Customer Solution Case Study
/ Manufacturer Keeps Current With ERP Software and Realizes Sustained Value
Oldcastle Precast uncovers greater value with each deployment of the latest Microsoft Dynamics AX
Overview
Country or Region: North America
Industry: Construction Materials
Customer Profile
With 80+ locations, Oldcastle Precast, one of Oldcastle, Inc.’s six product groups, is the leading manufacturer of precast concrete, polymer concrete, and plastic products in the United States.
Business Situation
Oldcastle needed a flexible ERP solution to replace its existing legacy system. They struggled with the decision to upgrade to the most current version of the solution or continue with the old.
Solution
Oldcastle Precast selected Axapta 2.1 to replace their aging system and through their decision to continually upgrade their Microsoft Dynamics AX solution, they realized significantly greater value.
Benefits
· Doubled purchasing discounts by reducing vendor list by 40%
· Consolidated plant overhead functions resulting in 2% annual savings
· Centralized accounting functions and reduced AP staff by 66% / “Without Dynamics AX the job [of implementing rapid change in these difficult times] would have been insurmountable."
Bob Quinn, CAO,
Oldcastle Precast
Oldcastle Precast is a leading manufacturer of precast and polymer concretes, and plastic products in the United States. Locked in to a legacy ERP solution for almost 15 years, Oldcastle faced increasing risk and cost in supporting this aging system. In 2001 they decided to migrate to Axapta 2.1. Oldcastle Precast realized significant benefits from this migration; however, that was dwarfed by the much greater value they experienced by continually upgrading their Microsoft® Dynamics® AX solution as subsequent versions became available. By staying on the most current version of Dynamics AX, Oldcastle Precast could leverage the added features to lower inventory variance, consolidate overheads, centralize business functions, and further improve their manufacturing operations. By 2010, for every U.S.$1 invested the company generated almost U.S.$5 of benefits.
Situation
Many companies struggle with the decision regarding whether to upgrade to the most current software version or continue with the old version. Questions as to overall value, organizational resistance, and memories of prior deployments gone awry can lead decision makers to hesitate when offered the opportunity to upgrade. Though not always clear at the outset, most companies will quickly realize a greater return on their software investment by staying current and pursuing the prescribed upgrade path rather than waiting and skipping versions.
One critical component of any manufacturing company’s IT infrastructure is their Enterprise Resource Planning (ERP) solution. Integrating and combining production, accounting, sales, inventory, and operational data, ERP solutions can serve as an invaluable management tool for any organization, which was particularly true for Oldcastle Precast. Oldcastle Precast is one of Oldcastle, Inc.’s (North American arm of CRH, plc.) six product groups. Based in Auburn, Washington, their IT department oversees and manages a wide variety of IT assets for Precast’s 80+ locations across the United States. As a highly decentralized and geographically distributed company, Oldcastle Precast relied on the data provided by their in-house ERP solution - called simply “Term” - to facilitate day-to-day as well as longer-term management decision making.
Term was Oldcastle Precast’s legacy, UNIX-based ERP software, which was very flexible and well utilized by both management and operational staff, but according to Bill Blyth, Oldcastle Precast’s Chief Information Officer (CIO), “By 2001, Term was a 15 year old package that had not been supported in 5 years, so we knew it was at the end of its road.” With Term reaching obsolescence, Oldcastle had concerns about the high operating expenses and the higher cost of hiring any consultants, developers or trainers. Also, without vendor support, any future improvements or basic maintenance would fall on IT department staff at the expense of pursuing more valuable opportunities.
Solution
Oldcastle Precast needed an ERP solution that would replace its aging legacy system. After reviewing a number of potential options that were deemed too complicated and inflexible, including SAP and JD Edwards (now Oracle), Oldcastle Precast selected Axapta 2.1 (Axapta 2.1 was released in 2000; Axapta was purchased by Microsoft Corporation in 2002 and is today called Dynamics AX) to replace their aging Term system. “We liked the simplicity of the solution and the UI,” explained Blyth. “The UI was like Microsoft® Office, so the learning curve of the new package was easier. As one of our general managers explained during a demo, ‘I could figure out how to do a dispatch ticket in Axapta in a day or two, but I don’t think I’d ever figure out how to do one in JD Edwards.’”
