Implementing an ERP & Making it Work
A ferrous casting facility shares its successes and obstacles in establishing an ERP within its operation.
Jessica G. Okhuysen Valle, Corporacion POK S.A. de C.V., Guadalajara, Jalisco, Mexico
(Click here to see the story as it appears in the September issue of Modern Casting.)
In mid-2011, Corporacion POK S.A. de C.V., Guadalajara, Jalisco, Mexico, an engineering firm offering metalcasting and machining solutions, transitioned from lot (or heat) traceability to individual serial number traceability to comply with the needs of some of its customers. Instead of migrating only some of the products to serial number traceability, the company opted to convert all part numbers to this type of tracking. Management saw it as the best way of tracing parts and trusted it would standardize criteria and deliver more precise information for quality and problem solving.
By early 2012, POK had an urgent need for a system capable of tracking the serial numbers throughout the entire manufacturing process and rendering automatic material
certificates. Doing it through spreadsheets was consuming too much time and vulnerable to human mistakes.
While in the process of creating a tailor-made traceability system, POK discovered an already established system for the metalcasting industry that could execute the needed tracking and purchased the software in mid-2012.
The Implementation Plan
Implementing an enterprise resource planning (ERP) system is a huge task for any size company, and mistakes in implementation can have costly consequences.
The main component of an accurate implementation plan is time; however, history has shown timeframes in ERP implementation are likely to be broken. Understanding this before starting is important for the project leader (and whomever that person is reporting to) to avoid feeling frustrated and instead continue working toward the set goals.
POK designed an implementation plan after a week-long initial visit from the software provider. The objective of that visit was to get to know the company and understand the full capabilities of the software.
First, POK had to assess its operations and evaluate if it was going to keep any of the existing systems. At the time, the company was planning through Excel and using an ERP software system for accounting and human resources. The metalcaster also had the first phase of the in-house traceability system in place.
After understanding all the modules within the new metalcasting ERP software, POK defined implementation stages with clear goals and deliverables. The company chose to keep using its existing software system for its accounting and HR because the metalcasting ERP software did not have the capability of managing payroll nor the technical needs for the Mexican tax system. The new ERP software would be used for production only.
Stages of Implementation
POK’s installation and implementation of the new production ERP system occurred in six stages:
1. Creating Libraries: POK decided it wasn’t a good idea to automatically import data from its other databases into the new ERP software because much of the data was not up to date.
Only a handful of individuals with deep knowledge of the company were involved at this point, and POK was careful with selecting who would input the data because it was building the foundation for what would become the backbone of the company.
At this stage, POK created the product library, process library, customer library, sales book, company calendar, alloy library, supplier library and scrap codes, among other components. The company chose to only input data applicable to existing open orders. It continues to expand these libraries with each new purchase order.
2. Appointing an ERP Master: This was harder than expected and still something POK is trying to achieve. It is common for the people involved in the early stages of implementation to be key personnel for the company, but because they are important assets, it’s logical that they have their hands full already. POK has found it tricky to maintain a project leader who can dedicate most of his time to the ERP project.
3. Testing the Software: Before inputting real data, POK tested the system for any issues or bugs. Several were found and reported to the software designer, who responded quickly and efficiently to the issues. Often, onsite visits served for proper documentation of the bugs and an update was released shortly after they left.
4. Getting Ready to Go Live, Take 1: After building the foundations and testing the system, it was time to input real data. At POK, many individuals would be using the ERP system. In August 2012, the company presented the system to supervisors and asked them to form teams of who would be responsible for performing a physical inventory and data input.
After training sessions, the plant stopped activities from a Friday morning through Monday morning to conduct the inventory.
When the stock take was complete, POK found a huge setback. When castings reach the machining stage, many can be turned into a variety of part numbers. Although the new ERP program had the ability of tracking serial numbers, the supplier had never had a customer tracking 100% of its production through unique IDs nor had it converted one part (casting part number) to several others (machined part numbers).
POK wanted to make sure the system represented what was truly going on, so customization programming had to be done at a core level of the software. This set the timeline to launch back a few months.
POK also learned that the concepts of how to allocate parts to production orders had not been fully understood by everyone, which meant the Work in Progress (WIP) tracking was not reliable.
