December 1996 € Volume 6 € Number 12

Solutions

Extend Helps Contractor Save Money

DynMcDermott Petroleum Operations Company (DM), managing and operating contractor for the Department of Energy Strategic Petroleum Reserve (SPR), initiated reengineering of the SPR supply chain to reduce expenses, decrease need-fulfillment time, and improve information.

DM's reengineering team developed a best practice baseline process that incorporated reengineered process principles, technology innovations, team inventions, and material, supplier, financial and acquisition management.

To build a simulation model of this process, the team chose Extend+BPR from Imagine That, Inc. The model served as the baseline from which to develop the best alternative for the SPR. Multiple simulation runs were conducted to test alternatives and gauge the effects of varied constraints on two key measures:

• Average time from request to item or service available
• Average cost to process a request.

According to Brian Seagrave, DM's Director of Strategic Initiatives, "The simulation model was instrumental in narrowing the universe of possible solutions down to the best for the requirements, estimating return on investment from the new process design and information systems, and clearly demonstrating the impact on cost and speed from governmental rules exceeding commercial best practices. This helped to make the case for deviations and changes in local regulations."

The team determined that the best design alternative for the SPR would include the following features:

• Improved, "cradle-to-grave" material and service materials planning for operational equipment.
• Fewer and larger procurement actions and innovative vendor relationships
• Electronic commerce
• Eliminated database constraints through integrated network software
• Expert systems to put decision expertise at the fingertips of the material or service requisitioner, combined with decentralized and delegated authority.

This design is expected to save $2.5 million per year (net of all reengineering, information systems, and implementation expenses), cut need-satisfaction time by 36 percent, reduce inventory by 5 percent of annual revenue, and increase accounts payable productivity to 3,600 vouchers per person per month.

Steel Warehouse Improves Capacity Management With FACTOR

Steel Warehouse Company of South Bend, Ind., processes cold roll and hot roll steel for manufacturers and major steel mills. To maintain market leadership, Steel Warehouse needed to improve capacity management, specifically in the areas of order promising and production scheduling, to provide accurate insight into expected order completions and production performance. Management sought a product that would help them make decisions to best meet customer service while minimizing manufacturing expenses.

Steel Warehouse had several objectives for improving capacity management. The first objective was to provide credible order completion date estimates consistent with manufacturing's current workload and its capacity. Second, the company wanted to improve current on-time delivery performance to the customer. Third, it sought to eliminate unnecessary overtime. Next, Steel Warehouse wanted to eliminate unnecessary order expedite expenses. The company also wanted to reduce time spent on scheduling and anticipate potential problems before they occur. And last, management wanted a mechanism to adjust plans/schedules as unanticipated events occurred.


Making the selection
Steel Warehouse previewed scheduling products based on its objectives and selected FACTOR Production Manager from Indianapolis-based Pritsker Corp. Steel Warehouse saw FACTOR as the best tool to help them manage key orders and resources; approve selected overtime; determine priorities; and more efficiently coordinate production. FACTOR offered benefits including reduction in cost of goods sold and improvement in decision-making.

To guarantee a successful implementation project, the Steel Warehouse project team was able to increase its understanding of FACTOR by participating in a Technology Transfer Program. This program, prepared and conducted by Pritsker consultants, resulted in the design for the implementation.

The Steel Warehouse FACTOR application encompasses all production processes in the South Bend facility-including pickle, temper, slit, leveler and shear. The FACTOR scheduler is part of an integrated systems environment that includes an order entry system and a work-in-process tracking system. Because each customer order usually has a different combination of processing steps, quantity of steel, and source of steel-each order has a unique routing. The application is configured each night to automatically regenerate a new schedule. This schedule is waiting for production management at the start of the day shift. This also configures the order promising environment with the latest set of firm orders to support the sales force in providing realistic, achievable delivery dates for new orders.

Steel Warehouse has realized significant benefits from its implementation of FACTOR. On-time delivery of orders has improved from approximately 60 percent to 85 percent. Customer satisfaction has improved by providing realistic order delivery dates as the order is placed. Time spent developing schedules and plans has been reduced, and communication of schedules and plans have improved. Consistency and completeness have been enhanced in order entry. And, the company enjoys increased insight into capacity and improved understanding of operations.

TRW Takes Best Approach to Managing Assets

When a company is known for its technology, it's no surprise that it uses technology to help keep its own employees as efficient as possible. For Cleveland-based TRW, a leader in aerospace and automotive technology with 60,000 employees, even something as mundane as tracking equipment inventories is made easier with bar code scanners and fixed asset management software. These tools make it possible for just one employee to track the value of thousands of fixed assets in use at numerous manufacturing locations.

Mesa, Ariz., is the hub of TRW's North American air bag operations that serve Ford, General Motors and other auto manufacturers. Since 1988, the 3,500 employees of Vehicle Safety Systems Inc., a TRW subsidiary, have produced more than 30 million air bags-$12.4 million worth in 1995 alone-for customers around the world.


Keeping track
As a fixed asset accountant, Steve Reding is responsible for all fixed asset tracking and reporting at the TRW/VSSI passenger-side air bag facility in Queen Creek, Ariz., just outside Mesa. When new equipment is placed in service, Reding must add it to the fixed asset management computer system, then track and report depreciation values each month for TRW's consolidated financial statements. Scanner and database management software from Best Software Inc. of Reston, Va., help him accomplish his duties.


Accurate calculations
Reding uses a hand-held data collection terminal to scan bar code inventory labels that he has affixed to the 1,900 fixed assets at the Queen Creek facility. Information about the assets such as description, location and condition, is pulled into a software program called FASTrack, which then allows Reding to reconcile the inventory online and update the fixed assets database. That database is shared by FAS for Windows (also from Best), the fixed assets management system Reding uses to calculate depreciation and track the current value of all the facility's fixed assets. By using the two applications, Reding is assured that his depreciation calculations are as accurate as possible-they are made on a fixed asset database that is in sync with the assets that the facility really has.

FAS for Windows allows Reding to view up to seven books on a single screen. The program gives him access to more than 20 IRS and GAAP compliant depreciation methods, and can produce more than 20 standard reports.

"I like the fact that Best offers program updates whenever there are changes in the tax laws that affect fixed assets," Reding says. "The software calculates all the depreciation for me, which can be very complicated for federal tax reporting. And, I don't have to keep up with all the tax laws myself to maintain and reprogram my fixed asset management system."

Reding used the FASTrack scanner software for the first time last fall when he did a complete fixed assets inventory over a two-month period to establish his new database. He has now set up a cycle where certain fixed assets are inventoried each month, so that each fixed asset will be evaluated at least once every two years to stay in compliance with federal accounting laws and regulations.

"I label 50 to 100 items a month, do the inventory, manage the database and tracking system, and run all the reports," says Reding.


Saving time
Automatic data collection has slashed the time it takes Reding to do his inventory. "It's a huge improvement. If I'd done my inventory by hand, it probably would have taken three to six times longer. I'm sure that I shaved a month off my schedule by using the scanner and FASTrack."