by Mark Chillingworth

British manufacturers can compete if they reduce and manage costs accurately says IT head at Hansatech EMS

Jun 07, 20119 mins
IT LeadershipIT StrategyManufacturing Industry

A year ago taking office Prime Minister David Cameron said the Conservative-led Coalition government was going to “rebalance” the British economy, which he described as being over-reliant on sectors such as finance. Cameron told an audience in Yorkshire that his government would back manufacturing in sectors such as aerospace and green energy as well technology, giving “manufacturing another chance in this country…by getting the infrastructure right”. In his March 2011 budget Chancellor of the Exchequer George Osborne said his changes to business taxation was “a budget for making things, not making things up”.

Political rhetoric is all well and good, but for the British manufacturing sector to really compete, it is going to take a bit more than slick words from those who in the past did more to damage manufacturing than any previous legislator. Manufacturing is a competitive sector and one that it is truly global, therefore companies based in Britain will need to be efficient in all their processes to ensure that they can win deals that of late have defaulted to Eastern Europe, Asia and now the BRIC economies.

In Poole, Dorset one company is demonstrating that manufacturing survives and is in fact growing and in no small part because the company relies on good information management and has made some strong strategic IT decisions. Hansatech EMS is a contract electronics manufacturer building circuit boards for original equipment manufacturers (OEM). It specialises in radio frequency equipment that is used in mobile telecommunications and specialist vehicle tracking devices that public transport and freight companies increasingly opt for.

In recent years the company has also expanded its operations to include a consultancy arm that carries out project management for manufacturers who are looking to take costs out of their manufacturing processes.

“We are seeing a lot of ideas coming through at the moment,” says Steve Ching, head of IT at Hansatech. “There are still a tremendous amount of ideas coming out of the UK. Designers are looking for advice on how to actually make the devices they have conceived, so we have become a manufacturer and professional services organisation.

“There are also a couple of places in the UK that are outsourced design providers and then they work with us to take a product out into the market,” Ching says. One example the company became involved in recently was a new technology for deep cleaning hospital wards. Hansatech worked with the inventor to produce 10 to get out into the market to gauge interest.

“We are now looking into taking costs out and getting it out into the market,” he says.

Ching explains that electronics manufacturers are a demanding customer base for any manufacturer. “One customers offers the challenge of placing an order, getting the materials in, build the product, ship and bill the customer in eight days. There are some extremely short lead times for us to engineer and ship within,” he says.

Poole is a hub for specialist manufacturing and engineering in the UK, acting as home to Sunseeker, the luxury yachtand powerboat manufacturer as well as the European arm of Penske motorsport which has built F1 and Indy 500 single-seater racing cars. Ching is upbeat about the prospects for manufacturing.

“Work is coming back to the UK we have recently won some business from Poland because of the costs of transport at the moment. The price of fuel has had an immediate effect, although there is a cost to us for the components we bring in.

“Realising the development and technology and how to use them is core to the UK, there is a huge opportunity to develop products that are used in other devices. It is quite exciting in the UK at the moment.”

Hansatech is benefiting as a manufacturer not only because of the wider economic changes the world is going through as a result of unrest in oilproducing nations, but also because it is an efficient organisation that can compete. It operates as close to a lean operation as possible. On a tour of the specialist factory floor Ching points out how small – intentionally – the stock area of the Dorset company is, with little in the way of raw materials or finished product awaiting customers or time on the production line. To achieve this Hansatech has been, like most manufacturers on an enterprise resource planning (ERP) technology journey. The most recent chapter of this journey involved a new ERP system being integrated into the business just as the company carried out a management buy-out and went it alone after having been part of a larger organisation.

Hansatech has opted for the Epicor 9 ERP platform and its integration has, Ching says, played a significant part in optimising the way the company operates.

“Some of our customers are multiple customers via different project teams acquiring our products. Our engineers structure their materials requirement in the way they want to build a product. That is not always the best materials management method for the business to know what materials it has in,” he explains of why Hansatech needed an ERP that looked across the business and served the needs of engineers building products to a tight deadline and a business trying to operate at a good margin.

