LIUC Corso di Gestione della Produzione e della Logistica.
Docente : Prof. Claudio Sella

(ERP) Enterprise Resource Planning

In baseball the first name in bats is Louisville slugger. Hillerick & Bradsby, the makers of the Louisville slugger began in 1857 as J.F.Hillerick & son, manufacturing a different wood product that was more in demand at the time, butter churns. Their career in baseball began when John Hillerick’s son, Bud, snuck out of school to catch a game one day and badly promised star player Pete Browning that he could make him a new bat after the star broke his in the game. Hillerick & Bradsby ended up holding a majority of the bat market for years, until the acceptance of aluminium bats in the 1970s.
In 1978 they expanded their capacity to manufacture aluminium bats. The company manufactures the bats as well – Power Bilt Golf since 1916 and Louisville hockey since 1968. In 1992, the executives of the privately held company decided to address some nagging problems.

Tom Hillerick – System Analyst, Hillerick & Bradsby
“Our executive management staff had a series of meetings looking at the issues they felt needed to be addressed for Hillerick & Bradsby. These involved anything from order entry problems to production problems to returns, getting inventory straightened out as far as too much of what we weren’t selling, not enough of what we were. And that led us into looking at things that would help all of those issues at the same time.”

Hillerick & Bradsby circumstances are actually very common among corporations and were particularly intense in the 1990s. Companies preparing for Y2K and evaluating potential problems had a crucial decision to make; perform an expensive reconfiguration of independent but connected legacy computer systems or start over with a completely new system designed to streamline information flow and support sales operations and supply chain management, as well as accounting, finance and marketing. The choice is a difficult one. The new systems are called ERP or Enterprise Resource Planning systems. They are designed to simplify all of the processes of the firm or Enterprise by storing all information in one common database as well as automatically updating the information at every stage of the production department manufacture, only the inventory that the sales department has requested and the shipping department is more efficient. ERP’s benefits include increased customer service; higher profits and a boost in moral as frustration at repetitive tasks and missing information fade away. Implementations are long, usually lasting years. The transition period between the legacy system and the ERP system is difficult as employees are forced to abandon their habitual ways of working for all new methods. But according to Hillerick & Bradsby and many others, the cost of implementation will be worth the savings down the road. The process of making wooden bats seems simple enough. But under the legacy system it had become inefficient with only the top 15% of the customers being serviced.
?“We found that we were shipping on time and complete 30-40% to our major customers. They have to have 100% on time and complete. That is part of the contract that we have with them. Our accounts receivable – AR was running real long: 365-400 days, our production people weren’t communicating with our sales people and management staff in the way that they should. We were having problems with information between all these groups. It would take anywhere from a couple of days to a week to get any information answered.”

In fact Hillerick & Bradsby service quality was in trouble because the manufacturing department and sales department didn’t always communicate. The production processes were out of tune with demand. Inventory was processed in batches at night but it was not attached to any sales tickets until it got to shipping. The shipping department was burdened with tracking down inventory to fill orders. Sometimes it wasn’t there. Suppliers were out of sync with Hillerick & Bradsby’s production because Hillerick & Bradsby was not able to accurately predict their needs. Hillerick & Bradsby was in desperate need for a streamlined production process that was triggered exclusively by the sale of their product. The first step to streamlining production was to acknowledge the problems and devise the needs of the new ERP system. Once that was agreed upon the committee chose the German company SAP to be their software provider in April of 1995. SAP is a server-based system where a common server holds all the companies’ information. Every computer is connected to the server and once the data is entered, it lives on the server, where everyone can see it, from any computer. Data entry is crucial to the success of SAP, procedures are fixed and rather inflexible and discipline is important. SAP starts the production process at the very beginning with development.

“We have a spreadsheet in Excel that we use to create a list of materials, each spreadsheet holds 100 materials and has all the fields necessary to create the product in SAP properly. These fields are the sales information, the price information, production information, inventory information and purchasing information. And this way, all the information gets in the SAP at one time. Lumber for the bats come from small mills in Pennsylvania, the wood is shipped to the Akeley Pennsylvania Plant where all of the billets are made. Billets are thick dowels of wood from which the bat is cut. The Akeley Plant is the clearinghouse of billets for the Ellicottville New Mark and Louisville, Kentucky Plants which manufacture wood bats. SAP ships the billets to Louisville if the bat is professional or personalised or to Ellicottville if the bat is for consumers.”