The main issue was the most advanced serial numbers in the process had not been put against the most urgent orders. Also, several part numbers did not have open orders. POK could not allocate its data since it had not been input.
After serious consideration, the metalcaster decided it was easier to clear all the stock take information and start again rather than fixing the unreliable information already input.
5. Getting Ready to Go Live, Take 2: Involving people so they believed the new ERP system would eventually minimize administration labor was probably the most difficult part of the implementation. Even though POK has a relatively young (but experienced) staff who were comfortable working with complex computer programs, breaking habits was hard.
The basic concepts of how the system worked and the goals it would help the company reach had not been successfully communicated to the workers. The company chose 20 ERP process owners and launched a training week during which the people who were going to be using the ERP program on a daily basis were taught the advantages of a correct WIP count and order allocation.
After the training week, POK was ready to make another stock take. In February 2013, POK conducted a physical inventory and commissioned teams to input data. As a confirmation, a route sheet was printed from the ERP program and attached to every single part in process to ensure nothing was left out.
POK controlled what it defined as most important processes and instituted obligatory bookings. This meant if a serial number had not been recorded as “passed that stage,” the part could not be booked to the next stage. The stages included pouring, heat treat, NDT inspections, casting finishing, machining reception and finish machined.
The company has discovered that its ERP program users often seek help on things they should know how to solve on their own. One challenge has been for the project leader to have time to continue the implementation of the system instead of troubleshooting and servicing internal customers. Proper training and user manuals personalized to POK have helped minimize this. Keeping the system up to date is a team effort and must be supervised.
It is easy to leave inputting as an activity for the end of the day, causing the data to be skewed. POK has launched a pilot trial of shop floor data collection where the operators themselves input data in real time. POK didn’t begin with shop floor data collection from the beginning because it wanted to understand what information was worth having. ERP process owners played a role in identifying such data.
6. Shop Floor Data Collection Pilot Run: POK chose a manufacturing cell that processes parts quickly for the pilot run of floor data collection. The run was successful but came across several obstacles.
Four computer screens were located in the manufacturing cell. Quality plans were created for the products being processed and results were being input by the operators. If a part did not pass the inspection, it would instantly be booked into a “rework route,” helping POK obtain a rework and scrap percentage instantly. All the certificates to be sent to the customer, including NDT reports, dimensional verification reports, material test reports, hardness reports and shipping documents, were generated immediately, printed and placed with the parts.
POK didn’t actually see results of the implementation until it could finally generate reports.
The ERP software works alongside SAP-owned report designing software. With both software programs, POK can generate any report and visualize any type of information. Knowing how to use the report-designing software has been an important factor in the success of the ERP program implementation. Giving people data they can use and analyze has been key for the acceptance of inputting data into the software in the first place.
POK’s first major success was the automation of all certificates of conformance and material test results. The spectrometer and carbon and sulfur analyzer were linked to the ERP database, and the report was created in the reporting software. This reduced the amount of man-hours needed to put the information together by 70%, but most importantly, it did away with human error.
Today, POK generates many reports through its ERP. Supervisors receive daily, weekly or monthly automatically-generated email reports of relevant information about their area. Reports include:
- Parts poured.
- On-time delivery score.
- Pending open orders.
- Parts in finish goods.
- Parts currently at outsourcing.
- New orders received.
- Projected sales per customer.
- Scrap rate.
POK’s Investment
POK has operated its ERP software for more than two years now. After 30 months, the average cost per month was $4,125. Although licenses only account for $1,150 per month, onsite training accounts for the highest percentage of investment. POK has held 15 onsite training sessions (four in 2012, five in 2013, four in 2014, and two so far in 2015). As POK continues to evolve, so should the ERP system. POK hopes to continue with quarterly visits from the ERP software provider.
Calculating ROI can be tricky because many benefits of an ERP system are intangible. By monitoring scrap rates, POK can pinpoint specific problems to address and solve. By reducing the level of inventory, POK has reduced its material costs through better procurement and planning. Properly calculating the cost reduction is time consuming and difficult, but the company has concluded the benefits of utilizing the ERP program surpasses the monthly cost.
Ongoing Improvements
Initially, POK concentrated on training the shop floor workers directly, believing that supervisors were already inundated with a large amount of work. However, the supervisors are the leaders of their areas and would have been better served to be part of the earlier training. POK is now working on training them and providing them useful reports from the system. With their enthusiasm, the ERP program has received a boost of input of information. The plant currently is finishing creating quality plans for all products, just as it did in the manufacturing cell pilot run.
