ERP Implementation at BPO Sets Precedent for Automotive Supplier Industry
May 2008
Please briefly describe to us how BPO was first established.
BPO was founded in 1994, and is owned in equal shares by B-Plas A.S. of Bursa, Turkey, and Plastic Omnium, a French company. BPO is in fact a continuation of B-Plas A.S., itself founded in 1984 for the manufacture of plastic and metal parts for the automakers. Starting in 1994 and in line with the developments in the automotive sector, manufacturing was being diverted to Turkey from Europe. This motivated the primary automakers to form joint ventures with foreign companies. The initial Renault Megane project in Turkey is an example. The vehicle was first introduced to market in France in 1997, and was being mass produced in Turkey after a mere 7 to 8 months.
How would you characterize the automotive business in Turkey in general? What, if any, are the problems, and how can they be addressed?
2008 saw the number of automakers worldwide reach a critical mass. There are numerous brands across the globe, including those in India, China, Korea, and of course the U.S. Two or three years back, I had counted roughly 65 brands at the Paris Auto Show. At the September 2007 Frankfurt Auto Show, I observed that this number has increased. Each year automakers try to get put forth their latest models to the customers. The markets are experiencing serious competition. Such a competitive environment is a challenge for both the automakers as well as the automotive suppliers in which to survive. For businesses to survive for the long term, highly significant amounts of core capital is required; therefore, I predict that nationally owned automotive suppliers in Turkey will cease to exist past the year 2010, and will mostly be replaced by companies whose capitals are controlled from overseas (in any case, national automakers are already mostly extinct). Competition is severe and profit margins are very small. These are my own predictions.
We have projects lined up through 2012 and 2013. However, I do not feel highly optimistic for the timeline past 2013. This is primarily due to the fact that the dominant automakers are choosing China and India for their investments. If we consider Oyak-Renault of the present, the quality of the vehicles manufactured in Turkey is higher than those manufactured in Europe. I would estimate that the same applies to vehicles manufactured by Ford and Tofas. And these quality vehicles are manufactured at a lesser cost than Europe. This is the reason we get business contracts today. However, as countries such as China and India start to make true headway and come online, I think that such contracts will cease. The direction that Turkey will be heading towards within the world conjuncture is an important issue, and the results of the integration of the global system with Turkey is yet another equally important issue. To summarize, a large number of variables need to be considered for a realistic forecast for the automotive business past the year 2013.
What are the types of problems you have faced before 2000 that have forced you to transition into implementing an ERP system?
One subject we are faced with in our business is consolidation, which I will attempt to explain. But first, I need to point out that an absolute requirement for the implementation and convenient use of consolidation is the use of certain information systems.
Now, what exactly is consolidation? As you may know, an organization consists of various departments, such as quality control, logistics, production, planning and engineering and others. Every one of these departments have, at times, overlapping responsibilities. As a result of work performed by these departments, certain reports and figures are output and become available. These outputs need to be able to complement and verify each other. We call this consolidation.
Without the use of ERP systems, it is impossible for us to perform consolidation or for the departments to talk to each other using a common language. The data used among the departments exhibit certain attributes that do not necessarily match each other, because they do not use the same reference framework. What is described and what is understood start to diverge.
With consolidation, the system becomes one where every department has the obligation to accurately describe its own activities. As a result, the organization no longer becomes dependent on specific individuals and the knowledge they carry with themselves. In the end, the ERP system moves us towards becoming an organization where actions are taken based on accurate and precise analysis.
Therefore, an ERP system is a highly detailed yet extremely beneficial management tool that provides organizations with the necessary corporate vision by implementing the required consolidation that I have discussed, as well as getting accurate figures out for everyone's use, without being dependent on interpretations by specific individuals, as well as maintaining these results in a current and updated form. This is how much we value an ERP system and as a result, we do our best as a team to maintain our system.
It is quite an achievement to transition to an ERP system back in 2000 when most other firms were still trying to make up their minds. When did you start implementation of your second ERP system, namely CANIAS ERP and what were the reasons you decided to abandon your previous ERP system?
We, along with IAS, embarked on the CANIAS ERP implementation project in the period encompassing the end of 2005 and the start of 2006. We had started our first ERP implementation back in 2000, and it's safe to say that it lasted until the end of 2004. What went wrong? The system started aging, and was not updated. The vendor did not keep up with technological advancements, and the local technical support organization was relocated to Spain. Also, that system did not allow us to perform development activities on our own.
What was the most important reason for you to choose CANIAS ERP?
