“This initiative has enabled us to go from multiple systems and software to one all-inclusive system.” —Frederick Coyle, Director of Quality, ETCO
New cloud-based system saves automotive manufacturer $37,800 in the first year, and the savings are growing
Executives at ETCO Inc. recently found themselves facing a tough decision. The 25-year-old systems that the maker of automotive and engineered products depended on were increasingly unable to keep up with the company’s growth. Every department within the company was adversely affected, from accounting through operations and shipping. Similarly, every customer was also negatively affected by long lead times, late deliveries, and a lack of accurate documentation of shipments.
But updating the existing system would cost an estimated $700,000, and purchasing a new system that would be maintained on-premises would run anywhere from $350,000 to $1 million. Instead, ETCO selected a third option, implementing PlexOnline, a cloud-based ERP system that provided the company with always-available real-time data that is more accurate than the data it had previously used.
The new ERP system enables ETCO to manage its IT needs with only two support staffers, as opposed to the six required before. The total cost of this initiative, including financial and human resources, was approximately $53,000, and monthly subscription fees are $5,300. After these costs are accounted for, annual return on investment was $37,800 for 2010.
The company expects the annual ROI to continue to increase based on changes in staffing permitted by the new efficiencies, as well as the consolidation of processes like accounting, purchasing, engineering, and human resources—improvements also enabled by the new initiative.
Key process improvement metrics that have contributed to the financial savings, as well as the overall streamlining of operations at ETCO, include shipping accuracy rate, which improved by more than 80% (from an average of one error each month to one every six months); a reduction in IT staff by 60%; a reduction of physical-inventory headcount by more than 80% (from 12 people to two); and physical-inventory speed, which improved by 1,200%. (Previously, inventory took three days; it now takes six hours.)
Says Frederick Coyle, ETCO’s director of quality, “This initiative has enabled us to go from multiple systems and software to one all-inclusive system that has improved our communications, efficiencies, and customer support while reducing costs.”