Micro Control Starts Transformation With Business Process Focus
To be managed effectively, achieve client goals and deliver value, ERP projects require structure. On every Ultra project this framework is provided by our methodology, which organizes the transformation process into four phases – business process improvement (BPI), enterprise technology selection, solution implementation management and business value realization.
Experience shows us that achieving our primary goal – business performance improvement – with an ERP solution depends on this step-by-step process – doing first things first – because each phase guides and informs the one that comes after.
To offer a look at the phases of our methodology in action – and reveal why it’s critical to success – we are following several ERP projects as they move from phase to phase, and ultimately to completion. Recently, we profiled the R&L Spring Company.
This blog will take us inside the recent ERP project for Micro Control Company. Like R&L Spring, Micro Control is a mid-market manufacturer that has many manual processes – and a critical need for business process improvement (BPI).
Micro Control Company is a Minneapolis, Minn., manufacturer of advanced test equipment for the electronics industry, primarily high-power burn-in test systems designed to detect failures in semiconductor devices by applying extreme electrical and temperature conditions.
Like many specialty electronics equipment manufacturers, Micro Control produces low-volume/high-complexity products for limited number of customers. And, like many mid-market manufacturers in every industry, the company relied on a large number of manual, time-consuming and potentially error-prone processes to run the business and manage production.
ERP Project Phase 1: Business Process Improvement
With a project team in place, the first step was documenting the Current State.
Most of the company’s business is configure-to-order. “Micro Control builds four different models of test ovens, which are then customized,” said Ultra business consultant Andrew Schmidt. “It’s like buying a car, where you add options. About 80% of a unit is standard, and the remaining 20% is custom configured. These products are exceptionally complex, and we found that they were handing this configuration on paper.”
“Micro Control had a big spreadsheet they used to plan all their work, track units through the manufacturing process, and assign to a customer order,” Schmidt said. “It worked OK but, obviously, that’s not the best way to handle those processes. The company needed a system to help them manage that planning and tracking, provide visibility and better track costs and work in process (WIP).
“Micro Control is unusual. It only has about 50 customers, and the units are expensive. So, purchasing a unit is not an unplanned, spur-of-the-moment thing,” Schmidt continued. “They can do collaborative planning with customers, and have confidence that they will take delivery.”
So, the planning challenge, Schmidt said, is not volume, it’s accurately managing the different unique configurations and costs.
“Typically, Micro Control starts making units as basic, made-to-stock, and then, as they’re being built and as the orders actually come in, configures units to specific customer requirements,” Schmidt said. “As I said before, it’s like buying a car. You start with the basic model and add options.”
Inventory control, accurate cost tracking, and configuring and quoting is difficult using a spreadsheet, however. And when a customer wants a non-standard change, it’s even more challenging.
“Often a customer will say, for example, that they want an option, but with a different voltage, and then engineering has to get involved,” Schmidt continued. “Changes like that create extra engineering time (which is difficult to capture), changes to the cost of materials and, in the end, changes to the cost of the unit.”
A configure-to-order unit becomes an engineer-to-order unit this way – a conversion that is hard to manage with a manual process.
With this approach to production, procurement is a challenge too. “Better production planning would enable better purchasing,” Schmidt said. “And, to make it even more challenging, Micro Control utilizes a number of suppliers that required long lead times.”
“They were managing parts-buying separately on spreadsheets,” Schmidt continued. “And a great deal of non-documented ‘tribal knowledge’ was involved in the process – they just ‘knew’ how long specific parts took to be delivered, and used that experience to anticipate the need for parts.”
Field service management offered another big opportunity for new efficiencies and visibility. Like virtually every other Micro Control process, manual processes were used to manage their installed base, track their systems in the field, catalog the parts installed in them, manage field maintenance, repairs and replacement parts, and handle the exchange/return of parts. And their installed base was surprisingly large – the testing units last 20 to 30 years.
And finally, the company’s financial processes needed an overhaul to eliminate manual work, enable easier and faster access to critical information, and provide modern analytics and reporting. A complex sales commission process was handled manually, too.
Developing the Future State Vision, Eliminating Manual Processes
With the Current State evaluated and documented, the project moved to the Education & Visioning phase, bringing Micro Control up to date on the capabilities of today’s technologies (and the possibilities they offer), educating the team on current best practices, and helping the organization imagine its processes transformed. This under-appreciated but key component of the BPI process creates a platform to define a Future State.
The development of a Future State vision is a key to ERP success because it plays a huge role in software selection and implementation strategy.
For Micro Control, the Future State process began with collaborative business process re-engineering workshops designed to find answers to Micro Control’s process problems, find gaps in capabilities and technologies, and quantify the potential value of new efficiencies and capabilities. And it ended with a detailed vision of the company’s re-made processes and a transformation roadmap.
“With Micro Control, our primary goal for the Future State phase was to find ways the company could manage better by eliminating spreadsheets and manual processes, design processes to capture data – especially cost data – that was not being captured, and help them create better, more efficient management processes,” Schmidt said. “Overall, we looked for opportunities to remove human involvement from processes that didn’t need it.”
Next: How BPI and a well-defined future state helped Micro Control select the right solution for their business and future transformation.