0845 345 3300 tellmemore@theaccessgroup.com www.theaccessgroup.com

Executive summaryManufacturing and Supply Chain IT systems are not just a business cost – they are a vital tool in controlling and reducing other factory costs. But in a fast moving environment this can only be sustained by continual review, renewal and reinvestment.

The Supply Chain Management Survey was carried out for Access Group, the leading Supply Chain Management System vendor, by Redshift Research among 300 business decision makers working in UK manufacturing and logistics businesses

Unsurprisingly, the costs of running factories are seen as one of the biggest challenges facing businesses today. In a recent survey for Access, 45% of firms (and 49% of the larger companies) rated costs as one of their top current issues.

At the same time, 48% of respondents admitted that their IT infrastructure to cut costs was lagging behind the game. This is almost certainly an underestimate – given the rate at which technologies and markets are moving, systems just three years old may not be making the contribution they should.

Continual review is highly recommended as the latest systems offer advantages that can be converted into reduced costs. The correlation between IT and factory costs is seen principally in terms of eliminating wasted time and effort.

This was something that Ringtons found out recently. Having used Access software for 10 years this family-owned, specialist tea business began upgrading to Access SupplyChain Solutions to create a springboard for seamless integration throughout the company and migrate from a multi-system business to a single strong system, with perhaps one or two secondary supporting systems.

The company’s production division had been using a variety of IT systems, which worked independently of each other. This made managing location and movement of stock between its warehouses and manufacturing site a rather cumbersome, manual and inefficient process. The upgrade has not only resulted in complete traceability but it has also made laborious, time-consuming manual spreadsheet updating a thing of Ringtons’ past.

As Ringtons has experienced, the latest software releases are more readily integrated, eliminating costly and error-prone rekeying. They can also offer enhanced

capabilities to use Business Intelligence routines, while speed and efficiency in real time enables manufacturers to ask, and answer, more of the right questions such as: do we have stock, where exactly is it and when can we deliver?

Quicker answers may only save a couple of minutes per question, but it soon stacks up to a significant amount of unproductive time saved and, amongst other benefits, enables costs to be identified and controlled.

Supply chain IT: the factory cost cruncherIT investment is often seen as a necessary and irrecoverable cost, but the contribution that continuing investment in manufacturing and supply chain systems can make to controlling and reducing costs elsewhere can be overlooked.

The company’s production division had been using a variety of IT systems, which

worked independently of each other...

...the upgrade has not only resulted in complete traceability but it

has also made laborious, time-consuming manual spreadsheet

updating a thing of Ringtons’ past

These are some of the direct savings that can be put against the admitted costs of keeping IT systems up to current standards. In addition, the latest systems can also enable greater competitiveness.

The ability to monitor and track supplier reliability is an example. By using the MRP system to flag up demand at the right time, and by automating confirmations to and from suppliers, the firm can be proactive towards impending problems rather than reacting once they have

occurred.

Problems resolved in this way eliminate costs such as emergency couriers (not to mention the risk of lost orders). Even if supplier problems are in the short term irresolvable, there is at least an auditable record of delivery (or as it may be quality) problems allowing a ‘robust’ negotiation on price.

Extending integration into the systems of suppliers, and of customers and third parties such as 3PLs – for example, by allowing your customers to log in to your website and thus to the relevant parts of

your system, or allowing you to access the systems

of your suppliers or delivery partners,

can

transform customer service. Auto-alerts can keep the whole multi-partner system up to date, problems are flagged early, and if ‘on time to promise’ is no longer looking feasible (and things do go wrong even in the best-managed supply chains) the possibility exists to manage or massage customer expectations before current and future business is irretrievably lost.

The costs in play are not just about future business – given an early enough view of the problem and the ability to communicate with

the systems of business partners, it becomes

possible to make rational decisions:

for

example, whether

it is better to offer late delivery

through normal channels with a suitable rebate as

compensation, or to meet the original delivery time through unbudgeted expenditure such as overtime working and air freight delivery.

Similarly, more advanced IT can greatly reduce the incidence of production bottlenecks and ‘rush jobs’, both of which tend to have a nasty ripple effect on costs even of apparently unrelated production. Better forecasting, more extensive systems

integration and orchestration, and more sophisticated planning tools allow far more ‘what if’ scenarios to be explored not just in isolation but including their impact on other jobs and operations.