POK also is analyzing bottlenecks and has been able to track efficiency in the production lines. The plant is redesigning its pattern warehouse to ensure important information and location of each pattern are recorded into the ERP program. This will help reduce time for “pattern seeking,” while also enabling the plant to keep track of pattern usage and plan pattern quality inspection and repair.
POK also is implementing a costing module. Since the company now has enough data to analyze, it is discovering its manufacturing costs.
In the near future, the plant would like to spread the shop floor data collection pilot run to all areas, most likely beginning with the CNC shop. POK also will begin quoting and estimating through the ERP program. Further, it will link the system to its CMM machine so dimensional results won’t have to be manually input. Finally, POK will link its accounting system to the ERP system.
ncountering a scenario in which you are forced to suddenly and immediately suspend melting operations for an extended period can be a death sentence for many metalcasting facilities. Small to mid-size businesses are the backbone of the industry, but many do not survive when forced into extended downtime. One disaster-stricken metalcaster, however, found resilience through its own perseverance and a circle of support from peers, friends, suppliers, teams from installation and repair providers, an original equipment manufacturer and even competitors.
Tonkawa Foundry, a third-generation, family-owned operation in Tonkawa, Okla., was entering its 65th year of operation this year when a significant technical failure ravaged the power supply and melting furnaces on January 17. Thanks to the textbook evacuation directed by Operations Manager Carrie Haley, no one was physically harmed during the incident, but the extent of emotional and financial damage, and just how long the event would take Tonkawa offline, was unclear.
Tonkawa’s power supply and two steel-shell furnaces would have to be rebuilt. No part of the reconstruction process could begin until the insurance company approved removal of the equipment from the site. The potential loss of Tonkawa’s employees and customers to competing metalcasters seemed inevitable.
Within two days of the incident, repair, installation and equipment representatives were on site at Tonkawa to survey the damage. Once the insurance company issued approval to begin work, the installation team mobilized within 24 hours to remove the equipment and disassemble the melt deck.
Since the damaged equipment was installed in the 1980s and 1990s, Tonkawa and an equipment services and repair company quickly strategized a plan and identified ways to enhance the safety, efficiency and overall productivity of Tonkawa’s melt deck.
“The most critical issue was for our team to organize a response plan,” said Steve Otto, executive vice president for EMSCO’s New Jersey Installation Division. “We needed to arrive at Tonkawa ready to work as soon as possible and deliver quickly and thoroughly so they could get back to the business of melting and producing castings, and minimize their risk of closing.”
Several years after Tonkawa’s melt deck was originally installed, an elevation change was required to accommodate the use of a larger capacity ladle under the spout of the furnaces. Rather than raising the entire melt deck, only the area supporting the furnaces was elevated. As a result, the power supply and workstation were two steps down from the furnaces, creating a number of inconveniences and challenges that impacted overall work flow in the melt area. Additionally, the proximity of the power supply to the furnaces not only contributed to the limited workspace, but also increased the odds of the power supply facing damage.
The damage to the melt deck required it to be reconstructed. It was determined to be the ideal opportunity to raise the entire deck to the same elevation and arrange the power supply, workstation and furnaces onto one level. The furnace installation company provided the layout concepts, and with the aid of Rajesh Krishnamurthy, applications engineer, Oklahoma State Univ., Tonkawa used the concepts to generate blueprints for the new deck construction. The results yielded a modernized melt system with an even elevation, strategically placed power supply, enhanced worker safety and increased operator productivity.
“Eliminating the steps and relocating the power supply farther from the furnaces was a significant improvement to our melt deck,” Tonkawa Co-Owner Jim Salisbury said.
Within four days of insurance company approval, all damaged equipment had been removed and shipped for repair.
The insurance company required an autopsy on the damaged furnace before any repair work could begin. The forensic analysis was hosted by EMSCO in Anniston, Ala., in the presence of insurance company personnel, as well as an assembly of industry representatives from the companies who had received notices of potential subrogation from the insurance company.
Tonkawa’s furnace was completely disassembled while the insurance company’s forensic inspector directed, photographed, cataloged and analyzed every turn of every bolt on the furnace over a nine-hour workday. The coil was dissected, and lining samples were retained for future reference.
