Improving Financial Performance

Dec. 11, 2006

How manufacturers put ERP to work.

In New Age lingo, enterprise resource planning (ERP) is holistic.

It's about big-picture stuff. ERP represents a big investment. This isn't about picking a package or two of software off the shelf at Staples or Office Depot. And manufacturers expect a big return on their investment.

True, manufacturers have mixed and matched software modules -- for example, production and CRM systems from SAP, a financial management package from Oracle and a human resources management package from PeopleSoft -- and often they've considered the combinations to be both efficient and effective.

But as good as individual business software packages are, the results the ERP system as a whole can deliver are the ultimate test. At the end of the day, it's about the whole enterprise, about improving operations and overall financials.

Consider Barnes Aerospace, a privately held Windsor, Conn.-based producer of machined and fabricated components and assemblies for aerospace manufacturers.

In early 2005, Barnes Aerospace implemented Infor Global Systems' ERP SyteLine at its Windsor Airmotive repair base in West Chester, Ohio, to complement the Infor SyteLine systems it was already running. The issue was "scalability," says Pete Gottschalk, group director for management information systems at Barnes Aerospace. The business was planning to double its sales, and the division manager believed the existing ERP system could not support that level of business, Gottschalk explains.

During the first 12 months with the new system, Windsor Airmotive in West Chester posted double-digit increases in sales and profits, recorded a 65% decrease in accounts receivable and a 174% improvement in days payable outstanding. Oh yes, it also closed its books in half the time it formerly took.

SUMCO USA Corp., a unit of Sumitomo Mitsubishi Silicon Corp., self-described as the world's second-largest silicon wafer producer, says it has reduced IT costs to 2.5% of sales from 6% of sales by selecting SAP to obtain a one-source ERP solution for its three U.S. manufacturing sites. Mergers and consolidations had left SUMCO facilities without a common database, a situation, notes Dan Moore, SUMCO's Phoenix-based IT director for ERP systems, that the company decided needed to be changed.

Implementation of the new system began with some finance functions in 2002, progressed through such manufacturing functions as production planning and finally brought in human resources. The system is now fully operational, and Moore and his colleagues this fall were planning for a two-step upgrade that's expected to begin in 2007.

Replacing its legacy system with QAD's GXE enterprise system has allowed Vita-Tech International Inc., a California-based contract manufacturer that develops and produces nutritional supplements, to automate and centralize business processes, bringing it closer to customers and dramatically reducing lead times. The company has been able to process 20% to 30% more price-quote requests and to reduce quote processing time to days from weeks.

Vita-Tech receives as many as 100 requests for quotes per week, and its legacy system involved manual distribution of information, making it difficult to set priorities and respond quickly. The new system, among other things, provides automated alerts so that purchasing and R&D can work on a quote at the same time.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.