Increase Productivity And Efficiency Through Integrated Technology

For the third time in less than a month, Textron Aerospace Fasteners (TAF) fell behind schedule on its order processing. And, for the third time in less than a month, TAF's shop-floor employees had to work overtime so that TAF could ship its orders on time. Textron Aerospace Fasteners (Santa Ana, CA) makes inch-long rivets that are used in both commercial and military aircraft. A rivet is a metal pin and sleeve used to fasten different aircraft pieces together. Textron, which has 600 employees, supplies rivets to major aircraft manufacturers and assemblers such as Boeing, Northrop Grumman Corp., Lockheed Martin, and Airbus.

It wasn't just the labor costs from the overtime that concerned TAF's principals. They knew that with the excessive overtime, employees also had less time for quality checks. Says Arnie Butki, TAF's project manager for information systems planning, "Our biggest fear was sending a customer an order that wasn't up to our standards."

Previously, the company's software for managing different business areas, such as inventory, accounting, shipping and purchasing, was not integrated. As a result, Textron had a difficult time reconciling information related to production, work orders and inventory. Consequently, the company continually put itself in jeopardy of missing customers' order deadlines.

Butki knew that if Textron Aerospace Fasteners were to become more efficient - and thereby cut overtime costs - it would have to significantly upgrade and add to its existing information systems.

So, company principals invested in an enterprise resource planning (ERP) system that was developed by QAD, Inc. QAD (Carpinteria, CA), with 900 employees, is a developer of ERP software, which tracks the movement and quantity of raw materials, labor, accounting, etc., throughout an organization. For the three months ending April 30, 1998, QAD's total revenues rose 38% to $44.3 million.

Textron uses QAD's ERP system to manage all major business areas, including order processing, inventory, accounts payable and receivable, shipping, and purchasing.

Textron also is using related technologies, such as bar coding, document and image management (DIM) and electronic data interchange (EDI), to more effectively manage its manufacturing operations.

In the following pages, Butki explains how each of those technologies is benefiting the company. He also discusses the hurdles that Textron had to clear in making the transition to new technologies.

Lack Of Integrated System Proves Problematic For User
Because Textron's former software programs were not integrated, information entered in one package did not immediately transfer to other programs. As a result, Textron's employees often relied on information that was neither current, nor accurate.

Butki explains the types of problems Textron was experiencing. "Customers would order more rivets after they had already placed orders. So, our order processing department would check how many rivets we had in inventory. And the order processing department would think we had enough to meet customer demand. But we actually wouldn't have enough, because the information they were seeing wasn't current. And, because we relied on outdated information, we had to scramble around at the last minute to make the extra rivets."

When customers changed their orders at the proverbial last minute, Textron still was able to fulfill their orders - but at diminished profit margins. For example, the shop-floor employees often had to work overtime and weekends in order to fulfill customers' orders. "The extra labor costs incurred from the overtime were substantial enough that upper management became concerned," Butki says.

However, scrambling to meet orders at the last minute caused other problems. For one, employees didn't have as much time for quality inspections, Butki says. In addition, when working extra hours, employees became more fatigued, increasing the possibility for manufacturing errors.

Says Butki, "We could live with the extra labor costs. But shipping an order that was not up to our standards could cause us to lose a customer."

ERP Helps In Managing Crucial Business Areas
In order to better manage its production and processing of shipments, Textron Aerospace Fasteners adopted QAD's enterprise resource planning software. Textron established four primary goals upon implementing ERP and other technologies:

1. Reduce cycle times – Cycle time is the time needed to manufacture rivets and ship them to customers. Prior to adopting ERP software, Textron's cycle time was 14 weeks. After implementing ERP, Textron cut its cycle time to 10 weeks. "ERP helped us cut cycle times because it provided more consistent, up-to-date information to our different departments," Butki says. "For example, we never used to know exactly how much raw material we had in inventory because the database was only updated every few days. And not having precise inventory counts meant we sometimes had to wait to work on orders until we received the next shipment of raw materials. Those types of problems ultimately delayed production."
   
   
2. Reduce the amount of scrap – Textron also wanted to cut the number of rivets that it did not make to customers' specifications.
   
   ERP also helped Textron cut its scrap by providing more accurate and more up-to-date information. "Before, by not having an integrated information system, we mixed orders up," Butki says. "And when the orders got mixed up, we would make too many of one type of rivets, and not enough of another type. The surplus rivets were considered scrap.
   
   "Now, the ERP provides us consistent information throughout our processes: from the time customers place orders, to the time we generate work orders, to the time we purchase the materials needed to process the order. Because ERP provides us accurate, real-time information, we don't have as many mix-ups and miscommunications that lead to production delays."
   
   
3. Increase manufacturing capacity – Textron wanted to better organize its production runs in order to increase overall manufacturing capacity. Previously, Textron "jumped back and forth" between orders. For example, Textron first would set its machines to produce an order of larger-sized rivets. Then, workers would adjust the settings to produce smaller rivets. After that, it was typical for workers to set the machines back to the first size.

   "We were wasting time by continually changing the machine settings," Butki explains. "By grouping the orders into more logical run sequences, we would spend less time changing settings - and more time making rivets. And the information provided by the ERP software has helped us schedule the orders in a more logical, coherent fashion."
   
   

4. Improve inventory control – Textron also started bar coding its inventory of materials and rivets. The company uses radio frequency, handheld data collection terminals from DataNet to take inventory.
   
   "Before, workers often couldn't find inventory that should have been on the shelves," Butki says. "We knew bar coding our inventory would allow us to more easily track it."

Lessons Learned In Implementing New Technology
Textron, Inc. (Providence, RI), is the parent company of Textron Aerospace Fasteners. Textron, Inc., is a $10.5-billion, global, multi-industry company with operations in four sectors - aircraft, automotive, finance and industrial.

Other divisions of Textron, Inc. had adopted new technologies prior to the Aerospace Fasteners division's adopting ERP. So, Butki sought the advice of personnel in those other divisions on how to best manage technology transitions. He also visited other companies that had undergone similar transitions. "Adopting new technology was going to result in some significant changes for us," Butki says. "And, many people don't like change after they've become accustomed to doing their jobs a certain way."

From talking with Textron's other divisions, Butki learned several ways to make Aerospace Fasteners' transition easier:

• Assemble an implementation team - Butki put together a group of 12 employees to oversee the implementation and help with the transition to new technology. He wanted employees with technical skills on the implementation team. But from talking to Textron's other divisions, he also learned the team members should have diplomatic skills, as well.
  
  "I knew, prior to the implementation, that we'd have to sell the employees on the new technology," Butki says. "And so we needed team members with good people skills."
  
  
• Conduct demonstrations for employees - Butki also decided to demonstrate the system for TAF's employees. "I wanted them to see that the new system - even though initially, they didn't know how to use it - would make their lives easier," he says. "And the best way to accomplish that was to show them how it would make their lives easier.
  
  "The employees using the system had to feel as if they were an integral part of the overall implementation," Butki continues. "We didn't want them to think we were making all the decisions and just forcing the system on them."
  
  
• Set realistic implementation goals - According to Butki, many companies set unrealistic goals for the time needed to implement new technology. And, Butki knew that these companies often became frustrated when they failed to meet unrealistic goals.
  
  "Rushing the implementation just to meet a goal would've been disastrous," Butki says. "We wanted to devote the proper time to training the employees and demonstrating the system for them. We set a goal of implementing the system in 10 months, and it took 12."

Butki concludes, "Companies that invest in new technologies, such as ERP and EDI, have a distinct competitive advantage."