Case Study In The Metal Hardware Components

Traditional industries indeed have a need for ERP management systems, but some companies may believe that their scale is too small to justify the implementation of ERP. They may think that they need to wait until their company grows to a certain size before the value of ERP becomes apparent. In reality, as long as a company has a modest scale, such as having more than 10 employees, it can consider starting to use ERP. ERP is not like buying a TV or an air conditioner, where you can simply plug it in and start enjoying its benefits. It requires a period of adjustment, training, and learning by employees before it can generate benefits. ERP helps companies save manpower, reduce costs, prevent loopholes, increase production efficiency, and enhance capacity. Companies should not wait until their business scale becomes large and complex before starting to use ERP. By then, it may be too late to integrate orders with production lines effectively. If a company starts using ERP for computerized management from the beginning, everything will appear well-organized, and it will be better equipped to handle increased business in the future.

 
 
Company Ya specializes in hardware components, specialized bearings, and hardware door lock accessories.
 
Although it’s a traditional industry, managers need to comprehensively review and improve the current operations, transforming manual processes into computerized and institutionalized ones. The first step is to computerize the workflow of the production line, allowing for comprehensive control over each manufacturing process and real-time monitoring of the progress of each work order. Any changes should be displayed instantly, and production quantity and labor hours should be fully understood, eliminating the ambiguity of visual management methods used in the past. While implementing Manufacturing Execution Systems (MES) may seem like a daunting task, with the right software tools, simple actions such as barcode scanning at the start and completion of each workshop task can yield remarkable results. By minimizing the areas of ambiguity previously managed by visual methods, better control over progress can be achieved, leading to reduced costs and maximizing the company’s wealth and profits.
 

1.Valuation:

Before implementing the system, Ya Company only used a system for simple sales and purchase record keeping. When it came time to make deliveries, data was entered to print invoices, which were then signed by delivery drivers and customers to verify the correctness of the sales volume and kept as records. As for sales orders, they were often taken over the phone from customers, and invoices were generated manually. Inventory management was also done manually, with records kept in ledger books. While each of these issues may seem minor individually, collectively they became significant problems that the company needed to address.

2.Problems:

  1. Manual calculation required for sheet metal, aluminum, and bar materials.
  2. Lack of real-time information linkage between accounting, sales, and procurement departments.
  3. Outsourced processing information is only known after receiving invoices from vendors.
  4. Inventory management relies heavily on manual documentation, leading to discrepancies and delays in verifying quantities sent to warehouses.
  5. Procurement of materials through manual documentation often results in under-ordering, causing production delays.
  6. Difficulty in confirming data and actual conditions for production and sales meetings.
  7. Discrepancies between inventory calculation units and procurement pricing units, leading to inconsistencies in data between accounting and warehouse departments.
  8. Lack of a systematic approach to prioritize the use of surplus materials from cutting aluminum bars or steel, resulting in waste.
  9. Inaccurate collection of production line working hours, relying on manual reporting by supervisors and additional paperwork for data compilation.
  10. Inability to accurately track the quantity of materials in transit for procurement and production.
  11. Time-consuming and labor-intensive process for generating statistical analysis reports.
 
3.workflow:
  1. Hold a kickoff meeting to confirm the company’s Standard Operating Procedures (SOP) and assign different modules of the ERP system to relevant personnel.
  2. Establish coding principles for material numbering to reduce instances of duplicate materials or materials being assigned to multiple codes.
  3. Configure ERP system parameters according to the company’s requirements, such as decimal points and approval checkpoints.
  4. Provide explanations on ERP system master files and internal control linkage within relevant programs.
  5. Conduct vertical training sessions based on the six major cycles tailored to each department’s responsibilities.
  6. Issue notifications on horizontal connections between departments based on the six major cycles and provide explanations on related operations and handling of exceptions.
  7. Offer training on the six major management areas.
 
4.The implementation of Production Management (MO) and Manufacturing Execution System:
 
The first challenge that Ya Company must address is to strengthen and improve its current operating mode. The existing mode of operation focuses only on sales and inventory management, with no computerized operations in the production line workshop. Although manual records are complete, they are not convenient for data querying and statistical analysis. However, the mode of operation in MES management systems does not allow for such situations. Clear records of the start and completion of each process are necessary, and it is essential to link the workshop progress with the production orders. The production orders should be barcode-enabled, and the start and completion of each process in the production order should be barcode-enabled as well, with each preceding and subsequent process closely linked. Therefore, the company first requires that after receiving an order, the customer’s order data must be entered into the system, controlled and managed through a five-part production notification process. Once the engineering unit confirms that the Bill of Materials (BOM) for the product meets the customer’s requirements and signs off on it (on the first copy of the production notification), and the production management unit receives the sales order (on the second copy of the production notification) with the engineering unit’s signature, it indicates that the product can be converted into a production dispatch order (SO2MO) according to the BOM, which can then be transformed into a manufacturing order (MO2PD) based on production requirements. The manufacturing orders are then printed with barcodes and handed over to the workshop, where each manufacturing order is barcode-enabled. While this process may seem simple, it is crucial for reducing manual errors.
 
5.Implementation of QC Management & Inventory Management
 

The next issue that must be addressed is to strengthen and improve the current warehouse operation mode. In the existing operating model, there is a lack of recording for materials issued to subcontractors and for materials used in internal production processes. This results in inaccurate inventory data for both internal and subcontractor stocks, making it impossible to promptly identify inventory shortages in the system. This situation leads to production downtime due to material shortages and an accumulation of excess inventory for certain materials.

