South Wales office chairs manufacturer Giroflex today offers its customers instantly validated choices from several million variants – of backrests, arms, upholstery and so on across all its ranges. It’s customisation on a grand scale, and what it’s done is simple but very impressive. The firm’s Fourth Shift ERP (enterprise resource planning) system, and its associated partner IT systems were designed form the ground up to manage complexity – and provide customer service to beat off big rivals across Sweden, Germany, Italy and the USA.
At first sight the trick seems to be the system’s combined rules-based order entry and product configuration interface for sales staff. And it’s partly that – but there’s much more to it: every aspect has been geared to ‘mass customisation’ and accurate up-front costing.
There are no standard bills of materials (BoMs): all are order-dependent. So the configurator software (from Eden Origin) immediately generates a BoM, checks component stocks, part lead times, work centre resources and planned deliveries – and shows earliest safe build date. Simultaneously, it calculates and displays detailed product costs and prices to sales.
And within the next month or so, it will also return promised delivery dates using ST Point’s integrated advanced planning software – within seconds. Currently though, once a customer accepts an order, it’s verified and the system’s capacity plan is updated, ultimately allowing the system to allocate resources in an environment where order volumes and product mixes that can vary fantastically.
But it hasn’t always been like this! When Giroflex underwent a management buyout in January 1998, replacing the IT was seen as a fundamental strategic issue. Says Ewan Tozer, Giroflex’s IT and engineering manager: “Getting it right from the beginning would deliver cost and performance benefits at the earliest possible stage.”
Up for review was everything from production to engineering and finance, sales forecasting and order entry. Tozer says Fourth Shift was selected for several reasons: it could provide the functionality, the price was right and the Microsoft platform allowed integration of others’ payroll, forecasting and reporting packages. Also, it offered partner vendors able to integrate the special order entry, product and price configuration and order promising described above.
Tozer says it all works very well. In action, for example, the Eden Origin system stores ‘knowledge’ about contracts, special offers, options, credit limits and appropriate overheads. Importantly, its business rules can be changed quickly and openly – and they’re applied automatically on the sales screens. “We see this as a cornerstone,” says Tozer. “Anyone in the sales team can provide best quality customer service.” Integration with purchasing and accurate forecasting were also important since 50% of Giroflex’s spend is on bought-in components and sub-assemblies – with lead time and stock implications. And this too works well, with what Tozer describes as a mix of top level sales forecasting, tempered by statistical history analysis and combined with detailed product family data.
“The new integrated management process, including accurate forecasting and efficient materials ordering, production scheduling and utilisation of resources, ensures minimum lead times,” says Tozer. And he adds: “Thanks to the effort we put into planning and implementing the IT, the visibility and precise control we now have over all key aspects of the business has raised efficiency across the board.”
And it’s all been achieved without shop floor data collection (SFDC): as Tozer says, “our throughput time is just hours, and we’re getting down to minutes, so we don’t need it.” In fact, everything is controlled, directly or indirectly, from the sales orders. Tozer explains that there are no manufacturing orders: daily MRP creates the component purchase order schedules and the manufacturing date, but a Crystal Reports business intelligence add-on provides the works build documentation as work-to lists against regional allocations (not product batches), sequenced for reverse-loading of delivery lorries.
Also, with the scale of integration and thus data on materials, resources etc available to Crystal, managers, administrators and employees across production and despatch all get reports based on current information. Tozer is sure this has improved the quality of decision making.
Implementation of the system began in September 1998, focussing initially on setting up pilot systems and copying fixed data. When the deadline for changeover came in July 1999, the team went for the ‘big bang’ approach: old and new systems ran in parallel for one day, and then the old system was switched off. Giroflex says the transition was completed with only minor disruption, the factory ran smoothly.
Of the business targets set, all are now being achieved. Delivery times have been cut, customer service improved and profitability of every order is known as it’s taken. Also, Giroflex has also moved from costs plus overheads to accurate activity-based costing driven directly from the rules-based order confirmation system. This has allowed margins to be made more consistent, contributing 2% to profitability. A further £14,000 a year is being saved by cutting stock turns from seven to six weeks. But the biggest savings are from improvements in administrative and shop floor productivity. The former has increased by 10%, saving £35,000, and the latter 5%, saving £45,000 per annum.
Tozer: “In addition to improving communication and co-operation throughout the business, the system has also improved motivation – everyone sees it as an aid rather than an obstacle to achieving their objectives.”