Service centers have experienced a series of highly profitable years, and many are reinvesting some of those gains to bring their management systems up to date. Systems providers, likewise, are busy upgrading their products to incorporate the latest software technology and address the changing needs of metal distributors and processors.

“The smart companies know the good times won’t last forever and are taking the opportunity while cash flow is good to invest in new systems,” says Tim Holman, director of marketing at Bayern Software Inc. in Phoenix, Ariz., echoing the sentiment expressed by most software companies.

Peter Doucet, vice president of consulting at Invera, Newtown Square, Pa., says his company’s STRATIX enterprise software system is receiving strong inquiries from service centers, which are not only growing organically but through mergers and acquisitions. The integration of new acquisitions, and service centers’ growing use of outside processors, greatly adds to the complexity of managing inventory and processing at multiple locations.

“Over the years, as service centers have tried to get closer to their customers, they’ve had to add processing capabilities. Often a particular process is not a big enough part of the business to warrant bringing equipment in-house, so they partner with an outside processor,” Doucet says.

This presents special challenges for enterprise resource planning systems, notably keeping track of material once it has left the warehouse. Each software product tackles this task in a different manner, but Doucet describes Invera’s approach.

“Historically, outside processing was treated outside of the normal order fulfillment cycle. To send material to an outside processor required entering a separate purchase order, as if it were a separate transaction. We have essentially blended outside processing inside of the standard order fulfillment cycle. With STRATIX, whether you are processing something in your own warehouse, in a sister warehouse or at an outside processor, it’s really a common process.”

To cite one example, say an order calls for the service center to burn a plate in its own warehouse, send it out for drilling at one outside processor, who then ships it to another processor for bending before sending it directly to the customer. STRATIX automatically generates purchase orders for the different steps that occur at outside processors. It detects that one process is being done at your warehouse and the others at outside locations, and automatically creates the transfer requests. Without paperwork shuffling from the sales department to the warehouse, shipping personnel can see on their screens that orders are due to ship to that processor, and can initiate the process with the click of a button. The system then generates the necessary shipping documents. Salespeople can monitor the progress of each order from their desktops as the system tracks them, Doucet explains.

AXIS Computer Systems Inc., Marlborough, Mass., a Consona business unit, recently released version 5 of its AXIOM Enterprise Management System. The new release contains over 100 new features developed to directly address current issues affecting the service center industry, including increasing customer price and delivery pressures, rising raw material and freight costs, and the expanding use of electronic commerce, says Ron Greco, AXIS director of sales.

“Service centers are being asked to do more and more to the material, beyond just distributing it. They are pushing the envelope more toward manufacturing than pure distribution. Traditionally, systems that addressed the service center space were distribution-oriented; they really didn’t accommodate that value-added processing.”

To meet OEM customers’ demand for metal with first-stage manufacturing steps—such as bending, drilling or polishing—already completed, service centers have to work more with outside processors, concurs Todd Ouellette, industry manager at Verticent, Tampa, Fla.

To manage their relationships with these contract processors, they need a system that automatically creates a purchase order to the subcontractor, and generates shipping documentation as the product moves to and from the processor. For a service center to create a shop floor work order for its warehouse, as well as one for a third-party warehouse, to ship and receive the material, and then handle the payment and billing for multiple parties, is a complicated sales order process with most systems, Ouellette notes. In fact, salespeople often don’t even try to sell outside services because order entry is such a headache—which costs their company potential profits.

Controlling excess inventories
The recent oversupply in the distribution channel, and the resulting price pressure, highlights the need for better inventory management by service centers. Software vendors have refined their approaches to inventory planning and replenishing to help service center buyers do a better job of forecasting demand.

Inventory management systems like OpenTrac from Northrop Grumman, Canonsburg, Pa., will help the industry better balance supply and demand, says Gary Marzec, director of industrial operations. “Many of our clients have a far better handle on their inventory and therefore can schedule and provide less material in the pipeline. This represents a huge productivity savings. Because there is better visibility to that inventory, they can manage it leaner, which saves a tremendous amount of money.”

Northrop Grumman’s focus is on supply chain management, facilitating communications between trading partners to help the industry manage its inventory. Its OpenTrac family of ERP software products is designed to handle the requirements of large, sophisticated companies, so the trend toward industry consolidation represents an opportunity, Marzec adds. “As companies come together, they look to integrate their systems, which plays to our environment.”

Invera’s STRATIX monitors a service center’s inventory levels, forecasted demand and outstanding mill purchase orders, and calculates how much and when each item should be reordered based on past history. “In a multi-branch environment, one warehouse may have excess inventory while another needs inventory. The buyer is able to tell when another warehouse has the product he needs, and can transfer it rather than going out and buying it,” says Doucet.

Unstable metals prices add to the uncertainty of inventory management, and software can only do so much, he admits. “Now they are not only buying to meet anticipated demand, but they’re buying because prices may go up. With pricing less sure, it adds a component that is difficult for systems to help. We can certainly tell a buyer how much he needs to buy, but if he sees a good deal offshore, we can’t tell him not to buy it.”

