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Barden UK using SAP R/3
Case study of successful SAP R/3 ERP implementation at the Barden Corporation in Plymouth, England
By Phil Robinson (BPIC) - Comments to : [email protected]
It is not often you hear the word "delighted" from a Managing Director just after the cut over to a new planning system but that was the word used by Graham Sterling, the Managing Director of the Barden Corporation.
Barden is a part of the German FAG
Kugelfiscergroup and make high precision bearings for applications such as high precision machine tool spindles, aerospace and other very demanding applications.
Barden had just implemented the SAP R/3, during the first week of October 1998. R/3 is the market leading Enterprise Resource Planning (ERP) software from the German
company SAP.
Jargon Warning
If this case study uses terms with which you are unfamiliar, you can look them up in the Jargon Buster at
http://www.bpic.co.uk/jargon.htm. For more details see Business Excellence (ISBN 0-952-8885-05) by Phil Robinson.
MRP Ltd's first contact was with a group from Barden who attended a
presentation at The Wrigley Corporation (the chewing gum company) who are neighbours to their Plymouth factory. Wrigley had used MRP Ltd. to help them implement their BPCS package some years ago (see the Wrigley case study). After a visit from Mike Salmon, MRP Ltd's Managing Director, Graham Sterling (MD), Rita Haggar (Personnel and Training) and Chris Lawley (IS Manager) attended our 2 day Top Management Seminar in October 1995. At this seminar they learn what a well implemented planning process can do for a company and was sufficiently impressed to recommend Graham Sterling, Barden's Managing Director, Chris Lawley, their IS Manager and Rita Haggar, the Personnel and Training Officer, attended MRP Ltd.'s November Top Management Seminar.
Few people implement such radical changes to their business processes very often in their careers. When faced with this challenge you have two alternatives. You can either put yourselves in the hands of (and at the mercy of) an external consultant or, our preferred approach, train company employees in the implementation process that we have refined over the years so that the company retains control and ownership of the project. We see our role in the latter case as education of the company experts and gentle guidance to tailor the generic principles to the company.
Barden took the latter approach. We offer Managing Directors who attend our Top Management Seminar a free place on the Implementation Course which Graham took up in April 1997 when Barden's holding company FAG started talking seriously about implementing SAP R/3.
Following the implementation course, we helped Barden draw up an education
programme to achieve the necessary level of understanding. The project then became the implementation of a new and better way to plan the business using the software as the tool rather than just the implementation of new software. In the first phase of education, 30 people out of a total payroll of 250 attended one or more of our courses. We find that, unless a minimum of 15% of indirect employees attend external education, the necessary culture change does not happen. A significant factor in this successful implementation was that Barden did more than the minimum education on both the Business Excellence principles as well as the SAP R/3 software.
Barden's R/3 project started in earnest with the education programme in May 1997 so the implementation took 18 months although the target cut-over date had been set at April 1998. The revised, more realistic, time scale was another significant factor in their successful implementation.
Barden had the unusual problem that sales and marketing were handled by a separate organisation who were not going to get involved with the R/3 implementation so that Sales and Operations Planning, normally a key process, could not be properly
implemented. In September 1997 they decided to focus attention on 3 key areas, inventory record accuracy, bill of material accuracy and purchasing. My first visit to
their factory in Plymouth was to get these task forces on the road.
----2
Inventory Record Accuracy
The first surprise for the inventory record accuracy task force was the number of places that inventory was stored in. They thought they had 3 stores but it turned out there were over 10 places inventory was stored. The next problem this group faced was that completed work into stores was processed by accounts some time after the work has been physically moved into the stores. To check the inventory record accuracy you have to be able to compare the physical stock with the computer record. If there is doubt over what has been processed, this is impossible. Three of the four main storage areas achieved the minimum required 98% level of inventory record accuracy in six months, too long really, and one store that had been moved was lagging behind the rest but at least they made it in the end.
Bill of Material
The Bill of Material task force had the problem of replacing a tried and tested but complicated and expensive process with a simplified process that relied on a single, very accurate source of all bill of material data. The ownership of all bill of material information must be with the originators so that causes of errors are corrected, not just the errors themselves.
Another big bill of material issue was what should be included on the bill of material. In our view everything that is consumed in the manufacture of the product should be on the bill of material unless the cost is insignificant and it is readily available (e.g. often air and water), especially if the amount you buy depends on the volume of throughput. One debate here was about the expensive grinding wheels they use. They could be on the bills to simplify purchasing and capture their cost in the cost roll up or, as was eventually decided, they could continue to be purchased using re-order points.
