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ERP On A Budget

Particularly relevant in the current economic climate, David explores the concept of implementing ERP on a budget. How can companies safely cut costs and still deliver a successful outcome? It’s all in there. To read this article please go to the erp software section of the Evaluation Centre.

Planning For Success Towards ERP

While few UK companies are actually pushing ahead with S&OP, the subject is now much higher up the business agenda than in the past. In fact, many are claiming that S&OP is in their action plans – “just not yet; we are leaving it until we’ve implemented our ERP system”. Ian & Robin explain why companies need to re-consider this approach. To read this article please go to the erp software section of the Evaluation Centre.

Leaning Towards ERP

In an attempt to bring some common sense and truths to bear upon the fallacy that Lean and ERP are in some way incompatible, Ian and John D have written a management briefing on the subject. This was recently published by the Evaluation Centre. To read this article please go to the erp software section of the Evaluation Centre.

Squeezing The Last Drops Out of MRP

Guttridge, the UK’s leading manufacturer of bulk powder handling machinery for agricultural, food and chemical applications, implemented the Epicor Vantage ERP system during 2008. The system offered immediate benefits in terms of speed of processing and the presentation of management information and was generally considered a success, but the company’s Managing Director, Peter Guttridge, and his colleagues knew that there were more benefits available.

As a company making and designing to order this was the first proprietary ERP package used within Guttridge and the company’s first use of Material Requirements Planning. Although MRP had improved the visibility of requirements, the usual issues facing a business designing and making to order were causing difficulties in terms of the management of customer order dates. The number of action messages facing production planning and buying staff was proving a limiting factor in taking the business to the next level and really squeezing the benefits from MRP.

Peter Guttridge discussed this with Brian Squires, a former MLG client (as Divisional Vice President within Flowserve Corporation), now a part-time Professor at Nottingham Business School and provider of strategic consultancy to the business. Brian recommended MLG’s approach to such matters so Peter met with Ian Henderson to discuss the Vantage system, the opportunities for extending the Lean programme and the process improvements necessary as the company moved further into new markets.

Ian supported the next round of Guttridge’s improvement activities as an exercise in re-defining the future vision. Working with the management team and key players, he identified some new (and key) process steps that would enable a better handle to be established on dates throughout the planning process. One of these was the adoption of the Vantage ‘Capable-to-Promise’ functionality and, supported by an Epicor consultant, this tool was introduced. Some organisational changes were made to improve and simplify communications and the foundations are now in place for the next step forward in performance.

In his thanks to Ian, Peter highlighted how the external input had achieved shared ownership of the changes and a clear understanding within the company of what is to be done. Ian commented that he was impressed that Guttridge were not prepared to settle for having the new system implemented, but recognised the potential for getting more out of the ERP tool and so initiated this work.

Peter also said that he and his team had enjoyed the experience, which is almost as rewarding!

Best Practice Planning

MLG were approached by a leading brand name in dairy products to review their planning systems. The company was experiencing unprecedented and significant material shortage issues; management wanted to understand why this was happening and how to fix matters.

John Dean conducted an analysis of the systems and procedures only to find that a combination of some all too familiar problems had led to the current situation of poor delivery performance and spiralling costs associated with poor planning:

  • The company’s markets were changing. In its main channel – the ultra-competitive retail grocery sector, the major players (supermarkets) were seeking to gain advantage over their competitors by driving their supply chains to operate to ‘efficient consumer response’ (ECR) principles – essentially the food industry’s name for Lean or Agile.
  • In response to significant forecasted growth, the company was in the process of a major site expansion to create additional capacity. However, in the short term this had reduced the amount of storage space available for finished goods, ingredients and packaging alike.
  • The industry-standard ERP package that the company had successfully implemented had served them well for some time. However, most of the people with the understanding of the system and the concepts and principles by which it operated were now no longer in the same roles and this knowledge had been eroded.

The company was therefore trying to manage the business with a planning system that no longer mirrored the required business model and it did not have the ability to rectify this.

The solution was relatively straightforward and cost-effective. John prepared and led workshops in which the staff were re-trained in the principles of Supply Chain / ERP and worked together to match these to the existing business processes and the ERP package currently in place.

This provided the ability to re-align planning system parameters, procedures and management practices to allow people to operate effectively in their new environment with the changes and constraints they had experienced. It also provided them with the understanding that this is an ongoing process and the skills to be able to react positively to future changes.