Though not new, the demand forecasting module in Bayern’s STEEL PLUS program is getting more attention from service center users, who are increasingly concerned about overbuying and inflating inventories, Holman says. Rather than using simple reorder points for individual items, Bayern’s software looks at the past six months of sales and usage history to determine how many months of supply is on hand. The system allows inventory managers to see if they have purchase orders outstanding that should be cancelled. It automatically recognizes spikes in sales and omits them as anomalies, and accounts for such factors as seasonality and individual customers that are no longer active.

“Past history is a good indication of future usage,” Holman says. “More and more are taking advantage of this demand forecasting because they realize that, even though they may be able to get a good deal on material, it does no good if it just sits on the shelf.”

Human, programming languages
Recognizing the growing diversity of the American workforce, Verticent has been busy translating its software into multiple languages, says Ouellette, who cited one Maryland service center where five different languages are spoken: English, Spanish, Vietnamese, Chinese and Russian.

“We’re finding that as technology moves out onto the shop floor, language becomes more of an issue. We’re giving our customers the capability for each employee to have screens come up in whatever language they want.”

Staying on top of the technological trends, some software vendors are beginning to adapt their applications using the latest Microsoft .Net [“dot-net”] development tools. Microsoft defines .Net as “a strategy for connecting systems, information and devices through Web services so people can collaborate and communicate more effectively.”

Dot-net technology will eventually replace electronic data interchange, which has never fully caught on, especially among smaller trading partners, Ouellette says. “One of the reasons we are rewriting portions of our applications in Microsoft .Net is to facilitate transfer of information over the Internet, as opposed to EDI. What it allows is not just the ability to far more easily access your database over the Internet, but to pass data to other systems using the dot-net system. EDI on steroids is the best way to describe it.”

John Bilek, president of Enmark Systems Inc., Ann Arbor, Mich., says his company’s release of its new Eniteo system is a full .Net rewrite of the company’s Command Center program. “It’s a ground-floor rewrite of a service center application in the latest dot-net framework. It’s not old code we just put lipstick on.”

Putting data on the dashboard
With mergers and expansions common among service centers, managers often need to monitor activities at more locations than ever before. “In the last two years, I bet 25 percent of our customers have opened at least one new location. Many have opened several more,” Holman says.

Bayern’s new STEEL PLUS Inventory Dashboard is a separate program that runs alongside STEEL PLUS. The dashboard, which appears as a small window on the screen, is designed for managers with responsibility for multiple warehouse locations, who need quick and easy access to important inventory information such as available stock levels and incoming orders. Users can drill down to access additional detail such as “on-hand” vs. “in-transit” inventory, mill heat numbers and other user-defined data.

“For companies with multiple locations not necessarily on the same database, we created this inventory dashboard so they can see where their inventory stands at these other locations on the fly,” Holman says.

Invera offers a similar management dashboard feature that allows managers to monitor sales and bookings in real time in a special window on their desktop. “A lot of managers are interested in knowing how their sales are going, not necessarily at the end of the day or the end of the month. With this dashboard, managers can check certain business conditions with a quick glance at graphs, charts or data without having to plow through reams of reports or five or six screens to find the information,” Doucet says.

The Metal Center Management System from Compusource Corp., La Palma, Calif., offers three dashboards: one sales oriented, one operations oriented and another finance oriented, says Brian David, director of sales, metal distribution. “A dashboard is a way to graphically represent business data, typically designed for managers as snapshots in their areas of interest. It uses graphs or speedometers, just to give them a snapshot of what’s going on. Then they can drill down if they want more information.”

MCMS also includes new modules for job costing, quality/ISO management and more barcoding integration, David says.

Increasingly, service centers are incorporating barcodes and wireless hand-held scanners into their inventory management operations, giving them real-time control, David notes. “We put a barcode on the pick ticket that goes out to the shop. All the metal has a tag on it. If sales sells some two-inch round bar, the guys in the shop shoot the order number off the ticket, and shoot the tags off the bar, and that updates the inventory in real time—as opposed to the old way of writing it down, taking hours to get it back to the office, and meanwhile someone has sold that metal twice.”

Using barcodes can help service centers gain more control of inventory, find items faster, shorten the time needed to conduct physical inventories, cut shipping errors and reduce human error in the warehouse. Barcoding eliminates duplicated effort, such as rekeying paperwork. Orders can easily be tracked in real time with a simple scan as they move from one processing stage to another. Ultimately, barcoding helps companies reduce their labor force. “Barcoding is hot now, especially among the top 25 percent of larger service centers who are more tech savvy,” says Bayern’s Holman.

At AXIS, its latest version of AXIOM features new wireless capability for shop floor data collection, from handheld scanners to scales. The software also offers refinements for the printing of the barcode labels. “Service centers face increasing demand from their customers to label material in a particular way. Demand for customer-specific label creation is becoming extreme,” says Greco.

