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May 27, 2000

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ERP for Molders, Part 2:  Avoiding the pitfalls of implementation

Editor's note: In Part 1 of this series (May 2000 IMM, p. 32), we discussed what benefits enterprise resource planning (ERP) has to offer molders. In this article, we'll look at how molders can get the most out of their ERP systems with a successful implementation. For contact information on the suppliers mentioned here, see the May article.

Installing and implementing ERP hasn't exactly been simple or successful for some companies. Horror stories abound about runaway costs and lengthy business disruptions associated with ERP implementation. "Taking a nuts and bolts industry into the technology age often means a lot of snafus," comments Patrick McCrevan of Syscon International in South Bend, IN.

And, like any piece of equipment, just having an ERP system neither guarantees vast improvements in business, nor gives a company a competitive advantage. Implementation and utilization considerations are vital to an ERP system's success.

Things to Consider
Makers of ERP software almost universally agree that success at the back end requires good planning at the front end.

"At the end of the day," says Amir Raza of Mascon (Schaumburg, IL), "I can assure you that what the company spent up front on software is only a fraction of the total cost of implementing the program. Buying the software is only the beginning."

William C. "Rusty" Russ of DTR Software International in Jacksonville, FL says, "The difference between successful implementation and unsuccessful implementation is the management at the top and whether they give the authority to someone to ensure the success."

Liz Alflen of IQ Management Systems (Paso Robles, CA) adds that successful implementation of an ERP system is a macro effort. "ERP is so all encompassing; it's a whole corporate philosophy," says Alflen. "It's not just the platform that's needed, but the people as well."

McCrevan agrees and notes an additional element of successful installation. "We always stress that training is a huge part of implementation," he says. "We pile it on up front. Monitoring systems can fail when there's no buy-in across all departments."

Raza says it's critical to get a system that's geared to the specifics of a molding environment. "Sometimes molders try to implement a general manufacturing package not specific to molding," says Raza. "That should raise a red flag." They also may install software without understanding what is required of the user, he adds. "Or they might install a generic ERP system and find that it doesn't do what they want it to, so they spend thousands of dollars customizing it."

ERP means different things to different people. "We're willing to change our software to meet a client's requirements," says Raza. "However, companies have such unique business practices that we make changes to meet not so much the molding environment, but the business practices of the molder."

DTR, which has specialized in the plastics industry since 1983, tailors its software to meet each client's needs. Then, a structured training program is developed to help people learn how to use DTR's software properly.

Timing
In some cases, molders purchase the software, send key people to training classes, and then implement it themselves. The problem with this approach, says Russ, is that implementing ERP involves more than simply training people on the new system. Often it involves changing various business processes.

These changes may be simple, such as whether the company should change its part numbering system and if so, what the new system should look like. Or they may be more complex, like altering the way production is reported on the shop floor. Given the flexibility of many ERP systems, implementation involves figuring out the best way to configure the system to work in the particular environment.

Mascon has identified two fundamental ways to implement an ERP system. There is phased implementation in which one module, such as accounting, is implemented before the next module, say, inventory, is installed. There is also what Raza calls the Big Bang method of implementation in which the entire system is installed and the client goes live all at once.

"Over the years, it's been our experience that the phased-in method doesn't provide the true value of implementation," Raza says. "First, everyone is so exhausted by the time the first phase is implemented, that they never really move to the next step, which lessens the value of ERP. Secondly, the effort of running two systems, the existing system and the new one, in parallel for a prolonged period of time often overwhelms the company."

IQMS' Alflen notes that the implementation process is critical. "We make sure implementation is a step-by-step process. We like to act as hand-holders and consultants for our clients," she says. "You can't just load it and use it. We try to give our customers tools for success."

Alflen points out that some customers drag their heels during implementation, pushing projects aside. Turnover and consolidation also make implementation difficult. IQMS likes to see full implementation done within six months; however, it doesn't have to take that long.

Rick Foote, manager of special projects at Cal-Mold Inc., a custom injection molder in Mira Loma, CA, installed IQMS' IQWin32 system a year ago. Cal-Mold was able to bring the system up within three months of initial installation and ran only a 30-day parallel before converting completely.

Length of time to get an ERP system completely operational is critical. "If implementation lasts more than 15 months the chances of it being a success are diminished significantly," Raza explains. "Implementing a system like this requires maintaining consistent focus on implementation and the more time it takes, the more difficult it is to maintain that focus."

