CLASS ABCD

At the risk of getting into what might look like alphabet soup, we
need to introduce another concept based on the letters A, B, and C
plus one more. Here goes.
By the mid-1970s the term MRP had become a buzzword. Almost
everyone, it seemed, was “doing MRP.” Many companies weren’t
happy with their results. On the other hand, some companies were
achieving spectacular results. Companies’ reactions to MRP ranged
from: “It hasn’t helped us at all.” to “It’s terrific; we couldn’t run the
business without it.”
It became obvious that there were profound differences in how
well companies were using this set of tools. To help focus on this issue,
Oliver Wight, the leading pioneer in this field, developed the
ABCD classification. (See Figure 1-6.)
Class D installations have often been viewed as “another computer
failure.” This strikes us as a bum rap for the computer, because
the computer is the only element that’s doing its job. Has the computer
failed? No, it’s working. Has ERP failed? Not really; it hasn’t
Figure 1-6
Class A Effectively used company-wide; generating
significant improvements in customer
service, productivity, and costs.
Class B Supported by top management; used by
middle management to achieve measurable
quality improvements.
Class C Operated primarily as better methods
for ordering materials; contributing to
better inventory management.
Class D Information inaccurate and poorly understood
by users; providing little help
in running the business.
Enterprise Resource Planning 17
had a chance. What has failed? The people in the company. They’ve
failed to implement and operate this set of tools successfully.
Class C means a company has reduced its inventories, in some
cases substantially, and probably is better able to manage engineering
changes. The return on investment (ROI) for Class C typically is
very good. However, the company really hasn’t changed the way it
runs the business.
The company operating ERP at a Class B level has dramatically
improved its ability to deliver the product on time to its customers,
minimize shortages in the plant, avoid unplanned overtime, reduce
inventories, and cope with the myriad of changes that typically confront
a manufacturing organization.
Class A yields all of the Class B benefits and more. The business is
managed with one consistent set of numbers, from top management’s
sales & operations plans down through the detailed schedules
for the plant floor, the suppliers, the distribution centers and, most
important, the customers. Financial plans and reports are developed
from the highly accurate operational numbers used to run the business
on a day-to-day basis. Extensive use is made of simulation, performing
what-if analyses using the ERP data base, in both units and
dollars.
To evaluate their performance, many companies have used the
Oliver Wight ABCD Checklist for Operational Excellence (Fifth edition,
2000, John Wiley & Sons, New York, NY). This checklist is a
series of questions which an organization can self-administer to determine
how effectively it’s using the tools of ERP, and this process
results in a letter grade (A,B, C, or D) and helps to determine the
path for improvement.