Where Excel excels

Here's how one consultant described ERP (enterprise resource planning) at a recent seminar: "planning: it does very little; resource: that's a throwaway term; enterprise: yes, it integrates all the departments in an enterprise "" and that's all it does."

Not too many people disagree with that description. At least, not the manufacturing people involved in day-to-day production, inventory, machines and people management.

ERPs, they argue, are developed and implemented by IT specialists who may understand the broader needs of the enterprise, but not always the intricacies of manufacturing processes.

"As far as manufacturing is concerned, ERP is based on assumptions, it lacks intelligence and that hinders control and visibility over production and delivery," says one production manager.

It's not that ERP companies and software vendors don't offer that intelligence. They do, as add-ons or modules to ERP, but then the cost goes up exponentially, implementations take months and the already complex systems get more complicated.

Meet Tony Rice, an independent South African consultant, who designs and implements that extra intelligence at a fraction of the cost that ERP or software companies do, in a fraction of the time they take, creating user-friendly systems for manufacturing staff to operate. Rice's USP: he does all that on Microsoft Excel "" yes, that MS Office spreadsheet package we use everyday. That means, no software programming, no elaborate codes, and no time-taking report-making "" all of which boils down to obvious cost and time benefits.

In fact, Rice has created production scheduling tools and techniques over Excel that can perform many other tasks of ERP at a manufacturing unit like materials requirement planning, capacity planning, finite capacity scheduling and even basic supply chain management.

Some big companies are buying into Rice's innovation. His company Production-Scheduling.com has a client list that includes Toyota, Unilever and Shell in South Africa and 3M in the US, Cadbury in New Zealand and Motorola "" all of whom had already implemented ERPs and used Rice to extend their functionalities.

To understand where ERPs fail to deliver and how Rice's techniques provide an edge, take a look at how ERP evolved and functions. ERP evolved from MRP (materials requirement planning) and MRP II (manufacturing resource planning).

While MRP (late 1960s and 1970s) helped keep a tab on materials requirement at manufacturing units "" dealing with bills of materials and inventory management "" MRP II (1980s and early 1990s) was a step ahead, also taking into consideration other resources like machines, people and various processes.

ERP, the next avatar, say experts, is nothing but MRP II plus an integration of a host of other functions in an enterprise like finance, human resources, budgeting, distribution and so on.

"ERP hardly addresses the shortcomings of MRP II, so for manufacturing units there's no difference between MRP II and ERP," points out Shishir Bhardwaj, Rice's India partner and an independent ERP consultant.

So while MRP is still core to ERP, where does it succeeds and fails to deliver? MRP is valuable for units that have a stable demand, deep bills of material, and can keep large inventory or long lead times "" primarily, units where there is minimum or no change in set schedules. But then customers nowadays are so demanding that companies are under pressure to transform their manufacturing practices. Competitive pressure is driving manufacturers to compress lead times, cut inventory, increase asset utilisation and reduce costs. To have good customer service levels companies need to promise delivery dates.

The key to appropriately match production with customer requirement is information that allows suppliers to better manage their supplies. For instance, if demand increases, materials fall short or orders get delayed, based on that information processes are rescheduled and the impact is minimised.

Unfortunately, MRP is unable extract such information because the technology lacks the logic to do so. It calculates the net requirements of materials for meeting the customer's orders assuming an infinite capacity in production and a fixed manufacturing lead time.

In practice, however, the lead time is a derivate of a finite schedule and the queue in the order book. "In its very nature MRP fails to elevate the production scheduling process to a better technique," says Bharadwaj.

On the other hand, Rice's Excel-based production and scheduling techniques assume a finite capacity "" having capacity doesn't mean that resources will be available when we need them. It provides an accurate view of future capacity and inventory as well as of when each order will be complete, thus allowing the manufacturer to make realistic delivery commitments.

It also provides a flexible basis for ordering raw materials. Says Rice, "What takes about two hours to re-schedule on MRP, takes no more than 10 seconds to two minutes on our system. You can re-schedule operations 10 times a day without any hassles."

Rice's production and scheduling techniques can be integrated over existing ERPs and can also be run as stand-alone systems. "What it needs is a database source to extract information "" it doesn't matter whether it's from an ERP or an accounting package," says Bhardwaj.

At the same time, explains Rice, "We are not advocating that you replace an ERP system with our techniques. An ERP is a huge database that integrates the organisation and provides visibility between departments. That's something Excel can't do."

Implementation of Rice's Excel techniques and tools cost around Rs 3 lakh to Rs 3.5 lakh for mid-sized and large companies in India. Says Bharadwaj, "Cost depends on the effort required in proper implementation."

That can take around 30 to 40 days for most large and mid-sized companies, including training sessions. But for smaller firms, the Excel programme can work out to just around Rs 45,000 to Rs 50,000.

And the benefits? Typically, the return on investment (ROI) for implementing the production-scheduling.com Excel tools along with ERP is 100 per cent in three to four years; a stand-alone Excel implementation can offer the same ROI in less than six months, claims Bhardwaj.

He adds that for companies that have implemented these techniques, inventory levels have dropped by 30 to 50 per cent over a year; operating expenses, too, he claims, have come down by 7 to 10 per cent.