Seeking automation

The implementation of the new solution will help Pilot Pen streamline its supply chain, so that its regional distributors can purchase products directly from the manufacturer’s Dubai-based warehouse.

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By  Neil Denslow Published  January 25, 2005

|~||~||~|Pilot Pen has overhauled its IT infrastructure with Microsoft Business Solutions Great Plains enterprise resource planning (ERP) solution and re-located its Middle East supply chain hub from Japan to Jebel Ali.

The company, which manufactures a wide range of pens, pencils and art materials, made the move in order to better support its regional distributors both by having inventory closer to the market and a greater presence on the ground.

Previously, Pilot Pen included the Middle East in a much wider region that stretched all the way from Singapore to Turkey. It did not have a sophisticated IT backbone to link it. However, the company decided it was losing out through this approach, and that it needed a physical presence in the Middle East with a state-of-the-art IT platform to drive sales.

“Our sales position was quite weak in the Middle East compared to other markets we operate in, such as the United States. We decided we needed a local company and new technology to care for distributors, so we could communicate more effectively and [provide] a better service, which would then allow us to compete effectively,” says Akira Ota, CEO of Pen Pilot Middle East.

In 2002, the company decided to set up a regional subsidiary, based in Jebel Ali. Pen Pilot chose the free zone as the base for its operations for a number of reasons, including the possibility of 100% ownership and the facilities available. “The infrastructure that Jebel Ali offers to any international company is excellent. It is on par with the rest of the world,” says Ota.

Pen Pilot was also attracted to the free zone by the fact that it already had 80 Japanese companies, and because of the work of Jebel Ali Free Zone Authority (JAFZA) liaison officer based in Tokyo. “He facilitated the move in a much smoother way,” notes Ota. “In that respect, I think Jebel Ali is far ahead of other free zones [in the region].”

It also wanted to enhance its supply chain processes. Previously, the 13 national distributors in the region, which covers the Gulf, the Levant region and Egypt, all ordered from the factory in Japan and their goods were shipped directly to them.

This process was proving to be inefficient and time consuming for Pilot Pen. The lack of a comprehensive IT infrastructure was hindering the organisation. After evaluating a range of solutions from different vendors, Pilot Pen decided to work with Microsoft.

“The main reason as to why we decided to team up with Microsoft and use Great Plains as the ERP system is because of its user-friendly Windows-based interface. It is also able to scale up with the company, including managing an inhouse distribution centre,” explains Ota.

“The availability of product upgrades was also important to us. I have seen the previous version and Great Plains is very dynamic. It keeps getting upgraded with more and more features. Even the version that we have right now is much more than what we need at this stage,” he says

The implementation of the ERP system was undertaken by Dubai-based Emitac, which also installed the HP/Compaq server the software sits on. Emitac provided the staff training as well. The system was installed out of the box with only a few modifications made so that it could generate reports to meet the requirements of Pilot Pen’s head office in Japan.

“It was pretty much out of the box implementation. The implementation team did not need to make too many modifications to the solution because at this stage our needs are simple,” says Ota. “We decided to work with Emitac because of its proven work record in the Middle East region. We wanted to work with an implementation team that understood the requirements of our company and carried out the deployment in a seamless fashion, on time and within budget.”

While the deployment was completed without any major hurdles, the biggest challenge was the training aspect since, Pen Pilot was still recruiting staff as the September 1, 2004 ‘go live’ deadline approached. “The system was ready, but our employees were not there. Emitac therefore had to strike a fine balance between meeting a deadline, while having nobody to train,” notes Ota.

“However, as the system is Windows-based and everything is point and click, the learning curve was pretty quick,” he adds.

Now the deployment is complete the company is starting to reap benefits on several fronts. At the forefront of the Pilot Pen’s technological leap is the availability of stocks at its warehouse in the Middle East. The manufacturer’s regional partners will now order stock directly from Jebel Ali, which will decrease their logistics cost, as well as simplify the manufacturer’s supply chain.

