Business — Banking — Management — Marketing & Sales

Companies which manufacture «by order» (i.e. by customer order, by production order, or in using a combination of both) are faced keeping track of order progress. The management reporting systems in most Ukrainian companies, however, are designed to generate reporting by period (i.e. by month, quarter, year). Orders, on the other hand, generally extend over several periods. Order tracking systems, due to this, have difficulties to extract the data they need from the traditional period orientated management information systems. Because of those difficulties they take often the form of reports analysing the work in process by workshop in taking for granted that, if work in process in the work shops looks reasonable, adequate order progress can be assumed.

An example for this approach is the work-in-progress report generated at a major Ukrainian company which looks as follows:

This report — prepared in 1000 UAH — is supposed to provide management with information about the status of the typically 40-50 orders in progress which have a lead time of 3-4 months, and which represent an average inventory value of 25-30 million UAH. The information this report is based on — i.e. the status of orders and the related direct cost — is captured manually as part of the monthly closing of the company accounts. The report is available around the 15th of the following month. It contains only values and no break down of the values into orders (order information is captured originally but it cannot be consolidated because the order identification differs from workshop to workshop).

Further, the expression «workshop» in this report is somewhat misleading and does not designate a manufacturing activity along the productions cycle but the eight traditional product lines for which the company maintains reporting in its accounting system. Presently, one of those product lines stands for 90-95% of the activity, the other seven representing product lines inherited from the past (e.g. consumer products) and the activity of which has practically ceased. Due to this, work-in-progress reporting for the main activity, amounting to the above mentioned 25-30 million UAH, represents one line on the report. If this report is received by the company’s Financial Director around the 15th of the month, it relates to status of up to six weeks ago. If questions come up as to the correctness of the global work-in-progress number for the main activity (i.e. as to the order progress), any analysis is difficult and time consuming because the manually prepared data capturing documents have to be followed down to the shop floor clerk level. The report, due to this, is primarily an accounting document and of limited utility for initiating management action (the events it is related to are «history» when the information is received by management).

The reason for these system-wise inadequate controlling practices stem from the fact that the current IT-system cannot be used as basis for order tracing and work-in-progress control by order. The recording of order numbers is not foreseen in the system and orders are not given a clear identification which would permit to follow them through the production cycle.

This weakness cannot be corrected short term — a solution would be possible only through a general IT system overhaul .

The Tacis project team, therefore, has developed a concept which works independent from the current data capturing routines, and which can use the software developed as prototype for the «Panel of Key Indicators». This concept — i.e. the principles of data capturing, the periodicity of data capturing, and the format of data storage in the related data warehouse — is described in the following.