ERP From The Ground Up

You're a $600 million division of General Motors (GM). You manufacture lighting fixtures (headlamps and taillamps) for all GM vehicles. Life is good. But at the end of 1998, GM begins to spin off divisions, starting with you. The company tells you that you have exactly 24 months to become your own stand-alone company and separate yourself totally from GM IT support - which by the way, consists of 130 mainframe legacy applications.

Your name is Jim Johnson. You're VP and CIO of Guide Corp. (Pendleton, IN) - soon to be privately held - and you've got yourself an IT project.

All Aboard! Partners, Vendors, And Project Teams
Guide Corp. chose EDS (Electronic Data Systems), located in Plano, TX, as its strategic partner for the entire transitioning effort. In January 1999, Guide signed a three-year service agreement with EDS, and immediately following, initiated two projects: a wholesale infrastructure and an entire ERP (enterprise resource planning) implementation. "EDS helped us to jump-start this whole process," explains Johnson. "We also put together an outside team to help us with package evaluation. Instead of writing an RFQ (request for quotation), we went down the list quickly by using outside consultants to give us software expertise and auto industry relevance." By February 1999, the team had created a list of 12 potential ERP vendors, including SAP. In the end, Guide Corp. chose MFG/PRO from QAD (Carpinteria, CA) for order-to-cash functions and PeopleSoft (Pleasanton, CA) for HR (human resources) functions. MFG/PRO software is a core enterprise application that operates in 26 languages. The application uses either Oracle or Progress databases, and runs in UNIX, Windows, and Windows NT environments. MFG/PRO can be implemented at multiple sites and its user interface is an ultra-thin Java browser. "MFG/PRO fits our needs on several levels," says Johnson. Guide Corp. runs in Windows NT environments and has four locations: headquarters in Pendleton, IN; and plants in Anderson, IN; Monroe, LA; and Monterey, Mexico.

By May 1999, vendor contracts were signed and Guide Corp. began to move forward with implementation. "The first thing we did was replace the entire desktop infrastructure - 600 workstations in all," says Johnson. "We upgraded from old 286 MHz and 386 MHz to Pentium IIs and Pentium IIIs, with Windows 98 NT." Then Guide Corp. began to focus on the larger picture. The company created a detailed implementation plan and formed several full-time project teams, dedicated to building the new infrastructure. The first team was organized around five major business functions. For each of these functions, a full-time Guide employee provided the business expertise while QAD provided application software expertise. At the same time, a second team of outside consultants and Guide employees worked on applications such as EDI, labeling, and data collection. The third team were PeopleSoft experts working on all HR efforts. Johnson says each team worked around the clock on their specific duties. And all teams had a target date of April 1, 2000 - months ahead of the GM deadline.

Installation Teamwork Finishes Quicker Than Expected
In the interest of time, Guide decided to adapt its business to the QAD system, not vice versa. Adapting to QAD minimized custom programming and shortened process design. So Guide started with a QAD blueprint out of the box and began implementing the hardware and network infrastructure immediately. Johnson says all teams were so diligent and committed to the task at hand, that the installation phase went quicker and smoother than they had anticipated. One team installed three large-scale Hewlett-Packard (HP) UNIX servers with HP disk storage arrays, as well as an additional 40 PCs. Another team replaced aging terminals on the plant floor with thin clients, while team number three upgraded Guide's LAN (local area network) to a 100 Mbps backbone with 10 Mbps to the desk. At the same time, a fourth team created Guide's own frame relay WAN (wide area network) for connecting all locations.

After all installations were complete, Guide Corp. chose an all-at-once implementation approach to QAD. "A phased-in rollout would have necessitated very complex interfaces and extended the project by many months," explains Johnson. Guide rolled out 600 users and all ERP, warehouse management, and shipping business functions for all four locations - including the Mexico plant. (In fact, Guide runs a Spanish version of MFG/PRO at the Monterey facility.) At the same time, Guide also rolled out salaried payroll to the PeopleSoft platform, and the task was completed. "On April 1, 2000, our IT infrastructure was fully operational - three months ahead of GM's schedule and under our budget," says Johnson.

With time and money to spare, Guide Corp. used the remaining months to further enhance the company's infrastructure. Guide Corp. began adopting many Lean Manufacturing techniques and purchased Hyperion's (Sunnyvale, CA) Essbase OLAP (online analytical processing) product. (For more information on Lean Manufacturing see the Secondary Feature article on page 55 in the April 2001 issue of Integrated Solutions magazine. For more information on Essbase OLAP, see the Secondary Feature article on page 52 in the May 2001 issue of Integrated Solutions magazine.)

A Stand-Alone Eight-Module Infrastructure
Guide Corp. had officially replaced the GM infrastructure. "GM's infrastructure comprised 130 mainframe legacy applications that didn't talk to each other very well, so we had interfaces all over the place," explains Johnson. "Plus, we had multiple copies of the bill of material (BOM) running each system," explains Johnson. All the item data and product structures are kept within the BOM. "For example," Johnson adds, "to manufacture a particular headlamp, we need these lights, screws, and brackets. The BOM also describes all your labor processes needed to manufacture the product. In other words, how much labor does it take to put this screw in this lamp?"

With QAD, Guide has one integrated application that runs the entire business - and only one copy of the BOM, which is located in the bill of material module. This and seven other QAD modules run all order-to-cash business functions.

What are they and how do they work? First, the order goes through the bill of material module. Then it's sent through the MRP (materials requirements planning) module where the module calculates the raw materials Guide Corp. will need to purchase from suppliers. Following that, the order is sent through, as Johnson calls it, the EDI (electronic data interchange) module (also known as the Order Processing module). "We have about 300 suppliers," explains Johnson. "But only a few use EDI. As you go down the tiers, you get smaller and smaller suppliers, that aren't set up for EDI. We fax our orders to those suppliers."

The order itself is then created within the purchasing/receiving module. "And we pay the supplier through the Accounts Payable module," illustrates Johnson. When materials are received, employees scan them and update the Inventory module. Shop floor employees then manufacture the product and enter all work-in-process information into QAD.

When the product is finished, it's shipped, using pick lists, bills of lading, packing lists, and ASNs (advanced shipping notices) from QAD. Then finally, QAD posts the order to the accounts receivable system.

When all this has taken place, all transactions are collected and posted to the General Ledger module where Guide Corp. does all of its financial reporting. "We run queries and reports out of QAD itself," explains Johnson. "We have the client/server version of QAD, which makes it easy to import queries into Excel and other types of programs. We do a lot of Excel extracts from QAD. And now we complement those extracts with Hyperion's Essbase analytical tool."

Lean Improvements
Many Lean Manufacturing views center around business as a continual process. That's why today, Guide Corp. is still adopting new technologies for its now stand-alone IT infrastructure. "We are very much interested in QAD's e-commerce suite of applications, particularly on the supply side," adds Johnson. "We are working with our suppliers to become more automated with them. We are also currently looking into vendor-managed inventory." Johnson says the idea behind vendor-managed inventory is to give key suppliers direct access to inventory levels via a Web viewer. "That way you eliminate the middleman - creating the purchase order, sending it out, etc. The vendor actually goes in, looks at your inventory levels online, and takes responsibility for managing their inventory in your facility. QAD has a product called Supply Visualization, and we are currently looking at that."

Johnson makes no secret of the fact that the company is still working towards improvements. Even though Guide Corp. has already reduced IT operating costs by one-third, it plans to develop a supplier e-commerce Web site in concert with QAD MFG/PRO. Maybe being Jim Johnson isn't so bad after all.