posted on 3/30/2011 8:52:00 AM
Engine manufacturer MAN North America was wasting time with paper punch cards and job-costing estimates until it employed a human capital management system to automate the production flow in its job shops.
A C-level executive appointed to lead a company may bring along a handful of trusted colleagues from her former management team. Likewise, an operations manager tapped to run a rival manufacturer’s plant may ask some of his best machinists to join him at the new company.
Technology travels the same way. When a manufacturer needs to automate its business processes, the decision process may eventually lead to sophisticated software evaluation tools such as Managing Automation’s TechMATCH, but more often than not, it begins with a personal recommendation.
That’s how the North American division of heavy-equipment manufacturer MAN found a better way to automate its human capital management (HCM) processes, including time and attendance, payroll, and job costing.
For years, Germany-based MAN had contracted with American job shops to perform repairs on the diesel and turbo engines it sold into the North American market. Among other applications, MAN’s machinery helps run power plants, turns the propellers on thousands of large marine vessels, and ensures efficient flow in natural gas pipelines.
MAN restructured itself in North America over the past few years. First, it decided to bring repair operations in-house for its Turbo division, a move that involved acquiring four job shops in Texas, Louisiana, and Alabama through 2007 and 2008. After the acquisitions, MAN hired Sean Yang as an IT project manager and asked him to help bring the repair shops up to the technology standard of their new parent company. An automated human capital management system was an obvious choice, Yang says.
“When I went to the shops,” he explains, “they had a very old-style clock: You use the paper and you get a punch and a stamp.” That meant paperwork, and plenty of it, for the accounting person responsible for entering the data into the payroll system. “On the accounting person’s desk, you’d see a big pile of those paper cards,” Yang says. “And every day she had to spend at least three hours to sort out all the paper cards.”
Moreover, shop supervisors were pulled away from their operational duties to manually verify workers’ attendance records, says Russell Young, who manages the operations at MAN’s Baton Rouge facility.
“Supervisors would have to come in every morning [and] spend anywhere from 30 minutes to an hour and a half just verifying that this guy worked on this job and his time was correct,” Young says.
Software Selection via Suggestion
Yang saw room for improvement, and he used a time-tested method to achieve it: He suggested that MAN implement a human capital management system he had used during stints with previous employers.
“I worked for other companies and I accumulated a lot of experience with the Kronos system,” he says. “I realized this was an ideal system, and also familiar. So, I recommended it to our management.”
In October 2009, Yang and his team at MAN began implementing the system; the hardware included 15 Kronos 4500 electronic time clocks distributed across the Turbo division’s four locations and 200 employees. (The Turbo and Diesel divisions operated separately until 2010, when MAN brought them together under a divisional umbrella.) On the software side, MAN chose Kronos’ Workforce Time & Attendance offering to automate the payroll processes, and its Workforce Activity application to collect information on how employees spent their time on specific jobs during the workday.
Now, when employees clock in and out for the day, the Kronos Time & Attendance system delivers the records straight from the time clocks to the accounting system. Then, with a “quick glance,” Young says, he and his fellow supervisors can verify the data.
The human capital management capabilities within Kronos also give Young and his supervisors better visibility when they need to schedule jobs in coming weeks. “It gives you the ability to look at guys that have vacations scheduled,” he says. “If I’ve got a job coming up next week, I’ve got to run this CNC horizontal mill, and I can go to the Kronos clock and see if the guy that runs this machine has any vacation scheduled for that time.”
In the days before the HCM system, “I’d have to go out there and ask him. And right about then he starts planning some,” Young says with a laugh.
Finding Return on Investment
Perhaps the biggest bang for MAN’s buck came from the intelligence it gained by better tracking the time workers spend on each job. MAN bills its repair work based on the hours workers spend on the job, and also adds levies to cover utility and maintenance charges on jobs that involve oversized equipment such as large lathes and boring mills.
Since job costing is the lifeblood of a manufacturing job shop, a human capital management system that allows workers to efficiently clock on and off specific jobs helps ensure that invoices are correct and customers remain content with the level of service they receive.
In a paper-based environment, job costing can be one of the most difficult things for an accounting manager to understand and manage. A manufacturing facility, after all, need not be a sprawling, million-square-foot campus for a worker to get lost in the ebb and flow of daily operations. MAN’s Baton Rouge operations cover approximately 100,000 square feet, which includes a general machine shop, a rotating equipment shop, a large equipment shop, and areas where workers perform welding, fabrication, and water-cutting tasks. Under the old manual system, that was more than enough space for workers to find some idle time while ostensibly working on a job.
One can argue the finer points of human nature, but the reality is that in any workplace a certain nonchalance prevails among some workers, and management must take steps to tamp it down. At MAN’s job shops, that behavior can lead directly to an inflated customer bill, doubling the incentive for supervisors to weed it out. With the Kronos system, they could.
Under the old regime, employees wrote on a card the job number they had worked on and the hours it had taken, according to Yang. “It was pretty much the honor system. Usually there’s a lot of problems with that.”
Young concurs. Before the automated system, a machinist might finish a job “and then sit on that job for two, three hours after, cleaning up tools,” he says. Or basic human error would intervene. “A guy [would] punch in on the job, he would forget, ‘What was that other job number I was working on? Oh heck, I’ll just put all my time on this job.’ “
Automating the human capital management equation helped stamp out incongruities. “After we implemented Kronos, it pretty much eliminated all of this,” Young says.
For now, SAP’s ERP system transfers production orders to the Kronos system with the help of Microsoft BizTalk middleware. Shop floor managers then print the job order to give to workers. Under the next phase of the HCM project, to be completed this spring, a production supervisor will print a bar-code-based work order router that includes a description of the job, each step it requires, and the time needed for each step. When a worker begins a job, he will scan the bar code into the machine, then scan off when he is done. The Kronos Activities module will track that time for review by supervisors like Young and accounting personnel. For now, the Activities data must be entered separately into MAN’s SAP ERP system for billing purposes, but within a month the HCM and ERP systems will be linked and the hours worked on specific jobs will automatically populate customer invoices, Yang says.
Yang believes MAN’s $150,000 investment, which included the clocks, the HCM applications, and the implementation consulting, will pay for itself in increased productivity, more accurate billing, and hours saved on once-manual tasks. The company is now conducting an analysis on the ROI numbers, but some of the benefits are already obvious.
“The lady who needed to spend three hours per day to process the payroll, now she’s free. She can do something else,” Yang says.
As technology travels from company to company on the strength of recommendations, it almost always encounters initial resistance. Young says the changes in the production workflow took some getting used to. “When they first got [the HCM system], there was a lot of griping going on,” he says of the worker on the shop floor. “But now that the guys actually have it, it’s a whole lot easier for them to use. It’s not a problem now.”