“The billets are pulled into the machine, they are unbundled at that point, then the operator runs the bat, once he has a complete (trut?) we issue a job ticket to the floor for that and the job ticket and the bats go through the system. The bats are branded and they are sanded, dipped in Lacquer, boxed and at that point we put in the inventory. The operator would come through as he puts the bats away and make an entry into the system stating: this job ticket is complete, here’s how many I’ve put in the inventory at this point. ”

Because the Louisville Plant is responsible for the Pro players bats as well as special occasion bats such as the world series bats they run small batches of inventory and the work is more personalised. They make 300 different products and their output is 350,000+ bats a year. Ellicottville manufactures the rest of the wooden bats, 400 different models which total cues 800,000 bats per year. And this inventory bats vary depending on the order that they are filling. In both plans inventory is sorted by a requested ship date on the sales order schedule line. Hillerick & Bradsby also maintain several warehouses in the system to sort out inventory for their largest customers. SAP has also helped Hillerick & Bradsby centralise their operations by linking their various plants together onto one system. On the legacy system, each plant had a warehouse number and because they batched inventory at night their information was only updated each morning. With SAP, each facility still has its own number but shipping information is updated in 5-minute increments and all other information is Real Time.

“Nobody is really by the plant, they can all what sales orders deliveries, production tickets, things of that nature in any given plant that they work in. ”

Although the production processes are running smoothly now it was 5 years before Hillerick & Bradsby saw quantifiable results from their ERP system. The arduous implementation process began in May of 1995 with training classes for the implementation team. The MAS committee and the configuration committee who had designed the data entry screens and customized SAP to the companies needs had to learn ABAP, the programming language to keep the system running and attach outside applications. The configuration committee later had to teach data entry procedures to employees. In July of 1995 a test system was created and the 18-month configuration process began.

“We knew going into it that there would be some glitches. During our development phase, which lasted 18 months, we had gone through and crashed our system many times. It had to be rebuilt, reinstalled. We knew we had resistance from the people who had been here for a very long time.”

Suppliers had a hard time with the new system, which was more sophisticated than their systems.
“Most of our suppliers are really ‘mom&pop’ type stores, they are doing limited Internet access stuff and they are doing very limited faxing stuff. Moral sagged during the transition period as long time veterans struggled to change the way they worked.”
John Hillerick, IV – C.E.O.
“It raised everybody’s stress level for a temporary period of time. It was very stressful, we implemented first some power bilt and it was not fun coming to work for about a year because you didn’t know if you could ship stuff out the door or you might not ship out the right quantities of different things. We had, we didn’t have it down right so the level of stress was almost unbearable.”
After struggling through implementation Hillerick & Bradsby now sees the value of their ERP system. Currently, the company ships 88% of its orders on time and complete, versus 40% before SAP. Because of their new efficiency, labour costs were reduced and employees’ time became free to work on other projects.
“California’s our largest warehouse distribution plant, anywhere. They will ship roughly $60 million worth of the product each year. The bulk of which, probably 45% of it goes out in February and March. Each year it was not uncommon for them to work 6 days a week, roughly 75 hours that week. The first year on SAP meaning February and March of 1998 we had, if I remember correctly, somewhere in the neighbourhood of over 100 hours of overtime for those 2 months which was unheard of. No temporary workers, which was unheard of. And for those 2 months saved roughly $100,000 in overtime costs. All of this because SAP will only print out a delivery ticket per inventory that it has in the system. That it knows is available to ship.”
With SAP regulating inventory and shipping, customer-service is soaring.
“We’ve actually poled our top customers and we are in the 90-95% satisfaction category there. We’re transferring information through the system faster and easier and we’re able to ship to smaller customers when they actually want it instead of when we could get around to it. That’s made a huge difference in the perception of Hillerick & Bradsby, we’re now being noted more as a customer service oriented corporation than a performance corporation for product.”

Accounting now has easy access to information that helps them stay on top of accounts receivable and the sales cycle has been shortened. Eliminating the cash crunch. But the ultimate result came in 2001 when Hillerick & Bradsby sales were the highest ever; over $110 million.

Tom Hillerick – System Analyst, Hillerick & Bradsby
“SAP has probably most helped in the area of being able to look at where we were, where we are and where we are going. By that we can see how the orders cane into the system, how we dealt with the orders that came in, how production kicked is to meet that demand or how purchasing kicked is to meet that demand. Where the inventory levels stood at, where they went to and how the inventory left the building. And then be able to look at the customers and say: where they serviced in the way we thought they should have been? And better yet, did we do our job? The system will spit out the numbers fairly fast for us and we’re able to use it to react to the situations going on much faster than before.”

Although it’s never a smooth ride, changing a company over to an ERP system can really free it from inefficiency and disorganisation which eventually erodes the quality, service and profitability. However it’s not just the software that solves the problems. The people have to be committed to making changes.

John Hillerick, IV – C.E.O.
“It really focuses you to become disciplined at what you do, you cannot make entries or not be timely with your entries. It really focuses you to do the right things to run your barriers.”

Tom Hillerick – System Analyst, Hillerick & Bradsby
“I would have to say I’m a believer in SAP. Have to be. I\m the one that has to sell it every single day.”

John Hillerick, IV – C.E.O.
“We know it works and it allows me to go home and sleep at night knowing we don’t have to deal with this situation for a long long time.

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