WEBASTO ROOF SYSTEMS, INC. LIVONIA STAMPING DIVISION Part 1 MFG/PRO FINANCIAL REVIEW OF IMPLEMENTATION MMUG 2004 SPRING CONFERENCE COLUMBUS, OHIO MARCH 21-23, 2004

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WEBASTO ROOF SYSTEMS, INC.LIVONIA STAMPING
DIVISIONPart 1MFG/PRO FINANCIAL REVIEW OF
IMPLEMENTATIONMMUG 2004 SPRING
CONFERENCECOLUMBUS, OHIOMARCH 21-23, 2004
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Agenda

• Company Background
• Inventory of Functions and Problems
• Decision Process
• Report card Jeff Kohagen, QAD
• Internal Changes
• Areas of Improvement
• Results/Problem Resolution
• Internal Process Changes
• Cost Savings
• Looking Ahead
• Accomplishments

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About Webasto

• Tier 1 supplier of roof openings and sunroof
  assemblies
• Volume increase of 50 in the last 3 years
• One stamping facility and four assembly
  operations
• 50/50/2010 goal
• Plan to grow stamping business separately over
  the next 3 years
• Currently using Mfg/Pro, Version 9.0, 200 users
• Work with Big 3 as customer and supplier
• Reporting requirements by customer
• Run 3 shifts, 5 and 6 days a week

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Inventory of Functions and Problems

• Audit recommendation to automate more of our
  system
• Internal process conflicts with QAD functionality
• Inventory valuation does not tie to G/L
• Invoices through A/P to increase from 1,400 to
  2,000 per month
• Transactional problems with sub contracting
  module
• Inconsistent product structure setup causing
  inventory variance issues
• Incurring premium costs for late deliveries
• Value add to our customer should be 25 or less
• Correcting journal entries need to be eliminated
  or minimized

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Decision Process

• Considered outside consultants
• Contacted other companies with the same issues
• QSCAN beneficial?
• Cost justification
• QAD Knowledgebase inquiries
• Considered reimplementation of individual modules

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System Report Card
How are we doing? What can we improve?
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What Did We Look At?
Modules / Functions
Financial
Manufacturing
Distribution
Process
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How-To

• Process Review
• Get baseline measurements
• Cycle times
• Effort
• Functionality Review
• What is not used?
• Checklist of menu items
• Look for links and dependencies
• Whats off-line?
• What adjustments are being made

EXPLORE!
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Interviews

• Dan Higgins
• Get overview
• Attention areas
• Costing
• Inventory accuracy
• ERS

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Interviews

• Orders
• Background and business needs
• Questions
• Reviewed cumulative orders
• Issues
• What spreadsheets are used

What is off-line that could be on-line?
Refresher training on scheduled orders
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Interviews

• Accounting
• Background and business needs
• Questions
• How is the chart of accounts structured
• Does it meet reporting requirements
• Are you product lines mapped to sub-accounts
• Do the control accounts reconcile?
• Potential set-up issues
• Multi-currency?
• Multi-entity?

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Interviews

• Purchasing
• Background and business needs
• Are you using GRS?
• Are you using Blanket Orders?
• Issues
• Use of MRP
• Inventory accuracy
• Timeliness of transaction reporting

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Interviews

• Manufacturing / Production Scheduling
• Background on the process
• How are repetitive orders managed
• Do you report scrap?
• When is production reported?

Report scrap transactions as part of the
repetitive order Timing of production reporting
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Interviews

• Materials
• Background on process
• Amount of monthly inventory adjustments
• Using ABC classification?
• Who updates inventory planning data?
• How are receipts processed?

Set up ABC classification and start cycle count
program Set up scrap factors Reduced monthly
inventory reserve
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Interviews

• Product Change Control / Engineering
• Background on process
• Issues with Rev level item status

Process improvement with Group Office
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Interviews

• Costing
• Procedures
• Product structure accuracy
• Scrap rates

Implement fully absorbed costing
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Summary

• Review results
• Develop plan
• What to implement
• How to implement
• Support for implementation
• Change management

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Internal Structural Changes

• Created in house user group with representation
  from all departments within the Division
• Various levels of user experience
• Makeup of team (cross section of depts.)
• Meetings held at least twice monthly

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Internal Structural Changes

• Reevaluated user responsibilities in key areas
  maintaining Mfg/Pro activities
• New item number setup and maintenance
• Decentralization of Purchasing functions to
  obtain better control at Division level
• Initiated Continuous Improvement program
• Use Deviation process to get product structures
  updated timely

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Areas of Improvement

• Enhance functionality of existing modules and
  implementation of ones not previously used
• Organizational Structure Responsibility
• Streamline responsibilities for loading new
  information into Master Files
• User Training and Documentation

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• End of Part 1
• Questions ??

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WEBASTO ROOF SYSTEMS, INC.LIVONIA STAMPING
DIVISIONPart 2MFG/PRO FINANCIAL REVIEW OF
IMPLEMENTATIONMMUG 2004 SPRING
CONFERENCECOLUMBUS, OHIOMARCH 21-23, 2004
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Results/Problem Resolution

• Implementation of new modules
• Fixed Assets
• ERS Evaluated Receipt Settlement
• Changes to existing modules and processes
• Global Requisition System
• Warehouse Management/Scanning system

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Fixed Assets

• Mfg/Pro Fixed Asset module was not utilized
  Excel spreadsheets used to track assets and
  calculate depreciation
• Fixed Asset module implemented through all
  divisions in June 2003
• Version 9.0 more user friendly
• Five Books used General Ledger and Amount
  book (all assets), MACRS book (leasehold and
  building), and Bonus/50B books (all other assets)
• Can use system assigned or create specific asset
  numbers

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Fixed Assets

• Benefits
• Eliminates adjusting entry at year end for
  depreciation expense
• Linked to General Ledger
• Tax information calculated accurately and
  automatically
• Can enter as much detail as desired for tracking
  purposes vendor information, purchase order,
  project number, etc.

