"KADVI": to business competitiveness through automation

Having implemented the solution TOPS Consulting based on Microsoft Dynamics AX, the expense of material and financial resources on production could optimize JSC Kaluzhsky dvigatel (KADVI) significantly, reduce "illiquid stocks" in warehouses by 25 million rubles, reduce inventory quantity in shop storerooms by 40% and enter normative inventory management. It allowed to increase production volume and sales by 20%, to provide shipment accomplishment to clients in required terms.

About the Customer

Kaluzhsky dvigatel (JSC KADVI) is the large engineering enterprise numbering 3000 staff founded in 1966. Makes turbine jets of low power for application in land installations, autonomous means of power supply, the high-quality garden equipment – motor-blocks Oka and Ugra, motor-cultivators, rotor mowers and the hinged equipment. Besides, KADVI has stable relations with the enterprises of large mechanical engineering and provides production of accessories (foundry, stamping, machining, a galvanics) and also executes orders for production/repair of the equipment in instrumental production.

Fight for the markets and for the buyer escalates every year. To each head it is important that the products answered modern level, it was demanded, competitive, and, so would make profit.

If earlier the Russian enterprises really competed in domestic market only among themselves, having similar production technologies, the equipment and resources which created the price of their products, then now the number of competitors considerably extended due to arrival on the Russian market of the European and Chinese producers. These firms differ from Russian in approaches in the organization of production processes and production requirements to the released product. Therefore, new - the level of production organization and quality of process management were added to competitive advantages, in addition to the equipment, technologies, materials. To sustain the competition, business processes should have well prepared personnel and be controlled online.

Those Russian enterprises which faced the competition and do not want to lose the advantages acquired for years, not only think of the ERP system, but also begin its implementation. To implementation we are pushed by both instability of the environment, and restriction of financial resources, and annual increase in prices of natural monopolies.

All these factors and also need of cost optimization and increase in efficiency and transparency of work of production process, accelerated making decision on implementation of the unified information system of enterprise management on "The Kaluga engine". The tool which objectively would reflect a picture of work of the enterprise in real time which would allow to control the resources spent in production was required, to estimate the fact of achievement of desirable level of key indicators on the basis of reliable data.

Creation of a new management system was carried out in several steps. The company successfully automated all main business processes: production, logistics, management of finance and fixed assets, automated accounting and tax accounting, having connected planning, management, accounting and the analysis in unified information environment. In 2013 the company mastered new functionality – management of maintenance and repairs (MRO).

Feedback

"Project implementation based on the solution TOPS allowed our enterprise to make a big step forward. We did not make the wrong choice of the partner: the TOPS Consulting company proved as the professional command working for achievement of result. We achieved originally an effective objective and using Microsoft Dynamics AX created an effective enterprise management system and a uniform information working space, having provided the interconnected process: "заказы-финансы-закупки-склады-производство-отгрузка-учет-анализ", - Irina Vladimirovna Guseva, the deputy CEO for strategic development and management of the Kaluga Engine plant noted.

In more detail about the project

Automation of a circuit of finance and logistics

At the first stage of an implementation project Microsoft Dynamics AX automation of a management system for finance of the enterprise, including accounting and tax accounting and the reporting, budgeting and logistics management was carried out. Integration of modules into a common information space and accuracy of the obtained data in real time on resource capability of all types, their target movement and a remaining balance became result of work.

Based on the first stage of the project the enterprise had an opportunity to keep complex accounting in a system: to quickly keep the budget of cash flow and the income and expenditure budget, to carry out the accounting of inventory items, to monitor conducting transactions with partners, to prepare the accounting, tax and management reporting, to keep accounting and tax accounting of fixed assets and intangible assets, to timely obtain information on a status of financial and economic activity (for any date).

As a result of automation of section of accounting and management of fixed assets, in the ERP system accounting and tax accounting more than 50,000 fixed assets (FA) and intangible assets (intangible assets) is kept today. There is an opportunity to create the specific reports on structure of the equipment and its location necessary for the enterprise for objective assessment of the available business fixed assets and capacity planning.

As a result of start of the Expanded Budgeting for Microsoft Dynamics AX add-on module developed by TOPS Consulting at the enterprise maintaining the budget of cash flow and the income and expenditure budget is implemented. Besides, the module provides automatic formation of planned targets for budgets of the next period on the basis of budgets of a previous period taking into account certain criteria.

