Manufacturing is not an industry one readily associates with software-as-a-service. Finance, advertising, and retail are fertile ground for SaaS, but it seems like too much of a leap of faith for small manufacturers.
Well, let me introduce you to Spring Dynamics in Almont, Mich. The village, located about 50 miles north of Detroit, has about 2,800 people, 45 of whom are on the Spring Dynamics payroll. The company cranks out about $13 million of springs per year. About 90 percent of those springs end up in cars made by Ford, GM, and Chrysler. Exports account for the remaining 10 percent. Cars are loaded with springs; two under the hood make it surprisingly easy to raise and lower, and 20 keep you from sagging into the seat cushion.
Spring Dynamics left its Industrial Age heritage and entered the Information Age when it found Plex Online, an Auburn Hills, Mich., SaaS provider of ERP applications for manufacturers. Spring Dynamics found Plex through a very influential and credible source: its customers.
Jessica Marco, vice president for operations for Spring Dynamics, told us it got by with a "primary accounting system with a few shop floor modules" before adopting Plex's services. "The guys on the floor had to write information on paper," which was given to two people in the materials department for manual inputting. Unclear handwriting made for mistakes. Keyboarding errors during inputting compounded the problem. And the data provided no real-time picture that could prove useful for decision making. In an industry that demands precision, this was not working out for the best.
In June 2010, her company made the switch. The migration took four months. The cost savings and efficiency gains were apparent almost immediately. The first place a change was seen was in inventory accuracy. Before Plex, there could be a 5 percent variance between actual inventory and the paper record in just one location. That amounts to a $65,000 cost, Marco said. Plex cut that error rate to 0.7 percent, or about $9,000 for two facilities combined. The two positions for inputting all that data was cut to one. And those savings pay for Plex; Spring Dynamics pays about $4,200 a month to use the system.
More subtle cost savings also became apparent. The way Plex is structured, "every job is routed a certain way," Marco said. "You can't skip steps." Not skipping last part inspections means customers are rejecting fewer shipments.
The SaaS solution also automates paperwork. Invoices are automatically drafted and sent electronically to customers. Like the typewriter, Excel is biting the dust. Managers no longer pull data from spreadsheets. Instead, they use Plex to generate reports.
Finally, Plex's SaaS solution gives Spring Dynamics an electronic data interface (EDI), a feature customers are increasingly demanding for record notification. EDI automates shipping notices and customer releases (shipping schedules), which used to be filled out by hand. This is an added advantage for Spring Dynamics, because many competitors lack this capability.
Many case studies look at the promise of SaaS, but this one is worth noting because it dwells on actual gains. Spring Dynamics has been using a SaaS solution for almost two years, and the gains are not only apparent, but also measurable.