We started our relationship with IAS in 2005. There were really two primary factors we decided to go with IAS. The first was the fact that our Turkish partner, B-Plas, was already working with IAS, and this caused a significant synergy to be realized. The second factor was the fact that TROIA, the development language used by the CANIAS ERP system, had been developed entirely by Turkish engineers through incentives provided by TUBITAK (The Scientific and Technological Research Council of Turkey). These two synergies combined led to our partnership with IAS.
We wanted to transfer to BPO the application experience that we had gained at B-Plas. Both companies operate in the same business. They are active in the automotive supply business and are involved in the manufacture metal and plastics. We felt that the integration of the system would be easier as the business processes of the two firms were alike.
We did meet with other vendors but chose to make our decision based on a development platform created in Turkey. For us, product cost was really at a priority level of three. We could have purchased a much less expensive system. However, a Turkish-based software system proved to be a major advantage for us.
Due to our discussions with B-Plas, we were aware of such attributes of CANIAS ERP as being easy to modify, and allowing convenient transfer of information to other software such as Excel. These were yet more reasons for our choice.
For us, having access to the system source code for the CANIAS ERP was an important criteria. The one problem we faced with the previous ERP system we had been using was that we did not have access to its source code, and therefore were not able to make changes. As B-Plas is also using the CANIAS ERP system, we were able to obtain first hand technical information about the advantages of the system from them, and made an educated decision based on all the inputs we collected.
For examle, using the previous system, there was absolutely no way we could add even a simple user interface button to, for example, the screen managing bills of consignment. We had to contact the vendor's consultants for such minor issues, and based on their workload, it took anywhere from a week to two weeks to have a simple button implemented. In our company, when the end users report a problem or request a feature, and we are unable to respond to them, the end users will be disappointed. And in those cases, it will take six months to repair the damage to your credibility!
While using the previous system, we were having to spend an inordinate amount of time for the most basic tasks, and this was the primary reason we decided to do away with it. In fact, it was a blessing that the company did not improve itself, and moved its operations outside of Turkey, as this proved to be the motivation we needed to seek another solution and finally end up transitioning to the use of CANIAS ERP.
Was there any internal resistance to the changeover to the new system, and if so, how did you overcome the objections?
Yes, we certainly faced opposition. There were users who questioned the need for a new program.
Using the previous ERP system, users were having to spend 15 minutes to issue a consignment note; now they are able to do the same task in one minute, and are able to appreciate the difference. When they see problems being resolved in the shortest time possible, they pronounce their amazement and approval.
When they started being able to see production data in real-time, they said "Using the old system, we were told this was not possible, but now CANIAS ERP proves that it is possible." And then the objections faded away. When the personnel are shown by the management of the advantages and the conveniences of the system, they end their objections. It takes about 6 months for the objections to be overcome.
We know that the automotive supply business has a very restrictive set of requirements and criteria. Supplier evaluation criteria, compliance issues, and EDI use are some of these factors. How did CANIAS ERP help with these issues?
The data we get from our customers changes constantly. There is an absolute need to have a system in place so as to be instantly in charge of such ever-changing data and to be able to track the data. The CANIAS ERP system enables us to be able to monitor such variable data within a systematic framework.
In fact, we spent a considerable time at the start of the project implementing EDI functionality, for automated communication with the Renault company, one of our customers. That project is now complete, and furthermore, we have also implemented EDI communication with our own suppliers, and have plans to do the same with B-Plas, as soon as our work schedule permits.
Considering your plans for the future, how do you see CANIAS ERP helping you achieve your goals?
The use of CANIAS ERP contributed significantly in helping us transform ourselves into a professional corporation. Individuals may come and go, but the organization should persist. Therefore, enterprise resource planning is an extremely important tool to help achieve organizations become lasting entities through the implementation of fundamentally sound infrastructures, as well as being a bridge between corporate culture and the organization's activities.
Without an ERP system in place, you may establish an organization and put in place the rules to follow, but when individuals leave that organization, the rules leave with them. Furthermore, an ERP system also helps a strong corporate culture take root in an organization. These are the benefits of an ERP system as I see them.
Mr. Ozpehlivan, as an executive, how do you view the benefits provided by CANIAS ERP to you and to BPO's management style?
CANIAS ERP has had several significant contributions to our management strategy. Its primary benefit has been removing uncertainty. At times, our data is maintained in separate environments. It is vital to be able to access this data instantaneously and to also be confident that the information it contains is accurate. In the past, we were not quite confident about the accuracy of our data, and had to constantly check with individuals. However, starting the use of CANIAS ERP has enabled us to have confidence in our data. The system has been configured properly from the ground up to produce accurate data. For us, having immediate access to a sales or a purchase price is critical.
We now have such instant access to manufacturing costs, and to the ratio of our purchasing costs within our sales figures. This presents a tremendous convenience for us, which we have put into daily use. We now track live manufacturing data in real-time. Data is captured instantaneously by the ERP system at most steps of the manufacturing process. We can observe parts of the manufacturing performance in real-time throughout the day, and the complete performance picture on a daily basis.
