Armstrong Maintains Edge With Resource Planning and Control System
|(from left) John F. Wilson, president and general manager; Daryl Welch, vice president, information systems; William Hannah, vice president, treasurer; and Terry Glynn, vice president, materials, on the shop floor of Armstrong Manufacturing Co.|
|Staying sharp and
maintaining a competitive edge more than clichés at Portland, Ore.-based Armstrong
Manufacturing Co. In just 60 days, we transitioned from an antiquated manufacturing
system to a new resource planning and control system, Manage 2000 from Minneapolis-based
ROI Systems, ensuring that it would remain efficient, profitable and competitive far into
the 21st Century. The implementation was quite a feat, considering the industry average
for such implementations can be six months or more, but not surprising given the character
of the employees and management of Armstrong.
Armstrong occupies one of those niches that one doesn't usually think about, but is crucial to the industry it serves. We develop and manufacture automated machines that sharpen and repair circular and band saws for sawmills worldwide. But even in such a narrow niche, the competition is tough. Armstrong, which sells its saw maintenance equipment through independent distributors, needs to be able to complete orders quickly without excess materials in-stock. Through its new resource planning and control system, the company has been able to reduce production lot sizes from 50 to 10. That has significantly reduced finished goods inventory and dramatically increased the variety of products the company can supply within a narrow time frame.
"When customers decide they want a certain piece of equipment, they'd like to have it as soon as possible," says John F. Wilson, president and general manager of Armstrong. "Because we make a variety of machines, it's unrealistic to have all of them sitting in inventory; it's too costly. By shortening our lead times from order entry to shipment, we can be much more competitive.
Customer demand also influences which products get made and when, depending on current trends and new industry practices. "Not all the equipment we sell is mandatory from a customer's point of view, " Wilson says. "A customer may decide to try side-grinding his saws, which is an optional process from the mill's perspective, but he may have just viewed an application where it worked well. If we tell him it will take 12 weeks for us to deliver, unforeseen circumstances may change his mind. For us to take advantage of business opportunities, we have to move quickly. An order may not be here tomorrow."
|A band saw needs to be resharpened every three to four hours.|
|Mike Long of Armstrong Manufacturing Co. uses ROI Systems' Manage 2000 to check on the availability of items in stock.|
|In addition to
manufacturing complete machines, Armstrong has a repair parts business that comprises a
third of its sales. One of the company's top priorities is shipping service parts orders
by the next day. Better than 99 percent of all service parts orders meet that self-imposed
"A new band saw costs from $300 to more than $1,000," her says. "Every four hours, band saws need to be resharpened. Circular saws will tend to go up to eight hours before resharpening. So resharpening and leveling give you months of usage rather than one-time usage. And because these sharpening and leveling machines are used all the time, when a spare part is required, a company needs a replacement right away. A customer who is out of sharp saws is out of business."
production floor and inventory to maximize efficiency and reduce waste is a daily
balancing act. To accomplish this, the company has incorporated an automated and dynamic
planning, production and reporting system that adjusts work requirements to most
efficiently use our available manufacturing resources. In addition, the system ensures the
company has enough parts on-hand to fulfill work orders as well as spare parts orders
without tying up excessive capital.
We spent two years looking for a computer system that was faster than our Wang minicomputer and was Year 2000-compliant. We weren't looking for software that would change the way the business runs. We found that a new enterprise resource planning and control system could dramatically cut manufacturing times while decreasing inventory size, as well as a host of other capabilities.
"We were running on a Wang VS minicomputer, which was a very large box but its performance was the equivalent of a PC/AT," says Terry Glynn, vice president of materials. "The computer was underpowered, very slow and in no way was going to be Year 2000-compliant. Neither was the software that ran on it." He says Armstrong wasn't a typical manufacturer looking to switch systems. Its priorities - speed and Year 2000 compliance - were more important than gaining more inventory turns per year or increasing the bottom - requirements typically associated with manufacturing software implementations.
