In a time where efficiency and lower costs are universal goals for most companies, Adell Group knew it could do a better job at maximizing productivity and visibility through technology.
“We immediately kind of understood that just by walking around the plants, you could measure the inventory by the inches of dust on it,” said Michael Lee, CIO of Vehicle Accessories Inc.
Adell Group was acquired by Kinderhook Industries, an investment portfolio of companies, in 2019 and was folded into the Vehicle Accessories Inc. umbrella. Shortly after, Adell Group began digitizing its resources.
“We knew we had an issue with inventory, and we knew we were going to be acquiring several other companies and needed a way to bring those companies together, so we started looking at ERP systems,” Lee said.
Many companies turn to ERP systems to streamline processes, improve worker productivity, anticipate IT agility improvements and enable further innovation through modernization efforts, according to a Boomi survey of 1,675 CTOs and enterprise architects.
Even though leadership at Adell Group was on board with tech investments, making it an easier sell for the CIO, the top decision-makers took their time to ensure that the system they chose had the proper capabilities, easy end-user experience and stayed within budget.
For capabilities, Adell Group focused on traceability, inventory control mechanisms, better reporting, real-time plant floor data, controls over scheduling and accessibility for both English and Spanish-speaking workers.
Before digitizing, most things at Adell Group were manual.
“Once it left the office, it was completely manual with some spreadsheets, a lot of pieces of paper flying around with signatures, so we really wanted to automate that facility, and we knew we could get a lot of advantages out of it,” Lee said.
Lee worked with the CFO for three to four months to make an ERP selection and ended up with Plex. For companies undergoing digital transformations, it can be a large undertaking with many risks if not completed correctly.
Seven in 10 digital transformation efforts do not meet their objectives, according to a report from BCG. Some companies have experienced massive losses due to inefficient technology implementation, such as J&J Snack Foods, which lost an estimated $20 million in revenue in one quarter during its ERP transition.
Adell Group adopted the ERP system through three implementation phases, separating the launches based on specific business units.
When the first round of implementation began, the company was not running at full capacity due to the pandemic. Lee said this was a blessing in disguise because they were able to walk transactions through the plant floor and train workers without interrupting their day-to-day duties.
The company also used the liaison method where a company chooses one person from the plant floor to be a type of spokesperson for the project to the rest of the workers. Lee brought the person up to speed on the advantages of the new ERP system for the business and employees, leading to greater credibility among the workforce.
Within the first week of each implementation, Lee said the respective business unit reached 100% adoption.
By February 2021, Adell Group was six to seven months post-implementation and was able to measure the impact of the new system compared to the year before without the ERP.
“We knew there were improvements because we never missed a ship date,” Lee said. “We were ordering and making the right things because we knew what we had on the shelves, in inventory… so that was the biggest benefit for us, and that kind of trickles down everywhere all the way through to the efficiency numbers.”
In addition to greater visibility of inventory, floor activities and shipping and receiving details, the company lowered direct labor costs, including the cost of tools, systems and wages, by 26% from $287,000 in February 2020 to $212,000 a year later.
The company also reduced overtime hours by more than 55% from 873 hours in February 2020 to 389 hours a year later.
Clarification: This article has been updated to reflect Adell Group used the same process to adopt the ERP system in different phases.