We are now able to verify our entire operations by cross-referencing the data output from individual departments. Some problems we had in our business processes became apparent and were easily solved. Now the data elements within a process flow all check out.
We do have more work ahead of us, but we have at least established a baseline and have data coming from distinct departments of the organization that verify each other. We have the stock management and materials management functionality working. We have about four thousand items (productive and non-productive) that we manage using CANIAS ERP. There are a variety of reference items which are impossible to track manually. Thanks to CANIAS ERP, we are now able to perform rapid and accurate evaluations, and take the necessary action items based on the results obtained. These have been the most important benefits to our organization. Inventory management, and the ability to view costs and sales pricing are additional benefits we have realized.
Mr. Memis, what benefits does CANIAS ERP present to you as the company's manager of IT operations?
First of all, I can say that it decreased our work load tremendously. While we were on the previous ERP system, we were working hard, but we were not able to catch up with the requirements of our end users. The requests and problem reports were piling up. With CANIAS ERP, we have resolved these problems.
To cite an example concerning manufacturing: using our previous ERP system, getting a response from a barcode reader took 4 minutes, when even seconds are of significance to us. It is really critical for us to be able to respond to our end users in a timely manner. We went through two EDI format changes in the automotive industry at large, and when you don't react to such changes in a timely fashion, you get left behind.
We are able to utilize all formats under CANIAS ERP without encountering any problems. With our previous ERP system, we experienced problems due to an EDI format change which caused us to lose our EDI capability for several months. Today, we are able to perform EDI exchanges with our own suppliers. We could not even dream of doing the same with our previous ERP system, as that system lacked any sort of flexibility.
During our implementation, we focused at length on the requirements of our sales and purchasing departments. We are now able to monitor whether our incoming overseas orders are waiting at customs or whether they are stocked at warehouses. After our customer sends us a message for a parts request, we are able to make delivery within three minutes. Since we directly supply manufacturing, we have developed applications for the manufacturing department, as well as an application that automatically generates a job order when a consignment note is issued. Similar applications include those for management of bills of materials and inventory tracking. We have implemented EDI for our logistics department, and we are now developing budgeting applications for the purchasing department. Each department has its own departmental budget, and may or may not have the power to issue their own purchase orders. We can now track all such authorizations. These were all features that were being requested in the past but were not being met by the previous ERP system. We now have these features, which really has made our life much easier. Once past the initial stages of the implementation, the system is now working like clockwork and we keep making enhancements.
IAS often observes lack of management support as the most significant factor missing in ERP implementations. When management does not support the implementation, or does so in a half-hearted manner, the personnel become instantly demotivated, and that leads to all sorts of problems. We know that you employ a distinct management style. What would be some of the recommendations you may have for managers at other companies embarking on ERP implementations?
We are a country that has a serious problem in producing leaders, and this in turn affects corporations as well. I feel the company leadership needs to do its job and lead. You cannot delegate leadership - it just does not work that way. The top management needs to play an active role in the implementation. You cannot make progress by delegating your responsibilities to a fellow manager and expect him or her to lead the implementation.
The manager for the organization needs to believe in the undertaking at hand, and force the project forward. Resistance to change is a typical response in all people, and can only be countered by strong management. If the leadership is not involved in the implemenation, the project will fail.
BPO B-Plas Plastic Omnium
Gokcen Grup, was founded in1858 as a textile concern by Osman Fevzi Bey, who was also one of the original founders of the Chamber of Commerce and Industry. In 1929, the company entered into Turkish-Japanese joint venture for the manufacture of printed fabric, and a factory was established. The partnership ended with the start of the 2nd World War.
In 1952, the company took the name Gokcen Ltd and expanded into the construction and die & moulding businesses, supplementing its activities in textiles. Gokcen Ltd was a pioneer in Turkey for manufacturing techniques in printed fabrics, and maintained its lead in innovation and technology.
Gokcen Group founded BEMSA A.S. in 1974 and was the first to employ plastic injection, plastic painting and vacuum forming technologies in Turkey. With the founding of BURIS A.S. in 1984 which specialized in fabric dyeing, the group was now comprised of three sister companies.
B-PLAS A.S., a leader and expert in the automotive plastics sector in Turkey, formed a joint venture with the Plastic Omnium of France in 1994 and BPO (B-PLUS PLASTIC OMNIUM) Automotive Metal and Plastics Supply Company was founded. The company manufactures metals, plastic injection parts, plastic color-identical vehicle body components as well as plastic body fuel tanks manufactured through blow moulding technology.
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