ERP, once a luxury, now a necessity

Facing tough competition from China and other Asian countries, it has never been more vital to make a manufacturing operation as lean as possible. Enterprise resource planning (ERP) systems can help you get there.

Processors obviously cannot afford to be labor intensive if they want to remain competitive. Technology, supported by efficient processes to use the data it generates, can reduce labor costs provided it seamlessly integrates business activity across the enterprise.

In other words, enterprise resource planning (ERP) technology is no longer nice to have; it''s a must have, industry members concur. "I believe the real reason for the necessity is all about the cost of doing business," says Terry Cline, VP of IQMS (Paso Robles, CA), a provider of ERP system design, programming, implementation, and support services. "State-of-the-art information systems are a primary weapon to get more out of the shop for less."

ERP, a term coined by technical research and advisory firm Gartner Group in 1990, is generally characterized by its ability to manage the nuts, bolts, and business processes.

Some of the most common automated ERP business functions include financial and business analysis, sales orders and other customer-related information, purchase orders and supplier data, inventory, product lifecycles, and more.

"Standardizing those processes with a single, integrated ERP system saves time, maximizes productivity, and enhances competitiveness," says Joey Benadretti, VP of Syspro USA (Costa Mesa, CA), a producer of ERP software. "All manufacturers and distributors, including those in plastics, need these advantages."

In the real world

This business approach is not limited to just large or multinational corporations. The reality is that even smaller processors operating a few machines can benefit, as ERP software can be tailored to suit the firm and grow with the company. If response among adopters contacted by Modern Plastics is any indication, then ERP is already proving itself as a viable means of improving supply operations in repetitive manufacturing industries such as plastics.

"ERP brings all of the information under one roof and expands the capabilities of system users to make informed decisions and relay quick, accurate answers to those who need them," says Jeff Somple, president of Mack Molding''s (Arlington, VT) northern operations. "This is particularly important at Mack, where our high level of assembly requires a stringent monitoring of both the supply base and our inflow of materials."

Mack is implementing Mapics ERP software at its Inman, SC facility this spring. The molder''s Vermont plants previously used Effective Management Systems software to run its major business systems, but had outgrown it. "All manufacturing systems throughout Mack Molding will be integrated, including Mack''s seven off-site warehouses," says Wanda Knowles, director of information technology.

The firm chose ERP software from Mapics, a solutions provider focused exclusively on manufacturing, because it required a system that provided functions beyond those specific to the molding industry. In addition to sheet metal fabrication and plastic parts manufacturing, Mack provides engineering support, quoting, finishing, and assembly. It expects to reap several advantages from the new system, such as shorter lead times, faster time-to-market, lower operations costs, and reduced inventory, scrap, and waste.

Phase two of system implementation will be completed by late summer and includes additional software modules to incorporate workflow and expand reporting, quoting, shop floor, and e-commerce capabilities.

"With e-commerce, customers will be able to place their orders directly into our system, thus speeding up the entire sales order process," Knowles says. "Mack''s customer service representatives will receive immediate notification of new orders and change orders, eliminating double data entry and further reducing data entry errors."

Custom molder Engineered Plastics Corp. (EPC; Menomonee Falls, WI) switched to an ERP system from DTR Software International (Jacksonville, FL) because the previous software could not keep pace with the growing complexity of the rapidly growing business. "It became difficult to understand what changes in our processes affected costs and, what''s more, we could not quantify those costs," says John Papineau, general manager.

A desired process change that would affect project costs was the reassignment of labor.

According to DTR, with a definitive schedule, EPC could better use its staff and allow employees to be responsible for several machines rather than just one, leaving others to perform additional secondary operations. EPC found the Manufacturing Manager from DTR, a comprehensive ERP solution for plastics processors, provided production management with valuable information for making strategic decisions about what to produce, when to produce it, and what resources to use.

"With accurate scheduling we''ve been able to transition our operators from running a single press full time to semi-automatic and even automatic processing," says Papineau. "Now we can confidently assign one person to operate up to four presses at once, which means we can reduce associated labor costs by up to 75%"

One key ERP benefit is as a means for processors to better maintain production scheduling, taking the work out of human hands and letting a computer run the show. This can prove especially prudent in just-in-time processing, where a late production change requires quick assurance that tools, raw materials, sub-assemblies, inserts, and more are on hand.

"We have reduced the redundancy of handling or creating data [several] times to work with multiple formats or systems," says Scott Krogh, production manager at Kennerley-Spratling Inc. (San Leandro, CA). The custom injection molder has been using the EnterpriseIQ system from IQMS for more than three years. "It has freed up time for administrative staff to be proactive and tackle a deeper level of problem-solving, improving information flow and accuracy."

Prior to implementing the IQMS software, Kennerley-Spratling used computerized and pen-and-paper systems to drive and track inventory, production, sales orders, and purchasing. "A lot of manpower was being spent on tasks that could be streamlined and automated by a more inclusive, integrated system," Krogh explains.

Molders say it is difficult to quantify how ERP systems have impacted their bottom lines. The return on investment (ROI) varies by company due to many variables, including the dedication of management and the buy-in of employees. A Meta group study of 63 companies found that it took an average of one to two years after the new system was in installed to see benefits.

"How much payback a company derives from an ERP solution depends greatly on the size of company, number of employees, and how bad the company infrastructure was to begin with," Syspro''s Benadretti says. "Many times an ERP solution replaces a ''home grown'' system that might have been sufficient at one time, but is inadequate to support a company''s growth."

If the activity of gathering and analyzing data increases management''s ability to make faster, more efficient business decisions, experts say, then the investment is clearly worthwhile. For example, Wisconsin Plastics Inc. (Green Bay, WI) reports that the accurate inventory count provided by its real-time ERP system helped it establish a just-in-time replenishment program with suppliers, resulting in a decrease of overall total raw material inventory by 17.5%.

Likewise, access to real-time information helped Nylon Molding Corp. (Pomona, CA) shave roughly 14 hours off its reporting process according to Tom Mendez, controller. "We close our books at noon on the first workday of the new month and by 4 p.m. we have completed all our financials and analytical activities."

Before investing in ERP, industry members advise processors to discuss their choice of system with suppliers and customers, since the proliferation of ERP systems has led to development of some which are unable to communicate with others. Processors can acquire ERP systems in two ways, by either choosing a package designed specifically for them, or taking the best-of-breed approach, acquiring and bundling together different programs, each designed to handle specific tasks. Although installation costs vary, depending on variables such as size and geographic diversity of the processor''s facilities, ERP systems typically sell from roughly $35,000 to $250,000. "System costs are affected by implementation processes," Syspro''s Benadretti points out. "The complexity of some ERP solutions results in implementation costs that often exceed the initial costs of hardware and software."

Greg Valero [email protected]

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