Lean Thinking on your back office

You can't be complacent about your ERP system. Too many people see the go-live date as the end of the job: it's not, it's the start of the ERP experience." So says Derren Smith, financial director at Somerset-based aerospace manufacturer Doncasters Chard. Why? Because if you're into lean thinking and continuous improvement (and who can afford not to be) why would you not include the system that runs your business? Not only to cut its costs, but to enable better, slicker processes. That's precisely where Smith is driving, with pragmatism and a determination that deserves the enviable growth this company is seeing. The business strategy is don't sit still and let others pass you by; think about what you're doing and find better ways – and for him the IT strategy reflects that precisely. Doncasters makes precision structural castings and environmental control systems, and used to be a cost centre to Honeywell Engine Systems Group, before being acquired in April 2001 by a venture capital group backed by RBS (Royal Bank of Scotland). It became part of the Doncasters Group when that was purchased by RBS in July of the same year. Initially faced with no purchasing, finance, HR or IT functions in house, and no system or IT infrastructure, it had to tackle issues fast. On the IT side it had just six months to set up and migrate all data in what is rightly a very demanding sector. Within weeks, Syspro ERP from Information Engineering had been selected, people were being added and business processes were being developed. "It was hectic," recalls Smith. Doncasters was installing most of the Syspro ERP system – financials, inventory, purchasing, sales analysis, sales order processing, bill of materials (BoM), work in progress (WIP), lot traceability, MRP/MPS, fixed assets – as well as what's now Syspro APS (advanced planning and scheduling), with shop floor data collection (SFDC) and time and attendance. Among key issues was transferring the right information from Honeywell's mainframe. Says Smith: "In the aerospace sector, lot traceability is crucial – who supplied the material, which batch, when were the certificates of conformance created... Losing it could have meant scrapping £1.7m of products. With lead times of six to eight weeks, that would also have meant serious problems with OTD [on-time delivery] and the risk of losing customers." Smith concedes that the firm had to do without pilot testing and didn't have time for more than on-the-job training. But the company went live when it had to, with a much more than passable system. Manufacturing is littered with firms that have fared far worse, spent a great deal more time and money doing it and, whether they realise it or not, have a considerable job ahead. "As soon as it went live, the new system gave us real-time visibility of the whole operation," says Smith. "Just running MRP daily meant we could instantly reduce lead times and improve OTD." All materials traceability was in place, the live database had been accurately populated, nothing had to be scrapped and the team had gone further than many in all sorts of areas. For example, it had set-up touch screen terminals in production so operators could log to jobs electronically and keep the business automatically tracking WIP, scrap rates and operation times etc. The following months were about bedding in and starting to transform the system to drive benefit. So in production, for example, ERP development went hand in hand with lean manufacturing initiatives. Says Smith: "We've been using the principles of 5S right across the site, we have kaizen teams, and we've been reorganising the workplace to become more productive. We also introduced first-in, first-out principles to keep our inventory down, and although we're not doing single piece flow, we are using SWIP [standard WIP] to limit WIP to constraints, so that if we're not achieving to plan we don't keep releasing materials and jobs." And the IT contribution: "Using the shop floor monitoring system, we've been recording actual work centre and routing times, and cleaning data on the system automatically, so that as we make improvements through lean, they're reflected for planning and standard costings." Basically, a routine extracts data to an Access database via ODBC, determines recent weighted averages, and pokes it back to replace the ERP data. It's a good point, sometimes forgotten. "A lot of data on ERP databases is thought of as static, and it shouldn't be: things are changing all the time – particularly if you're getting your continuous improvement right." And there's been similar work in engineering design. In fact, a combination of the new system, lean manufacturing and engineering development in the first 18 months post implementation resulted in lead times falling from an average of eight weeks to just four. Brand new start All well and good, but Smith still isn't resting on his laurels. "It's back to the drawing board," he says. "In a sense, we're going back two years and doing what we would have done then. We've now remapped our business processes against class-leading standards – that's everything from quotations to sales order receipts and rough cut capacity planning – and we're looking at alternative ways of using the system to support that." Smith says the strategy was to apply lean to Doncasters' back office processes. That resulted in a bunch of priorities, among them MPS. "We're implementing that now so we can get more forward visibility for capacity planning. That's important because we're in a serious growth cycle, so we need to do better for capex." Then there's product configuration: "Where we need to do rework, Syspro doesn't let you insert operations mid-routing. So we've implemented a configurator to hold a library of rework routes. It saves on admin time ... and we can see it on the system, and book it." Next was engineering change control. "In the last six weeks we've introduced that, especially to address audit issues. It records the BoMs and routings, monitors any changes, who made them – everything we need to have a full electronic audit trail." Back to core ERP, and he says: "There are several examples where we've made activities with the system smoother and faster by applying lean principles. For instance, the way we book some of the operations now – where our lean work on the shop floor means we don't have to worry about materials sitting between sequential operations, they've been aggregated as far as the system is concerned." Meanwhile, looking at business process improvement Smith says Doncasters prioritised activities around future bottlenecks. "So on the customer-facing side, as the business is growing we're having to handle more enquiries, more quotations. We needed to reduce the work around producing quotations and accepting orders." Which isn't trivial, since the firm has to constantly review, for example, product certification. "We're formalising all that in the system, and eliminating the additional databases and spreadsheets that we have historically maintained." What about APS? "Finite capacity scheduling is probably a step too far for us. We have short run batches and they're too volatile to spend the time on that side of the system. With the lean work we've done, we're going to leave that to the shop floor supervisors." He agrees that for others APS may well be a sensible way to go, but for him: "Switching off APS will save us the licence, maintenance and support costs." Next up, the firm is using the system to record its suppliers' performance in terms of lead times, OTD and so on, not only for management, but again so that data accuracy for MRP is more accurate. "Our current challenges are around MPS and our subcontractors and purchasing and supply – to get that data as accurate as our manufacturing data." In fact, Smith believes that through this all-round activity, Doncasters will be able to halve its lead times again, to just 15 days. "By the end of this year we'll have the back office as streamlined as engineering and production, we'll have supplier score cards embedded and product costing and management routines very much improved so that we can sustain the growth we're seeing. My view is we're collecting the data, and we're going to use it."