Case Study of ERP of Kohwa Precision Molding

Kohwa Precision Molding (Shanghai) Co., Ltd. sounds unfamiliar and unimportant to the ears of many. When it is made known that Kohwa is one of the manufacturers of mobile phone shell for big names like Panasonic, NEC, and Mitsubishi, they would have a different idea of the company.
A fully funded Japanese enterprise, Kohwa Precision Molding (Shanghai) Co., Ltd. upholds the management concept of high requirements on work and product quality. To elaborate on the concept afore-mentioned, any defected product cannot flow to the next link of the work flow and eventually to the market. By so doing, the manufacturer is responsible for the quality expected by the customer, and to a large extent, for the manufacturer itself. Quality is the only ingredient of the recipe of maintaining an edge of product price and performance in the market.

From Technology Information Application to Management Information Application

The parent company of Kohwa Precision Molding, Takagi Seiko Co. of Japan, launched years ago the application of the most advanced mold design software in the world, and developed a suite of specialized mobile phone mold R&D software applications. The set of applications was a perfect fusion of the theoretical knowledge of analog traffic analysis and reasonable mold design and decades of mold manufacture experience of the company. Thoroughly understanding the benefits brought about by technology information application, Kohwa Precision Molding is more concerned about the encouraging effect resulted from management information application. In that regard, it determined the development road by resorting to ERP-enabled enterprise management.

In 2001, Kohwa Precision Molding was founded in Shanghai. In 2003, it planned to launch ERP. Though Kohwa Precision Molding had a relatively mature MRPII system from the Japanese parent company, it gave priority to a set of domestic software as most of the operation personnel were localized. Secondly, it intended to reduce the cost of secondary development through the powerful functionality and generic applicability of the ERP. After careful investigation and screening of the domestic ERP manufacturers, it considered that the setting of the Kingdee K/3 ERP modules was more suitable for the production process and management concept of the enterprise. In addition, the K/3 ERP showed distinctive functional advantages over its competing peers, and could implement a smooth migration from the existing Kingdee financial software. As a result, the Kingdee K/3 ERP became the natural favorite of Kohwa.

Professional and Personalized Information Application

The mobile phone shell market witnesses fierce competition, with ever increasing personalized requirements. To cope with the diverse requirements, ERP has in turn unique production process and technique requirements for each enterprise. On the road of management information application, being professional and personalized is a decisive weigh.

The management concept of Kohwa requires high product quality. According to the conventional practice, a product needs only to go through the receipt and delivery as well as inspection formalities when it is flowing among workshops, and one workshop will handle a number of links of the process. If the product has a problem at the first link and yet goes through to the next link regardless of the problem, the product cost will eventually be raised. To properly address the issue, the implementers of both Kohwa and Kingdee had in-depth discussion and exploration. According to the special requirement afore-mentioned, Kingdee proposed the establishment of a virtual warehouse between the links of the same workshop, and that after one link of work was completed, the product should go through the receipt, inspection, and delivery procedure. In that case, only qualified products could enter the next link of the process. Consequently, unnecessary wastes were reduced, and most important of all, the problem occurrence rate of the product at each link could be tracked. Based on the data collected, the manufacturer could implement cause analysis and improvement.

The Kohwa ERP system contained a backflush picking process, which was a process set by the Kingdee implementation consultant according to the characteristics of the Kingdee system and the production situation of Kohwa. On one hand, the process reduced the workload of raw material receipt and delivery, and on the other hand, it ensured the tailor-made solution based on the accurate and trackable input data. For example, the raw materials of 200 mobile phone shells were picked, and at the end only 195 mobile phone shells are produced. At this point, the system would automatically change the quantity to 195, and handle the difference 5 as waste. To reduce potential sizable waste, the company formulated the waste limit criteria. In the case that the quantity of waste exceeds the criteria, it would be considered a bad batch and the cause should be identified. The advantages of backflush picking are that the receipt and delivery formalities are streamlined, and the product inventory is accurate and easy to control. Of course, the disadvantage is that it may result in shortage due to inaccurate raw material arrangement if the operation personnel do not perform backflush in time. The company established an ERP application management system to ensure the accuracy, effectiveness, and timeliness of the system.

Prior to the launching of the ERP, Kohwa had been applying the self-developed engineering plan table to compile the production plan, which was visual but at times failed to provide accurate information of the inventory. The workshop management module of the Kingdee K/3 ERP system takes the production equipment as the work center to schedule production, and adds requirement time, planned time, and material procurement lead time into the production plan. In this case, the control of the overall production capability is accurate. Currently, a complete production process of Kohwa starts from sales, and goes to the input of the sales POs and predicted requirements of the month into the system, and then to the issuing of plan MO by the MRP budget. At this moment, the personnel of Kohwa would work according to the production plan and material requirements generated by the ERP system, resulting in more reasonable and more accurate planned work. The plan MO of the ERP is based on the sales PO. In the past, the engineering plan table included the sales PO and the prediction, which was not accurate. In the case that the scheduled delivery is changed suddenly, it will cause inventory accumulation or shortage. The ERP system can implement more stringent management of the sales POs and customer requirements, and control the production fully based on POs. As a result, the inventory is reduced, capital circulation speeds up, and at the same time, the supply requirements of the customers are satisfied to the full. There are times when a material is not missing in the engineering plan table but it is found to be missing. The cause is that the engineering plan table is an Excel form, with weak protection, easy calculation mistakes, or mistakes due to bad communication. In the case that the receipt and delivery are not performed in time in a certain period, the data of the ERP system cannot reflect the true status of the inventory either. Currently, though the scheduling reasonability and accuracy of Kohwa has been greatly improved, there is much work to do before the full capacity of the K/3 system is exhausted. To achieve that end, it needs the joint efforts of both Kohwa and Kingdee.

Huang Tianrui, Director of the Business Department of Kohwa, gave a to-the-point comment on the use and achievement of the ERP system. Currently the Kingdee K/3 ERP system has been applied in the sales, finance, logistics, and workshop departments. It made significant achievements in product batch tracking, cost control, time and operation, and scheduling. For example, each product has a No.. With the No., the related production equipment can be tracked. The production status and production volume of the day of each shift can be viewed through the production report. The query of the current inventory ensures the possibility of immediate production in the day, and hence the emergency handling capability is enhanced. In the past, there were four workers to manage the inventory, and now only one full-time worker and one temporary worker can achieve the same result. The utility of human resources is improved. No doubt, the ERP system is not the peak of information-based enterprise management as the system itself is in the process of continuous improvement. In addition, due to the varied forms of the enterprise, some functional design cannot satisfy the requirements of the enterprises. For example, the cash flow details of the ERP system come from the finance department, and the A/R and A/P business are controlled and implemented by the finance department. However, in Kohwa, it needs the logistics department to report the A/R and A/P business. There is another example. One of the production characteristics of Kohwa is the strong generic applicability of material. The upper and bottom covers of the mobile phone shell are made of the same material or paint. To streamline the picking, they usually are picked together. The materials for the two parts of the shell are complementary during the use. It is difficult to calculate the quantities of the materials for the upper and bottom covers, and the amounts of waste for each part, as well as specify the causes respectively. The attitude of Kohwa is that they intend to consolidate the implementation in the next step, atomize the production planning and management function of the ERP, and meanwhile, incorporate the HR management, budget management, and project management to the agenda. In a full-picture view, enterprise information application is developed in multiple dimensions and perspectives, so that the enterprise market competitiveness can be enhanced strenuously.