A Cautionary Note
A caveat, however, comes from Clark A. Witmer, director, manufacturing and distribution practice for Blackman Kallick Bartelstein LLP, a management consulting firm in Chicago. "Manual is not always ineffective," he says. "Automation can sometimes require complex computer programming that does not justify the cost.

"Most ERP implementations are focused on technology conversion rather than business process improvement," he continues, which results in underutilization of the system's available functionality.

"Reliability, flexibility, and cost improvement are the ingredients of competitive advantage," he adds. "These are not determined by which system you have, but by how well you are using it."

Witmer recommends targeting specific processes for improvement and understanding the software's capabilities to "simplify, integrate, and automate these processes." And he recommends that a company model and pilot the changes prior to the actual implementation.

"Modeling simulates the software in business situations to test and verify the recommended solutions," he says. "This process identifies needed inputs, outputs, procedures, and issues that need resolution before implementing." Piloting, he adds, "is the formal testing of the integration of the solution with all business functions that will interact with it using controlled inputs and verifying expected outputs."

One of Mascon's implementation stages involves building a prototype or model of how the company works within the software. When the prototype is complete, the project team invites all of senior management and users into a room for a "conference room pilot," where they take 10 to 20 live orders and flow those through the entire system.

It exposes the software to the rest of the company and to management, and confirms that the model works well, explains Raza. If all goes well with the conference room pilot, they begin training other people at the client company and start the process of getting all data from old systems to the new system.

Management Changes
Another key ingredient to the successful implementation of ERP is the commitment of management to do things differently and to be receptive to change. Implementing ERP absolutely means a change in management because it affects every critical operation in the company, Raza says.

"Top management has to publicly commit to ERP and reinforce this to all employees," he adds. "While it might sound simplistic, you'd be surprised to know the number of companies in which top management isn't committed to the implementation."

All too often, molders want to put in a new system, but have it work like the old system. "Why would you want to invest tens of thousands of dollars only to have a system that works like the old one?" Raza asks.

Witmer adds that "improper implementation decreases a company's return on investment in the new hardware and software, yielding a new system that does things the same way, only faster."

"Implementation does foster change and in many ways it is up to management to embrace this change, commit to it, communicate it, and reinforce it," adds Mascon's Raza. "When management is committed, when those charged with implementation have clear objectives and a comprehensive plan, and when you work with a vendor that understands your business, ERP implementation can be a smooth and highly rewarding process."

Taking the plungeImplementing ERP systems has been successful for many molders, and achieving this success was the result of much interaction between the software provider and the management team. Communicating a company's goals for ERP is critical. Bruce Wendt, president of Kaysun Corp., a custom molder in Manitowoc, WI, says his company was looking for several key elements in its ERP package.

For instance, the company operates from three separate buildings in two locations. "We have to have the ability to look at data from any of those corporate facilities and get a real-time snapshot of the cycles of our presses, real live data for MRP in purchasing, the ability to look at the engineering bills of materials-everything including costing of product was very important to us," Wendt explained.

The company found what it was looking for in IQMS' package, implementing the system in October 1999. Kaysun serves the business equipment, outdoor power, automotive, power transmission, and distribution markets, and anticipates sales for 2000 of about $28 million.

For Crescent Industries Inc., a custom molder and moldmaker in New Freedom, PA, implementation was a challenge, but one that the company was up for. "Putting it in place is tough," says Brian Paules, Crescent's controller.

The company chose Mascon's Aims ERP system mainly because Crescent molds around 1200 different products. The company specializes in short-run, high-dollar components with demanding quality and finishing requirements, primarily for the medical equipment industry. That means lots of different materials and many mold changes.

"We were getting drowned in the transactional overhead of the business," Paules says. The molder operates 14 presses ranging from 50 to 385 tons, and employs 75. Crescent did one of the fastest implementations Mascon has ever been involved with, the company says. Work on the system began in mid-August 1999. On Nov. 1 it was complete and on Nov. 2 the company was shipping parts and invoicing customers with virtually no disruption to its clients.

Crescent attributes the successful startup to the fact that it had a large number of employees participating in the implementation process. "I had 13 people involved in the hands-on implementation," Paules explains. "We did a lot of cross-training so that a number of people understood all aspects of the business and got a good handle on the big picture, and how what they do affects other people."

Although, says Paules, it's still a little early for the company to realize all the benefits of the ERP system, what it has seen so far has been positive. "It's provided a real assessment of what our reject costs are," he notes. "This is something molders have creative ways of avoiding, but I see a potential to recover profits."

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