“Epicor has allowed us to do that,” he says. Ching demonstrates the busy interface of the application, which divides the business up into standard manufacturing job areas such as sales, product management, materials management and shipping. These are the standard parts of a business and the Epicor system.

“Having these as standard parts to the software saved us a huge amount of time because it works the way we do. Having worked with other ERPs, working the way a business does sound obvious, but you wouldn’t believe the number of ERP systems that do not.”

Hansatech, like many manufacturers and their CIOs has had a challenging journey with ERP systems. The company is 25 years old, and Ching began assessing ERP systems back in 2006 when the company was still using a green screen manufacturing process system. Soon afterwards Hansatech was acquired by the Anglo-Nordic company PartnerTech, which was already using an ERP system from IFS and inevitably wanted to standardise IT operations across its manufacturing base. Ching integrated the IFS ERP into the Poole business.

“IFS was their preferred ERP, we took it on in 2007 in a six-month project and three months of business process changes,” he says.

But more change was afoot. PartnerTech was looking to consolidate its manufacturing footprint, especially in the UK. The Hansatech management board felt that there were good opportunities in the UK for its manufacturing operation and negotiated a management buyout of the UK operation, launching Hansatech on its own again after a short period of ownership.

“We kept all our customers because we saw an opportunity, as part of PartnerTech we were turning away business as it didn’t fit the corporate philosophy, which it turned out didn’t fit in with the UK. Hansatech has an established business name and that helped with the marketing as we went alone again,” Ching says.

For Ching and the Hansatech IT this meant another significant change.

“We discovered the real running costs of our previous ERP system. Prior to the management buyout we had been sheltered from the costs of this ERP. The customisations were a fortune to maintain and a lot of the features we didn’t need.

Counting the cost of ERP

“It was three times the cost than was needed and extremely complicated and I wondered whether as Hansatech we could manage this as a business,” Ching says. He had already considered the Epicor ERP system in his initial fact finding for a new ERP before the PartnerTech acquisition. Ching decided to call Epicor in for another demonstration to assess whether he should make the bold step and switch Hansatech onto another ERP system, less than a year after it had integrated IFS ERP.

“There was a lot of soul searching to make another change, but the running costs of Epicor was a third of OFS and needed no customisation,” he said.

What followed was a rapid integration of the Epicor system.

“On the 17th of February 2008 I called Epicor for a demonstration and placed the order on March 6th, installation began on March 12th and we went live on April 6th.

“IFS didn’t have a method of breaking out a business, they couldn’t tell us how to chop a division off and it would have taken days of consultancy,” he says of the technologically difficult separation from their previous ERP. Hansatech required just four days of consultancy to move to Epicor as 80 per cent of the functionality the Dorset business required was out of the box.

“It is the systems that are limiting business,” Ching says of some ERP technology. “Now we are finding the best way for the business using our ERP. You’ve got to remain focussed on what is best for your business. We are a manufacturer, we buy material in, we make, we sell, we get the cash in,” he says of what really matters not only to the Hansatech business, but to him too as the IT head for the company.

Ching opted for the Epicor 9 system because of the simplicity to offered his organisation, for example setting up alerts for key staff members takes 15 minutes he says.

“The documents I would have to write for IFS to have changes made and the process was so hard that we stopped doing so.”

As to change management issues with the staff at Hansatech Ching communicated to the staff that they all knew how to raise a purchase or perform other business process, so they were to approach the new ERP as if they had changed job, they knew how to perform a certain task, but in a new job may not know the systems until they have tried to carry out tasks on them. Overall Ching reports the workforce took the tool in hand and got to grips with it.

“We saw most of the business benefit of ERP by going from our legacy systems to the IFS. What we saw with Epicor was a business benefit of reduced costs.

“IFS was a big learning curve. Fortunately once you’ve been through it once you know what you want to buy,” he says.

Now Hansatech is dynamically improving its business, delivering data on where a product is in the manufacturing process to the directors instantly, so that if the MD is with a customer they can provide real feedback, not wait for a weekly report to be generated. It is these sort of IT led information and process changes that can help the manufacturers in the UK remain competitive with other overseas markets.