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Summer 2011
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Technology that Adds Value to Value-Added Services

Modern enterprise systems offer the industry-specific functionality that service centers need.

The increasing number of value-added processes found in today’s service center environment requires more technological sophistication than ever before. Many service centers have felt the pain of attempting to transition their legacy software systems—designed for more traditional buy and sell business models—to support a more diverse set of product and service offerings.

Legacy or “niche” service center systems often don’t have the scalability or flexibility to adapt to broader manufacturing or value-added services, which prompts many companies to consider investing in a new platform. Significant enterprise technology investments in the metals industry are typically made every 10 to 12 years, a period during which innovation can dramatically change the value of enabling technology. Modern enterprise systems, formerly referred to as enterprise resource planning (ERP) systems, now contain technical advances designed to give service centers both the industry-specific features they need and a flexible platform to support business competitiveness and growth. These technical advances include streamlining cross-functional processes, optimizing material allocation and empowering end-users with information to help them make decisions.

Streamlining cross-functional processes
Service centers need integration between sales, production and quality departments to facilitate hand offs and make sure products meet customer specifications. Whether specifications for a product are standard or indicated at the time of sale in a make-to-order setting, modern enterprise systems readily capture and transfer customer requirements and acceptable tolerances to production for validation. Furthermore, if material must adhere to multiple specifications, such as ASTM and regulatory requirements, leading platforms can merge the specifications and, in cases of duplication, retain only the tightest tolerance. Once the link between sales and production is established, systems have the ability to validate quality tests as production is reported, reducing the need for separate quality inspections. After quality tests have been passed and chemistries inherited from the parent tag, material certifications (or MTRs) can be generated and released with the material.

Optimizing material allocation
Service centers can now look for enterprise systems to optimize material allocation, a function formerly handled offline or with third-party or custom applications. Given the capital service centers must invest in inventory, material optimization is not optional but is vital to survival. Contemporary systems have functionality to meet such requirements, including robust planning engines that anticipate and allocate remnant material. This analysis happens before production is even complete, eliminating the offline and error prone matching game performed by production planners who are often forced to “rob Peter to pay Paul.” New features for prioritization also are common, allowing on-hand inventory to be checked for a range or hierarchy of sizes rather than requiring a specific item or size preset in the bill of material.

Another recent advancement in material optimization is production reservation logic that selects the lot of material with the weight closest to the quantity required by planning or the production schedule, rather than the typical first in, first-out (FIFO) reservation. While considering the material required to fulfill demand, the system recommends the optimal material, helping reduce costly downtime from re-lists when material is not run in full. In addition, this logic reduces excess finished good and semi-finished good inventories that result from over processing, which can have a big impact on margins. The more virgin (or unprocessed) inventory on hand, the more flexibility service centers have to fulfill varying customer demands.

Empowering users with decision-enabling info
Service centers rely on enterprise systems to eliminate manual processes and provide users with actionable information. Offline, manual exercises have been replaced with automated calculations that provide real-time data to decision makers in the office and on the shop floor. Logic such as theoretical yield calculation (TYC) helps service centers that perform stamping, shearing, leveling and other processes that consume pounds to produce pieces. Taking into consideration gross weight, TYC provides visibility to the number of pieces of a given part that can be yielded from the available pounds or tonnage of on-hand inventory. This knowledge helps planners proactively manage inventory levels and more easily identify production discrepancies when the theoretical yield differs from the actual beyond an acceptable tolerance. Another critical system feature designed for service centers is the automatic calculation of cut point, which helps operators know where to break the outside diameter in order to adhere to customer weight
restrictions.

As service centers expand their value-added offerings, other system advancements can come into play, such as factoring dimensional transformations into routings. Common applications are tube, bar and wire processors where a routing operation might result in the material being drawn to a new outside diameter and wall thickness (in the case of a tube mill). The target dimensions (OD/width and wall/gauge) need to be specified on each production operation along with a factor that represents the anticipated change in length or width. Production feedback reporting on the actual dimensions and, where applicable, the number of pieces in process is also required.

Historically, and understandably, many metals organizations have felt enterprise systems were too generic for their business, unable to manage their unique requirements or adapt to changes in product and service offerings. Fortunately, service centers today don’t have to compromise or settle on a solution that isn’t a good fit. Using the technology advances over the past decade, metals companies are increasingly implementing systems that add value and provide the best of both worlds: an enterprise-wide integrated platform with industry-specific advances that can streamline, optimize and empower.
 
Editor’s note: This article was contributed by the experts at Crowe Horwath.

Crowe Horwath LLP, Indianapolis, Ind., is one of the top 10 public accounting and consulting firms in the United States, providing technology solutions for the metals industry through Microsoft Dynamics AX, including applications for financial, customer relationship, supply chain and human resource management, as well as business analytics. For more information, visit www.crowehorwath.com/microsoft.

  
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