ERP Implementation Results in reduction in working capital requirements, improved margins, Driving Business Transformation
The Challenges
A portfolio company that had been in business for decades had installed Sage few years earlier, but they weren’t receiving the expected benefits. Leadership was contemplating a change in software to obtain the desired reporting. CEI Strategy & Advisory was hired to review the current state business processes, data, and capabilities of the software. The previous attempted implementation process was challenging due to duplicate non-integrated business processes, “dirty” data, and existing resources performing the functions with limited training.
Solutions
CEI Strategy & Advisory conducted a 30-day assessment and recommended the company keep the current ERP software and implement the required capabilities of the software.
Cleaned all data and designed and implemented best practice business processes enabled by the ERP software.
Re-organized the organization to support the new workflow and created management and exception reporting to use the clean data..
Trained users on how to use reporting to improve business performance..
The Factors
CEI Strategy & Advisory addressed the following factors to achieve a successful business transformation:
Process: CEI defined and implemented new processes that were enabled by the ERP software. The team defined the processes that would be followed, who would perform them, how they fit together, how they should work within the ERP software, and what controls were needed.
Data: CEI identified the data needed to fulfill the entire organization’s needs, who was responsible for creating it, updating it, and maintaining it to support all processes with accurate and timely data.
Organizational change management: CEI addressed training needs, communicated progress, and ensured the whole organization understood how process changes might affect them.
Discipline: CEI ensured that processes were followed, job roles were aligned, and hand-offs were with proper access.
Results
CEI Strategy & Advisory helped the organization solve a variety of issues with their ERP system, data, processes, and organizational structure that resulted in a successful business transformation. The new system enabled the following improvements that impacted working capital and margins:
Increase Working Capital
Forecasting capabilities that identified accurate demand for future months
Ability to identify actual product demand for purchasing
Clean-up / set-up Bills of Materials – more accurate inventory, more accurate raw material demand
Real-time updates of on-hand inventory balances
Improved Margins
Bills of material now include
Price Books for more accurate and profitable pricing
Tracking of tooling expense for reimbursement
The new business processes also streamlined the shipping/invoicing process, eliminated offline / non-ERP based processes, and enabled exception reporting for customer service, engineering, and operations.
Improvements that impacted operational performance:
Material attributes now on ERP system enabling sorting of data by key attribute
Variance analysis in product costing
Capture of material substitutions
Support for Maintenance, Repair and Operations purchasing
Traffic calendar/scheduling appointments
Use of product data to track actual production times vs. standards
Part number schema defined and implemented
Visibility to supplier-owned inventory
Eliminated non-value-added routing steps
The team deactivated thousands of inactive finished goods, updated router times for more than 2000 items, and implemented structured processes for external work.
CEI also created a business analytics and reporting workstream to develop reports to support and measure process adherence and the impact of the new processes.
The CEI Strategy & Advisory led project team drove the behaviors that enabled the transformation, including:
Usage
Accurate, insightful information now exists for use in running the business, allowing strategic decisions to be made, efficiencies to be found, and the health of the business improved dramatically
Problem Identification
If anyone identifies a problem, they must STOP and figure out the root cause and resolve it
Adoption
All new reports and functions depend on everyone using the system
Results overview
CEI Strategy & Advisory provided a solution that helped the organization avoid the significant capital expenditure required to remove and replace their existing ERP system.
There was a significant reduction in costs (20+%), including raw material purchases, scrap, on-hand inventory, and headcount. In fact, CEI’s efforts resulted in a reduction of on-hand inventory from $12 million to just $5 million.
Data ownership was established, which enabled accurate reporting of product and customer margins by keeping the data clean.
The organization experienced an improvement in customer service with a focus on delivering the right product at the right time with the required quality.
CEI skillfully addressed the heart of the issues and empowered the team to take ownership of new business processes, which ultimately contributed to a remarkable improvement in margins (doubled) and EBITDA.
The team members were trained on using reports and dashboards to make informed business decisions.
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