Early Training Benefits ERP Introduction

We were asked, unusually, to provide some training for a major food company in the South East of England in the early stages of planning the implementation of a new ERP system due to go live at the beginning of 2009. Unusually? Yes, as all too often generic training in the principles behind ERP systems seems to be treated as a bolt-on, late in a project, when the system is configured and people are about to be trained in how it is to be used.

Why is this company’s approach, of training at the outset, such a better way of going about things? Quite simply because the first step in any implementation has to be to define the way the business wishes to work in the future. Companies that begin with the software and the way the package experts envisage that it will be configured are committing the business to a future way of working over which the key players have had little input and therefore no ownership. Defining the future before any consideration of the software allows genuine best practice to be established – best practice that meets the needs of the business, its products and markets. Of course best practice can only be defined by people with a real understanding of the topic – the concepts and techniques.

Working with the in-house Project Manager, Robin developed a three-tier training programme for the 36 people involved in the implementation. Delegates received a basic, intermediate or comprehensive level of education depending upon their role in the implementation

The system went live as planned and is generally recognised as a success in true business terms. While the training is by no means the only reason for this, it is undoubtedly a factor. The nature of the company management team and its approach to the implementation, as witnessed by the professional way that training was such a key early step, suggests that this was always likely to be an ERP success story.

Re-Inventing Business Processes

MLG recently won a competitive tender for a task to radically overhaul the sales administration processes within a household name in a nationwide service business.

The company was aware that there was much duplication and inconsistency between branches in its sales administration activities. Management wanted to understand what best practice would look like, what it would cost and crucially, before committing this cost, what business benefit would be gained by adopting this consistently across all sites.

Initially David conducted a review of a number of the company’s key locations, mapping the current Sales Administration processes. Then David and John Dean worked with a Project Team of carefully selected key members of staff to develop the future operational vision i.e. how the company should operate in the future. This was achieved by a series of workshops at which David and John led and facilitated the team in exploring and understanding the different applications of best practice within Sales Administration processes – not only within their UK market sector but also looking wider to other countries and other sectors. Innovative and incremental improvements were all hotly debated and the result was a documented, robust and shared understanding of a substantially better process to handle sales.

The business benefits were developed by the team and then reviewed in detail with a somewhat sceptical operational management to establish what could be realistically achieved. This was an essential step towards securing the high level of confidence in the findings that the organisation required.

MLG then worked with the company’s IT department to identify the systems implications and development effort required to support the agreed future processes.

The company already had a significant IT development schedule and so for the final piece of the jigsaw we helped the company develop an implementation plan that was cognisant of this and sought to maximise short-term business benefit whilst minimising the burden on their IT resources. In this way the company have been able to implement some of the changes and gain certain benefits early on. The company plan to start the IT development required to implement the remainder of the changes later this year despite the difficult economic circumstances, so compelling is the business case.

Lean Mentoring Role for Ian

MLG clients who require a broader base of skills than those provided by our own team are recommended to consider the services of Teabag Talent (www.teabagtalent.com), a ‘by invitation’ community of independent professional advisors. Teabag offers the whole range of business skills and members only gain admission if their skills and professionalism are proven.

As well as calling upon Teabag for skills in areas outside our own, we provide our own specialist services to Teabag clients as required. One recent example was a company who needed a mentor to coach their Manufacturing Manager in best practice – in particular in the area of Lean.

The Compin Group is one of the major players in the field of interior fittings and ‘front-ends’ for the railway industry. It acquired its UK operation in early 2008 and began the process of establishing within Compin (UK) Limited the best practice that makes the Group’s name synonymous with quality, competitiveness and respect for commitment to customers.

Ian supported this activity over several months and significant progress was made in improving company performance, as recognised by the company’s customer base. Several major new contracts have been secured and the business can look forward with confidence. A number of initiatives have contributed to the progress made – the photograph shows members of the team engaged in the re-layout of an assembly cell as part of a 5S initiative.

Comp

Interim Role for John Dean in BPO

On behalf of one of Europe’s largest IT companies MLG were recently commissioned to develop a detailed transition plan and due diligence framework for a major IT Services outsourcing engagement throughout the EMEA region. The material was needed as a key part of a tender submission that the company was making to the world's largest provider of multi-service HR business process outsourcing (BPO).

Services in scope were traditional deskside hardware and software support in 13 countries and 35 client sites. However, the client organisation had very stringent requirements concerning data security (owing to the nature of their business) and this in turn had a significant impact on the nature and complexity of both the due diligence and transition activities.

