CLASS 'A' ERP BOOSTS PERFORMANCE AT LUXFER GAS CYLINDERS

Luxfer Gas Cylinders has achieved Class "A" status in Planning and Control through a remarkable culture change and business transition over the past four years. This, and a massive programme of Lean Manufacturing, Continuous Improvement and other techniques, have dramatically improved on-time deliveries, lead times and productivity.

Part of the international Luxfer Group, Luxfer Gas Cylinders is the largest manufacturer of aluminium gas cylinders in the world. The company has six manufacturing plants world-wide, including one in the UK at Nottingham. It makes around one million cylinders a year for use in fire extinguishers, scuba diving, breathing apparatus, beverage dispensing units, medical and speciality gases.

Four years ago the Nottingham plant had no effective business processes, integrated IT systems, performance measures or management information. A customer survey indicated that while product quality was considered to be excellent, lead times and delivery performance were extremely poor. For example, even after waiting the quoted 9-12 month lead times, customers could still have to wait another month or so before product delivery.

Luxfer CEO Ian McKinnon charged the company's management with turning the business around, improving customer service and initiating fundamental change through an Oliver Wight Class 'A' Planning & Control implementation, which commenced in 1996. Coupled with this was the implementation of an EFACS MRP II system.
Andy Butcher, Operations Director, observes: "Resourcing five sites, throughout the UK and US, to Class 'A' is difficult because it is basically a do-it-yourself project requiring full time commitment, and the people who need to do the work are already very busy. We decided on a full time project team, backed up by an executive steering committee and various task forces. The Luxfer plant in the US was also carrying out a similar implementation and it used broadly the same project organisation.

Production Manager Tim Jeffery, comments: "Oliver Wight's Andrew Purton guided us through the Oliver Wight business model and ABCD Checklist. A number of multi-disciplinary task forces were created to re-engineer our business processes and we achieved a steady rate of improvement as we got to grips with planning and control. We concentrated on driving up delivery reliability and speed, and over the last three years our On-Time-In-Full (OTIF) indicator has risen from the low teens to consistently over 95%. A lot of work has been done to reduce manufacturing and supplier lead times by managing sales demand better. Delivery speed has reduced from over nine months to two months or less for some products."

Andy Butcher, adds: "In both the UK and US, we believed communication was important and launched the Class 'A' project with an interactive presentation to everyone in the business and used notice boards to keep people informed. However, when we surveyed employees we discovered that awareness was very poor. So we greatly increased our efforts with a whole raft of activities such as one-to-ones, newsletters, posters, freebies, competitions and more regular briefings.

"In the US, approximately 25% of employees attended five-day or three-day overview sessions led by Oliver Wight Europe and USA. Key process owners were also involved in extensive outside education, and internal communication sessions included using Oliver Wight videos and Luxfer-prepared materials. Communication of progress was monitored through quarterly self-audits via the various steering committees, and the results communicated in a bi-monthly newsletter. The extra effort paid off and another survey found excellent awareness and belief."

Luxfer US had been badly bitten in the mid-90s by an ERP supplier who had promised the world but failed to deliver. Determined that this would not happen again it shortlisted Oracle and SAP. ERP Manager Duncan Banks says SAP was chosen and implemented on-time and on-budget due to a number of key reasons. Foremost, the design teams first developed the key business processes and used Oliver Wight education and methodology to establish high level process redesign before implementing SAP. Also crucial is that Sales & Operations Planning (S&OP) had been functioning for two years at the time of implementation, so there was a clear understanding of the sales forecasting, supply management and financial forecasting processes. In addition, before going live with SAP all master data was at, or approaching, Class 'A' performance levels.

The benefits for Luxfer US are impressive, including a totally integrated business system and a significant improvement in business process execution. For example, the 50 steps to undertake procurement have been cut to 10. Manufacturing lead times have also been slashed from 30 days to just eight.

Performance at Luxfer UK has also been transformed with extensive improvements in customer service and business performance. The company has achieved cost benefits which have resulted from increased control, particularly of work-in-progress (reduced by as much as 67%), stocks of raw materials and bought-in supplies, and inspection costs. Around 1 million was taken out of fixed costs in 2000.

Luxfer UK has also benefited from putting S&OP processes in place. S&OP is a monthly management process providing the link between a company?s strategic plan and its operational planning. This enables management to monitor the balance between supply and demand (production and sales), the implications of new product introduction, and the financial projections arising, and so improve control and understanding of the full business ramifications. The process encompasses a Demand Review to assess changes in the market followed by a Supply Review to establish how the Supply Chain will respond. There is also a New Product Development Review to monitor the progress and impact of change. The process concludes with an S&OP meeting (Management Review) to review business projections, understand change, rubber stamp proposed actions and give direction to future activities.

Andy Butcher summarises the key tips for a successful implementation:

• Commitment from the top.
• Full-time project manager and team.
• Cannot do enough communications.
• Cross functional task forces/design teams.
• Use S&OP for early benefits.
• Education should be the foundation.
• Develop the 'system' blueprint on paper and understand business process requirements prior to detailed software design.
• Master data accuracy prior to going live is essential.
• System training is often underestimated.
• ERP system is a tool, not the solution.

In the area of NPD the company utilises a multi-disciplinary team that meets weekly. New product proposals are brought to the forum and evaluated by the team. "NPD has enabled us to get new, lighter and stronger aluminium alloys to the market much faster," adds Tim Jeffery. "We have achieved more in one year than the previous seven. Previously, sales people would say we could make something and then find that we couldn't or, if we could, it would be at a loss. At the very least we would have a dissatisfied customer due to a missed due date. Since we introduced NPD two years ago we have developed 2 million in extra revenue."

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NOTE FOR EDITORS:
Oliver Wight

Oliver Wight was an innovator in industry. He recognised the challenges that industry faced whilst always seeking to do things better. His ideas were matched only by his ability to communicate them in ways that generated acceptance, commitment and enthusiasm. When computers first emerged in manufacturing he saw the role of people being overshadowed by technology. He made it his personal mission to put people first, and to give them the knowledge they needed to use their new tools. His tenet ?Computers aren?t the key to success, people are? remains a core philosophy of the Oliver Wight Companies.

Today the Oliver Wight approach is to provide long-term coaching and support for clients striving to attain business excellence through sustainable behaviour change. Founded upon a best practice business framework Oliver Wight provides:

*Knowledge transfer of best practice methodology;

• Facilitated process design workshops to develop a unique application for your business;
• Ongoing coaching, support and critique throughout and beyond the life of the implementation;

With a track record tracing three decades and a distinguished past in working with both international ?blue chip? organisations and medium sized businesses Oliver Wight?s current client list includes ICI, GlaxoSmithKline, The Wrigley Company, Caterpillar, Unilever, British Aerospace, Rolls Royce, 3M, Merck Sharpe & Dohme.

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