How ERP Enables Leaner Business Processes

July 1, 2011
Shipping to and servicing a growing customer base efficiently is becoming as important as product quality. Such product support must be supported by lean business practices.

ARPAC makes shrink bundlers and spiral stretch wrappers. Located in Schiller Park, Illinois, ARPAC’s staff of 220 has been responsible for installing close to 30,000 machines worldwide. Affordably serving this installed base made up of a broad range of equipment and industries required leaner business processes.

According to Ryan King, director of IT for ARPAC, the age of the equipment alone—12 years and counting—was enough for the company to seek an enterprise software solution to help lean-out their business processes.

Employees were spending too much time on manually transcribing data on disconnected databases which required double entry and allowed for mistakes. This was ineffective and frustrating, especially when it came to customer orders.

“We started to realize how long it really took to complete a task,” King says. “People were either getting really used to workarounds, or getting very good at the current process. The limitation of the systems was ARPAC’s breaking point.”

A New ERP System

In 2007 ARPAC implemented a new enterprise resource planning (ERP) system (Epicor). A key selection criterion was the ability to minimize human intervention in routine practices so ARPAC resources can focus on value-added business activities instead. King and his team wanted to outsource manual labor to its new ERP.

It was in doing this that King hoped his IT department could become a revenue source for the company. To do so, the IT department needed to eliminate waste. The company’s biggest waste was in terms of time and resources, so it had to identify what employees should not be doing that the ERP system could. This was the start of ARPAC’s lean journey.

Lean Automated Processes

King and his team led a company-wide initiative to leverage its ERP solution to help adopt what ARPAC calls Lean Automated Processes (LAP). The objectives for LAP are simple:

• use information technology to maximize the ease of doing business,
• decrease the cost to do business.

ARPAC maintains stock of many standard packaging machines. The kanban techniques it has adopted have saved the company 15 hours a week in terms of work hours, amounting to a savings of approximately $225 per week ($11,700 per year).

Take barcode scanning, for example. Jobs are now created and manufactured without paperwork. Electronic purchase orders are automatically created on the shop floor by scanning the part barcode. The system can also trigger a late email notification that is automatically sent to suppliers if an order is behind schedule.

“It used to take more time to do the paperwork than to create a part,” says King. “Now it is instant.”

ARPAC quickly learned that eliminating “go-between” processes was critical to reducing waste across all aspects of the company’s daily operations.

How Lean Supports Sales

ARPAC was spending large spans of administrative time and many resources tracking and re-ordering stocked parts. This required a full-time position to manage. A program was designed using the LAP concept called the ARPAC Vendor Inventory System (AVIS). Through this portal, ARPAC’s suppliers can monitor and replenish their stock. As soon as ARPAC’s inventory levels drop, an email alert is automatically sent to its suppliers who can log onto the AVIS site to see what part needs to be reordered.

The online workbench provides the purchase order number indicating the part type, quantity and agreed price for the product or service. Once the order is submitted a packing slip with a barcode is automatically generated so when ARPAC receives the shipment the paperwork is already done. ARPAC scans the barcode upon receiving the package and avoids manually entering the purchase order information into the system.

With the self-service online tool, ARPAC can communicate with its suppliers without wasting staff time interacting with a purchasing agent. Parts and services are provided in a more timely manner and the company always has good inventory on its shelves. Today, 30 suppliers use AVIS.

Purchase Order Confirmation

ARPAC also created an online program for Purchase Order Confirmations (POC). Previously, it experienced accounts payable problems matching purchase order prices to invoices, and faced price list issues. On average, the company spent three hours a day on each buyer chasing down suppliers to confirm purchase orders.

With the POC program, another online portal for suppliers to access, purchase orders are confirmed, packing slips are printed, back orders are processed and invoices are submitted. Since this is all done online, ARPAC was able to reduce its purchasing head count by one. A credit card transaction module helps the company set up electronic processes for handling credit card payments. By eliminating the need to process credit cards by hand, the company saves approximately $14,600 a year.

By automating routine tasks ARPAC achieved a return on investment within the first six months.

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