EFACS selected as part of commitment to excellence for Naim Audio

Naim Audio

Customer Profile

With some of their high end audio products costing over £10,000 Naim’s commitment has been to strive to build the finest sounding audio equipment in the world.

The Challenge

Finding a system able to integrate the knowledge and resources within Naim and manage supply chain and manufacturing process to stringent quality standards.

The Solution

The combined impact of a very impressive reference site visit and proof of concept taken together with the security of dealing direct with the author and developer of EFACS resulted in Exel being the ultimate winner.

The Benefits

Linking of finance with production meaning faster month ends. Overcoming production bottlenecks by controlling skills and test resources more closely. Serialised barcoding and improved costing for after sales service.

EFACS selected as part of commitment to excellence

Founded in 1973 Nairn are a £10m plus company with a simple passion to build the finest sounding range of audio equipment available in the world today. To follow this with similarly high quality service and aftercare. Nairn required a system that would help them plan and fulfil this passion for quality and integrate the knowledge in the business that was required to provide it.

A passionate and committed interest in music is the foundation stone of Naim Audio that has enabled the company to design and manufacture what it believes to be the finest sounding range of audio equipment available in the world today. Founded in 1973 by Julian Vereker MBE (1945-2000), the £1 OM plus turnover company has built a worldwide reputation for quality, both in terms of product and service. With high-end reference units retailing in excess of £10,000, this is a reputation that must be maintained at all costs, and as Naim products can last a lifetime, this extends beyond the design and manufacturing process into servicing and aftercare. With so much resting on this commitment to excellence, when Naim needed to replace its in-house business system, only EFACS from Exel Computer Systems made the grade.

The specialist nature of Naim’s product range dictates a business model unlike the majority of mass electronic manufacturers. To begin with, much of the company’s business is highly labour intensive, from R&D through production, testing, packing, and on into servicing and aftercare. Using real time demand monitoring, Naim’s 125 staff produce sufficient units a day to satisfy global demand split roughly salsa between its UK and export markets. Not allowing for alternative voltage configurations for overseas markets, Naim has a relatively small product range yet this requires a huge diversity of individual components, all of which must be sourced not just for initial manufacture, but also for upgrades, repairs, and servicing.

Consequently Naim faces a number of tough business challenges, the greatest of which is quality, as IT Manager Jain Giles explains. “Quality and ensuring a consistency of supply of quality components is our greatest challenge. Every single component we use is deliberately chosen because of its individual quality and also the role it plays in making the final product sound. A number of factors can affect us, just in this area. First, it is not uncommon for our own internal tolerances and specifications to be tighter than the supplying manufacturer so every component is rigorously tested and checked. This understandably has a bearing on the consistency of supply. Second, because our R&D process is so time consuming and meticulous, we may select a component only to find at the end of the process that it’s either no longer supplied, the supplier may no longer exist, or that the supplier may only have made a limited batch and we have to decide whether to buy the entire batch or re-specify. There is also the question of at what point during the R&D stage do we actually look to buy the required components? And with many of our units still in use after 1 a or even 20 years, we also have to maintain a range of components for each product, or maintain the ability to provide appropriate upgrade parts.”

Another challenge is in the area of forecasting and the related area of stock levels of very high value goods that can easily be damaged. Giles again, “In addition to the standard stock and spares issues, the high value nature of our products and the variability of power supply configurations for different markets means we have to get this right. If we have a set number of a product we decide to build, what number do we build for the UK, the EU or the US? We can’t build too far ahead because that represents either a lot of high value Work in Progress (WIP) or finished goods which then need to be stored in exacting conditions to prevent them being damaged in the slightest way.” The company’s total commitment to uniqueness of serial numbers also becomes a factor here because a unit only ever receives its unique serial number when it is fully complete. Up until then, it could feasibly be finalized into one of several different products.

Changes in legislation have also brought considerable challenges for Naim. One very recent example of this has been the requirement to use only lead-free solder as of July 06. Not only did this necessitate a huge investment in time and capital in re-designing the company’s flow solder equipment, it also meant substantially rearranging the internal layout of various sections of the company, especially the area of spares and repairs which still have lead based solder in use. As Giles notes, “This also affected our entire supply chain and we had to invest hundreds of man hours to validate the compliance of every component we use.”

