The project was to implement a fully integrated Enterprise Resource Planning (ERP) system. We were replacing what the existing system which was primarily a batch accounting system which had need modified to produce some inventory and production cost reports, mostly on a monthly basis. Not very good from the production / operations aspect, but it was what we had.
As was expected, we had to prove that the purchased ERP system balanced to the home grown accounting system, before the accounting department would sign off that the “numbers” out of the ERP system were correct and acceptable.
This was supposed to be easy. We ensured that the starting balances were identical, that the same consumption and receiving figures were sent to accounting as used in the new system, and yet for some items we could not get the same ending balance. Each material that was issued & received was recorded correctly in the new ERP system, and since we had not change the old system, the assumption was that the old system was still correct and the new system was in error. We finally followed every piece of paper though the production process and identified what was done with the data. It turned out that when production opened a container of raw material they sent a tag to accounting. When accounting received the tag, they immediately issued the whole container quantity to production in their accounting system. If this was done at the beginning of the month the actual material issued was very close to the full container and the two systems matched, if the container was opened at the end of the month, the full container was issued in the accounting system, but only the amount actually used was issued in the new ERP system. Of course the two systems were not in balance.
We had thought that the same procedure was being carried out in both systems, and in general, they were, goods issues were being recorded. Again the devil was in the details. Understanding the processes in the systems being replace or being interface to became part of the initial phase of all projects from that point on.
This same facility had a significant consignment inventory associated with its package materials. There was an automated feeder line that stretched from the consignment warehouse across the roof of the plant into the production area. Different packaging materials were sent down these lines depending on what was scheduled to be produced. At the end of every month we need to pay for the materials used. Each month we took a physical inventory of the consignment material in the warehouse, and spent a number hours calculating the quantity of the material still stuck in the feeder lines so that we could give an accurate inventory account to our vender. After watching this for several months it occurred to us to ask if we had ever returned any of the material in the feeder lines, and even if it were possible to empty the lines without significant effort. The answer was no. Why, we asked, if we could never get the material back to the vendor, why are we counting it, couldn’t we just accept ownership of what was in the line and avoid the time and effort of doing the monthly calculation? After we got past we have always done it that way, there was no reason to keep doing this. Accounting thought it was a good idea, and the production staff got to go home earlier after the physical count.
Opportunities for improvement are everywhere, and every little bit helps to realize the perfect plant. Nothing is too small. By challenging the accepted procedures, we were able to save 2 hours of overtime wages for 3 people each month, not much perhaps, but the original procedure had been in place since the plant had been opened.
In another case we discovered a report that was being sent by production to accounting at accountings request. Since we were implementing an integrated system we wanted all departments to be satisfied. We needed to ensure that we could duplicate what had been requested. The report was a 3 part preprinted form that was filled in every shift, every day. One copy was filed by the operations supervisor, one copy filed by the plant manager’s assistant, the third and final copy was sent to account for their use. When we visited accounting we found that the only thing they did was to file too. Apparently seven years prior they needed the information for a study they were carrying out. The study was completed, the person who was doing the study had left the company, yet the procedure was still carried out. No one had ever asked why, or questioned what the benefit was for doing this. Needless to say we stopped this data collection.
Look out for these orphan procedures during your journey; I am sure that you will find many of them. Once a procedure is in place they are performed until they are stopped, even if they no longer have any value.
Do not over look small changes to existing business procedures in your journey to the perfect plant. Not everything is solved with a new system.