A made-to-order manufacturer on track to hit half a billion in revenue had a surprising problem. They couldn’t see where they were making or losing money.
Labor costs were logged as rough estimates, not actual data from the shop floor. Without that visibility, quotes were off, production planning was reactive, and profitability was more guess than fact.
In this episode of One Fail One Fix, from shares how Shop Floor Data Collection in Dynamics 365 Finance and Supply Chain Management gave this manufacturer real-time insight into every production order, and the confidence to grow profitably.
Plus, Ryan’s advice to other manufacturers to avoid this type of fail.
Video Transcription - How D365 F&SCM Shop Floor Data Collection Boosted Profitability with Western Computer
Anya Ciecierski, ERP Software Blog
This is One Fail, One Fix with Ryan Pollyniak from Western Computer.
We’re talking about a made to order manufacturer doing 340 million in annual revenue with 280 employees, but with plans to grow to 500 million in just two years.
But they had one critical blind spot. They couldn't track profitability at the production order level.
Why? Because they had no way to accurately measure labor costs tied to each order, just a general labor estimate tacked on as a line item.
So Ryan, why was this such a big fail for a manufacturer of this size?
Ryan Pollyniak, Western Computer
Hi, Anya. So this manufacturer came to us with an RFP, and one of the main themes in it was profitability tracking, among other themes.
It was a big fail for them because each manufacturer is different. And in their case, they came to Western Computer and put this RFP out because they are made to order, and they had reasonably big production orders that were very different depending on what the order was.
So why it was such a fail for them was applying a standard labor cost to various iterations of the same product, essentially, in a made to order environment, doesn't lead to any kind of visibility for what each variation or each type of the product that they delivered would cost them. It was just applying a static number.
So they came to us asking to fix that. It was one very important part of their RFP.
Without that information, they couldn't track their profitability. They couldn't appropriately quote, they couldn't refine production processes to see which of these steps is taking an exorbitantly long time. Do we need to charge more or do we need to eliminate that process? Which ones are working best?
So all of these things, their ability to quote and to forecast profitability and to grow in general were impacted by not being able to track this.
Anya Ciecierski, ERP Software Blog
Right. And with such plans for growth, that really was an issue. So from Western Computer, what was the fix for this fail?
Ryan Pollyniak, Western Computer
So Western Computer took the approach of using out of the box Dynamics 365 Finance and Supply Chain Management Shop Floor Data Collection.
This is part of the application. And what that enables a user, an organization like this to do is to specifically apply labor costs, among other things.
The shop floor data collection app allows many pieces of tracking, but among other things, it allows directly applying labor to the different production steps in a process and to the production order as a whole.
So employees can clock in and clock out and apply their time to a production order right from the shop floor using a scanner or a workstation. And that's real data.
Real time data that flows right into the application, attributed to this made to order build, not to a production order in general. And it's not an estimate. It's not just a line item applied to a production order to account for labor hoping that it's accurate. It's real time data, and now you can see the real effect of what changes in your production process can have on profitability and how much these items cost to produce.
Anya Ciecierski, ERP Software Blog
Right. Sounds like it had a big impact. So what would you say were the top benefits that they saw after this was up and running?
Ryan Pollyniak, Western Computer
There were a lot of benefits. Really what it boils down to in any business is profitability.
So we could start there and say it enabled them to know how much money they were making on each production order, and actually to count it effectively and to track profitability from a financial perspective.
They can use that information also to identify inefficient processes during their production processes, which is still the first main benefit, right? Increasing and tracking profitability comes down to getting better. And you can't get better through a production process unless you know the data behind the scenes, what's going on.
So profitability tracking, number one.
Quoting. When they first came to Western Computer, this was a big issue. It wasn't so much that they asked us to build a quoting engine. They had their own tool for that.
But they didn't know. We've got a new made to order production order coming up for something that we haven't built exactly this way. What do we quote for labor?
There was no data there to back up a decision like that. And this ties back to profitability again, but I'll consider quoting separate.
If you want accurate quoting, you've got to know how much it costs to build something. And that's what this shop floor data collection and this new approach to assigning labor to each individual item gave them.
Real data for labor and cost savings. They could quote more precisely. They could make sure that they were getting the margins that they needed on their equipment.
And I'll say the third one may not be considered very much, but they incentivized their employees. Their shop floor managers and their production managers through actually having KPIs that were tied to profitability.
They couldn't measure this before. So they now had a tool by which they could incentivize their operators and their managers on the production floor to do a better job, to really strive to produce these items in a reasonable amount of time and to attain targets that they were able to build over time.
How long was each routing step going to take? That was a guess before. Now they had the data to back it up and they could measure employee performance against these new metrics, which they never had before. So that one might get overlooked sometimes.
Anya Ciecierski, ERP Software Blog
Interesting. So obviously you have a lot of experience in this manufacturing industry. What advice would you give to other manufacturers to avoid a fail like this?
Ryan Pollyniak, Western Computer
I've been working with manufacturers for a long time. There's sometimes aversion to change. Manufacturers are quite focused on getting product out the door today. We'll worry about tomorrow when tomorrow comes.
The landscape is changing and there's a lot of competition out there. And competition is going to use tools like this to gain competitive advantages.
Depending on the type of manufacturer that you are, for this one fail in particular that we're talking about, Western Computer's advice is to get this in early. Start before this is a big problem, or in the initial phase of the implementation even.
For this company in particular, could they have phased in this type of shop floor functionality later as a nice to have? Absolutely. You'll commonly have these peripheral type things bolted onto a foundational ERP application after go live.
Well, that could take time sometimes. I've heard before, phase two never happens. I don't really believe that. We do believe in that walk, crawl, run philosophy at Western Computer, but don't put it off if it's going to be critical to your business.
If you're made to order like these folks and you really need to know how much labor you're applying to each production order and it's a key metric for you, put it in at the beginning.
Make sure that you're taking advantage of it from day one so that you can reap all of those benefits. That would be my main advice.
You'll be sitting there years later and not having done it. So the critical stuff, and this certainly applies to this company, do it day one and make it part of your foundational ERP implementation.
Anya Ciecierski, ERP Software Blog
Great. So as we wrap up, what would you like manufacturers to know and remember about Western Computer and why it's a good choice to work with your team?
Ryan Pollyniak, Western Computer
Yeah, absolutely. We've been doing it a long time. We're passionate about being unbiased in our platform selection.
We represent all Dynamics 365 applications and we're laser focused on happy customers, long term partnership for life.
That's our mantra. Happy, referenceable customers for life and delivering quality implementations.
We're passionate about doing that and being trusted advisors. After 25 years doing this and over 1200 implementations, we've built a good reputation and one that we stand on and take very seriously.
Glad to talk through your needs with you if you would like. You can or attached to this video, I'm sure.
Anya Ciecierski, ERP Software Blog
Thanks for the insights, Ryan, and thanks for sharing how Western Computer really helped this growing manufacturer fix their profitability blind spot. And it sounds like they're in a good position for that growth that they're looking for
By Anya Ciecierski, ERP Software Blog Editor, www.erpsoftwareblog.com
