Business Excellence using Sage line 100 at VW Heritage Case study of a car parts distributor using Sage software

by Phil Robinson (BPIC) - Comments to : phil@bpic.co.uk
URL : http://www.bpic.co.uk

Background to VW Heritage VW Heritage has grown from a restoration business to a world wide distribution company specialising in supplying genuine VW parts where they are available, or good quality replacements. They currently employ 8 full time staff. In the early days David Ward, the company founder, was able to walk around his stores and place orders to top up stocks. As the company grew and more staff were employed, this informal approach was not possible due to the demands on David’s time. To help with both accounting and stock control, VW Heritage implemented Sage Sovereign, later updated to Sage Line 100. The telephone sales personnel could now use Sage to see what stock was available to meet inquiries. It soon became apparent that there were problems as the level of stocks was increasing but there was also an increase in the number of times parts were out of stock when ordered. The number of orders not shipped on the day promised had also risen.

Jargon Warning If this case study uses terms with which you are unfamiliar, you can look them up in the Jargon Buster at http://www.bpic.co.uk/jargon.htm. For more details see Business Excellence (ISBN 0-952-8885-05) by Phil Robinson.

The expansion of business and stocks necessitated a move from their overcrowded building in Portslade to a larger site in Henfield in West Sussex. It was just prior to the move that David asked me to have a look around to see if I could make any suggestions to improve the way they worked.

3 problems were identified during my visit.

1. The first classic problem was poor stock record accuracy. No-one was even sure what the stock accuracy was.
2. The next problem was poor housekeeping due in part to the old, overcrowded premises.
3. The third problem identified was a lack of understanding of the Sage software. This resulted in over complicated procedures. Many useful software functions were not taken advantage of.

David was, like many in his position, a very busy person and felt an outside influence would have a greater impact than trying to make the necessary changes on their own. Small companies do not usually have large training budgets and VW Heritage was no exception, so David approached the Sussex Enterprises office to see if any funding was available. Sussex Enterprises agreed to fund 50% of the costs of the proposed 1 day education course provided there were satisfactory objectives and agenda for the course.

The 1 Day Distributer's Course

The course was arranged at Tottington Manor Hotel, a few miles from VW Heritage, for the whole staff of 8. Temporary help was arranged, including David’s wife, to hold the fort while the full time staff were away.

The course was in 4 parts:

1. Introduction to Business Excellence. The starting point for an improvement project is to "raise the high bar" which was achieved by describing the standards reached by other companies in the same or more difficult circumstances. VW Heritage had just put up a web site (http://www..vwheritage.com) so were now competing on a world stage and must therefore aspire to world class standards.
2. Basic data. Sage, like most business software, is not intuitive. It is worth really getting to understand it and this takes time dedicated to learning. We find people need a minimum of 3 complete days for each module used with a good instructor just on the software to get a basic understanding of the functionality and then need time "playing" with the software. To raise awareness of the need to understand the software, the course explored ways that the software could be used to improve customer service, simplify purchase decisions and monitor data quality. Once the Business Excellence principles and the software are well understood, the need for a written operating manual was stressed (we call this Company II); a new way of working for everyone to follow in the future. Once it has been decided what changes are needed, the fixed data on the system has to be brought up to standard. Getting the data up to standard is time consuming so is often carried out by tidying up data as it is used for a while and then having a weekend "purge" on the rest. Finally there has to be a regular feedback of the quality of data to "the boss" to maintain the high standard of data accuracy required to operate efficiently.
3. Stock record accuracy. Every company needs to know what stock it has and when more will become available. The initial guess of stock record accuracy was 60% which inevitably results in lost sales, excessive inventory, a lot of wasted time and reduced morale. The principle of first setting up a small control group to check the stock recording processes and then having on-going auditing methods in place was explained. The single most important factor in achieving and maintaining stock record accuracy is the understanding by everyone that a high level of stock record accuracy (close to 100%) is the most efficient way to operate in the long run, as well as giving the highest possible customer service for the inventory investment. Another key element to support all the Business Excellence concepts is good housekeeping, not only in the stockroom but in the offices as well. A very useful housekeeping technique is to take a video or photo. People get used to their own clutter until they see a photo.
4. Purchasing. Once the fixed and variable data is accurate, it is much easier to purchase more effectively. The principles of vendor schedules and kanban were discussed as the way to develop good supplier relationships in the future. Suppliers are the key to success in this business without doubt.

The Results so far

Following the course David held a number of meetings to decide the way forward. The areas tackled in the first few weeks after the course were :

• Stock record accuracy improved within the weeks following the course because people were more aware how much easier everyone’s job is if stock records are accurate.
• Tidying up stock was another quick result, including re-laying out their mezzanine floor, assigning bin locations on the system and starting to replace the cardboard bins with new, rigid plastic bins that could be stacked tidily and securely.
• Cleaning up the data on Sage including more meaningful descriptions.
• Asking suppliers for more information on their paperwork to simplify goods inwards.
• Work on simplifying data entry into Sage.

The next jobs to be tackled are :

• The start of a control group to improve the inventory recording processes.
• Simplifying purchase order entry by both a better understanding of Sage functionality and some software improvements.
• More information out of the Sage system about part sales to improve sales forecasting and purchasing.

Improving housekeeping has proved difficult. They eliminated "homeless parts" and speeded up data entry but the initial improvement has slipped back. I threatened to bring my video camera round to do a housekeeping audit (see below) or you could use video surveillance cameras if they are installed.

Conclusion

David was very happy with the improved moral and sense of direction everyone has now. There are still frustrations as there always will be; lack of time is always a factor. There are undoubtedly short term gains. Only time will tell whether the gains will be sustained and provide a platform for a world class company to grow from this specialised VW Heritage business.

 Phil Robinson - www.bpic.co.uk   - January 2000