At this stage the automated calculation and all interrelation of all plans of the enterprise, continuity on planning periods, calculation of budgets on the basis of exact normative planning, maintenance of the relevant regulatory technology base allowing to make planned cost calculation in any analytical section was provided. Accuracy of calculation of production plans of workshops taking into account the available actual remaining balance in storerooms, in a WIP and the normative inventory level configured in a system is provided. The rhythm of production and increase in production due to operating control of security and accomplishment of plan targets (in piece, in N/h), a timely material feed in production increased. Streamlining of release on terms due to delivery of products on laid on ISU in a binding to the production orders approved in a system with closing of dresses with the worker (on a piece-work pay). There was an accuracy of formation of cost value and actual costs by production orders. The basis for management of productive activity of the enterprise - creation of uniform base of the normative reference information, necessary settings of a system and the analyst is created.

Automation of a guidance loop production and planning

At the second stage of the project the schedule system and production managements according to the MRP II standard based on uniform base of the normative reference information which supports all design-technology documentation of the enterprise, conducting production accounting and scheduling of production in a real mode of time, formation of uniform synchronized sales plans, production and supply was automated. Annual plans are synchronized with strategic plans of the enterprise.

On a planning circuit the new information system provided planning of sales, productive and supplying activity of the enterprise, including:

• maintaining plans and sales forecasts;
• calculation of materials requirements, parts, semi-finished products and labor costs on the production program (MRPI) and taking into account warehouse stocks in the central warehouses and work in progress;
• formation of safety stocks of materials and DSE;
• calculation of net materials requirements, parts and semi-finished products on the production program taking into account warehouse stocks and work in progress;
• purchase planning;
• planning of warehouse material transfers and component parts from the central warehouses to shop storerooms;
• the automated formation of the volume production schedule of products for a year with breakdown by quarters and months, by commodity groups;
• the automated formation is normative – planned calculation of products according to cost items;
• forecast planned requirement in labor resources (in N/h);
• planning and budgeting of expenses on the production schedule of the enterprise.

For conducting production accounting the solution provides:

• accounting of material substitutions and DSE;
• calculation of material requirements taking into account material substitutions and component parts;
• accounting of a holiday of Inventories in production;
• intershop accounting of the movement of parts and assembly units;
• accounting of semi-finished products of own production;
• accounting of defects, technology and other losses;
• the cost accounting on raw materials supplied by the customer processing;
• accounting of material substitutions, component parts, etc.;
• accounting of direct production costs (a semi-finished method) by cost items and a section of workshops;
• work in progress assessment at normative cost value;
• assessment planned and calculation of the actual direct production cost of the made products, nodes and parts;
• scheduling of production in a real mode of time.

Based on the second stage of the project the enterprise had an opportunity to conduct a full stroke of production management in a system. Thanks to implementing solution "TOPS: Discrete production" at the enterprise is implemented formation of sales plans, production plans, purchase plans of materials and component parts, the plan of utilization of capacity, production scheduling, assessment of planned and actual cost of products and semi-finished products, work in progress accounting, etc.

Monitoring system of KPI

Working off of quality and efficiency of electronic interaction of all contractors in a common information space, mastering of new forms of data exchange and also the translation of all manual reporting of services on the reporting created of the ERP system was the following block of works. And after that the company approached the third block – to creation of a monitoring system of the key indicators developed by KADVI taking into account the opportunities provided with the operating management system of Microsoft Dynamics AH.

Earlier, to put the broad picture on the enterprise for solving of tasks of controlling and strategic planning, it was required to analyze tens of different reports, considerable efforts and time for data collection from manual reporting system were required.

Today there is a possibility of the choice of indicators, with pokmoshchyyu whom it is possible to keep track of the interesting results of activity of production, to manage an expense of resources, to put and solve problems of increase in efficiency of the enterprise. The analytical cuts of management accounting provided at a stage of implementation of functionality of a system help us with monitoring of key indicators of activity, allow to control stocks, liquidity, to estimate workmanship of agreements, to monitor accomplishment of production schedules and implementation, to optimize financial resources. As any movements of material and financial resources at once are reflected in accounting, at any moment the information system provides reliable data about a current status of a stock of resources in storage locations.

Thanks to the ERP system results of accomplishment of budgets and production schedules, shipments, income are controlled in the daily mode, as well as the movement of material and financial resources. Using the ERP system in real time we manage such indicators as sales proceeds, volume of payments, shipment and commodity release, development, variable and fixed costs, and also marginal income.