Upgrade Phase 1
Deployment and Roll-Out of Axapta 2.1/2.5
Transitioning from their legacy Term system to Axapta 2.1 proved to be an arduous process for Oldcastle Precast. Moving from a UNIX to a Windows environment, entering data into Axapta, switching to a graphical user interface, bringing an unfamiliar user base up to speed on the new solution – all of these challenges and others made the initial implementation a struggle. The IT department rolled out Axapta 2.1 to Oldcastle Precast’s 62 manufacturing sites and offices, transitioning to Axapta 2.5 as it became available during the deployment. The complete roll out, including planning and getting ready, across all locations took 20 months. For each location, a deployment team of 4-5 people would stay on-site for approximately 3-5 weeks to assist in the transition. To facilitate user adoption, the IT Department supported on-site, role-based classroom training at each user location and developed detailed, role-specific “How To” guides based on typical user activities. Oldcastle’s had an initial outlay of approximately U.S.$6.5 million to cover the cost of software licensing, external consultants, deployment, hardware, and additional staff to roll-out the solution.
Benefits
Though a lengthy process that spanned between the summer of 2001 and November 2002, Oldcastle did succeed in moving from their legacy ERP system to Axapta 2.5, and quickly began to realize a number of important benefits from the On Hand Inventory Control, Purchase Order Management, and Document and Record Management modules. With this deployment, Oldcastle was able to migrate to a centralized database that provided a single reporting structure and improved operational visibility through use of cross-company reporting tools.
Plant Inventory and Purchase Order Management
With Axapta 2.5, Oldcastle Precast was able to integrate purchase order data with their plant inventory data to significantly tighten purchasing and inventory controls across the country. Plant managers could now review their inventory lists easily from within the system, identify potential issues, and drill down on any potential orders or items to understand if materials were on order, received, not yet received, etc. Thus, Oldcastle Precast was able to achieve greater inventory accuracy. As they grew from 62 facilities in 2002 to almost 80 in 2006, they were able to reduce the combined inventory variance by almost 80%.
Document and Record Management
With Axapta 2.5, Oldcastle Precast was further able to incorporate document management capabilities into their ERP system. As Accounts Payable (AP) invoices would be submitted by vendors, AP staff was able to “KwikTag” documents to specific invoices in the system. A user could easily add an invoice number and scan a document to include it with its associated record in Axapta. This enabled users to review transactions, invoices, delivery tickets, and payable records directly from the ERP system, rather than having to track down a paper copy from a filing cabinet in the office or somewhere scattered across the country.
Improved Operational Visibility
A third important benefit realized through Axapta 2.5 was the ability to develop a consolidated view of Oldcastle Precast’s business. Originally with Term, managers would need to wade through a massive stack of papers to review each manufacturing site’s profit and loss reports. With Axapta 2.5, Oldcastle Precast was able to utilize a single database of information, a single reporting structure, and a newfound ability to review the performance of all of Oldcastle Precast’s business units simultaneously.
Upgrade Phase 2
Deployment and Roll-Out of Dynamics AX 4.0
Following the successful roll-out of Axapta 2.5, Oldcastle Precast’s IT department continued to refine and maintain the solution for their users. Just before finalizing their roll-out of Axapta 2.5, version 3.0 of the software was released, though the IT department did not want to pursue an upgrade immediately following their initial deployment. When invited to join the Microsoft Technology Adoption Program (TAP) for Microsoft Dynamics AX 4.0, Oldcastle Precast was ready to standardize its infrastructure on the Microsoft platform, and saw participating in the TAP and upgrading to AX4.0 as a good way to improve their solution’s performance while increasing manageability.
As they started the deployment process, Oldcastle Precast’s IT department quickly realized the upgrade would be significantly less complicated and costly than their transition to 2.5, even as the number of system users had grown. The full roll out across all locations was completed in 10 months. Given Oldcastle Precast’s experience with the Axapta 2.5 software and general end-user familiarity with the solution, the IT Department was able to go live with Dynamics AX 4.0 over a weekend. The upgrade to Dynamics AX 4.0 was achieved at a reduced cost of approximately U.S.$2.0 million. This upgrade was considerably less expensive than their initial upgrade to Axapta 2.1/2.5 because the IT department had standardized around the Microsoft platform, had learned a great deal from the initial deployment, and was able to perform many more of the upgrade and deployment tasks in-house rather than through external consultants.