To address this, guidance will be provided to conduct a comprehensive inventory count and cost assessment, followed by inputting the data into the system for reconciliation. Subsequently, in the procurement process, the warehouse manager will perform quality control receipt operations based on supplier delivery orders. After confirmation by QC personnel, the materials will be transferred to inventory. Warehouse staff will then only need to receive the quantity indicated on the QC transfer order and allocate storage locations accordingly.

For materials issued for subcontracting and internal production, issuance will be based on production notifications issued by the production management unit. This process will reduce the occurrence of issuing incorrect materials or quantities. Additionally, since the system updates inventory in real-time, warehouse data will be highly accurate and up-to-date.

 
6.Introduction of Procurement Management
 
In the hardware manufacturing industry, there has been a discrepancy between the purchasing pricing unit and the warehouse receiving unit. With the introduction of the system, this pricing issue has been resolved. The system can convert the purchased quantity into pricing based on weight, thereby resolving both the accounting payment and warehouse quantity issues. Previously, procurement data was calculated manually by purchasers or obtained from warehouse staff, often resulting in missing information on in-transit items. The implementation of ERP’s MRP calculation module has eliminated the problem of under-ordering materials leading to production delays.
 
7.Introduction of Scrap Management
 
Previously, the manual retrieval and cutting of materials such as sheet metal, aluminum, and bars resulted in an accumulation of excess scrap in the warehouse. With the implementation of the scrap management system, this issue has been effectively addressed. The system automatically screens and selects the most suitable scrap for users, allowing them to retrieve and cut the appropriate scrap accordingly. This has significantly reduced the backlog of scrap in the warehouse, optimizing material utilization and streamlining operations.
 
8.Introduction of Accounting and Financial Management System
 

Previously, our accounting department faced challenges with receivables and payables management, as we had to wait for sales or vendors to provide data before recording transactions. Additionally, reconciling accounts was a cumbersome process. With the implementation of an ERP system, our accounting process has become more streamlined and efficient.

Key improvements brought by the ERP system integration include:

  1. Real-time data transfer: Accounting can now directly import relevant data into the system as soon as it becomes available. Previously, it took over 10 days each month to compile and summarize data for accounts payable and receivable. Now, we can swiftly process invoices and payments as soon as vendor requests are received and confirmed, saving time and effort.

  2. Streamlined invoicing and reconciliation: The ERP system automates the invoicing process and facilitates reconciliation by generating invoices and matching them with corresponding transactions. This enables faster and more accurate financial reporting and reduces the risk of errors.

  3. Enhanced vendor management: Leveraging the system’s capabilities, we can efficiently track vendor performance, monitor material consumption, and follow up on outstanding payments or returns. This level of oversight has elevated our vendor management practices and improved overall efficiency.

By integrating our accounting processes with the ERP system, we have achieved greater efficiency, accuracy, and control over financial operations, ultimately enhancing our company’s financial management capabilities.

 
9.Utilizing Analytical Reports
 

  1. Detailed Accounts Payable Reconciliation Statement: Utilizing custom report modifications, Ya Company’s accounting department can directly confirm on this report that each purchase of materials is ordered by the purchasing staff based on production needs and inspected by QC upon receipt, ensuring confidence in approving each expenditure.

  2. Review of Meeting Data Directly on System-Based Reports:

    • Backorder Details of Sales Orders… Sales Order Status Report.
    • Backorder Details of Purchase Orders… Purchase Order Status Report.
    • Backorder Details of Outsourced Processing… Order & Production Dispatch Schedule.
    • Late Delivery & Defect Details from Suppliers… Supplier Late Delivery Statistics & Supplier Quality Defect Statistics.
    • Order Processing Tracking… Order Process Tracking Report.
    • Financial Forecast… Purchase Order Status Report (Amount), Sales Order Status Report (Amount).

In terms of hardware configuration, adopting Jiang’s Cloud ERP Management System eliminates the need for purchasing a dedicated server. The software and database are hosted on the cloud, providing a stable and secure working environment 24/7, 365 days a year. For users, this means reducing instances of system crashes or instability during rush orders or operations, thereby significantly improving work efficiency. Additionally, all company computers only need to connect to the cloud server, eliminating the need for IT personnel to work overtime.

 
10.The benefits of the system implementation
 

Due to the implementation of MES, Ya Company has embarked on a comprehensive review and correction of its current workshop operations. The manual recording of production daily reports has been replaced by automatic entry into the system after scanning barcodes for starting and completing tasks. This allows for easier inquiry, analysis, and statistical tracking of workshop production status. Moreover, it enables managers to shift from visual management to centralized control room integrated management, reducing the critical time for error correction. Workshop progress is now clearly monitored, and QC inspection reports are incorporated into the computer system. This greatly alleviates the heavy burden on manpower and aligns with the requirements of ISO inspection records. Both the ERP and MES systems fully support and provide great convenience to Ya Company and its customers in terms of quality and delivery schedules.

However, it’s important to note that the system is merely a tool; the key lies in whether users can make the most of it and fully utilize its functionality to achieve complete data control. With the assistance of experienced consultants from Jiang, who have tailored the operation processes to Ya Company’s industry needs and sequentially implemented them, the company is gradually advancing towards its goal of “progress control and quality record management,” ultimately aiming for sustainable operation as a century-old enterprise!