Pretty little things drive even prettier profits

Simon Ede is IT manager at world famous classic sports car designer/builder Caterham Cars. He’s responsible for everything from the firm’s new 20-user integrated manufacturing and business management system to the networks and even the factory electricals. Just six years ago he was running the service department – but he was the only IT literate member of staff. That’s how it goes. Back in 1994, Caterham Cars was running with a Unix-based Goldcrest business system. It had been progressively modified over 10 years to the point of not being supportable and wasn’t Y2k compliant. Says Ede: “It was the classic dead end of bespoking: we had to do something.” That something was to start again. Bravely, Ede trawled through MCS and found some 30 possible IT vendors. Faced with the dilemma of choice, Ede says his previous effort documenting what Goldcrest had become and pondering what would be better, enabled him to quickly “whittle this down to six”. Phone conversations took it to three – and then it was demo time. From the outset, Ede was keen to go with a standard ‘vanilla’ system: the spectre of bespoking loomed too large. Although the company directors expressed concerned over his decision, viewing Caterham as unique, Ede argued that “we make pretty little things, but we’re manufacturers like everyone else.” And it turns out he was more or less right. He selected mid-market software firm XKO’s K-Open system for a number of reasons: functionally it was a good match, with adequate manufacturing, order processing and financials; and it was NT-based with all the benefits of Microsoft office software integration. Most important, he says, the core is ‘future-proof’ – because it’s standard and constantly updated. He adds: “It can be quite heavily bespoked with plug-in software modules [to avoid too much process re-engineering] but the core is always there – and in 10 minutes you can unplug and run as standard again.” Also, changes are tracked to help with future mods. The system went live after a six month implementation on 3rd November, with stock control, MRP, bill of materials, production scheduling, batch/serial/lot tracking, supplier productivity analysis, real time inventory and warehouse control. Ede admits there were problems: inadequate management commitment meant that aspects like training did not get priority. “People found themselves ‘too busy’,” he says. However, XKO’s consulting team was excellent, and the system was in and ready – even though the users weren’t. In the event, the old system was shut down over a weekend and all files converted and loaded by XKO. On day one it ran perfectly with “only one system error for a special that hadn’t been set up properly”. However, on the people side he concedes that problems ranged from inability even to log on to failure to understand how to execute processes. Nevertheless, it’s been a great success – and Ede comments that it’s very robust: after a week’s settling down it was fine. And the improvements, both in operational and accounting terms are outstanding. Ede says hard figures include: profitability now up 10—12%; efficiency in the accounts department improved by 30%; parts sales grown 16% – and all because of better cross-functional visibility of information enabling, for example, better sales targeting. Walking round the busy little factory you can feel the calm of craftsmen technicians backed by a system that’s supporting them and the business. It handles all aspects: Caterham’s car parts and merchandise sales (including the new Scalectrix game); new and used domestic and international car sales; hand-built finished and kit car manufacturing at about 600 per year; as well as service and repair. Engineering development, three warehouses and key supplier management are also part on the system. Sounds like any other system for any diversified manufacturing SME? Yes, except that sometimes it suddenly has to support the transformation to a high profile motor racing team, where structure, measures and processes are all but abandoned for speed, creativity in engineering – and winning. And the pressures of marketing in international motor sport also demand unpredictable gear changes: last year, Caterham had to devise a new car in just 10 days. So flexibility, and an utterly dependable ability to track work in progress, stock and people movements throughout the supply chain – being able to allocate and de-allocate on screen – is rather more critical than for some. Supply management is one among several other issues. Some assemblies, like the chassis, aren’t a problem because they represent some 95% of supplier Arch Motors’ business. So just in time (JIT), individual sales order-driven delivery is operated, currently using fax, but now moving up to email order number call-off. But for most sub-assemblies and components – Caterham’s Rover engines, gearboxes, suspension, wheels, tyres and headlamps, even injection moulded screen wash bottles, nuts, bolts and trims – the firm is dependent on major automotive suppliers like PTP and Oxley Trimming. Says Ede: “We’re one really small cog to them.” So Caterham continuously runs with 10—15% above-order inventory to maintain flexibility. In action, the system assumes an eight week lead time. Sales orders for new cars come in on fax from the showroom point of sale terminal configured for all types, options and specials. And that’s a lot: Caterham’s proud claim is that their technicians might never have to build an identical car. Once received, the order is checked and validated manually before K-Open is triggered to explode the bill of materials (BoM). It uses the delivery date to issue purchase and works orders, scheduling all and providing picking lists, work bay positions and so on. And it’s flexible: during car build, as the real world gets in the way of the schedule, parts can be pulled on and off the screen-based works orders at any time. The point is, says Ede, “the system equals reality: you can see the work in progress right out to the suppliers, all on the system.” And stock accuracy is now excellent. Before, says Ede, some £200,000 worth couldn’t be unaccounted for annually. “Last year I think we lost £55!” And he observes, that means no more money wasted on excess inventory, no time consuming audits and a clear picture of detailed profitability without fudge factors. Meanwhile, warehouse management handles hundreds of components, parts, sub-assemblies and car kits – about 8,500 SKUs – there having been several design and part changes over the years and as many specials. Currently, all part movements are keyed in as part numbers, with individual replenishment now automated back to suppliers. But neither Ede nor Caterham stand still. Ede gives examples of incremental system development like improving the potential for sales-driven production flexibility by allowing parameter adjustments in the purchasing module to match demand to capacity – automatically re-synchronising all associated processes. He says order promising is also now running as a background task prior to bringing it on. And shop floor data collection, with parts barcoding and links to time and attendance, may also come in – justified not on better parts data capture, but workshop time allocation for activity-based costing. Clearly, the complexity here requires no more than this. Even true MRP isn’t running – there being too much human intervention. And as for capacity scheduling, it’s still a manual paper process. However, Ede says that as the company grows and diversifies the functionality is there to support it. He says 85% of the package is currently up and the rest will go lived by the end of this year.