How the Right ERP Program Can Impact Your Bottom Line

The competition that moldmakers are facing from overseas operations with cheap labor costs requires a distinct competitive advantage. Moldmaking will always be a labor-intensive operation requiring skilled employees. But one clear way for domestic moldmakers to get ahead is to reduce cost and ensure on-time delivery of a superior quality product. Given these competitive factors of moldmaking, the direct bottom-line impact of selecting the right enterprise resource planning (ERP) business system cannot be overestimated.

Enterprise resource planning is the generic title given to business computer systems that integrate all of the major business functions of a manufacturing company. These functions include sales, engineering, purchasing, planning, inventory, production and accounting.

ERP systems provide benefits to manufacturing companies by integrating all areas of the business - streamlining business processes and providing accurate information for better decision making as well as tools for planning and controlling inventory and production. There are hundreds of ERP packages on the market today and the challenge is finding the right package for moldmakers.

Engineered-to-Order

Reko International, with more than 300,000 square feet of manufacturing space in ten production facilities, is located in the greater Windsor, Ontario metropolitan area. This well-respected moldmaker evaluated more than sixty ERP software options over a period of eighteen months before making a decision.

Established in 1976, Reko currently employs nearly five hundred people and besides key automotive moldmaking accounts, their customers are leaders in the consumer and industrial products and aerospace industries. Some of the company's current markets include plastic injection, compression and lost core molds (both prototype and production), custom machining, automation, fixtures and special machines, metal stamping dies (both prototype and production) and CNC machining centers.

Moldmaking is not repetitive. Each client project is unique and engineered-to-order. As a result, many of the well-known repetitive ERP software programs are ill suited for moldmakers. The ability to accurately estimate project job costing is essential. A price must be established that is both competitive and allows a profit. Very few ERP software programs are engineer-to-order, a system that allows true moldmaking job costing. This ability to collect all of the actual costs and know for certain if there is a profit is essential.

As important as accurate determining of the profitability in a project is the need for an early warning mechanism when project delays and changes occur that will cause a project to go over budget. These crucial engineer-to-order ERP warning systems allow for immediate corrective actions and the ability to maintain a profitable project.

When Reko needed to improve its visibility over costs, capacity and work-in-process, it selected an engineer-to-order ERP system from Cincinnati-based Encompix. Other ERP systems used by moldmakers include: JobBOSS from Kewill Systems, IFS and Vantage from Epicor. Initially, the moldmaker's existing systems were not integrated, which forced the company to maintain duplicate data sets and manually re-key information from one system into another. Second, there was no visibility of available capacity. This could lead the company to make use of costly outsourcing at times when it could have been avoided. Finally, and perhaps most critically, there was no way to measure actual performance against planned values to see anticipated profit on projects before they were complete.

The new ERP system allowed Reko complete visibility of estimate-to-complete in both time and dollars. It also has visibility of loads within work centers, and can now plan to balance work by switching jobs from machining center to machining center as needed.

The ability to deliver as promised, on time, is paramount to a moldmaker's success. The engineer-to-order ERP system must contain a project management function that allows the moldmaker to design the project plan and measure the status against that plan. Scheduling accountability is especially relevant to moldmakers who must be concerned with capacity more than with material planning. This system provides the capability to schedule jobs and see the earliest possible finish date (as well as the impact on other projects).

Choose Wisely

Selecting an ERP system for a moldmaker is like selecting a home. It is a major buying decision, and one that you will only make every ten years or so. And like a home, once you have moved in (implemented the system), you will find some problems or that it does not meet your needs after all. So as with the house, you are forced to make modifications (a new kitchen, an added family room or a new roof).

Unfortunately, the majority of ERP systems on the market today are not designed to address the requirements of moldmakers because they are designed to address material planning and repetitive production. Moldmaking will always be more "engineer-to-order" since the mold is designed and built to produce a unique product or part.

Moldmakers must be able to accurately estimate the production costs in a job - it is often the difference between winning business and winning profitable business. Deciding which contracts to bid and constructing an accurate estimate is often a time consuming process. Since most standard ERP systems require detailed parts, a bill of materials and routing records, they are of little help to moldmakers to construct an estimate.

Larger moldmakers - such as Reko, which has many active products with long leadtimes - require project management capabilities to plan and schedule the stages of the project to communicate the status to the customer. The ability to know if a project is on schedule and on budget is essential. More crucial is the ability to have visibility of potential problems or overruns so that they may be corrected before it is too late and too costly. Project management and the ability to collect and report actual costs and estimate-to-complete are capabilities only found in a few special ERP systems which work for moldmakers.

Like the warning on cigarette packages say - choosing the wrong ERP system can damage your company's wealth.