While the furnace sustained extensive damage, it did not have to be replaced entirely.
Structural reconstruction was performed to address run-out damage in the bottom of the furnace, a new coil was fabricated and the hydraulic cylinders were repacked and resealed. Fortunately, the major components were salvageable, and ultimately, the furnace was rebuilt for half the cost of a new furnace.
“The furnace experienced a significant technical failure,” said Jimmy Horton, vice president and general manager of southern operations, EMSCO. “However, not only was the unit rebuilt, it was rebuilt using minimal replacement parts.”
Though work was underway on the furnaces, Tonkawa was challenged with a projected lead time of 14 weeks on the power supply.
When accounting for the three weeks lost to insurance company holds and the time required for installation, Tonkawa was looking at a total production loss of 18-20 weeks. From the perspective of sibling co-owners Sandy Salisbury Linton and Jim Salisbury, Tonkawa could not survive such a long period of lost productivity. After putting their heads together with their furnace supplier, it was determined the reason for the long turnaround on the power supply could be traced to the manufacturer of the steel cabinet that housed the power supply.
The solution? The existing cabinet would be completely refurbished and Tonkawa would do the work rather than the initial manufacturer. This reduced the 14-week lead time to just five weeks.
Tonkawa is the single source for a number of its customers. Although lead-time had been significantly reduced, the Tonkawa team still needed a strategy to keep the single source customers in business as well as a plan to retain their larger customers.
Tonkawa pours many wear-resistant, high-chrome alloys for the agriculture and shot blast industries. Kansas Castings, Belle Plaine, Kan., which is a friendly competitor, is located 50 miles north of Tonkawa. Kansas Castings offered Tonkawa two to three heats every Friday for as long as it needed.
“We made molds, put them on a flatbed trailer, prayed it wasn’t going to rain in Oklahoma, and drove the molds to Kansas Castings. We were molding, shot blasting, cleaning, grinding and shipping every Friday,” Salisbury Linton said.
Others joined the circle of support that was quickly surrounding the Tonkawa Foundry family.
Modern Investment Casting Corporation (MICC) is located 12 miles east of Tonkawa in Ponca City, Okla. Though MICC is an investment shop and Tonkawa is a sand casting facility, MICC’s relationship with Tonkawa dates back years to when Sandy and Jim’s father, Gene Salisbury, was at the helm.
“Gene was always willing to help you out,” said MICC owner, Dave Cashon. “His advice was invaluable for us over the years, so when the opportunity arose to support Sandy and Jim, we volunteered our help.”
MICC offered to pour anything Tonkawa needed every Friday in its furnace. Tonkawa brought its alloy, furnace hand and molds, while MICC provided its furnace and a furnace hand for three heats. Many of the specialty parts Tonkawa produces were completed with MICC’s support.
When Salisbury Linton approached Cashon and asked him to issue her an invoice to cover the overhead Tonkawa was consuming, Cashon told her if she brought in six-dozen donuts every Friday morning they’d call it even.
“We’re all kind of like family,” Cashon said. “We’re all part of the same industry and though we may be friendly competitors at times, you don’t want to see anybody go through what they’ve gone through and it could have just as easily been our furnace that failed. While we all take the appropriate measures and perform maintenance to prevent these scenarios from occurring, they unfortunately still occur from time to time in our industry.”
Tonkawa had recently added steel work to its menu of services and Central Machine & Tool, Enid, Okla., was able to take Tonkawa’s patterns and fulfill its steel orders so it would not fall behind with those customers, while CFM Corporation, Blackwell, Okla., took three of Tonkawa’s employees on a temporary basis and kept them working during the downtime. Additionally, a couple of Tonkawa’s major suppliers extended their payables terms.
Thanks to Tonkawa’s suppliers, friends and its personnel’s own passion, persistence and dedication, the business is up, running and recovering—placing it among the few shops of its size to overcome the odds and remain in business after facing calamity.
Nearly eight months after that devastating Saturday evening in January, Salisbury Linton reflected on the people and events that helped Tonkawa rise from the ashes. “We certainly would not have the opportunity to see what the future holds for Tonkawa if it weren’t for all the kind-hearted people who cared about what happened to us. Everyone still checks in on us.”