Marque Magnetics slays ‘the snake’ as Epicor gets systems into line

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Published on the 16/02/2010 | Written by Epicor Software Corporation

AT A GLANCE

Marque Magnetics

INDUSTRY

Electronics Manufacturing

BUSINESS OBJECTIVE

To have better overall control of the quotation process and associated product costing cycle

SOLUTION

Epicor Vantage ERP

THE BENEFITS

Accurate labour times and costs
Credibility through consistency
Fast and accurate quoting

FOR MORE INFORMATION

EPICOR
W: www.epicor.com
P: +61 2 9927 6200
F: +61 2 9927 6298

The transformer manufacturer was grappling with a large ‘snake’ – as it calls the ‘slop’ between quoted and actual job costs – when Epicor Vantage brought its snake-wrangling skills to bear and helped wrestle the snake down…

Marque Magnetics is a specialist company that designs and manufactures transformers and chokes, as well as a wide range of specialty electronic wound components.

The company also imports and sells switch-mode power supplies. Its highly specialised products are locally manufactured in its Auckland factory, while the high-volume commercial products are made in its joint-venture plant in China.

Marque Magnetics started business in 1986 and now has 49 employees. It is experiencing steady growth both locally and internationally.

A quick efficient no charge design service, coupled with fast prototyping and competitive pricing proved so successful at Marque Magnetics, that companies from Asia, Europe and the US are utilising their services.

This expansion phase started in early 2001 with Marque Magnetics setting up a joint venture company, Huigao Magnetics Ltd in Tianjin, China. The manufacturing plant employs over 300 people and is tailored to manufacture medium to long runs of wound components.

Marque Magnetics’ client base includes Fisher & Paykel, TruTest, Gallagher Group, Navman and Tait Electronics.

Recently they won the contract to supply Cabco (a Kiwi company that manufactures high tech shopping trolleys integrated with TVs for the US supermarket giant – Walmart).

The transformer industry is a competitive market space with a low barrier to entry and many suppliers. Marque Magnetics have differentiated themselves by providing a personalised design service rather than endeavouring to manufacture stock transformers. This “design to order” philosophy allows Marque Magnetics to craft a device that fits their client’s needs exactly.

Business challenge
The key business issue Marque Magnetics faced with their existing system was the control of the quotation process and associated product costing that underpins quotation development. The lack of control over production costings and quotations meant that Marque Magnetics were accepting work with no clear idea of the profitability.

Three specific problems existed with the legacy system:

Purchasing costs. Marque Magnetics did not have ready access to the costs of the raw materials, which impeded the development of new quotations. (Raw material costs are a significant proportion of the end-product cost).
Retail — not an engineer-to-order system. The existing system was primarily a retail package. Its job costing functions did not manage the capture and reporting of labour. As labour costs are a significant portion of the product costs, this lack of control and understanding of actual costs meant that new quotes could be based on incorrect data.
Quotation functionality. Marque had a quotation function that failed to provide quotation history, any flexibility and no visibility.

Given that they wanted to provide a personalised service (engineer–to–order) to their customers, Marque really needed a better solution to manage the product costing to quotation cycle.

Managing “the Snake”
The key business driver for Chris Patterson (MD) is to manage their production within a tight band (Chris refers to it as ‘the snake’). The size of this band was called the ‘slop’.

This slop is defined as the variation from standard to actual cost for a job. Historically, this slop, or the width of the snake was between plus or minus 30%.

Since implementing Epicor Vantage, Marque’s hugely variable slop has disappeared reducing to a slim 10% “snake”. Chris has an aim to move down to a 5% snake.

The current process is to review the actual to standard cost of 80% of all jobs with a tolerance of 10%. The Engineering and Production teams meet weekly and examine key jobs at both ends of the spectrum i.e. those with actuals outside the snake with costs too high or too low. This review determines if the variance should be addressed by production or engineering or whether the standard cost needs to change.

The process of examining jobs “outside the snake” has two primary objectives:

Firstly it provides Engineering and Production with an opportunity to look at any jobs that are well away from intended standard and determine why this has occurred and if it can be fixed, with an engineering or production solution. This review of variant work is a useful way of advancing the efficiency of the manufacturing facility.
Alternatively, where it is apparent that the reason for the variation is inappropriate then this standard can be changed. It’s this review of standards that provides important feedback to ensure the accuracy of standards used for quotation development.
The intention of the “Snake” process is to ensure efficiency throughout the total manufacturing process. This efficiency makes Marque Magnetics very competitive.

Why Epicor Vantage?
Marque needed to address the issues above and went to market to identify an ERP solution. They identified COGITA and their ERP Vantage solution as a strong contender in their engineer–to–order market place. Marque Magnetics looked at several products and were impressed with Vantage from COGITA. Of particular importance to Marque Magnetics was the expertise of the personnel at COGITA.

This was a key factor in Chris’s decision to purchase Vantage.

Benefits of the Epicor Vantage Implementation
A significant side benefit is the more predictable performance of the manufacturing plant and its subsequent positive affect on profitability.

Benefits include:

The ability to manage labour cost on quotation down to each operation, allowing the engineering department to receive accurate labour times.
Having visibility of all cost elements pertaining to a quotation. Historically Marque only had control and visibility of material costs and because of the high cost of labour in New Zealand, visibility is critical.
Access to historical quotations. Many quotes are for repeat or similar work and it is important that Marque have access to and visibility of the details of former quotation to a client. Consistency is an important part of credibility and reliability. Vantage has provided quotation consistency.
Vantage has allowed clients expectations for fast quote turnaround and enquiries as an efficient tool for assembling and managing quotations.

The manufacturing facility now has a tool to manage and compare their performance to standard. A range of KPI’s (Key Performance Indicators) allows the management team to check and monitor performance and help ensure that plant profitability is maintained at desired levels.