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Posted: 11/27/2012
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Kyiv Cardboard and Paper Mill Ukrainian Manufacturer Manages its Operations with Microsoft ERP Solution

Kyiv Cardboard and Paper Mill Public Company, is a leading enterprise in the pulp and paper industry. The Mill's production complex has three main (container/box cardboard, sanitary/hygiene paper and paper products, corrugated packaging) and four ancillary facilities. With 500 client companies in Ukraine and abroad, the Mill's production complex required integration of all business processes into a consolidated general management mechanism to allow for centralized control over the entire manufacturing cycle.


Business Needs

Over the past decade, the Mill has developed and introduced numerous business applications for a number of tasks — from preparing and planning production to managing logistics and sales. "Classical" solutions (accounting based on 1C: Accounting, financial accounting in Microsoft Excel, etc.) were gradually supplemented with modern management systems for manufacturing processes. However, by being disconnected and narrowly specialized, these solutions soon made it impossible to create a single information system. Oleksandr Dudarenko, the Mill's IT Director points out that "As a result, any changes to business processes required significant resources and time to adjust programs. This was followed by a “recovery” period for operating activities. Similarly, information could not be processed in real time and systems were mainly used to makes summaries at the close of each month".

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* Our top-priority goals for implementation included sales automation from receipt of order to shipment of the finished product. Microsoft Dynamics AX was used to remove old order-handling principles completely. *

Oleksandr Molodtsov
Head of the Cardboard Sales Department
Kyiv Cardboard and Paper Mill

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This gave rise to the need to implement a bundle of ERP (Enterprise Resource Planning) and MES (Manufacturing Execution System) class, full-fledged solutions. Selection of the manufacturing execution system was clear from the start, as there is a globally recognized leader for the pulp and paper industry — Optivision from Honeywell. However, the situation with end-to-end enterprise management systems was much more complicated. Very few representatives of the latter can offer customized accounting and support for continuous manufacturing cycles at the same time. In addition, the ERP solution had to be integrated with Optivision and a package of business, tax and financial accounting had to be supported. The combination of these requirements was the driver behind the selection of Microsoft Dynamics AX: a platform that actively develops and offers great features for adaptation and expansion.

Solution

The project uses a three-level architecture based on Microsoft Dynamics AX 2009: the database server (Microsoft SQL Server 2008), the application server and client stations. SQL Server Reporting Services is used to develop and generate part of the reporting forms.

The project involved implementation of financial accounting, record-keeping for inventories, procurement, sales, transport logistics, partially bar-coding and – for the first time in Ukraine – business and tax accounting in accordance with applicable Ukrainian laws as amended during 2011-2012. In addition, end-to-end interfaces were developed within the project for interaction with Optivision MES systems for pulp and paper production and PMASC (a system for planning corrugated fiberboard production). They were also integrated into railway and car weigh-house management systems. A management system was introduced for transport logistics. At the moment of the system's launch there were more than 100 users; this number now exceeds 250.

Project highlights:
  • Development and introduction of a mechanism for automatic generation of the entire package of documents for products manufactured and shipped; including quality certificates generated by Microsoft Dynamics AX on the basis of input data from manufacturing MES systems. For example, tax invoices are now issued with their single registry maintained 24/7 (a requirement in the 2012 Tax Code) regardless of where they are issued — the Accounting Department, the cardboard or paper warehouse or the corrugated fiberboard production facility. Another example: the Mill's main raw material is waste paper; with over 28 tons consumed every month. Consolidated data on all incoming raw materials used to be manually entered from local accounting programs into 1C: Accounting before Microsoft Dynamics AX was implemented. After the introduction of Microsoft Dynamics AX, all entries (about 2,000 a month) are automatically posted in the Ledger. 

  • Cost accounting algorithms and models, including industry-specific ones, have been developed and introduced. For example, the cost of a paper mill that produces over 150 different products (toilet paper, tissues, paper towels) was previously calculated based on groups of products and took at least 10 days. After costing algorithms were implemented in Microsoft Dynamics AX, the cost is calculated for each type of product (!) with significantly improved accuracy and a time reduction to 2 days at most. 90% of time is now spent on verifying the accuracy of input data rather than costing. In the future there are plans to calculate actual cost minimums by the decade rather than only at the end of the month.