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Fixed Assets

• Benefits
• Month end depreciation calculated automatically
  and journal entry created for review before
  posting
• Can change information in current year,
  depreciation will recalculate automatically
• Better evaluation of life of assets for assembly
  vs. stamping division
• Better depreciation schedules for future
  budgeting
• Fulfills 2 year requirement from corporate
  auditors to automate

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ERS Evaluated Receipt Settlement

• Was there a need?
• Improve efficiency currently process
  approximately 1,400 invoices per month
• Anticipation of future programs, increase volume
  of invoice processing to 2,000 invoices per month
• Maintain current head count

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ERS Evaluated Receipt Settlement

• How does it work, will it work for us?
• Review and understand process
• Test all possible scenarios in test environment,
  from purchase order creation, vouching, payment,
  and general ledger posting
• Sharing supplier with other entities
• Which suppliers to use as ERS?
• Began with non-directed suppliers
• Supplier with minimal shipping/receipt problems
• Suppliers with consistent pricing

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ERS Evaluated Receipt Settlement

• Implementation
• Implemented August 2003
• Job instructions created
• Modified audit report
• Select a few suppliers at a time
• Use internally until comfortable with ERS
• Gradually add suppliers to ERS
• Notify suppliers, no invoice needed
• Cost savings 5.4 hours per week

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GRS Global Requisition System

• Changed internal approval process
• Maintain control over spending
• G/L account verification by Controller prior to
  receipt and A/P vouching greatly reducing
  correcting entries
• Sub accounts used to identify customer programs,
  internal use to identify machine repairs
• Project codes uses to identify Hilo repairs

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Warehouse Management/Scanning system

• Scanning system used to scan incoming raw parts
  and finished goods shipped
• Guarantees all finished goods production
  reporting is performed
• Real time information updated in Mfg/Pro
• Improve inventory accuracy
• Created location to ensure proper backflushing of
  sub assemblies
• Scrap scanning to begin in the near future

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Changes to Internal Processes

• Labor, overhead, freight in standard cost
• Cycle count process
• Restructured item type and sub accounts in Item
  Master
• Training
• Chargeback process for supplier non- conformances

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Standard Cost Changes

• Developed all rates to fit fully absorbed
  factory cost approach to standards
• Labor rate includes payroll and benefits
• Burden derived as percentage of direct labor
• Freight added as part of overhead element
• Used an Excel based worksheet costing out routing
  codes to reason check standards populated in QAD

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Before
After
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Cycle Counting

• Negative On Hand Balance Report scheduled to
  print at 7am daily
• Random selection of 25 parts per week
• Use class D for parts not to be counted
• Pre production
• Off-site warehouse
• Containers

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Item Master Redefined

• Identify product lines to allow reporting by
  customer
• Item types re-labeled for plant for better
  inventory control
• Phantom ID in Item Planning Data
• Commonize routing codes

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Training

• Overview training for all upper management, will
  be done annually going forward
• Training classes for user group members weekly
  for two months
• Users must demonstrate usage of QBits and
  Knowledge Database for problem solving
• Specific users empowered to build work aids for
  certain areas
• Update user training as necessary during summer
  shutdown
• Scheduled bi-annual assessment to be completed by
  group representing cross section of user
  community
• Multi-plant group also responsible for developing
  CI practices for the future

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Chargeback Process for Supplier Non-Conformances

• NCM module first created 3-4 years ago
• Have enhanced to identify specific issues
• Freight variances for shipping less than full
  loads
• Reworking material
• Premium cost issues
• Downtime charges
• Liability remains until cleared from supplier
  statement

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Annualized Cost Benefits
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Looking Ahead

• Eliminate physical inventory
• Expand ERS to include directed suppliers
• Enhancement of warehouse management module
• Review of Cash Management and Cost Management
  modules
• Review add-on modules to EB2
• Better use of SV and PROPLUS

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Accomplishments

• Based on future growth, ERS implementation has
  eliminated the need to hire a full time colleague
  for 2005 and has saved Accounting 5.4 hour per
  week
• Using scrap factor in product structure
  maintenance (13.5)
• Commonize routing codes
• Better use of phantom parts which now exist on
  most parent product structures.
• New part numbering process will assign part
  numbers randomly
• Better review of purchase order report for items
  past due
• Implemented weekend cycle counting (Saturday)
• Better use of product lines to easier fulfill
  requirements of reporting everything on a
  customer basis

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Accomplishments

• Enhanced use of sub accounts to easier track
  overhead cost by machine or work center
• Using all cost elements in standard cost to more
  accurately determine fully absorbed factory
  cost per part
• Enhancement of home grown NCM module for better
  recordkeeping for supplier chargebacks
• Accounting month-end and close reduced to one day
• Addressed item master responsibilities for more
  accurate planning of manufactured and purchased
  items
• Warehouse management system audits production
  reporting before being allowed to ship
• Automation (scanning) of scrap process currently
  being developed
• Updated training especially during summer
  shutdowns

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Accomplishments

• Established group to apply Continuous Improvement
  philosophy to QAD activities
• Better supplier rating information with PROPLUS
• Automation of GRS which improved approval process
  from six days to one or two
• Refined inventory reports to print by G/L account
  numbers for added checks and balances
• Issuing recurring blanket purchase orders for
  repeated MRO purchases
• Implementation of Fixed Assets module has
  eliminated manual work and Excel spreadsheets
• Use G/L account allocation to better monitor and
  control purchases
• Able to balance (5.13.5) Purchase Order Receipts
  report to General Ledger (sales tax).