Structural StrainsBy Larry Barrett | Posted 2002-08-09 Print
Cavalier Homes vastly increased its efficiency with factory software. Too bad it had to leave the project half-finished, like a builder whose funds have run out.
From the start, Cavalier felt the strain, not only of its declining business but the inevitable disorder that accompanies any large-scale software implementation.
"We had so many disparate systems from all these years of acquisition that we really needed to get to one single universe for all our transaction systems," Wilson says.
One of the first priorities was to get all of Cavalier's manufacturing plants and service centers all speaking the same language.
Prior to the SAP implementation and the concurrent business-process re-engineering that Cavalier went through, it wasn't uncommon, for example, for different Cavalier manufacturing sites to have boards that were 7-feet-8 inches or 8-feet-2 inches in length both being recorded as 8-foot boards in Cavalier's computers. Such discrepancies messed up the company's purchasing and inventory management, and frustrated service technicians who might end up with a board too long or short for their purposes.
All told, the introduction of planning software and tight controls of the manufacturing process meant Cavalier could build a new manufactured home for $1,600 less in an SAP plant than in one of its traditional plants (though not more cheaply than the industry average, as the chart on the following page shows).
The SAP software has also proven to have value as a business-intelligence tool. In particular, it appears to have given Cavalier managers insight into exactly what customers did and did not want in their new manufactured homes. For instance, the software told Cavalier that more than 90% of new manufactured home-buyers were choosing the same options over and over again.
That insight has allowed Cavalier to realize certain efficienciesat least in the locations where the SAP rollout is complete. Overall, the company has reduced its raw materials SKUs from 15,000 to 1,300 and chopped its inventory of raw materials in half. Less inventory on hand frees up cash, lowers storage costs and reduces loss due to damage or theft.
Carpets, floor plans, lighting, kitchen cabinets and every other conceivable option in a new home have been narrowed down to the most popular options, clearing more inventory space and speeding up the manufacturing cycle.
At one point, Cavalier's manufacturing plant in Addison carried more than 300 different types and styles of deck boards. Now, they're only stocking two types because the data they unearthed showed those choices were what customers wanted most. Similar inventory reductions have been made in everything from vinyl-siding colors to cabinet styles.
"So we just started building the homes with those popular options as part of our standard home," Wilson said. "Sure, we still have to be ready for that one customer that might want blue carpet or whatever, but by gaining visibility at the enterprise level we're able to eliminate the options and therefore the inventory of parts or features that customers simply didn't want."
Wilson figures that if Cavalier is saving $1,600 per home with only 60% of Cavalier's manufacturing facilities using the software, the company will save even more once the implementation is complete.
In any event, the benefits to Cavalier haven't accrued from better inventory management alone; the system for processing orders also has improved markedly. Case in point: Before SAP was installed, a dealer in Tennessee ordering a home had to call in that order to the Cavalier plant in Addison. The Cavalier representative, in turn, had to manually price out the specific model and options for the customer's home piece-by-piece before calling the dealer back with the sales price. For one home, that's arguably no big deal. But when you're selling an average of 31 new manufactured homes a dayand this was during the dreary selling conditions in 2000those time-savings add up in a hurry.
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