Benefits
Upgrading from Dynamics AX 2.5 to AX 4.0 brought new capabilities from the CRM module, Product Builder (a sales order line configuration tool), and the Electronic Data Interchange add-on. With AX 4.0 in place in 2007, Oldcastle Precast was poised to realize a number of additional benefits, including Business Rules, Plant Consolidation, and Improved Operational Efficiency.
Business Rules
By using Dynamics AX 4.0, Oldcastle Precast was able to enforce a number of business rules across its sales and purchasing processes for locations across the country, driving more consistent pricing, application of discounts, application of offer and contract terms, etc., which had a significant impact on their bottom line. By enforcing standard business rules through Dynamics AX 4.0 around pricing, discounts, and purchasing thresholds, they were able to improve their profit margin even in tough times.
Plant Consolidation
Another benefit realized through Dynamics AX4.0 was the ability to consolidate the overhead functions across a number of plant facilities around the country. Rather than having each individual plant in a given geographic market drive its own sales, marketing, estimating, and engineering services, Oldcastle Precast was able to identify areas of overlap and consolidate wide variety of overhead costs using the insights gained from Dynamics AX 4.0. This allowed Oldcastle Precast to have “a coordinated effort in the marketplace rather than individual effort in the marketplace,” according to Eric Farinha, Group CFO. Consolidations within Finance alone had approximately 2% of overhead in annual savings for the company beginning in 2008.
Improved Operational Efficiency
Dynamics AX 4.0 further allowed Oldcastle Precast to move its Accounts Payable (AP) operations from a distributed model, wherein each plant had its own AP team, to a smaller, centralized team that could oversee the required workload. The AP department was able to reduce nationwide staff by 66%. As an additional benefit, Dynamics AX 4.0 allowed the accounting staff to reduce the time to close the books and finish their financial statements from 5-7 days under Term to approximately 3-5 days.
Upgrade Phase 3
Deployment and Roll-Out of Dynamics AX 2009
Given their success with Microsoft Dynamics AX 4.0, Oldcastle Precast’s IT department had no hesitation to upgrade when Microsoft Dynamics AX 2009 was made available. Building on their experience from previous AX deployments, the IT department was able to deploy the new software version much quicker than past versions and at a much lower cost. With the Dynamics AX 2009 deployment, Oldcastle Precast was able to the reduce the full roll out time across all locations to only 6 months and have all users live on the new version over a weekend. The only additional cost the IT department incurred was an additional U.S.$800,000 to upgrade to Dynamics AX 2009. This deployment was even less expensive than the Dynamics AX 4.0 upgrade because Oldcastle had remained current with the latest software and had developed significant in-house deployment knowledge to facilitate the transition.
Benefits
The 2009 upgrade from AX 4.0 to AX 2009 brought new functionalities through Shared Services feature and the Address Validation, Sales Tax Outsourcing, Customer Invoices, and Multi Sites add-ons. With their new software version in place, Oldcastle Precast was able to realize a number of added benefits, including Improved Vendor Management and Purchasing Power, and the future roll-out of Role Centers to facilitate decision making.
Improved Vendor Management and Purchasing Power
Over the six months since Oldcastle Precast deployed Dynamics AX 2009, one of the single largest benefits has been an increase in purchase discounts obtained from their network of over 11,000 vendors nationwide. In the past, each individual plant would manage its own purchasing, resulting in single vendors receiving multiple independent purchase orders from Oldcastle Precast’s manufacturing plants and a significant loss in purchasing power for the company as a whole. Using Dynamics AX 2009, Oldcastle Precast was able to consolidate their list of active vendors from over 19,000 to under 11,000, decrease the number of checks printed by over 5,700 in just three months, and reduce check printing labor by approximately 10 hours a week. By consolidating their purchasing power, the company was able to double the percentage of discounts received on orders from its vendor base from roughly a quarter percent (0.25%) to almost a half percent (0.5%) over 6 months.
Role Centers
A benefit Oldcastle Precast’s IT department is beginning to deploy is the usage of “Role Center” functionality in Dynamics AX 2009. Role Center will enable Oldcastle Precast to drive management visibility and insight into their ERP system on a user by user basis, tailored to individual roles. Role Center will allow the company to provide different users with tailored performance dashboards, so that a sales person can easily evaluate sales team performance, a regional manager can evaluate regional performance, and so forth. This additional insight will allow Oldcastle Precast to make more informed business decisions to increase revenue, decrease costs, and eventually increase profit.