Software on demand
Not surprisingly, as demand for service center software has grown, so has its cost. Unlike computer hardware that gets cheaper even as it gets more powerful, software vendors are hoping to recover their product development costs. Service centers can expect to see increases in upfront costs and fees, which vary widely depending on how many users they have and how much ongoing support they need.

Some software providers are getting more creative in how they offer their products, and how service centers pay for them. Among recent enhancements to Invera’s STRATIX ERP software is an option for on-demand hosting. Rather than installing the software on servers and desktops at the client’s locations, users connect to the system housed at Invera’s technology center via the Internet. This approach eliminates the need for service centers to purchase and maintain new hardware or to hire staff for systems administration. Invera personnel handle all the data backups, software upgrades and other tasks.

“Each customer has their own server, so there’s a high level of security. They can still access their data and write their own reports just as if the system were at their place. But essentially, they have none of the operations and system management issues to contend with because that’s done by our professional technology staff,” Doucet explains.

Recent improvements in the cost and reliability of broadband technology have made this web-hosting approach more practical. “We often get comments from people who say they don’t want to be in the software business, they just want to sell steel. With this approach, they don’t have to maintain or manage their software,” he says.

Not only is Enmark’s Eniteo system new to the marketplace, but the manner in which Enmark plans to roll it out is also somewhat unconventional. Rather than buying the software outright, service centers will pay a monthly subscription fee based on the number of users. Periodically, as software developers complete each new piece of code, users will automatically receive the update.

“We plan to continually release major new features at no additional cost beyond the normal subscription fee,” Bilek says. “The theory is, as we enhance and improve the code, we will attract new service centers. If a customer buys the software today, three years from now their code set will actually be much better. What other product can you say that about?” Enmark will continue to support its Command Center product, though it will eventually be replaced by Eniteo, he adds.

Tracking labor costs
Most advanced ERP systems offer some mechanism for tracking the cost of labor involved in processing operations. Bayern’s STEEL PLUS Labor Tracking module serves a time-clock function on the shop floor. Using either a mouse or a touch screen, the line operator clocks in as he begins a job, scans the sales order, then clocks out when the run is complete. This tracks the time required for each job down to the second, and multiplies it by a loaded labor rate, which not only includes the operator’s salary, but benefits, insurance, utilities, etc.

“In the past, service centers have just estimated the cost of processing. Now they can track actual human time and machine time,” Holman explains. “One machine may be slower because it handles thicker material, another may use more electricity, yet another may need a more skilled employee. So you can build in a loaded labor rate for each machine. It gives owners and sales managers a much more accurate view of profitability.”

For service centers serving the construction industry, Invera’s software offers a new feature that streamlines the entry process for complex orders and facilitates shipping to the construction site. Architects and contractors typically want each beam or piece of plate to include a “piece mark” that relates to the plan or section of the building being built. “We have devised a function with a special streamlined order-taking process so such orders can be quickly entered while recording the different piece marks required by the customer,” Doucet says. The system groups the orders together by product type rather than considering each piece as simply an individual item. The piece mark data then flows through production and shipping so the pieces that are earmarked for a particular cross-section of the building can be processed and shipped as a group to the proper location on the work site.

Does service center consolidation threaten to shrink the market for software? Bilek, like most of his peers, remains unconcerned, as the service center market remains dynamic and growing. As he points out, the wave of Y2K retrofits took place almost a decade ago, and the next wave of technology upgrades is just beginning.

Software Vendors

Company: AXIS Computer Systems Inc.
Product: AXIOM
Web site: www.axiscomp.com

Company: Bayern Software
Product: Steel Plus
Web site: www.bayernsoftware.com

Company: Business Automation Inc.
Product: Metal-Pro
Web site: www.baipro.com

Company: Compusource Corp.
Product: Metal Center Management System
Web site: www.compusource.com

Company: Enmark Systems Inc.
Product: Eniteo, Command Center
Web site: www.enmark.com

Company: FastCAM Inc.
Product: FastCAM QE
Web site: www.fastcamusa.com

Company: 4GL Solutions
Product: Steel Manager III
Web site: www.4glsol.com

Company: Integrated Steel Management 
Product: Steel Service Center Manager
Web site: www.isscm.com

Company: Invera
Product: STRATIX
Web site: www.invera.com

Company: Metalware
Product: Metalware, MetalNet
Web site: www.paragon-csi.com

Company: Northrop Grumman Corp.
Product: OpenTrac ERP
Web site: www.it.northropgrumman.com/opentrac

Company: SigmaTek Corp.
Product: SigmaNEST
Web site: www.sigmanest.com

Company: Software Plus
Product: Production Plus
Web site: www.software-plus.net

Company: STEELMAN Software Solutions
Product: STEELMAN
Web site: www.esteelman.com

Company: Verticent
Product: ERP Plus
Web site: www.verticent.com