Industrial Research Assistance Program Programme d’aide à la recherche industrielle

Digital Technology Adoption Pilot Program

Building a digital backbone with ERP Case Study

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October, 2013

Building a digital backbone with ERP2

Introduction Since 2002, Winnipeg, Manitoba-based HERD Integrated Vehicle Protection has been designing, manufacturing and selling specialized bumpers for transport trucks. Based on proven Australian design and manufacturing techniques, the bumpers protect trucks from wildlife collisions and other mishaps on the road. HERD’s main customers are franchised truck dealers across North America, with revenues split about equally between Canada and the United States.

Now the largest North American manufacturer of vehicle protection products, HERD aims to become the world leader. Recognized as one of the fastest growing companies in the province of Manitoba, the company increased its revenues by 50 per cent over the past fiscal year. With such rapid growth and the capacity to double its business, the 110-employee company faced unprecedented infrastructure challenges that demand a futuristic solution. That solution was to build a digital backbone for managing all communications aspects of the company.

This case study shows how holistic adoption of digital technology through a world-class enterprise resource planning (ERP) system is essential to meeting the company’s needs for productivity, production, shipping, customer service, order entry, accounting and operations. Now that the backbone is in place, HERD is customizing it with advanced technology that raises the customer experience to new heights—an online store where buyers can configure, track and edit their orders. This is linked to a custom digital scheduling system.

This premium bumper, designed and manufactured by HERD, comes with a variety of configurations and options to protect vehicles against animal collisions.

Building a digital backbone with ERP 3

Situation: identifying the needHaving conquered physical infrastructure challenges so that it had enough capacity to double its business, HERD needed to rebuild its communications backbone with digital technology. “We were going to bottleneck on the information technology (IT) side—the invisible infrastructure and the tools required to communicate and work effectively as a team,” says Marc Daudet, HERD’s president and CEO.

Daudet subscribes to the “Theory of Constraints” for improving process flow—identifying bottlenecks that hinder production or service throughput one by one and systematically removing them. The top constraint is HERD’s ability to serve the customer effectively and efficiently. “Everything we do is with the aim of growing our market, so that means removing the constraints to making money not only today but also tomorrow.”

As the company grew, so did bottlenecks to customer service in areas such as order processing, scheduling, productivity and finance. To address these, HERD began a four-year technology journey, starting with a rudimentary ERP system based on a traditional accounting system using spreadsheets managed manually. But that was soon not robust enough to handle the volume, so it had to go.

“We Were going to bottleneck on the

information technology (it) side—the invisible

infrastructure and the tools We need to communicate

and Work effectively as a team.”—

marc daudet, herd president & ceo

Daudet then attempted a move to an expensive custom-designed solution. But after three years, he realized it was not right for HERD, so he scrapped it and selected another supplier. “We knew we needed a more holistic solution—one that combines everything from configuring a product to order entering, scheduling, production, invoicing, shipping and accounting,” he says. To eliminate the bottlenecks of financial support and internal expertise, and to find a suitable long-term solution, Daudet turned to the Digital Technology Adoption Pilot Program (DTAPP) delivered by the National Research Council of Canada Industrial Research Assistance Program (NRC-IRAP).

Building a digital backbone with ERP4

DTAPP: The right solution to address the needAccording to Tim Mitchell, NRC-IRAP Industrial Technology Advisor (ITA), DTAPP stepped in at a critical time for HERD. “We provided some financial support that helped them acquire and configure the ERP software, and hire an internal IT expert (business process analyst) to build up their capacity and take the load off the president and CEO,” he says. “This bodes well for the company’s future, since the analyst knows the ERP system intimately and can stickhandle the staged implementation and customization of various elements.”

Mitchell points out that the ERP system is the backbone of HERD’s communications software, which enables ordering materials, paying for labour, tracking production flow and sending instructions to the shop floor. With DTAPP’s help, HERD chose an ERP solution designed specifically for small to medium manufacturers that is flexible and easy to customize. The system also understands foreign exchange, which is important when doing business internationally.

Purchase

InventoryProduction

Accounting

Human Resources

Delivery

Business IntelligenceSales

CustomerPortal(under development)

Engineering

ProductionPlanning Enterprise

ResourcePlanning(ERP)

Working with advisors at NRC-IRAP helped HERD develop a systematic process for selecting the right ERP system. That includes identifying and understanding the needs of the company, establishing a structured series of checks and balances, and actual testing to assess if the supplier is the right

Building a digital backbone with ERP 5

one and if the system meets those requirements. “When we began working with DTAPP, I just wanted to get it done,” recalls Daudet. “But being patient in scrutinizing vendors and software, and not skipping steps is absolutely essential to getting it right the first time.” The ERP system now in place is “extraordinarily successful because it has the right base software, and the vendor provided exceptional service during implementation.”

This time around, to ensure that the ERP system succeeded where the previous attempts failed, HERD took a phased approach to implementation. “We made sure that the various pieces of software talked to each other,” says Daudet. HERD also hired an expert business process analyst to work onsite throughout the entire system implementation, help prioritize jobs and do the day-to-day firefighting. “The result is that orders are going into the system while being processed and shipped, and customers are paying,” he adds.

Post-implementation: the outcomes The benefits of the ERP system have already begun to translate into better product flow through the shop, less inventory, less waste and better quality products being shipped to customers. This is leading to higher profitability due to increased efficiency and reduced lead time—a significant competitive advantage. So far, the results are impressive:

• HERDhasrealizedproductivitygains of 15–20 per cent in operations, and 35–40 per cent in non-operations.

The ERP system has improved product flow through the shop and led to better quality products.

