Draining the Swamp A business rationale for an ERP implementation project

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Draining the SwampA business rationale for an
ERP implementation project

• Peter Palmer CMACS (Snr)
• Weyerhaeuser Australia Ltd
• peter.palmer_at_acslink.net.au

AUSTRALIAN COMPUTER SOCIETY NSW Branch Project
Management SIG 18 October 2006
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Agenda

• Setting the scene the business environment
• The information supply chain and process
  maturity
• The ERP implementation project a report card

AUSTRALIAN COMPUTER SOCIETY NSW Branch Project
Management SIG 18 October 2006
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Setting the scene

• Business environment
• The production process
• The trouble with making timber

AUSTRALIAN COMPUTER SOCIETY NSW Branch Project
Management SIG 18 October 2006
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The product supply chain
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The difficulties of timber production

• Disaggregation
• One log becomes many finished products
• Stochastic
• Not predictable, 70 accuracy
• Dynamic
• Its a flow, very fast
• In Australia/New Zealand
• Even a big mill is small, and we have lots
• Making thousands of discrete products
• From small logs
• Weve under-invested in the production process
• Most manufacturing is MRPII based
• Aggregation, discrete, deterministic
• Most ERPs are MRPII based
• Reverse BOMs, ghost routing, flushing

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The information supply chain

• Production planning
• Manufacturing strategy
• The Process Maturity Model

AUSTRALIAN COMPUTER SOCIETY NSW Branch Project
Management SIG 18 October 2006
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The information supply chain
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Current production planning

• Manual with spreadsheet support
• Last months plan with tweaks
• Two days to develop a feasible monthly plan
• Little supply chain optimisation or integration
• Focus is utilisation of raw material and
  production capacity
• KPIs are efficiency based eg recovery and cost of
  production

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Manufacturing orientation

• Production orientation
• Efficiency focus on best use of raw material and
  capacity
• Inward-facing KPIs eg manufacturing costs
• The traditional way as we started to understand
  processes
• Asserted to result in greater profitability
• Doomed, the commodity product trap
• Customer orientation
• Effectiveness focus on satisfying the needs of
  the customer
• Customer-facing KPIs eg Delivery In-Full On-Time
  In-Spec
• A trend noted since the early 1980s
• Asserted to result in greater profitability
• Inevitable, customers demand it and have choices
• Timber industry
• Production orientated
• But change is in the air
• Can the industry be customer orientated (and
  profitable)?

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Customer orientated and profitable?

• Customers wont let us stay production orientated
• Clear signals from customer surveys
• But as customer orientation increases, profit
  declines
• More constraints in the production environment
• Thus a need to be both
• Production orientated
• Costs, predictability, quality
• Production excellence
• The product supply chain
• Customer orientated
• Right products, right customers, right time
• Planning excellence
• The information supply chain

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Cultural Change the Process Maturity Model
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Process maturity observations

• Most companies at Level 1
• It take 2-3 years to jump a level, 10 years top
  to bottom
• You cant skip levels
• You can slide back
• Need level 3 for an ERP
• Decline Fall of the American Programmer
• Ed Yourdon, 1993

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The information supply chain

• Didnt exist
• Manual, not able to be integrated or optimised
• Production planning is the key to production
  management
• Seen to be uniformly poor in Australia/New
  Zealand
• Need a toolset to provide this capability
• Re-implement the information supply chain
• Deal with stochastic disaggregation
• Integrate customer demand with production
  capability
• Optimise doing the best with what weve got
• Process maturity
• Cultural change from level 1 to level 3
• Process change first, then the toolset
• Computer support
• Mandatory
• An ERP implementation project is conceived

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The ERP implementation project

• The approach
• The lessons
• The results

AUSTRALIAN COMPUTER SOCIETY NSW Branch Project
Management SIG 18 October 2006
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System implementation

• Phase 1 Plant maintenance
• Mid 2004
• Phase 2 Sales and distribution
• One implementation early 2005
• Phase 3 Manufacturing
• Mill by mill June to October 2006
• Phase 4 Supply chain planning
• Work in progress end 2006

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The lessons

• Big bang big risk
• We are all lean organisations now, no spare
  headcount to help go live
• Need to borrow staff from other sites for
  implementation fortnight
• Keep technical folks free to solve the problems
  as they occur
• Minimise the revenue hit at implementation by
  keeping the impact small
• Minimise the modifications
• Good intentions and better than before but still
  room to improve
• The standard system works, your mods change that,
  never enough testing
• Forever. Significantly changes the total cost of
  ownership
• Process re-engineering
• Good intentions but business inertia and project
  budgets dont mix
• An ERP is a process engine and demands a level 3
  process maturity
• Either do it calmly before implementation, or
  under pressure later
• Benefits
• Come from process simplification (without the
  toolset?)
• And analysis of operational data, ie 6-12 months
  down the track
• Name the names and the date, and list the
  operational budget line items
• Or nothing happens

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The results
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Summary

• Setting the scene the business environment
• Dynamic stochastic disaggregation not supported
  by the usual ERPs
• The information supply chain and process
  maturity
• A demand for customer orientation and a new
  implementation of the information supply chain,
  requiring improved process maturity and new
  toolsets
• The ERP implementation project a report card
• Re-engineer processes calmly before
  implementation or under pressure later, but you
  will do it

AUSTRALIAN COMPUTER SOCIETY NSW Branch Project
Management SIG 18 October 2006