The new system is linked with Pilot Pen’s other offices, which allows its staff to work from anywhere. “As far as the head office in Japan is concerned, [Pen Pilot Middle East] is now one vendor covering the whole region, whereas before they would deal with 13 different companies,” comments Ota.

Emitac says for a business like Pilot Pen, which has to manage a complex operation across a wide range of geographical region, Great Plains is an ideal solution to provide a greater visibility and understanding of business processes,” says Mohammed Al Halabi, business development manager at Emitac.

“The modular design of the solution allows businesses to deploy whatever functions they need to fit their requirements, while the familiar Microsoft platform ensures that the solution is integrated with other IT solutions. The staff can manage the system easily as well,” Halabi says.

In addition, the seamless IT platform also allows its distributors to respond quickly to tenders, which are often realised in the Middle East with very little notice. Previously, the distributors would have had to organise a special shipment for the goods needed for such a deal from Japan, which would have been both costly and slow.

“Today, if a distributor receives a tender we can ship out the goods immediately so they can respond more quickly,” Ota explains. “This has already helped our dealer in Kuwait win a tender, which was a significant new business for the organisation.”

Microsoft says Pilot Pen has successfully managed to decrease the lead-time in its supply chain and create an opportunity for its staff and customers to have a better relationship and capitalise on its global IT resources, as well as its assets in JBFA.

“The manufacturer is an ideal example of how the right technology with the right support, can be deployed to create a truly competitive advantage and greater value to customers,” says Rajesh Deepchandani, partner engagement manager at Microsoft South Gulf.

Furthermore, Pilot Pen also wanted to hold four-to-five months worth of stock in Jebel Ali, which comprises between 12000 and 1500 stock keeping units (SKUs).

The manufacturer looked at running its own warehouse, but decided on outsourcing instead, as this was both quicker and cost effective to set up. In order to keep its start-up costs down, Pen Pilot decided to outsource the warehousing of these items, with Kuehne & Nagel winning the contract.

“Because of the various processes and the documentation requirement we decide to outsource as much as possible [to begin with]… in future though, we eventually want to get everything done inhouse,” Ota says.

Pilot Pen chose Kuehne & Nagel as its supply chain partner for a number of reasons, the most important of which was the fact that the 3PL had air-conditioned warehousing readily available. This was key, as many of Pilot Pen’s products need to be kept fairly cool to ensure they do not deteriorate.

“Some of the inks in our products are sensitive so they need to be stored in temperature-controlled conditions and Kuehne & Nagel was offering that. The rates were also quite competitive. All these factors helped us choose the oragnisation as our logistics partner.”

Distributors place their orders with Pilot Pen by fax or phone. Pilot Pen then generates a picking list using its back end ERP system, which is then faxed to Kuehne & Nagel. Outbound transport from Jebel Ali onwards is left to the distributors to decide upon. They can either use their own freight forwarder or leave it to Pen Pilot to arrange shipment, a process that is also outsourced to Kuehne & Nagel.

The company would like to automate much of the ordering process in the future, but for now it is relying on these paper processes. “For the time being, this is the best system we can have,” says Ota. “Although, as we move forward we can better recognise what our needs are and then we can automate based on those requirements.”

Achieving complete technological finesse is the next big step for Pilot Pen. The company wants its entire system to be automated so that its distributors in the Middle East can order online. “Automation is a big dream for us. We would like to go for more automation and that is one reason why we went for Great Plains. We know the solution can facilitate that need at a later stage,” he enthuses. “Our goal is to have a sophisticated IT backbone in Dubai.”

In the meantime, the new ERP system is being used to maintain inventory management, which is done in line with Kuehne & Nagel. Both sides generate periodic stock reports, which can then be compared to ensure there are no discrepancies.

“Kuehne & Nagel has also implemented a system of weekly cycle counters for the most important SKUs,” adds Ota. “We compare these with our own system and if there is any sort of difference, we immediately tally it so we can nip it in the bud,” he explains.


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