Heads without effort obtain data necessary for them in any analytics (in general on the enterprise, by separate types of products, on workshops, according to specific production orders, on cost centers, etc.). Having reliable accounting information, seeing its dynamics, it is convenient to control financial performance and to carry out the assessment of accomplishment of the strategic plan. The list of the coefficients which are subject to mandatory control also includes revenue development, a relative gross income, an average accounts receivable period, turnover of inventory stocks, a quick assets ratio and a ratio of coefficients of sales increase, the salary and others.

Within financial monitoring at the enterprise estimate execution of budgets and the payment schedule, control marketing effectiveness and also operating activities of divisions taking into account the actual terms of accomplishment of plans.

Key indicators it is controlled at the scheduled time — daily, weekly, monthly, annually - and at the different levels of management. The diagrams reflecting change of control indicators are displayed directly on the internal website of the company. Diagrams change in real time, at the time of reflection of economic transactions in Microsoft Dynamics AH.

After automation of the main production, on KADVI automation of auxiliary and instrumental production is carried out, the new functionality of Microsoft Dynamics AH "Maintenance and repair" (MRO) in service of the chief mechanical engineer servicing a production equipment is implemented. In 2014 implementation of functionality of a MRO in the auxiliary service servicing a utilities equipment is begun.

Result

Start of the Microsoft Dynamics AX system in commercial operation for JSC Kaluzhsky dvigatel provided:

• possibility of maintaining uniform base of the normative reference information;
• a possibility of receiving on any planning horizon of a system of the interconnected sales plans and purchases, nomenclature production schedules, the plan for labor costs;
• calculation of materials requirements, parts, semi-finished products on the production program (MRPII) and taking into account warehouse stocks in the central warehouses, shop storerooms and work in progress;
• an opportunity operational dispatching of production in a real mode of time;
• formation and accounting of safety stocks in production;
• production accounting by production orders;
• the normative podetalny cost accounting according to PBU 5/1;
• a possibility of continuous and total reflection in accounting registers of all economic transactions changing structure of assets and liabilities of the enterprise;
• a possibility of obtaining reports on accounts with a possibility of selections and sortings according to all analytical signs set in a system;
• accounting and allocation of costs, flexible mechanism of closing of expensive accounts;
• formation of tax registers and implementation of tax accounting according to PBU 18;
• formation of balance of the enterprise and all annexes to it;
• timely obtaining reliable and consistent information about financial and economic activity of the enterprise.

Complex automation of the enterprise based on Microsoft Dynamics AX and specialized solutions of TOPS Consulting allowed JSC Kaluzhsky dvigatel to create monthly:

• sales plans on all product lines – more than 250 nomenclatures with enclosure to the 12th level;
• podetalny volume schedules of production – more than 10,000 production orders;
• purchase plans of materials and component parts – more than 4,000 nomenclatures;
• plans of material security of divisions – more than 5,000 nomenclatures;
• budgets of all levels;
• balance of the enterprise and all necessary report forms in a system

daily in real time to create:

• planned daily tasks to workers or crews on the basis of the production schedule;
• write-off orders on receiving components, necessary for production of a product, from the shop storeroom;
• dresses for works;
• salary accrual;
• delivery and acceptance certificates and transfers of DSE and finished goods;
• delivery notes and invoices at shipment of products;
• purchase orders;
• requests for payment.

daily in real time to control:

• level of warehouse stocks is to more than 100,000 units of Inventories;
• level of safety stocks;
• material security of production;
• a centralized delivery of materials in production workshops;
• step-by-step accomplishment of each production order;
• the movement all of material values in production;
• accomplishment of planned daily tasks;
• work in progress level;
• procurement process of all Inventories;
• actual amounts of execution of budgets and their deviations.

The solution TOPS based on Microsoft Dynamics AX allowed the enterprise:

• Reduce "illiquid stocks" in warehouses by 25 million rubles
• Reduce inventory quantity in shop storerooms by 40%
• Increase production volume and sales by 20%
• Provide production in required terms
• Optimize personnel (more than 1000 persons of laid on personnel)
• Increase the interest of youth in production
• A possibility of fast personnel training for substitution in the automated workplaces.

ERP system of Microsoft Dynamics AX on KADVI is a management system core. New information technologies provide to KADVI management both on strategic, and at the tactical, operational level.

After implementation of Microsoft Dynamics AH at the enterprise there was an effective instrument of accounting, control, the analysis and forecasting used for setting of strategic objectives.