Systems Plus is pleased to submit this application for the 2003 APICS Innovation Award of Excellence. As you will see, On-Time Orders is a truly innovative product that satisfies a real need within the resource management community, offering significant benefits for the users of traditional ERP and MRP systems.

The need for the product or process improvement

Note: Rapid Priority Management (RPM), the concept behind On-Time Orders (OTTO), was introduced in APICS The Performance Advantage, May 2002 issue, in the cover story titled "Realistically Mining the Data"

Amid the masses of data stored and displayed by the typical enterprise system (MRP, MRPII, ERP, etc), it is often a tedious process to find the work orders that support a customer order, the impact of a late delivery or machine breakdown, or just which activity is most likely to cause late shipments and customer dissatisfaction.

This problem has existed since the dawn of manufacturing information systems and has only gotten worse as systems have become more comprehensive, more integrated, and more complex. The data is there. The system has done all the coordination and calculation necessary to help us identify and manage all these things together. It's just not easy to find specific information in a context that answers the basic questions we face every day; When will this customer order ship? What should I be working on next? What order / resource is most likely to cause a problem? How can I identify and prevent delays before they happen?

The first use of Material Requirements Planning was a real breakthrough. The basic idea, identify what you will need and when you will need it, is brilliant in its simplicity and utility. It soon became clear that MRP generates a lot of data - and a lot of recommendations. Sorting through all of these could take days. Meanwhile, new orders came in, production disruptions changed actual lead times, and vendor receipts were late or incorrect.

Current planning logic provides a comprehensive list of what must happen in order to complete customer orders on time, minimize inventory, and operate efficiently. This whole concept of planning (and advanced planning), however, stops short of providing much help on the execution side. Whatever the planning method or frequency, the procurement and production departments are left with instructions on what to do to support the overall plan - but not much in the way of context; what specific actions will impact what specific customer shipments. Plans are developed item by item.

Tracing the impact of an action or a change (late receipt, quality problem) is problematic. Starting at either the top (customer order) or the bottom (raw material) or anywhere in between, tracing demand involves "pegging" through the bill-of-material one level at a time, matching required quantities and dates to find the next level (component or parent item). The deeper the bill of material, and the more products that use common components or assemblies, the more difficult it is to sort it all out and get the answers you need. Some materials departments spend nearly all of their time slogging their way through this mass of detailed data. The information we need is already in the system somewhere, and the problem is trying to get it out when we need it.

A normal MRP report will show all items/orders to be released, expedited, deferred, or cancelled. The planning process has correctly identified all the actions needed to meet the requirements. All standard MRP reports and inquiries, however, are item oriented. This is so because the entire MRP process and logic are item oriented. There's nothing inherently wrong with this, but it makes retrieval of all the information relative to a customer order, for example, an arduous process.

Our new approach is to access this MRP information but bring it together according to the customer order. Include all inventory, open orders, planned orders, and firm planned orders that will support this customer's requirement, down through all levels of the bill. Collect this information into a working file and provide reports and inquiries that show all the recommended actions for any items or orders no matter where they happen to fall within the product structure. We call this approach RPM for Rapid Priority Management. The nice thing about RPM software is that it can be written totally outside of the existing ERP system and is therefore immune to system upgrades and "version" concerns unless there is a change in the database structure. OTTO from Systems Plus is currently the only commercially available software product that incorporates the RPM methodology.

RPM is not "hard" pegging in which order identification is imbedded within each demand, work order and planned order. Hard pegging is highly restrictive (prevents flexibility) and is only useful in very specialized situations such as government contracting where the customer might actually own parts and WIP. Since RPM pegging is accomplished completely outside of the ERP environment, the "hard" relationship links exist only for the benefit of the reports and screens used to execute the plan. When the plan is regenerated, the system has complete discretion to re-plan according to its own logic and the supply-demand equation. Another RPM extraction and calculation readies the work file for the next round of execution decisions.

With this customer order orientation, it becomes easy to see which activities pose the highest risk to on-time completion of the customer order. Managers can use this information to pro-actively address these work orders, purchases, or resource issues. It also makes it easy to identify which activities directly support customer requirements and which are in the plan simply to replenish inventory or meet safety stock requirements. While replenishment is an important objective, it should take a back seat to satisfying customer demands

This new approach makes effective use of the data and information that already exists within the enterprise system. It does not change or impact the existing system in any way; it is not a software modification that might impact support costs. And it gives managers an execution tool to greatly improve on-time shipment performance and maximize the effective use of resources, applying them where they can do the most good.

Traditional MRP / ERP systems and advanced planning systems offer excellent capabilities in the planning and scheduling arena but fall short in providing first-line supervisors and managers with execution information they can use to properly identify and complete the work that will allow them to ship orders on-time today, tomorrow, and this week. RPM, as incorporated in OTTO from Systems Plus, breathes new life into traditional MRP II and ERP systems and helps companies improve on-time shipments and reduce inventory, expediting, and confusion.

