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Heading into the recession in 2007, executives at AGCO Corp., a Duluth, Georgia-based $10.8 billion agricultural equipment manufacturer, took stock. The company, though successful, lagged behind its two top competitors. Technology leadership knew it would be a few years before their limping legacy ERP was due to be replaced. In the meantime, AGCO was looking for ways to improve performance and reduce unneeded inventory.
The answer lay in the installation of Apriso's FlexNet manufacturing execution system (MES) software. "We knew to stay competitive with our 13 product lines, our push method [of producing goods according to periodic forecasts] had become unmanageable," said Darin Schmidt, advanced project manager at AGCO's Hesston, Kansas plant.
Since production schedules were based on forecasts, which were often faulty, as opposed to real-time demand signals, AGCO's inventory was "through the roof," according to Schmidt. "We had to find a way to control that. We realized we needed MES," he said.
Getting started with MES software
AGCO installed the MES tool in 2009 during the heart of the recession. Not many manufacturers were investing much in new technology at that point, but for AGCO, it was imperative, said Schmidt. His unit's biggest problem: the habit of carrying excess parts and raw materials waiting to be used in production. This was a hangover of the company's push-based approach, he added.
If a production line at the Hesston plant got backed up for some reason, the degree of clutter at each workstation due to unused parts quickly got out of hand. "A combine has 5,000 parts in it. You might have 50,000 pieces of inventory sitting around that you don't need until you get the line caught up," said Schmidt. Now that the plant has transitioned to a more demand-driven approach, procurement staff can calibrate the amount of supplies needed according to demand, not forecasts.
"If the line is behind, we bring in less material. If the line is ahead, we bring in more product. We now have real-time visibility," explained Schmidt. There is now much less clutter on the floor, leading to a totally unexpected benefit: fewer accidents. Schmidt was able to reduce the Hesston plant floor space by 32%, another major improvement.
Thanks to FlexNet, AGCO has also been able to reduce in-store inventory of finished products by 45%, translating to a massive dollar savings. A pressing need to reduce inventory -- both supplies on the shop floor and finished goods in store -- was the chief reason AGCO bought into MES software. The investment paid off handsomely in this regard, said Schmidt.
MES software brings leaner operations
Overall, implementing Apriso has enabled AGCO's Hesston plant to operate in a much leaner manner than before. For instance, plant floor operators now receive single-piece kits with everything they need to complete a particular production process. "We are driving to be very lean," he said.
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Quality is another area of improvement. One quality metric was "right first time." That means the finished unit -- generally a large piece of farm equipment -- comes offline with zero defects and no rework needed. "Before the MES solution, our 'right first time,' we had a right first time on the combine line of one per day," said Schmidt. "After we put the tools in place, we got a 400% improvement with four units offline every day right the first time."
Since implementing Apriso, AGCO has pulled ahead to take the number-two agricultural equipment manufacturer spot, right behind giant John Deere, according to Schmidt.
Having already attained so many benefits and improvements directly due to MES, Schmidt has now turned his sights to a future time when he will also have a new ERP system integrated with Apriso. The potential benefits are vast, he said.
2009 ended up being the perfect moment for AGCO to invest in technology to increase their competitive advantage, according to Schmidt. "Change or you will be changed," he said.
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