A Word from the General Manager - November 2014

November 1, 2014

Managing What You Can Measure

Brian Isard

Last month, following our Eastern Focus Meeting in Windsor, a group of CWPCA members took the opportunity to attend the NWPCA Recycler’s Conference and Plant Tour. This afforded us the chance to sit down with the business owners of the plants we toured and ask some direct questions about what it takes to be successful in the pallet recycling business, which has implications for both new pallet and crate manufacturing.

What was interesting was a consensus around the room that to succeed you need to really understand your key performance metrics (KPI’s). To do that you needed a software tool that helps to integrate production and sales with the normal business accounting systems. This sort of software solution is referred to as Enterprise Resource Planning (ERP) software solution. The key benefits are that it better identifies your “pain points”, improves visibility of business operations, and facilitates more accountability to business managers in improving results.

The take of these business owners on running a successful business was that you had to focus on these performance metrics:

  • Sales revenue per pallet
  • Production per table 
  • Sortation yield 
  • Cost per trailer 
  • Cost per repair 

The key take away is that you need to know your costs for transport, dismantling, cutting, rework, and how much waste  you are incurring. 

There are a number of software tools that assist in delivering insight into your business but the two systems that were most talked about during the plant tours were:

  • Microsoft Dynamics—For larger companies that want know in detail what is happening with every pallet and every customer they handle. 
  • Palmate ERP developed by Automated Machine Systems— For small to mid-size companies designed specifically for the pallet industry.  

One of my seat mates on the tour bus mentioned that he had struggled for years to decide whether to invest  in ERP software. At the time, his business was relatively small and he processed all sales orders manually. He had a constant problem calculating whether he had enough finished goods inventory to fill the orders to customers he was booking to the delivery dates  from the trailers loads of recycled pallets he processed. He relied on an end of week physical inventory count to get an accurate understanding of his inventory levels by quality and size. With the ERP system the first big improvement was that with better tracking of inbound pallets as they were sorted, and better tracking of what went across his tables for repair, he now had “real-time” information on inventories by pallet size that he trusted. This meant fewer physical counts had to be done, a big plus in a Midwest winter.

He mentioned that there were a couple of lessons he learned. The first was that whatever software provider you select make sure it is “scalable”, meaning you can add new functions as your business grows. He started off using only one portion of the software but he later expanded it to keep track of sales invoicing to his customers orders. He could then start to anticipate his customer requirements going into their busy seasons. 

The second lesson was that you have to make sure it integrates well with whatever business accounting software system used by your bookkeeper or accountant. The software supplier must be able to demonstrate that his product has the functionality to link to whatever you are using.

The third lesson was around the whole area of “change management” with the staff in the business. He indicated that when the supplier is testing the software and training your staff on how to use it and they tell you it’s ready to go “live” do yourself a big favor and test that it is working up to your expectations. If the system crashes due to incomplete testing, it takes away a lot of the confidence your employees have in how the new system is going to work. If the new system doesn’t work as promised, it makes it harder for staff to get used to using it. 

Many of us in our industry rely on manual records, production boards, and Excel spreadsheets to capture information for tracking production and inventory. There exists a real opportunity to better capture and share information with staff in your business with the use of a compatible ERP system.

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