The actual manufacturing process also comes complete with its own challenges. The company’s reliance on highly skilled human resource brings potential bottleneck issues in the case of illness or holidays, even with cross training being standard practice in the company. Workflow and space become important considerations during each of the PCB, assembly, test and dispatch stages. Add to this that certain test equipment can only be used on certain products and further potential bottlenecks become evident. As Giles succinctly states, “Everything has to be in the right place, at the right time, and in the right order, which means everyone has to understand their part in the process and the impact they have on everyone else.”

Prior to Naim’s investment in EFACS from Exel, it had relied on an in-house legacy system referred to as LEX which ran on a TSX 32 box. Having been largely written by Giles, the system provided a close fit to the way the company was ran and accurately covered the key areas in the company, namely accounts, production and spares/repairs. Over time however, and as Naim continued to grow, a growing number of weaknesses became increasingly clear, beginning in the area of financial information. Giles explains, “The system was never written to be an accounts system, so with LEX, it could take 2-3 weeks after each month end before the management accounts would be ready; year end accounts took even longer. Our payroll was also DOS based and despite securing a replacement when our original payroll company went bust, we knew that we needed to upgrade.”

Growing concerns over the non-integrated nature of the system which essentially kept all information separate according to department also added to the pressure to change the system. The company identified it needed either to write from scratch a new and integrated in-house/bespoke system or to source an external, “out of the box” solution. Eventually the latter route was chosen as it was felt that an internal re-write would be too time intensive and tie up key resource within the company. Giles therefore, with the assistance of an external consultant, began compiling an exhaustive specification list of what the new system needed to be. A sizeable list of candidates was soon reduced to 5 with Giles bluntly describing the reasons. “To be honest, it was clear that there were a number that didn’t have any experience in our business and some that simply couldn’t even do the job.” At this stage, Giles consulted with all relevant department heads to get their input and to ensure any decision was a true company wide decision. Reference visits were arranged and the process culminated with 3 contenders being presented with test data from Naim with a view to then demonstrating how their system would handle it.

EFACS proved to be the ultimate winner having delivered a very impressive site visit and also a solid proof of concept of how the system could and did actually work with Naim’s own data. This wasn’t all however, as Giles elaborates. “We wanted to build a long term and secure working partnership with a system supplier, and not just a product. Consequently, the people we were dealing with were important, in addition to the company’s deep knowledge of the industry as well as its overall attitude. This was in marked contrast to another competitor which was very keen to offer us the source code of one its products yet didn’t actually feel it important to mention to us that they had just been taken over. This naturally raised questions about the company’s business practices, but also about the longevity and security of the product we were being offered. With Exel being the author of EFACS, an established product, we knew that we would have access to the most knowledgeable people about the system, if or when we might ever need it.”

Contracts were signed in July 2002 after which followed a complex 2-year implementation period that Giles describes as “horrible” for a variety of reasons. At the heart of this was the process of mapping out and systematizing the entire company’s way of operating, which had always been very intuitive and with substantial amounts of vital information being the preserve of a number of individuals within the company. In addition to this, Naim had to wade
through a huge amount of data, as Giles explains. “We had 14,000 ‘customer’ contacts but a good proportion of these could either be suppliers or possibly both. Given the very long lifecycle of our products, many of these contacts were 1 a or 20 years old, so in addition to the usual situation where people have moved, we also had a significant number of contacts who had passed away. We adopted a positive ‘opt-in’ approach, and ended up with 2/3 of our data being obsolete.” Other complications lay in the task of defining the Bill of Material (BoM) structure, with over 4,500 components needing to be categorized in terms of what was used, when, and where. When combined with mapping out workflow, this task in itself took 1.5 years to complete, this onerous undertaking being the responsibility of Ann Jeanes (Logistics Manager) and Victor Edwards (Production Engineering Manager). As Giles reflects, “Whilst painful, it was both necessary and positive because it forced us to standardize the way we worked, which would be key to improving efficiency and visibility of what was happening in the company. As far as possible in a labour intensive process, it has also helped replicate the huge experience within our workforce by building it into the system.”

