Kyiv Cardboard and Paper Mill manages its activities with Microsoft Dynamics AX
Public Joint Stock Company “Kyiv Cardboard and Paper Mill” (KCPM) is the leading enterprise of the Ukrainian pulp and paper industry, one of the largest in Ukraine and Europe. In general, the share of the Mill makes about 30% in the overall pulp and paper production in Ukraine. Among its customers there are nearly 500 Ukrainian companies, a number of CIS companies. The industrial complex consists of three primary types of production (packaging and boxboard, paper, sanitation supplies and paper products, corrugated packaging) and four auxiliary types of production.
Over the past decade at the plant were developed and implemented numerous business applications beginning from production preparation and planning solutions to logistics management and marketing. The “In-house” and accounting (accounting in “1C: Accounting”, Financial Accounting in Microsoft Excel, etc.) by degrees began to be supplemented with modern management systems. But soon their fragmentation and niche specialization led to the impossibility of creating a unified information system. And, accordingly, any changes to business processes required significant resources and time to adapt applications, and operating activities “recovery” period. Similarly, it was impossible to process information in real time, so basically applications were used to summarize month results.
Thus it became necessary to implement a line of ERP (Enterprise Resource Planning) and MES (Manufacturing Execution System) solutions. But if the choice of production management system has been almost unique in view of the recognized world leader for pulp and paper industry – Optivision from Honeywell, the situation with complex enterprise management system was much more difficult. It was found that a few representatives of them are able to simultaneously provide as “accounting by request”, and, also, support for continuous production runs. In addition, there was urgent task of integrating ERP solutions with “Optivision” and implementation of Accounting and Tax. Taken together, these requirements led to select the Microsoft Dynamics AX, as a rapidly growing platform with advanced capabilities to adapt and expand.
The project was launched formally in April 2009, and the start of live operation was scheduled on January 1, 2011. Unfortunately, at that time, either in Ukraine or in the neighboring countries, there were no companies which had Microsoft Dynamics AX implementation experience in the pulp and paper industry. However, the contractor has been selected and set to work. But, even at the stage of business processes analysis there has been a change associated with the number of contractors participating organization structure of project management, appointment of new Project Manager and change in responsibility for the project implementation, which naturally affected the project timing. According to Alexander Dudarenko, an IT director of the company, the main problems were the complexity of the project, need to address the specifics of main three and four auxiliary facilities, short implementation time, lack of specialists, changes in Ukrainian Tax legislation in January 2011.
In the spring of 2010 the project was restarted, the plant has formed its own team of five experts with experience in Microsoft Dynamics AX implementation, contracting companies, which participated in the project and eventually led it to launch – the ERP PROFI and SMART business company. The number of KCPM and contractors’ specialists simultaneously involved in the project sometimes reached maximum of 50 people, commercial operation of the system was postponed until April 1, 2011 (95% of all tasks were carried out from March 2010 till March 2011).
The project was implemented on Microsoft Dynamics AX 2009 using the three-tier architecture: the database server (Microsoft SQL Server 2008), application server, the client site. As means to develop and obtain part of reporting forms the SQL Server Reporting Services was used.
During the implementation process financial accounting, inventory, purchasing, sales modules were introduced, and, for the first time in Ukraine, bookkeeping and fiscal accounting were implemented according to the current Ukrainian legislation with all the 2011-2012 changes. In addition, during the project were developed the complex interfaces to interact with MES systems “Optivision” for cardboard and paper industries and PMASC (production planning system of corrugated cardboard production), and, also, performed the integration with control systems of the railway and automobile weight-services, the control system of transport logistics. The number of system users at launch was over 100, and now there are more than 250.
The most important points are the following:
- Developed and implemented the automatic excerpt mechanism of all package of documents about manufactured and shipped products, including certificates in terms of quality of products, prescription in Microsoft Dynamics AX, which formed on the basis of primary data productions of MES systems. For example, now the Tax Invoice write out with the single registry formation is made (a requirement of the tax code in 2012) regardless of where it is written – accounting, cardboard warehouse, paper, corrugated cardboard at 7/24 mode. Alternatively: the basic raw material of a plant is a waste paper. Monthly consumed more than 28 thousand tons of raw materials. Before the Microsoft Dynamics AX implementation, the consolidated data of all receipts of raw materials were manually transferred to the “1C: Accounting” from the local accounting programs. After Microsoft Dynamics AX implementation the all postings on “Manual” are automatically executed and it’s about two thousand entries a month.