The solution design was undertaken by the service company and was based upon industry standard ITIL principles which allowed MLG’s John Dean to design and cost a plan that minimised risk yet remained price-competitive and could be executed in a relatively short period of time using the company’s in-house resources.

The tender was successful and the client issued a letter of intent to the service provider. When the exercise commences, the service company may decide (as they have before) to engage John on an interim basis to manage both the Due Diligence and Transition phases of the project – watch this space!

Repairing ERP

A subsidiary of a major multi-national, which makes and repairs complex, high-precision equipment for oil and gas drilling suffered problems after implementing a market-leading, sophisticated ERP system as part of a corporate project. The implementation had failed to recognise that this business unit had some additional requirements as a result of its repair operations and this led to some of the failings prevalent with such implementations – e.g. people felt that the system was driving them rather than them being in control of the system.

Through the Institute of Operations Management, MLG were asked to provide generic education on MRP and MRPII. Robin provided this and a number of issues came to light, after which we were invited to support an improvement programme.

In essence the software needed to be a better fit to the company’s operational environment. MRP could only ‘see’ demand for the new build programme (about 20% of the business volume) leaving 80% of the demand (from repair work) outside the Material Requirements Planning process. The result was an unacceptable level of shortages. With MLG’s guidance the in-house team added an MRP-visible repair programme, based upon demand forecasts. Planning bills were also introduced, enabling the system to plan major assemblies, which better mirrored the repair service operated.

Another key step was the introduction of a formalised Sales & Operations Planning process to manage the medium term (3-18 months) for both new build and repair. This helped determine the necessary production plan and resource requirements. Departments were thus able to plan labour levels and to start recruiting in time for people to be effective when needed. It also provided financial information to project forward and to be compared against plan.

Other improvement areas were:

  • Modifying processes to improve data accuracy – e.g. stock records and order dating
  • Reviewing and fine tuning planning parameters for MRP
  • Managing MRP action messages
  • Having the appropriate KPIs when using an ERP system.

The result is that the company is now making much better use of the ERP system, as witnessed by the KPIs (including shortages). Even more importantly the management is in control of the system and thus able to use it most effectively to support the business.

Strategic Management of Trust

John Beecroft took on an assignment recently to help the leading drug and alcohol agency in Wales achieve strategic improvement. The CEO had left the business six months previously and it was being managed by the three functional heads, who were running the business successfully but were wrapped up in all the day to day tasks associated with an operation located on eight sites with unpredictable clients.

A business plan covering the next three years was clearly a key requirement. John produced this with the department heads and key managers over the next two months and then led the presentation to the Board and Trustees. Once accepted, the key points were rolled out to all the staff together with a clear mission statement:

  • "The company aims to make positive changes in the lives of people affected by drugs and alcohol, through a range of services and support delivered by skilled and experienced staff, in the belief that people can and do change.” 

John also persuaded the Board and Trustees that their key task was to find and appoint a new Chief Executive, as any organisation needs one leader, even in the medium term. They are now very close to filling this position.

John took responsibility for managing the project of taking a new product, a unique computer-assisted motivational enhancement tool, to market. This had been developed through to 90% nine months earlier but not taken through to completion. With new focussed management impetus, the work to complete the development was undertaken and the marketing strategy established. The system is now being used by a number of Motivational Enhancement Teams and the prison service is currently evaluating it.

On examining business sectors within the organisation, John identified a key opportunity to increase the service being offered and also increase turnover and strengthen the balance sheet. The final residential rehabilitation centre, although well managed, was not balanced in comparison with the treatment unit – it was too small. The length of stay at the residential unit tends to be approximately six months. People leaving the treatment unit who are not ready to return to society immediately need somewhere to feel secure where they can talk to counsellors whenever needed and often relearn basic everyday skills.

If a suitable, much larger, building could be found for this function there was a definite need for this service. A property was identified and, subject to the relevant planning consent for change of use being granted, this will soon become a part of the organisation, providing three times the existing residential rooms and so an enhanced valuable service.

All in all a very successful assignment that proved that the basic management methods still work and can add considerable value to any organisation, if used logically.

Executive S&OP Breakfast Briefings Tour UK

Judging by the feedback received from the delegates at each of the venues, we are pleased to report that the recent round of breakfast briefings was a great success!