Training was also a central component of the implementation, especially as many staff members were not familiar with working with PC-based systems. Adopting a ‘train the trainer’ approach, Giles and her senior assistant sat in all the training sessions with the relevant staff. “It wasn’t as difficult as I’d expected;” she remarks, “people took to it really quite quickly. The only area we could have improved upon was in the area of initial data accuracy because if, every now and again, someone encountered a data error, it would have a negative impact on their trust of the system. This is only natural and shows just how important it is to take your people with you, when switching systems in such a major way as we did.” Go-live was planned for August 2004, to take advantage of the company’s annual holiday time and new financial year, and went surprisingly smoothly. As Giles comments, “Everybody just got on with their jobs, as they’d always done. We had some hand holding from Exel which was very helpful but again, just like the training, the actual go-live process was not as difficult as we had anticipated.”

The time since its successful go-live has been defined in 2 key ways:- a time of enjoying major benefits from EFACS and also a drive towards a Leaner manufacturing methodology, the latter led by Neil Carden, Naim’s Manufacturing Director appointed 3 months after the switch to EFACS. Carden’s background is one of considerable lean/Kanban experience and he identified that EFACS could work in partnership with building a Lean working environment. “It was clear that with EFACS, we now had much greater reporting at every level, especially on the financial side of the business. We also had much more information in terms of forecasting and how our supply chain extended into the future, up to 20 weeks and beyond. We were also identifying a lot of non-value added activity, wasted time in other words, and are now implementing greater use of Kanbans to help in this area. In this respect, we will use EFACS in a more supportive role, primarily to update stock levels etc, in line with what’s happening on the shop floor.”

Giles picks up the benefits, especially in terms of financial visibility. “With EFACS, the management reports we are now able to generate are not even in the same ball park as before. We now have access to huge amounts of data, can drill into this to an amazing depth, and whereas they took 14 days to prepare on LEX, they are ready within 2 days of each month end. That 12 day saving is a lot of time.” She continues to describe what this quicker and more accurate data means to the company. “In addition to simply having an accurate, up to date cash flow situation, we now have much greater insight into when or when not to launch products. We can now gain real time information and see trends in sales which again help us with our sales forecasts and helps spread our manufacturing workload. We also can see how efficiently we are using our workforce, which is vital seeing it is our greatest asset.” The service department is another area within the business to have benefited greatly from EFACS. Now the company has a comprehensive view of the time and costs associated with each service and repair which in turn provides information as to whether the existing service charges are actually covering the running costs of the department. The previously cumbersome and repetitive process of evaluating return notes, internal inspection notes, action reports etc, has now been streamlined, providing a considerable time saving. Again, Giles notes that with EFACS, “the service department has moved significantly from gut feeling about what was happening and why to hard facts.”

The dispatch department too has benefited, with a big reduction in paperwork and procedures. The single database with EFACS allows all information relating to an order, from its original quotation through to dispatch, to be entered only once and carried through the system. So much so that dispatch is now responsible for picking and packing, with all data entry being achieved via hand held scanner which reads a unique barcode generated within EFACS. This can be mission critical for a company like Naim, where serial numbers are all important because each product is uniquely identified by its serial number. Giles again, “Serial numbers are only allocated at the very end of the product’s assembly, just before it is packed and dispatched. It is completely unacceptable to either have a duplicate serial number or the wrong serial number allocated to a product so the bar coding facility with EFACS removes any possibility of human error, especially at the very final stage of the process when the goods are dispatched.”

How would Giles rate the system overall? Her answer is honest and informative. “In an industry as unique as ours, no ‘out of the box’ solution is going to give you everything you want. With EFACS I’d say we got about 80% of what we wanted, and you can’t get higher than that. We are now more in control of what we’re doing, better aware of our stock situation, have greater forecasting accuracy, and the potential of using EFACS in conjunction with an automated Kanban ordering system as part of our push towards lean. In short, we couldn’t have got to where we are today without EFACS.”