• Streamlined,moreefficientmanufacturingallows HERD to better react to volatile order volumes influenced by changes in the industry, new product launches and typical seasonal fluctuations. It has also reduced the physical space in the plant required for storing parts.

• Thesystemhaseliminatedtravellers—papercopiesofordersfloatingaround in plants. Employees find out what to do through digital portals on the plant floors, so everything is at their fingertips.

• Afullyintegratedmanufacturingresourceplanning(MRP)systemhasreducedcarryingcostsofparts and supplies inventory, and cut administration time required on parts replenishment by 30 per cent.

• Withbettervisibilityanddatacapturing/reporting,theimprovedERPsystemfacilitatesLean,5Sand quality control efforts.

Building a digital backbone with ERP6

The ERP system is HERD’s main building block. Still to come is the ultimate customer tool: the Product Configurator. This online ordering system will allow customers to select the products they need from photographsandplacetheirorders.LinkedtotheConfiguratoristheScheduler,atoolthatsearchesthe database for production availability, then immediately provides customers with a firm delivery date. It will also enable them to track their orders through production.

The journey: lessons learnedIn Daudet’s mind, there is no doubt that digital technology adoption is necessary. “We need to constantly add value to the market, and our employees need to be relieved of mundane tasks that technology can do so they can make more valuable contributions,” he says. Daudet and Mitchell agree that their journey in implementing HERD’s ERP system has valuable lessons worth sharing.

FIVE TOP LESSONS LEARNEDLesson #1: Plan to make the right decision

“Before you dive in and select an ERP system, conduct due diligence in evaluating the vendors,” says Mitchell. “This may slow you down initially, but it is an important investment at the outset.”

“before you dive in

and select an erP system, conduct

due diligence in evaluating the

vendors,” says mitchell.

Mitchell strongly advises having the supplier actually test-drive your data on their system for a few days—not just provide a sales pitch on how the system works. “Suppliers need to demonstrate their understanding of your business, then develop a firm proposal that shows their commitment to working with you.” This initial testing helps companies find out which product works best for them and requires the least amount of customization. “You should not have to customize the core software, just unique elements such as model numbers and product codes at the reporting end.” Software that does not require major customization is easier and less expensive to modify when it is time to upgrade.

Lesson #2: Network to learn

Mitchell advises companies to take advantage of industry connections to learn about others’ experiences. These could include users’ groups, other manufacturers (not competitors), professional or trade associations, even NRC-IRAP staff and consultants. “I know SMEs are extremely busy, but networking and sharing knowledge with your peers pays off in intelligence that will lead to big dividends.”

Building a digital backbone with ERP 7

At a recent roundtable exchange organized by Mitchell, six manufacturers (including HERD) that had purchased ERP systems helped each other by openly sharing their experiences, problems and best practices. HERD staff, which participated in the roundtables, confirm that “we learn every day.” Representatives from these six firms have committed to attending a series of monthly roundtable discussions over the next year.

Lesson #3: Commit to the long term

Daudet admits that, in his haste to implement an ERP system, he lost a great deal of time and money by choosing the wrong one. Before DTAPP came along, he did not assign enough importance to the testing phase—going through every scenario and validating that the data brought in from the old system actually worked with the new.

“This time, we took a phased-in approach, building bridges so that one piece of software talks to another,” he explains. “This meant we could isolate each piece to systematically migrate it over to the new system, knocking down bottlenecks as we went along.”

Lesson #4: Assign the right resources

HERD has found that hiring an internal IT specialist (business process analyst) was a critical factor in successful implementation of the ERP system. This freed up the president and CEO to focus on strategic issues while the specialist helps prioritize jobs, do the day-to-day firefighting and customize parts of the software.

Customizing product design and product control with integrated CAD and ERP systems.

Building a digital backbone with ERP8

Lesson #5: Get employee buy-in

Daudet found that a big challenge was changing the mindset of employees who were accustomed to doing things differently and resisted change. “This requires a paradigm shift, and employees need to understand that the old ways must be left behind,” he says.

HERD’s main strategy for breaking down resistance and changing the mindset was to actively listen to user concerns. For the first three weeks of implementation, the IT specialist worked onsite in the Customer Service department to provide immediate answers to staff working with the new system. The IT specialist was then moved to another location, and customer service employees were encouraged to think through problems on their own before asking for help. Throughout these introductory steps, management was checking on progress daily and identifying positive aspects of the transition. Communicating those positive achievements to employees generated a momentum for acceptance that soon had everyone on board.

The ERP system enables ordering materials, paying for labour, tracking production flow and sending instructions to the shop floor.

Conclusion “Adopting digital technology gave me the edge that I needed to pursue my company’s journey,” says Daudet. “And we are now confident that we can continue to succeed not only in North America, but also in global markets.”

Building a digital backbone with ERP 9

About the Digital Technology Adoption Pilot Program (DTAPP)

As part of the Government of Canada’s Digital Economy Strategy, NRC-IRAP is delivering the Digital Technology Adoption Pilot Program (DTAPP).

DTAPP represents a significant investment in the Canadian economy to increase the productivity growth of small and medium-sized enterprises (SMEs) in Canada across all sectors through the adoption of digital technologies.

An important component of DTAPP is to assess and measure the outcomes of digital technology adoption on the productivity of SMEs. DTAPP will utilize this aggregate knowledge and transfer successful practices and lessons learned to the broader SME community in order to:

improve the rate of digital technology adoption by SMEs

improve understanding of the link between digital technologies and productivity

raise awareness of the benefits and importance of adopting these technologies

This information will be a critical tool to encourage prospective adopters of digital technologies and will continue to impact the potential productivity growth of the Canadian economy well into the future.