Oz-Kan Makina's ERP Invesment and the Organizational Development That Has Followed
April 2007 - IAS Turkey
Oz-Kan Makina was founded in 1983, initially manufacturing conical and steam valves. It has since committed to butterfly valves as its main product line, and has been steadily increasing its capacity to meet the growing demand in this area. Oz-Kan Makina has also been making forays abroad through its recent export operations. In addition to improvements in its infrastructure and management, which it has taken undertaken to increase productivity, Oz-Kan Makina is also setting an example for other companies in its industry through the ERP implementation that is has embarked upon. Oz-Kan Makina General Manager Husnu Kancesme and ERP implementation project leaders Serpil Cetin and Serdar Kancesme described for us the challanges they had to overcome, the changes their organization went through, and what small and medium sized businesses can do to surmount the difficulties involved in ERP deployments.
IAS: While small and medium sized businesses are hesitant about embarking on ERP deployments, your firm is continuing its successful efforts in implementing its ERP system. As an organization focused on growth and organizational development, you are setting a positive example for other small and medium sized businesses. How did you decide on moving forward with your ERP deployment?
Husnu Kancesme: Our company has a manufacturing structure that is different from others. We produce a limited variety of products in large volumes. We attempted to develop in-house software that would be unique to our manufacturing structure, but realized that it was not going to work out. We met with a number of firms. But we were unable to come across a system that would fit our organizational make-up. Then our personnel happened to attend an IAS product launch, were amazed by what they had saw, and as a result, we decided to proceed. While ERP implementations are costly, we are positive that the returns will justify such costs. Therefore, we decided to make the jump to ERP.
IAS: What were your selection criteria when evaluating ERP products?
H. K.: We have a large variety of materials that we use in production, and therefore, flexibility was very important for us. Also, CANIAS allowing access to the system source code was a major advantage for us, as we wanted to make changes to the system user interface. The CANIAS system presented these benefits to us.
IAS: What were the first steps you took when you started the ERP implementation?
Serpil Cetin: Our first task was to restructure the codes we used for our materials. A standard coding scheme was devised and products were made to conform to the standard. A coding scheme did exist earlier, but the new scheme is more detailed and comprehensive. Now, all transactions on product trees and routes are performed with a close examination of the details involved. We work out the details on paper in meetings, then input them into the system. All tasks are first tested, then moved into live production. We move in a stepwise fashion.
Along with the start of the ERP implementation, we have started examining our business processes. These tend to be intensive activities, and we are moving slowly but confidently. Once we devise a process using the ERP system, we immediately move to define it in our quality procedures. For example, we state in the procedures how the task will be performed, point out the various user interface screens to be used, and describe the resulting reports that are to be generated by the system. As a result, our ISO procedures now include statements that describe the specific actions to be taken within the CANIAS ERP system.
Serdar Kancesme: Therefore, our existing processes are seeing definite improvements as a result of the use of the ERP system. In the past, defective business processes were being attempted to be fixed on paper through quality procedures, but these were risky as compliance with the procedures remained to be a problem. But now, all corrective actions are directly input into the ERP system, and because the system is utilized by our manufacturing operations, the quality processes are being adhered to automatically.
IAS: Were there any reactions to the new system by the personnel?
Husnu Kancesme: We had more reactions from the engineering team than the shop floor personnel. Initially we had to put in a struggle, and had to lay down some rules. But now everyone is interested in the system. Everyone is coming forth with new ideas. As they make use of the system, their trust in it grows. Now they adamantly complete data entry tasks when initially they were openly questioning their usefulness.
Serpil Cetin: Management support in ERP implementations is very important. In fact, once management sets a direction, the problem is largely resolved. At our organization, management support for the implementation is very strong. As a result, management decisions are taken for all implementation related tasks, and announced to our personnel.
Serdar Kancesme: It makes a difference who decides on the need for an ERP implementation. If the personnel are the ones making the request to start using an ERP system, the management either tends to not be very supportive, or they do not push for its effective use. However, in our case, management decided to move to an ERP system, and the personnel have supported the decision. In many companies, the existing business processes experience a 10% change while the ERP software undergoes a 90% modification. In my experience, our business processes have seen a 50% change rate for the better.
IAS: What stage are you currently at within the implementation?
Husnu Kancesme: The accounting department has just started its use. All modules with the exception of Quality Assurance, Human Resources, and Document Management have gone into production use. In fact, we held a party to celebrate this. CANIAS has every detail covered in its system, and the reports produced are very useful. We are currently not utilizing all reports offered by the system, but I feel that if we use even 20% of the available reports, we will be seeing incredible results. Our goal is to be able to have all departments generating reports by June timeframe.
