In part one of this series, we discussed how Microsoft Dynamics AX helps manufacturers improve their agility and time-to-value, as well as the enhanced business insight the new version of the Enterprise Resource Planning (ERP) offers.
It’s well-known (but hotly debated) that Canadian manufacturers could be doing more to improve productivity within their organizations. The productivity gap in manufacturing is costing Canada $70 billion a year in exports. Here we will explore ways the new Microsoft Dynamics AX (aka AX 7) can help manufacturers close that productivity gap by streamlining business processes.
Improved User Adoption Through a Modern User Interface:
A recent study, by the Canadian Manufacturers Association, found that labour costs and the difficulty of finding skilled labour have been identified as two of the top challenges facing manufacturers today.
With the influx of millennials to the workforce, user adoption is becoming a concern. Millennials’ expectations regarding how they interact with business applications differs from baby boomers’. In fact, I have worked with companies where they specifically stated that one of the key reasons for looking for a new system was retention of a younger workforce that was resistant to the current application(s)’ interface.
And let’s not lose sight of the fact that if people work outside of the business system, the benefits and value of the data within the business system quickly become less relevant and useful.
Reduce Labour Costs:
Our customers who implemented Microsoft Dynamics AX have leveraged the capability-based resource planning and production scheduling to:
- Reduce labour costs through reductions in overtime.
- Improve on-time delivery by ensuring that people with the right skills are available to complete tasks on the correct machinery, and have all the required inventory necessary.
Microsoft Dynamics AX allows you to manage individual resources and resource groups. Resource groups are a great way to get a macro-level view of potential capacity constraints – that could be human resources, machines, tools. and even floor space.
The graphic above depicts the short-term workload of one resource group based on firm production orders – in this case, the speaker testing and packing group. In this case, my default view is a weekly breakdown of capacity and work (shown in hours) and only includes the master production schedule (MPS).
This graph can be modified to include forecast, show percentages instead of hours, extend the timeline, or change the view to monthly:
Now you can see that forecast sales are definitely trending upwards, and I will hit my capacity limit by the end of the year.
If the resource group is not easy to scale, this tool gives you the ability to plan in advance to avoid overtime costs and/or late shipments. You can increase capacity by scheduling an additional shift (or half-shift), acquiring equipment, or outsourcing some of the production. If the capacity constraint is temporary, I can choose to adjust the MPS to manufacture in advance.
With timely information, you can make decisions and execute a more cost effective plan
Reduce Transportation Costs:
Our more complex MTO/ETO discrete manufacturers are often incurring higher than anticipated transportation charges due to the need to expedite inventory shipments to meet changing production deadlines. By leveraging the integrated inventory and procurement management capabilities of Microsoft Dynamics AX (e.g. MRP, Lean Inventory Management, Min/Max, etc.), our customers are able to reduce transportation charges and improve customer satisfaction by achieving on-time delivery.
Let’s look at some of the tools available for Procurement, Production, and Sales to help reduce transportation and labour costs, and increase on-time delivery.
- MRP creates planned purchase orders based on supply, demand, inventory and planning parameters – classic Time Phased Order Point planning. When forming Planned Purchase orders we can choose to combine demand over a time period, thereby reducing inbound transportation costs (and admin costs by processing less POs).
- MRP also creates action messages, suggesting whether existing firm purchase orders should be advanced, postponed, increased or decreased.
If I choose a suggested action I can get a graphical representation of all related actions.
Microsoft Dynamics AX has the same tools available for production as for purchasing, such as:
- Firming planned production orders can combine planned orders onto the MPS
- Action messages will suggest you advance, postpone, increase, or decrease the MPS
- Also other tools such as the Material Stockout list – using this helps focus material planners on critical shortages to reduce the probability of late orders and paying a premium to ship to customers
With the signing of the Asia-Pacific Free Trade Agreement and the pending approval of the European Free Trade Agreement, it is imperative that Canadian manufacturers close the productivity gap through:
- Working smarter with better information
- Reducing the cost of production through improved inventory turns, lowering transportation costs, and reducing labour costs
- A focus on improving customer satisfaction, through better on-time delivery
- And finally, improved agility and innovation in business processes
Businesses not only have to operate smarter in the global economy but also have to innovate faster. The new Microsoft Dynamics AX will support more agile business processes and bring a faster time-to-value for Canadian manufacturers.