The sessions were run in conjunction with the Institute of Operations Management and focussed on the hotly debated subject of Executive Sales and Operations Planning. The briefings were designed for senior management, for whom Executive S&OP offers a tool for balancing supply and demand. Failure to establish realistic medium term plans means that short term planning can never deliver success; we can only hope to minimise the level of failure in the short term. All too often, companies approach planning and control projects with the decision to ‘Leave it ’til later’, believing that S&OP is complex and difficult, when in fact it offers the foundation for everything else.

The feedback received was very positive with the virtually everyone stating they had broadened their understanding in the subject; not only as a result of the formal presentations from Robin and Ian but equally importantly from the informal discussions with the MLG team and the other delegates. The events were held in Coventry, London, Bristol, Huddersfield and Bathgate. We can repeat this as an in-house session upon request.

From the popularity of the tour, the IOM and MLG realise there is demand for focussed informative briefings of this type in a breakfast format. Accordingly we are already planning our next tour, tentatively scheduled for Autumn/Winter. We have yet to decide on the topic but have a few ideas based upon our collective experiences. Perhaps you have ideas on what you would like us to cover? If so drop us an email at info@mlg.uk.com. Alternatively simply register your interest and be one of the first to receive the details once finalised.

Welcome To The Green World

One of the key aspects of all MLG work relating to best practice in procurement over the last few years has been the promotion of whole-life costing in the sourcing process. Buyers pushed into achieving lowest purchase price for any item will rarely deliver the best genuine cost – we can, for example, always buy cheap pieces of plant but if we look at the genuine total cost of such an item we have to consider:

  • The serviceable lifetime of the equipment
  • The maintenance costs of the item
  • The disposal / re-cycling costs when the time comes.

Buying equipment – production plant, vehicles or office computers – should also involve an assessment of the supply base. System suppliers or machine tool manufacturers offer special deals when their planning processes have let them down and they face the prospect of excess inventory. We can buy individual items based on a price in the spot market at a point in time and soon find ourselves with equipment from several manufacturers to be serviced on an ongoing basis – perhaps requiring components from each to be stocked.

Similar concerns should also influence the sourcing of ongoing raw materials. The price charged by a supplier is only one element of the cost. We need to ensure that the supplier processes give sufficient confidence in the potential quality of their product to keep quality costs under control. We also need to think about the packaging approach adopted by different suppliers and the costs associated with unpacking and disposal of packing materials. Such costs, of course, are not explicitly measured and monitored by accountants and as such can be overlooked in some organisations.

Another factor has to be choosing suppliers who will deliver on time, on an ongoing basis. Assessing the potential supplier’s manufacturing facilities, quality processes and so on is a prerequisite. In some cases purchasing organisations recognise the need to contradict the traditional Lean, single-sourcing, supplier partnership approach in order to provide guaranteed back-up for vulnerable items.

Professional buyers have always worked in this way, of course, and some companies have moved to such approaches having recognised that simply chasing lowest purchase prices is the ultimate example of ‘what you get is what you measure’. If all we measure is the price on the purchase order then people will be tempted to achieve the best price to the exclusion of all else.

And now life for the professional is becoming more difficult as all commercial businesses and other organisations start to play their part in saving the environment. The term ‘20/20/20’ denotes that the EU has committed to reduce emissions to 20% below 1990 levels by 2020 and the procurement function has to play its part in this.

‘Sustainable Procurement’ actually appears to mean different things to different people. A study commissioned by the Oracle Corporation found that sustainability had replaced cost and speed as the dominant topic of discussion among purchasing and supply chain professionals. In this sense the term meant guaranteed ongoing supply. However, the term actually evolved within the public sector as relating to the sustainability of the planet and this is gradually becoming the dominant definition.

So, now we are looking at an approach to procurement which includes the environmental and social implications of our sourcing decisions. Many organisations have developed a sustainable procurement strategy; fewer have successfully implemented it. As with all strategies, the key element of success is the ability to translate vision and objectives into real-life ongoing ways of working. 

The key lesson when adopting Sustainable Procurement is that the practices adopted to sustain our environment must also be sustainable. This is not a ‘flavour of the month’ where the purchasing team include environmental consideration in the supplier selection processes while the flavour is still in fashion. This is a long-term, fundamental change to the way an organisation carries out a key element of its business.

Successful implementation requires a change project to modify existing purchasing processes and procedures to include sustainability, influencing key stakeholders to include environmental considerations in their business decisions, training staff and some quick wins where sustainable purchasing in action is demonstrated. As with all change management projects this requires sponsorship, a project team with the requisite knowledge and ongoing project management translating goals into actions. 

More details on: www.mlg.uk.com