One thing the company was looking for was a complete system, including hardware and software. "As we entered into the process, we decided that if we were going to invest in new hardware, it made sense that we have the best hardware/software-combined solution," Glynn says. "So we gave the software vendor we were working with at the time the opportunity to be evaluated fairly with many other new software packages. In the process of doing that, it became clear from a software standpoint that ROI Systems' MANAGE 2000 package made the most sense. So with the package in-hand and UNIX server from Hewlett Packard Co. [HP], we did a total conversion in 60 days. The philosophy was that every day we delayed full implementation was simply money out of our pockets."
We had immediate benefits. Within four months, we had reduced our finished goods inventory by $120,000. It also freed up space to allow the engineering department to expand within the building. Equipment manufacturing lead time dropped from 10 weeks to 5 weeks. Work in process dropped from $650,000 to an average of$~~300,000.
"Our total inventory dropped 33 percent, which created more than $400,000 in additional cash while operating with even higher revenues, which we expect will be $11 million this year," Wilson adds.
One of the things that really helped us get and maintain our 99 percent on-time delivery of spare/repair parts is a function within MANAGE 2000 called TPOP (time-phased order-point policy), which continually updates the system, drives priorities and makes sure that we're not out of specific parts when we need them. This self-maintaining and updating process occurs automatically, hundreds of times a day.
"Before, our planning people would bring in an order form and say, 'OK, we need 10 more band saw sharpeners.' And at that snapshot they'd make a decision based on the anticipated demand and history and place an order into the system," Glynn explains. "From the time that order was initiated until it was completed, which could be several weeks, a lot could happen. That order could either b&postp6ned or accelerated depending on what's happening with current demand each day. The ability of TPOP logic to react to daily changes enables us to manage our inventory much more effectively and still maintain the 99 percent off-the-shelf order fulfillment rate. So much of our profitable business is that kind of business-spare/repair parts."
As part of its 60-day installation of MANAGE 2000, we assigned a set of planning rules to every item that we buy or make. The rules tell the MRP (materials requirements planning) system how it should react based on whatever the circumstance is at that moment. With our old system, each one of its 1,300 service parts had to be looked at individually by a planner.
"It's just a tremendous time savings to have those parts planned dynamically and have the planners monitoring and fine tuning," Glynn says. "It gives us the ability to do regenerative MRP." Every day the system goes through the entire MPS (master production schedule) from the top down and re-plans all of the orders based on current demands, and orders them by date. Then it plans all of the material and capacity requirements, scheduling the machines to keep everything synchronized. "What's really nice about the system is once you set up the planning rules, everything is pretty much on automatic pilot. It just requires the planners and the purchasing people to come in and monitor the exceptions."
More than 60 PC workstations are located throughout the building, allowing employees to quickly access information. MANAGE 2000 is running on HP UNI)~, while its clients run the Windows 95 operating system. In the next several months, the entire company will convert to Windows NT.
-What started out to be a simple search for fi~sterequipment4hat's Year 2000 compliant evolved into an entire system solution that runs everything-from production schedules and inventory to receivables and payroll.
"When I was implementing our new benefits program, "says William Hannah, Armstrong's vice president and treasurer, "I was able to quickly write custom reports so we could monitor eligibility, PM personal accident insurance) deductions, dental insurance-all the things that our corporate offices would have to do manually in creating their own separate databases in Excel or Access. And I simply extracted the information right off the database. The system genuinely makes it easy to manage and use information."
"We're able to do things we never would have thought of; such as faxing purchase orders and invoices from the desktop," Hannah says. "On one occasion I used the data from MANAGE 2000 to create an employee census report. And at the end of each year we do an evaluation for our profit sharing pension plans. Within five minutes I had that information in an Excel spreadsheet that I could forward to our actuaries to value our profit sharing plans. So it was a very big time savings for me."
We have yet to use all of the capabilities and functionalitys of our resource planning and control system. But as we change and have new requirements, our manufacturing system will be working in step with us. Until we had the system in place, Year 2000 loomed over us. Now we're looking far beyond that, ready to accept exciting challenges and untapped opportunities.