  • Specific algorithms and processes have been designed for corrugated fiberboard manufacture. For example, about 2,500 production orders are processed every month. Before Microsoft Dynamics AX was implemented, cost could only be calculated through breakdown by product types. Now we are about to complete work aimed at implementing a real-time calculation mechanism for the actual cost of each individual order. Implementation of Microsoft Dynamics AX also gives automatic control over order placement in production (depending on the number of orders already in production), products manufactured and still stored at the warehouse and financial relations with each client.

  • A feature was implemented to support business and tax accounting processes in Microsoft Dynamics AX following changes introduced by the new Tax Code in 2011. The solution can be divided into the following sections: general financial accounting, VAT accounting and tax accounting.

Vlad Berezin, Project Manager (PM) since February 2010 and Director at ERP PROFI, points out that "the implementation project at the Mill was the most complicated I have ever dealt with during my many years as PM. Apart from the factors listed above, this stemmed from the large number of business processes to be introduced, the significant number of new requirements added during project implementation, very tight implementation schedules and management of a large workforce within the project team. To convey the scale of the project, I can offer illustrative figures: the initial project plan developed prior to launch involved about 13,000 man-hours, but the project team put in about 27,000 man-hours by the time the system was industrially commissioned. Initial deadlines were pushed back 3 months, which is within the limit established by PMI project management standards for such a project. We managed to keep the project within the original budget."

Kyryl Rudnyev, Sales Director at SMART business, believes that "the project was complicated due to its wide functional coverage; commissioning through cut-off when the old system is switched off and a new one is launched at the same time. This method is incredibly difficult to implement but also most effective. Companies should opt for it when there is a large number of qualified resources (there were over 30 external consultants and developers at certain times), a coordinated effort by the entire team involving both internal and external resources and full support of the project from the Customer's management."

Industrial commissioning of the ERP system was followed by a certain period of adjustment, which required correction of some organizational and technical errors, streamlining the import of "variegated" input data from old applications, etc. Nevertheless, the Mill's staff started using the system 24/7 on the very first day.

Now we are adjusting cost calculations for each manufacturer; starting up and commissioning second-priority functional units for logistics record-keeping and search of transport; transport control within the enterprise's territory; budgeting; automation for submission and approval of inventory procurement requests (the Request for Quotes campaign); and implementation of a bar-coding system at all production facilities’ finished product warehouses; etc.

Benefits

Despite the complexity and large scale of the project, a year later after the implementation of Microsoft Dynamics AX, the plant management saw the significant effect that has been made to cover all areas of business and realized a number of important benefits.

A single uniform enterprise management system
Integration of all business processes into a general management mechanism allows for centralized control over the entire manufacturing cycle — from delivery of raw materials to sale of finished products. In this way, business has become more manageable and the Mill's management is now able to make specific management decisions based on accurate and exhaustive, real-time data. For example, cost calculation in the old accounting systems did not allow for detailed calculation of expenses for each type of product made. The calculation was done instead for a group of products. The operating result could be obtained only 15-20 days after the month-end close rather than in real time. The new system corrects this (and other errors related to data transfers between systems) and eliminates data redundancy.

Departmental requirements better served by advanced expansion and integration functionality in Microsoft Dynamics AX
In addition to out-of-the-box functionality, configured and customized to suit specific business processes, Microsoft Dynamics AX 2009 offers advanced tools for expansion and integration with external systems. This has helped cater fully to the special features of all the Mill's facilities and provide interfacing with MES and other systems. Vlad Berezin believes that other ERP systems are unlikely to offer such flexibility. They would instead make project implementation more complicated, costly and lengthy.

Transparent business processes
The ERP system clearly formalizes business processes to make them fully transparent and makes sure users follow adopted rules. Project implementation helped enhance control over expenses and improve the quality of client service. Transport processes (delivery of goods to consumers) were related to contracts entered in the system and were thus adjusted to their specific terms and conditions. This was instrumental in introducing a mechanism for rigid control over logistics, accounts receivable and payments from clients.


This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Solution Overview



Organization Size: 2000 employees

Organization Profile

Kyiv Cardboard and Paper Mill Public Company is one of Europe's largest manufacturers of cardboard and paper products. The mill produces about 30% of all pulp and paper products in Ukraine.


Software and Services
  • Microsoft Dynamics AX 2009
  • Microsoft SQL Server 2008
  • Windows Server 2008 R2

Vertical Industries
  • Process Manufacturing & Resources
  • Manufacturing & Resources

Country/Region
Ukraine

Languages
English

Partner(s)
ERP PROFI SMART business

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