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Connaught
Electronics Ltd
3 . Opportunity /Problem Definition and Objectives
CEL had been operating a traditional MRP [Manufacturing Resource
Planning - see sidebar] system. With a low to modest use of
its functionality, the software was used to:
- produce
goods received notes
- manually
book in products
- generate
delivery dockets and manually match to supplier invoices
Orders
were submitted via email, fax, and phone even with enquiries
continuing to increase:
- The
company had an email system that had processed some 200,000
mails since its deployment in 1997.
- Zeta
Fax, which routes faxes directly to the relevant employees
PC, received over 10,000 faxes per year
Ordering
had some degree of automation with two particular customers
sending purchase orders and forecasts via EDI [EDI - Electronic
Data Interchange - see sidebar]. CEL however, needed a consistent
method of receiving orders into their systems and to supply
a common interface to all of their customers. They already had
a simple market focused web site, but it had no capacity to
operate as a B2B site.
Procurement
of raw materials from their supplier network along with paper-based
transactions was a very time-consuming process. CEL used the
Japanese originated KanBan method to reduce the volume of their
holding stock (KanBan - hold enough material for weekly / daily
production minimising capital tied into raw materials). Although
this process reduced stock overheads, it increased the amount
of administration required to maintain correct levels. From
the moment raw materials arrived at the plant they needed to
be logged into goods received, booked onto the factory floor
and checked out as final products. All the data captured had
to be organised, stored and queried. Monitoring and management
of the, literally thousands of materials moving within the company
drastically increased costs.
Human
resources accounted for a significant portion of the company's
overheads. Activities such as raw material scheduling, procurement,
tracking, delivery and payment could be attributed to these
costs. As the number of customers and products increased the
company required extra resources and process errors of one kind
or another became evident.
The
company examined the number of people working in purchasing,
accounts, finance and administration. If they were to double
their sales to meet their targets, the number of administrative
staff would have to increase proportionally to sustain this
planned growth. This extra cost was not viable in the long term.
In order to streamline processes and cut down on such costs,
CEL needed to automate internal operations.
The
company aspired to move further into the Tier 1 supplier market.
However, as a smaller company, their size and perceived ability
to cope with the management of large-scale production often
deterred prospective OEM customers. For example, if a product
recall were made on any item, CEL would struggle to fund the
man-hours associated with tracing all faulty products. Recalls
could entail tracking of PCB's (printed circuit boards) and
the multitude of components soldered onto them. CEL had no facility
to easily complete the tracing required in a large, full-scale
production order.
Increasingly
customers, themselves, wanted to have more control over the
manufacturing process. So, to make their proposition more attractive
to OEM's, CEL needed to provide state of the art manufacturing
processes. Streamlining and automating all stages of the operation
would allow them to build trust and attract more significant
deals. (One potential customer wanted to be able to track the
whole production process from goods inwards, right through to
manufacturing and dispatch. Each component of every finished
product needed to be traceable in such an operation.)
The
company had developed a reputation for being extremely flexible
with customers and made great efforts to accommodate any last
minute orders. Subsequently, CEL found it very difficult to
both predict these events and, in turn, forecast demand. The
company needed to acquire this ability if it was to aggressively
approach automotive OEMs as a bone fide Tier 1 supplier.To
summarise, CEL's problems were:
- Over
stretched human resource that had to manage raw material
scheduling, procurement, tracking, delivery and payment.
- The
potential increase in human resource required in administering
the company's operations, if it were to meet its ambitious
sales targets.
- The
lack of traceability during the manufacturing process.
- The
inability to accurately forecast demand and maintain corresponding
stock levels.
-
No consistent method of receiving and processing orders.
In
1999, to address these problems, the company outlined the following
high-level objectives for the next three years:
- automate
the flow of materials and products
-
secure more direct contracts with automotive OEM's
- reduce
direct labour
- achieve
stock accuracy
-
triple sales revenue
- maximise
patents and continue to develop products in R&D
- reduce
the indirect administrative overhead
-
decrease product failures
-
increase profit margins
Being
very much focused on future growth, the company was
required to make a significant investment to maintain
their competitive advantage and become more attractive
as a Tier 1 supplier.
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