Wide-ranging applicability, real-world impact

In addition to the success of OTTO at poultry products maker Shenandoah Manufacturing outlined below, OTTO has proved to be a valuable tool in other industries:

• An abrasives manufacturer reduced delivery lead-time with 50% of orders produced the same day they are received
   
• A punch press manufacturer greatly reduced disruption caused by shortages. Throughput doubled within 6 months
   
• A maker of store fixtures (completely EDI-driven) set a new shipping record (268 trailer loads, with no backorders) in the second month of its use of OTTO. Delivery performance up to 98%+
   
• A maker of socks was able to improve plant throughput time by 20%, and reduce inventory by 25% while keeping on-time shipments in the 96-100% range.
   
• Within 6 months, a welding equipment company reduced lead-times by 2 to 4 weeks and throughput 26%
   
• An upholstered furniture company, coordinating multiple plants to meet truck schedules, eliminated manual check-off sheets was able to produce daily schedules for automated cutters. WIP was reduced by one-third within 4 months of installing OTTO
   
• A manufacturer of pumps faced production shortages leading to delivery problems. During the first year, it eliminated 6 trailers that held partially-assembled units and had a record year (sales and shipments).
   
• A lawn sprinkler manufacturer used an OTTO report to identify orders that could be shipped to major EDI customers. Time spent working on shipments instead of gathering information led to improved customer service.
   
• A maker of light poles was experiencing delivery problems and production disruptions due to shortages. In the second month of using OTTO, it produced and shipped everything scheduled and set single month shipping record.

Strategic Planning

RPM and OTTO have the potential to change the way manufacturers (and distributors) operate now. The OTTO product self-installs in under one hour and is ready to produce results immediately. Only user familiarization is required to gain the benefits listed above.

Goals and objectives in response to the need

The overriding objective addressed by OTTO is to improve on-time shipment through increased visibility to priorities tied directly to customer order and end product demand. Secondarily, OTTO reduces confusion and expediting in the plant and warehouse, improving operational efficiency and effectiveness.

The plant manager, supervisor, or scheduler needs visibility beyond what is provided in standard MRP / ERP. The item-oriented planning process not only severs the direct link between lower-level planned orders and the source requirements, lot sizing masks the actual quantities needed for individual customer orders. When faced with the question of "what do I do first (or next)?", it's either guesswork or a laborious, difficult pegging process to understand the impact of work sequencing decisions. OTTO provides the information in formats that make work dispatching decisions crystal clear.

Describe the completed implementation

Shenandoah Manufacturing, a $20 million producer of poultry products, was having difficulty shipping orders to customers in a timely manner. Customer Service Representatives were complaining about the frequent backorders and late orders. Employees were giving it their best effort but were frustrated. Shenandoah successfully implemented a popular ERP system and had been using it for more than 3 years, yet the situation did not improve.

The company considered installing an APS system as a possible solution, but found that implementation would be difficult and expensive, and running the system might be a challenging task. We discovered OTTO following a consultant's recommendation. The initial demonstration of the software installed easily and was fully functional with real live Shenandoah data.

Some baseline measurements were made in December 2001 and determined that approximately 50% of our customer orders had shipped on time. In January 2002, as it began using OTTO, Shenandoah caught up on its entire backlog and started working ahead on February's orders. On-time order performance rose to 56%. In February the measurement jumped to 92%. Every month since then it has ranged somewhere between 98.3% and 99.5% which is well above the 96% goal set by Management.

- Mark Shank, Information Systems Manager, Shenandoah Manufacturing

Provide measurements and evaluation successes (qualitative and quantitative)

Following up on the above paragraph, on-time shipment performance at Shenandoah Manufacturing went from 50% pre-OTTO to greater than 90% in less than three months. Subsequent monthly on-time shipment records were:

• 99.1% of orders shipped in March were on-time
   
• 99.5% of orders shipped in April were on-time
   
• 99.2% of orders shipped in May were on time. Only three of 395 orders shipped were shipped after the promised date.
   
• 98.9% of orders shipped in June were on time. Only four of 362 orders shipped were shipped after the promised date. Sales volume for June was 40+% greater than May.
   
• 98.3% of shipments for July were on time. Five were shipped after the date promised of 346 total shipments.

"OTTO provides the means for keeping the whole production organization focused on the few things that have to happen as the ship date approaches to get each order shipped on time. Components that have potential for delaying an order are identified so they can be managed. Precious, limited resources are spent managing the right things at the right time rather than digging out and analyzing information.

Knowing the right things to pay attention to at the right time, information provided by OTTO, has allowed on time shipping to be improved by 40 percentage points in less than one month and lead time to be reduced from 3-4 weeks to 1-2 weeks on the most important products. Guessing at what and how much of the work being processed is for real customer orders versus planned orders is eliminated. This is especially important when capacity is short during the heavy portion of the business cycle.

By focusing on the right things at the right time, production expedites and interruptions are far fewer, production flow is much smoother and productivity is significantly improved." Roy Hackett, Plant Manager, Shenandoah Manufacturing Company