Over the course of time, all of their operations had become very independent in their procedures. There was a significant communication gap between the sales, finance, marketing and manufacturing personel. Promises of delivery against sales orders were not happening on time and manufacturing costs were impossible to track.
Different product costing numbers existed for the manufacturing, marketing, and financial reporting. There was no agreement within the company whether certain products were profitable.
Their CEO determined that their first goal, was the need to give all levels of management immediate, rapid, and accurate views of financial and operating information.
THEIR ACTION PLAN
- THEY ASSIGNED THE CFO TO FIX MANUFACTURING
- HE INVESTIGATED CONSULTANTS AND ERP SYSTEMS
They assigned their CFO the responsibility of making their manufacturing operations function correctly or to sell them to someone else. He spent the next month looking at consultants, ERP products, potential owners and new methods.
THE SOLUTION
To resolve all of their costing, delivery and operational issues he signed up for Info.Net via SAAS (Software as a Service). In his opinion, LAMAR Software had the experienced implementation and training personnel to help them. The SAAS choice was made because they had no internal IT staff.
After the organizational meetings they asked LAMAR to convert the data from their old system into Info.Net. This took a few days to get and convert.
The first thing they found was a large percentage of the data records were incorrect or incomplete. After some investigation, they found that the same problems existed in their old system.
UNEXPECTED PROBLEMS SURFACED
- THEY WERE SELLING HIGH VOLUME ITEMS AT A LOSS
- THEY DID NOT HAVE ACCURATE INVENTORY VALUES
Once the data corrections were completed, a full set of product cost reports were run. They found that their highest volume product was losing money on each sale. This information was hidden from them before. This got everyone's attention.
They also found that they did not have an accurate Inventory or WIP valuation. As a result of this visibility, the owners of the company committed to broaden the implementation. The implementation was now going to include engineering, purchasing, labor tracking, inventory management, and work in process. The board approved more resources for the CFO to accomplish the restructuring.
The implementation team's main focus was to define new strategic and operating procedures and to install "Best Practice" business methods The implementation team used the new system as an opportunity to redefine costing, sales pricing, and order confirmation procedures.
- THE RESULTS
- SHIPMENTS MADE ON TIME
- PRODUCTS PRICED CORRECTLY
- INVENTORY REDUCTIONS
- MORE ITEMS SOLD AND SHIPPED
- CUSTOMER SATISFACTION HIGHER THAN EVER
In a period of a few days, the CFO had accurate inventory valuations, WIP valuations, labor tracking and purchase price variance reports. Once those costs were validated, the CEO told the marketing department to reprice their high volume products.
In a very short period of time manufacturing's shipments against sales orders went from 2-7 weeks late to 99.6% on time delivery. Now they are considering reducing their advertised delivery times while their sales have gone up.
Customer satisfaction is much better now even with higher selling prices. They have more sales and better on-time delivery. This is the best of all possible resolutions.