- Developed and implemented the algorithms and costing model, including consideration of industry specifics. For example, before, the cost accounting of paper mill, which produces more than 150 different products (toilet paper, napkins, paper towels) was carried out by groups of goods and served at least 10 days. Following the implementation of developed algorithms for calculating the cost in Microsoft Dynamics AX, the process of costing is done for each type of product (!), the calculation accuracy has improved significantly, and the calculation time takes less than 2 days. And 90% of time is spent not on calculation of production costs, but for input data validation. In future, the calculation of the actual cost will be produced not only at the end of the month, and at least according to the decades.
- Developed the specific algorithms and processes used in corrugated cardboard production. For example, each month are executed about 2.5 thousand of production orders. Calculation of the implementation cost of Microsoft Dynamics AX was possible only in the context of products. Now the work is driving to a close, as a result of which will be a mechanism to calculate in real time the actual cost for each individual order. Also, as a result of Microsoft Dynamics AX implementation has been made possible automatic control of orders placing in production, depending on the number of already deployed in production orders, finished production and even of stored goods and financial relationships with each of clients.
- The opportunity to maintain bookkeeping and fiscal accounting in the Microsoft Dynamics AX has become available, including changes related to the introduction of a new tax code in 2011. The solution can be divided into the following main components: the general financial accounting, VAT accounting, Fiscal accounting.
After starting the ERP-system in live operation was a period of improvement, during which it took to correct some errors of organizational and technical measures to streamline the import of “mismatched” raw data from legacy applications, etc. However, from the first day the system was used by plant’s employees in 24/7 operation method.
Now is finishing the rework of cost calculation for each type of the production, as well as configuration and commissioning of the second priority of functional units and logistics account and search for transport, control of transport at the plant, budgeting, process automation, application and approval for the purchase of commodities, “Bid Company” as well as the introduction of bar coding on all stocks of finished products industries, etc.
Despite the complexity and magnitude of the project during the first 12 months of operation it was actually paid off. Such a high ROI rate is due to full coverage of all sides of the plant activity and due to the number of important advantages.
Unified enterprise management system
Integration of all business processes into the overall management mechanism provided centralized control over the complete production cycle – from the raw material to finished products sales. Due to the business has become more manageable, and the plant management was taking the correct management decisions based on accurate and comprehensive data in real time. For example, the calculation of the cost of old accounting systems does not permit a detailed calculation of costs for each type of product, so the calculation was performed on a group of products. Operating results may be obtained only by 15-20 days to close the month, but not in an operational mode. Also, the new system will remove this and other errors relating to the transfer of data between systems, as well as eliminate double data entry.
A full account of the specific production processes
In addition to the functionality that is ready, “out of the box”, which can be parameterized and configured by itself for specific business processes, Microsoft Dynamics AX 2009 offers advanced tools of empowerment and integration with external systems. Thanks to this the enterprise managed to take into account the specifics of all types of manufacturing plant, to interact with MES and other systems. In Vlad Berezin’s opinion, another ERP-system is unlikely to be able to provide such flexibility, at least, the implementation process will be significantly complicated, the cost will increase and the project will be extended.
Transparency of business processes
The clear formalization of business processes in the ERP-system is introduced to provide full transparency and not to allow users to deviate from the set rules. As a result, the project managed to achieve better control over costs, improve customer service. The logistics processes (goods shipping to consumers) were linked to contracts entered into the system and began to take into account their specific conditions, which allowed a mechanism to implement strict control of logistics, receivables and customer payments.
Public Joint Stock Company “Kyiv Cardboard and Paper Mill” is one of the biggest enterprises in Europe on cardboard and paper production.
For more information on products and services of Kyiv Cardboard and Paper Mill please visit the site: www.papir.kiev.ua.
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