number of parts in stock and their value. Similarly, labour costs are averages of the actual hours." He says it's taken away all the guesswork, and put the company back in control of admin, production and its suppliers. "The focus now is on what is really important, like identifying key cost drivers so we can, for example, analyse why one car takes more hours to build than another. That gives us true cost of production – real pricing information to help when quoting for new jobs." Beyond that, Liddiard says Lola is also already benefiting from SmartVision's ad hoc summary reports and its alerts functionality. The former enables users to search and query data without configuring specific reports. "It means we can do our own analysis: it's Windows-based, and comes up with an Excel type grid that we can manipulate till we find the information we want. We can also configure views to suit different roles in the business, and everyone is dealing with the same data." As for the email alerts, he says: "We're using those extensively now. For example, when we're doing the first cars for a production run, we get a BoM but then during assembly there are changes and substitutions. The beauty of this system is that it remembers all of those for you, so at the end of the build you get an alert for all the changes. You don't have to change the BoM, link into engineering, and all the rest, for every little thing." His estimate of the benefits: "It's saved us at least one person in purchasing and cut two or three days off the month end processes. And with the price variance reports, we're in much tighter financial control: it's significantly improved our ability to manage. This month, for example, the price variance was 0.1% out of half a million pounds of spend. And the WIP variance was £2,700 out of £350,000, and I can easily identify every job and the reason why it's happened."