The final big debate on bills of material was the composition of the part number. Best practice is to use the shortest possible, sequentially generated, non-significant, all numeric part number. Any descriptive and sorting requirements should use the description and classification fields. FAG did have an 8 digit numbering system but many people at Barden were attached to their much longer alpha numeric part numbers.
In the end they took the decision to adopt the 8 digit number internally. R/3 would convert to the customer and supplier numbers at the system boundaries. Another nice feature of SAP R/3 is that it was able to maintain the old part number in a different field.
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Purchasing
It is normally our recommendation to leave purchasing and manufacturing until later in the project to spread the work load. It is also easier to improve purchasing when the data available has improved. Barden decided they wanted to improve purchasing at the start.
The task force started talking about the number of copies of forms and who does what with their purchase orders. I persuaded them to forget about their current methods and start with a clean sheet.
We talked about different approaches to purchasing including:
Vendor managed inventory
Kanban deliveries to the point of use
Credit card purchasing
A reduced number of qualified suppliers.
The idea was to start an initiative in each area. For Vendor Managed Inventory the two areas looked at initially to give the maximum work load reduction in purchasing were stationery and safety footwear. Both areas required a disproportionate amount of administration work. Within a few months one
stationery supplier was delivering stationery directly to departments and sending in one invoice per month. Safety shoes had been changed from time consuming purchase orders with many return and credit notes to a voucher scheme at the local store. Flushed with this success the purchasing task force moved on to other consumable items.
For kanban deliveries to the lines, the task force looked at rings and balls. Balls were an attractive kanban target as the manufacturing process matched the size of ball to the bearing so it was hard to know which sizes of balls to purchase in advance. Progress was slower due to the technical nature of the parts.
It was agreed that purchasing some material using a credit card would give administration savings. Maintenance items was a good place to start this initiative.
Supplier reduction was set as an on-going objective with progressive annual reductions from nearly 1000 to 300 over 2 years with a target of 200 by the third year. Time was wasted at the start of the project looking at introducing vendor rating. The best they could come up with was a scheme that got close to confirming what they already knew about their suppliers. Once they had implemented SAP, they could use the standard SAP report on the reduced number of suppliers.
When a group gets its teeth into improvement they get the taste for radical change. I noticed paperless purchasing on the agenda of a recent purchasing task force meeting. A far cry from the initial debate about who should get which copies of the purchase order.
Progress in the area of purchasing was so fast that there were real communication
problems for a while. I had to remind Graham that it is better to have people complaining about too much change rather than the usual complaint of all talk and no action.
The reason MRP Ltd. recommends purchase improvements should follow planning improvements is that it is important to support all the above new purchasing methods with a vendor schedule to give suppliers a forward visibility of requirements rather than rely on history. Once the new planning systems are in place and the data is accurate, Barden should start to use the R/3 vendor schedules for all direct material. I hope to be invited back so I can check!
Manufacturing
In March 1998 we set up a private World Class Manufacturing course for
Barden. The course sparked a number of ideas so I was asked to set up another similar course in September. A series of initiatives emerged, within 6 months the results were visible, for instance, lead time could be cut from 10 days to 5 days.
More important than any individual improvement, however, was the culture of continuous improvement that was firmly established.
-4 Cut Over
Transferring data into a package as complex as SAP R/3 is never easy or quick.
The Material Master file, for instance, has over 400 fields for each part number with over 100 mandatory fields. The Product Structure File has over 300 fields for every structure and so on. Barden closed down their old system on Tuesday 29th. September and were up and running with SAP R/3 on Monday 5th.
October. A good measure of the success of any implementation is the number of exception messages generated. Barden complained at 3 to 4 pages of exception messages on their first MRP run, half of which they said were caused by an error in the Material Master data. They should be very pleased with this result.
When I asked the Graham Sterling, Managing Director, how the implementation had gone, he said he was "delighted". He felt the implementation went extremely well and they were already getting tremendous benefits as well as a reduction in costs. The whole culture of the company had changed, everyone was focused on working together and living off the same database.
I asked Richard Offer, a Business Unit Manager and project leader what he felt had been the key to their success. He believed it was because they did more training on the system than was recommended by IBB, their SAP implementation partners. They also did more external education with MRP Limited than we suggested. "You cannot do too much education and training" Richard said in conclusion.
Barden now have bills of material and routings over 99% accurate. This Richard felt was a key factor in getting everyone using the common database at all level within the
business, a key component of Business Excellence. Richard also felt that the ease of use of SAP R/3 was a factor here.
Rita Haggar's comment was also interesting. She said that they went into the project with trepidation and came out with enthusiasm. More than that you cannot say.
Overall a great success and a tribute to all involved.
Phil Robinson - www.bpic.co.uk - June 1999
