Magnet

Magnet’s planned approach to improving business efficiency.

Problem

As well as poor availability, the functionality of this system was also limited and many departments were relying on disparate cul-de-sacs of information expertise.   Effectively the core package had reached the end of its life. This was confirmed subsequently when the software owners announced the closure of all support services from January 2003.

Plans for a replacement had already reached a conclusion during 2000 but this decision was cancelled after Magnet Limited became part of the Swedish furniture group Nobia. The reason for this was the experience of a German subsidiary with the same ERP package that Magnet was planning to install.

Immediate alternatives included Nobia’s existing system, which was subsequently eliminated because it did not fit Magnet’s business profile. So in May 2001 the company started another selection process.   A project team was set up comprising representatives from IT and key user departments. The initial remit was to establish priorities, evaluate possible vendor solutions and put forward a budget for Board approval.

As the project progressed a full time Steering Group was formed to support the project team. Group IT Manager Aidan Phillipson was appointed Project Manager.   Proposals were requested from four vendors including IFS and Magnet’s incumbent supplier.

"We needed to give our existing supplier a reason to continue to support their system,” says Aidan Phillipson. In the final analysis it was a very close decision between IFS Applications and a competing ‘Oracle’ based solution.

Deciding factors for IFS included the screen presentation. The look and feel of the user interface was preferred to its competitor. Another important point was the support provided for purchasing and validation of invoices. This was a high priority for Magnet.

Readsoft

Magnet has a large number of suppliers, many of which are small businesses. The finance department processes about a thousand supplier invoices a day. Keeping on top of these invoices and matching them to purchase orders and checking against material actually received and verifying correct prices; was a time consuming process. IFS put forward a solution in conjunction with Readsoft to automate this process without having to key in information from the invoices.   This worked by scanning and lifting key details from invoices electronically and then feeding these into the IFS database which would then automatically match purchase orders and receipts to invoices.At the time this was a unique proposition offering real benefits to the purchase ledger teams in terms of improved efficiency and time saved on this process.

Now operational, this application is one of the first reference sites in the UK for the IFS-Readsoft integration. "We are starting to see the benefits and efficiency improvements coming through," says Aidan Phillipson.

Implementation

The Nobia Board ratified Magnet’s recommendation to install IFS, although it went against the policy, which was being applied at that time, for a preferred corporate solution.

Magnet’s case was that its business operations were different to the other group companies. "We have a strong retail side, whereas with the other members the emphasis is on manufacturing. Today commonality is no longer a big issue as current systems are all interoperable in terms of sharing information.”

Reviewing the full impact of the IFS implementation has been complicated by the fact that the company structure and organisation changed considerably during the course of the implementation.

The implementation kicked off in May 2002 against an eight-month delivery programme aiming to go live by January 2003. During this period two subsidiary factories were sold off and the decision was made to out-source the finance processing and IT departments. Although not directly as a result of the implementation, these changes resulted in a completely different set of circumstances between the outset and go-live.

Benefits delivered

Most significantly, Magnet now has an operational system which is fully supported and capable of supporting the company’s future strategic requirements. To minimise risk it was decided to prove each stage by piloting the system in a particular business area before rolling out into other areas.

An important aspect of IFS is its component-based architecture which supports Magnet’s step-by-step approach.   "Our implementation is really the first stage of a planned approach to improving business efficiency," says Aidan Phillipson.

“Noticeable improvements have already been made in the level of inter-personal efficiency through the introduction of automation and streamlining of processes.   Within the general ledger area, people used to spend a lot of time at the end of the month, retyping things onto spreadsheets and collating information for entry into the previous system. Information would then have to be extracted for input into a separate forecasting tool to produce the reports. These operations are now operating seamlessly and we have achieved a lot of improvement in the quality and efficiency in generating management reports.”

Another important objective has been the improvement of cost controls across the business.   Under the new system almost all purchase orders are on the system whereas previously Magnet operated with a lot of manual purchase documentation which was impossible to track and control. Now all purchasing is done through the IFS process and subject to authorisation. This has improved cost control, not only for the procurement of materials but also for services which was a major cultural change for the business.

As a step-by-step implementation it was important to achieve a high level of integration and interfacing with other Magnet systems. According to Aidan Phillipson this turned out to be a lot less painful than most people had anticipated it was going to be. This capability has provided significant benefits.

"We wanted to put a full enterprise resource planning (ERP) system in rather than a best-of-breed finance package.   Whist predominantly we were focussed on finance and purchasing elements, we wanted to put something in that would support manufacturing. Our initial plan was to do more for manufacturing at a later stage," explains Aidan Phillipson.

Having made good progress with the financial, purchasing and planning modules the scope of the project was widened to include a number of shop floor facilities to support production planning and materials tracking within the factories. In the process the number of users was increased from 120 to 170 all within the original timescale and budget for the project.

"Whilst previously this may have been considered a step too far, it was one that we felt confident about taking as we became more familiar with IFS.   The reward came by way of better methods for planning and recording of shop orders and being able to track orders on the shop floor and understand and improve the way we run the factories."

"With that step safely installed Magnet is now in the position to consider making the transition towards assemble to order production for kitchens. Similar plans are underway at the joinery division in Keighley with the implementation of additional configure–to-order functionality to support made to measure window frames.

Conclusion

So far, the sales side remains an area for future development. All Magnet branches operate as autonomous profit centres using in-house developed sales order processing systems. One of the advantages of IFS has been that the headquarters can now publish, on a monthly basis, a profit and loss account for each branch. Another key benefit to encourage branch performance.

In summing up the company’s experience with installing IFS, Aidan Phillipson describes it as “a ‘challenging’ experience with a project that increased in terms of user population and scope to that originally envisaged, with significant changes in our internal organisation and yet we still completed the project on time and under budget.

"If you ask me whether we delivered the system we thought we were going to put in at the beginning of the project, the answer would be: no, we didn’t. The business changed significantly over the life of the project. The opportunities that the IFS consultants identified, for widening the scope to include the manufacturing side, opened our eyes to the huge potential of the IFS software.

"We have broken new ground with the Readsoft integration and that is now delivering real benefits on a daily basis."

Looking ahead, Magnet has now completed the groundwork required for continuing development of its business processes on the supply side. As far as e-commerce is concerned, full-on EDI is probably not going to be viable for an environment involving a large number of small suppliers.   Payment by bank transfer has been introduced and other areas taking advantage of Internet technologies are actively under consideration.

In particular the use of XML (a web interface facility using eXtensible Markup Language) will support the development of electronic invoicing as well as other facilities for sharing information with key suppliers. This is a key area where Magnet Limited intend to build on its investment in IFS Applications.

"By moving cautiously step by step, we intend to carry our ERP implementation on through to better supply chain integration. There is a long way to go yet but we have certainly taken our first steps down that road," says Aidan Phillipson.

For additional information, contact:

Christine Murphy, Marketing Manager
Telephone: +44 (0)1494 428900
Fax: +44 (0)1494 428907
E-mail: christine.murphy@ifs.co.uk