The unplanned can be planned for, its full cost implications revealed. The work can be declined if the cost penalties are too severe; if accepted, the ability to move seamlessly in the system from job to job, machine to machine, process to process, can ensure the optimal use of materials, labour, machine capacities and set-ups, potentially turning a rush job from a loss-maker to a profitable piece of business. Equally, the firm has a basis on which to take longer-term decisions: whether it is better, on particular lines or in particular markets, to offer a longer lead but guaranteed delivery, or shorter lead times that may often require extraordinary operations or larger stockholdings to meet.

Now in theory, many of the existing, not particularly antiquated, systems in use by business today can do a lot of the above. Legacy systems are often big on reports – so big that it is hard to see the wood for the trees.

More advanced IT can greatly reduce the incidence of production bottlenecks and ‘rush jobs’,

both of which tend to have a nasty ripple effect on costs even of apparently unrelated production.

The most modern IT systems use routines, often labelled ‘Business Intelligence’ to concentrate attention on the exceptions: the issues and events, big or small, which may be hurting the business. Of course, in multi site multi partner manufacturing and supply chains (which is after all most of them) new abilities to operate wirelessly and remotely are key.

In too many companies, even those with apparently sophisticated and expensive IT investment, there comes a point where the important information is reduced to a piece of paper. In the office the breeze blows it out of the in-tray and the cleaner puts it in the bin; on the shop floor it is sullied by dirt and grease; and to find a piece of paper that travels with the product, the first problem is often to find that product by walking the floor.

These are all more of those ‘two minutes’ – insignificant individually, but adding up to a major penalty in inefficiency, error, and wasted effort.

These are the sort of ways in which investment in the latest IT hardware and software can really bear down on operating costs. But even for quite IT-savvy firms, the prospects of, for example, integrating the factory floor (their own, or even more scary, that of a subcontractor or supplier) into their Supply Chain system, or of having regularly to readdress an ERP system that almost by definition has cost a lot of time, money and grief to install, can be daunting.

The good news is that these things are not beyond any company, and they don’t have to be done in one big hit. For factory floor integration, it may be appropriate to start by

installing a base system covering say labour time and attendance, and machine times. A second phase might involve linking machines directly to the MRP/ERP system, and then proceed with regular review and enhancement as appropriate. Budgets can be set and returns on investment measured at each stage.Similarly, with the big ERP systems there is an understandable mentality that ‘if we are spending all this money then it jolly well better deliver everything from day one’ and the application ends up taking over the business. Also, if it’s taken two or three years from concept to sign-off, some of the IT investment may be showing its age before it has returned a penny.

Adopt a longer term strategy and a step-by-step approach – but, when it finally goes live, don’t sit back and fear to touch. You should already have a plan for revisiting, making enhancements, extending into new projects. The aerospace industry works on cycles of continuous improvement – so should everyone.

There should be few difficulties if the project is scoped properly, with progress realistically planned and carefully monitored, and employing a suitable degree of due diligence towards suppliers (and indeed your own internal teams). Robust and verifiable acceptance procedures and load testing are critical. The same implementation can have radically different outcomes on different sites, depending not just on the supplier but also on the quality of time and effort from on-site personnel.

Looking ahead, the need to keep IT systems ahead of the game will

be unrelenting. Many European companies are reshoring manufacturing from the Far East. In Germany, investment in technology including IT is helping ensure that the cost base remains attractive. Business in the UK does not seem, yet, to be making the same level of

investment.

In too many companies, even those with apparently sophisticated and expensive IT investment there comes a point where the important information is reduced to a piece of paper.

0845 345 3300 tellmemore@theaccessgroup.com www.theaccessgroup.com

Customer case studyRead how renowned tea manufacturer Ringtons uses Access SupplyChain to achieve a single integrated solution that is accurate, live and gives complete traceability.

www.theaccessgroup.com/ringtons

About AccessWe are a leading author of fully integrated business management software. One of the UK’s top five fastest-growing software developers (Sunday Times Buyout Track 100), over 10,000 businesses and not-for-profit organisations use Access to unlock their potential. Offering solutions for ERP, finance, HR, payroll, warehousing, business intelligence, PSA and manufacturing, our vertical expertise and template solutions allow for rapid and easy deployment, whatever your industry or sector.

0845 345 3300 tellmemore@theaccessgroup.com www.theaccessgroup.com