For the strategy to work, Kaye needed to quickly acquire new customers in its target market. That meant providing extensive customer service and getting ISO 9001 certification. The latter is a coveted stamp of approval from the International Standards Organization that puts Kaye in a much stronger position when competing for certain European contracts. ISO 9001 certification is also attractive for U.S. customers, who face rigid quality-control standards and strict monitoring and reporting requirements.
Tim Donaghey, director of operations, says ERP was integral to Kaye's winning ISO 9001 certification. The ISO's key concern is product consistency, which requires careful management of revisions so that outdated specs and plans aren't confused with newer versions. That can be tough for companies that, like Kaye, sell many models and variations of their basic products.
ERP helped Kaye more closely integrate engineering and manufacturing, by allowing factory workers to instantly call up illustrations of products on PCs. Before ERP, workers looked at sometimes out-of-date paper drawings. Now that an electronic link ties a parts drawing to a work order, they see only the latest engineering revisions. "We don't send blueprints to the factory floor anymore," says Donaghey. ISO auditors appreciate the new electronic drawings, he adds, because they eliminate the possibility of errors.
Kaye's ERP system also gives employees immediate access to documents that catalog the 920 test procedures and assembly operations ISO 9001 demands. The documents are available to all employees involved in the manufacture of an ISO-certified product, including those in design, production, quality control, and senior management. The fast, orderly electronic cataloging and companywide dissemination of the test and assembly instructions prevents a costly, time-consuming muddle.
Kaye uses the AvantÉ ERP system from DataWorks Corp., which took about six months to install and cost about $95,000. The company runs 18 of AvantÉ's 32 modules, encompassing engineering, manufacturing, materials management, business planning, sales, customer service, finance, warranty tracking, and field service. And Kaye continues to augment the system. For example, a recently enhanced product-configurator module calculates costs for custom-made products by tallying material and manufacturing steps (along with their charges) while an order-entry clerk takes the specs over the telephone. That enables Kaye to provide fast, accurate price quotes--an element of good customer service. And because the software communicates with inventory management, production scheduling, and other areas, the clerk can immediately tell a customer when to expect a custom model.
"The system allows us to respond to customers by shifting our resources," says Kenneth Hurley, Kaye's president and CEO. "We went from needing weeks to needing only a couple of days to get an order out. If we have to, we can have an order out the door in a day." That's a real selling point when a pharmaceutical company suddenly learns of an upcoming inspection and needs a $30,000 Kaye product right away.
What's more, says Hurley, "from an operations perspective, it has cut our inventory in half." Since Kaye joined the ERP camp, the value of its preproduction inventory has dropped from 20% of its revenues to only 10%.
Staff reduction is another advantage. Free-flowing information eliminated the need for expediters, who ran around the plant keeping tabs on material movement and work flow. Kaye was also able to cut half of its materials-handling staff and one-third of its order-entry personnel. In all, the company has reduced its head count from 105 to 77 employees since instituting ERP, even though it added a direct sales staff of 7 during the same period.
"We have to provide a higher level of customer service than our competition," says Hurley. He credits ERP for helping the company do that.
Iowa spring is also using ERP to fuel aggressive growth--as evidenced by the company's scramble to fill that last-minute order from the carmaker. The company is shooting for $20 million in sales by 2000, almost double its level last year. But unlike Kaye, Iowa Spring serves mature markets--it makes coil springs for use in farm and construction machines, automobiles, garage doors, furniture, and major appliances. Competitors are abundant, margins are thin, and pressure to reduce prices is intense. So Iowa is relying on its reputation for incredibly fast response to customer requests, says Bianco.
That reputation explains why the large automaker, though not a regular Iowa Spring customer, called the company when one of its own machines broke. Bianco says that without ERP he could have spent days just dispatching workers to sift through paper orders, inventory reports, product-utilization reviews, and schedules. Before ERP, order processing at Iowa used to take up to four days. Now it's accomplished in minutes, according to Bianco. "Once a work order is in our system, there's no paperwork all the way to the factory floor," he says.
Iowa Spring uses modules from the Time Critical Manufacturing system that cover its accounting operations. The company took a phased approach to installation, adding modules at intervals from 1986 to 1996. The system now also handles order processing, purchasing and receiving, inventory management, shop-floor routing and control, and bills of material, which list the part numbers of components used in a finished product.
It works like this: When a clerk enters an incoming order, the ERP system checks the bill-of-material module to see what parts Iowa Spring needs. In the inventory-management module, it automatically determines whether enough material is on hand and sets up the purchasing procedure if it's not. Other modules determine what machines will be needed to make the springs, check what speeds and gear combinations to run on those machines, and arrange machine scheduling. Finally, the shop-floor module creates the work order, which gives machine operators the go-ahead to make the part. Later the ERP system triggers the billing module to create an invoice when workers electronically sign off the job.