IAS: What specific customizations were developed for you?
Serpil Cetin: There have been several. Specific codes were designated based on materials features. A study was undertaken involving materials codes. An application was developed so that users could continue to make use of the codes during the length of the study. Applications were developed that allow users to directly access materials records by specificying criteria for materials attributes. Almost all product-specific details have been transferred into the system. Prior to starting the use of CANIAS ERP, some of our personnel were not computer-literate. Accordingly, some of the user interface screens were simplified.
IAS: What were some of the problems you have faced during the implementation?
Serdar Kancesme: We had a difficult time putting together a project team for the implementation. We could not get all department to assign a representative for each module. Instead, we held meetings with each department to collect information. So our core team was comprised of 2 to 3 people. In retrospect, module responsibilities should be assigned ahead of time and job descriptions should be spelled out. Otherwise, personnel tend to think that the system has all the capabilities in it, and that everything is on automatic. For example, they would point out that a product tree did not exist, when in fact they were not aware of the fact that it was up to them to create the required product tree. Again in the early stages, they would mention that they were unable to define a job order as the product did not have a route associated with it. They were unaware that they had to create the required route.
IAS: How did you overcome these problems?
Serdar Kancesme: As management and the project team, we pointed out to the users that there were many examples of several other companies successfully using this system. We pointed out the reference customers provided by CANIAS. We were able to counter resistance by pointing out that the system worked elsewhere, and should work at our facility as well. We made minor modifications, but stayed with the overall structure provided within the system. In time, doubts expressed about the competencies of the system were largely eliminated. If this had been a system that was accounting-centric, they would have raised objections that it did not meet the needs of the manufacturing side, and would have avoided using the system. Because CANIAS has hundreds of reference companies successfully making use of all modules, our job has been easier. When we pointed out specific companies that used CANIAS to run their production, accounting and customer relations systems, people were less inclined to resist as they knew that other businesses existed that successfully used the same product. Those that resisted using the system early on are now on our side. Initially they felt that their workload would increase, but then they realized that in fact, processes started running faster. There is no longer apprehension about mistakes and with whom the blame rests. If it was any other system that did not offer this level of comfort to its users, that did not produce results this quickly, I am sure we would be at a completely different predicament now.
IAS: What would be your recommendations to companies who are in the same business sector as your company, or who are about the same size as your organization, in terms of choosing an ERP solution?
Husnu Kancesme: ERP implementations should be started well before your business becomes swamped in data. We have a large variety of products. There may be other companies that are larger in size compared to us, or have a larger volume of output, but I can safely say that there is no other valve manufacturer that produces more variety of products than us. Therefore, in time you tend to become swamped in data. It is important to embark on an ERP implementation well before reaching that stage.
Serdar Kancesme: I feel there should be a preparation stage to last a year in duration. Prior to making an ERP vendor decision, all details should be worked out on paper. While performing the ERP vendor selection, preliminary preparations should be performed in parallel involving materials records, customer master data, product trees and routes, so that the duration of the following implementation project can be minimized. Because such data is not prepared ahead of time, small to medium sized businesses experience difficulties in ERP implementations. We could have had a smoother deployment ourselves by performing our preparations in a more detailed fashion. Each department could have started its preparation ahead of the ERP system purchase, including work related to sales, routes and production information. Moving forward using a project plan would have been preferable even before committing to an ERP purchase decision. In the early days, we did not even have a standard form we used for sales; each salesperson used his or her own form. We spent a lot of time on such details.
Had we had prior preparation, and had standards for such documents as invoices, shipping tickets, sales documents, and job orders, these would have been rapidly integrated into the ERP system. But everything had to be individually handled. An ERP implementation should not be considered as a fixed length project. The project will continue even after live production starts. Therefore companies should not be stating concrete timeframes, such as 6 months or a year, after which they feel they will be done. When forming their teams, they should be focusing on the future and on continuous improvement. Care should be taken when assigning module leads. Each department should assign an individual who will be actively using the system and who is comfortable with information technology concepts. The process does not end with the start of live production. The teams should be formed keeping in mind that continuous development will be taking place. Whenever we needed them, they or night, IAS personnel were there to help us. We know that they will be helping us long after we go to live production.
Oz-Kan Makina was founded in 1983, initially manufacturing conical and steam valves. It has since committed to butterfly valves as its main product line, and has been steadily increasing its capacity to meet the growing demand in this area. Oz-Kan Makina is known in its field for the quality products it produces, and has also been making forays abroad through its recent export operations. Oz-Kan Makina has entered the new millenium in its modern facilities, with an experienced staff, and is striving for leadership in its sector, and working hard towards its vision.