United Streetcar gets domestic manufacturing back on track with Oracle ERP solutions.
by Alison Weiss, August 2011
Everything old is new again—at least when it comes to streetcars. This nostalgic mode of transportation is currently experiencing a renaissance, because the modern streetcar offers an environmentally friendly public transit option that is helping to reduce traffic and revitalize urban city centers across America. One company that is taking this track, with a decidedly cutting-edge twist, is United Streetcar (USC). The company is bringing back a once-dormant industry as the only manufacturer of modern streetcars in the United States.
Based in the Portland, Oregon, suburb of Clackamas, USC was founded in 2005 as a subsidiary of Oregon Iron Works (OIW), a large metal fabrication shop that builds boats and bridges and other large projects. Chandra Brown, president at USC, says it was proximity to Portland—and the city’s beloved mass transit system, TriMet (also an Oracle customer)—that inspired the development of OIW’s new rail business.
“I realized in 2005 that Portland was importing its cars from the Czech Republic because there was no builder of streetcars in America,” says Brown. “Streetcars were basically founded in the United States, and in past history, almost every city in America was a streetcar city.”
Brown, who is also vice president at OIW, believed streetcars would be a growth industry. In addition, she believed it was important that the streetcars be built in the U.S., using parts and equipment made in America, from U.S. suppliers. “I went back to my company and said, ‘I think this is something we should do,’” she recalls.
However, building streetcars was a different kind of business than what OIW was used to. Instead of its usual focus on single projects to build hydroelectric bridges or military patrol craft, for streetcar manufacturing the company would need a system that made it possible to build projects on an ongoing basis and that also could be tailored to meet specific customer demands. If Brown and her team wanted to get USC on track, they would need an IT system to support the new business—and Oracle’s JD Edwards EnterpriseOne family of applications offered the perfect solution. “Building streetcars is much more of a mass production environment, which is different for us,” says Brown. “And we needed both the abilities of JD Edwards and the strong support of a local consulting firm to partner with us to succeed.”
Although many people may picture old-fashioned trolleys when they think of streetcars, modern streetcars are very different. The sleek cars are low-floor vehicles, completely climate controlled and accessible to people with disabilities. According to Brown, unlike light rail, which typically takes riders from the city center to the airport or the suburbs, a streetcar is more of a neighborhood or urban circulator. Rails generally are in the street, running in traffic with cars. “Streetcars, like light rail, are 100 percent electric, so it’s zero emissions. They are incredibly green,” adds Brown.
The first modern streetcar system was built in 2001 in Portland, and interest in the technology has since spread to cities ranging from Dallas, Texas, to Washington DC. Communities have found that streetcar lines not only link urban destinations; they also spark redevelopment in urban neighborhoods, with businesses, housing, and services all cropping up near routes—leading to safer, healthier, more-vibrant living areas that attract young professionals and empty nesters from the suburbs. “There are more than 50 cities that we’ve tracked in the U.S. looking at modern streetcars,” says Brown.
Elizabeth Deakin, professor of city and regional planning and urban design at the University of California, Berkeley, and the former director of the University of California Transportation Research Center, reports that economic development oriented around public transportation is vital. For example, she has found that development around light rail has created an economic development boom for housing because people really want to live near an effective public transportation system.
Deakin believes that growing support for public transportation is due to changing attitudes, especially from young people who are interested in sustainability. “It’s a lifestyle thing,” says Deakin. “People are particularly interested in trying to live in a way that doesn’t require them to use a car for everything. Recent research suggests that the creative class is much more interested in public transit, which is a good thing, because it brings people to a region who are inventors and who come up with new ideas.”
Another huge contributing factor to growing interest in public transportation is government investment. In 2010, the Department of Transportation and the Federal Transit Administration announced US$290 million in funding for 53 new transit projects for streetcars, buses, and transit facilities to improve quality of life in communities across the U.S. as part of President Obama’s Livability Initiative. States are also getting involved—which in some ways is even more important, Deakin says. “Here in California, we have bills encouraging metropolitan regions and local governments to go toward more mixed-use development to create the kinds of places where transit will actually work well,” she explains.
And while federal and state governments are certainly spending on projects for buses, research by the American Public Transportation Association (APTA) reveals that streetcars and light rail are gaining attention for the important reason that when conditions are equal, rail transit attracts from 34 percent to 43 percent more riders than the equivalent bus service.
Light rail also provides an alternative to existing forms of mass transit, according to Ralph Menzano, industry director of transportation at Oracle and the former CIO of the Southeastern Pennsylvania Transportation Authority. “There are probably few people who are happy to have to take the bus every day,” says Menzano, who believes that streetcars have a different allure than more-utilitarian forms of mass transit. Streetcar manufacturers must take this into account. “For riders, streetcars and trains are certainly a cut above buses in terms of enjoyment,” he says.
Indeed, industry studies cited by APTA point to the fact that light rail and streetcars have routes that are clearly identifiable and more stable than bus routes. They also use vehicles that are often more comfortable and don’t expose riders to fumes and noise.
“It’s obvious to me that people would rather take a streetcar than a bus, but streetcars right now largely have fanatical advocates,” Menzano says. “The question is, how do you make streetcars more mainstream?”
This is the question USC’s management team is focusing on as it builds the business from the ground up—no easy task as a brand-new company in an industry with no other U.S. company to use as a model. To make matters more complicated, USC is building the first streetcars in the U.S. in more than 50 years.
“One of the bigger challenges we have had is setting up a new supply chain in the United States,” says Brown. “We want to meet the [U.S. government’s] Buy America requirements that stipulate that at least 60 percent of your vehicle needs to be built and sourced from the United States. We’ve had to find companies that have maybe never built a part or a piece for a streetcar because most streetcars are built in Europe.”
According to Don Hutchison, director of finance at USC, this was complicated by the fact that USC’s manufacturing processes would differ from those well known to workers at its parent company, OIW. “OIW has been and is extremely successful, but it is really a job shop,” says Hutchison. “If a bridge or dam has trouble, we go and fix it pretty easily. We don’t have 100 of them, and don’t have to worry about which one it is and how to get parts. The streetcar is more of a production environment.”
USC executives realized they needed to implement an enterprise resource planning (ERP) system to manage the manufacturing and supply chain processes as an engineer-to-order shop, where base items would be similar but builds would be unique. It needed help to evolve into a manufacturing company.
To help with the project, Hutchison and his staff connected with Jibe Consulting, a management and technology consulting company and Oracle partner based in Portland. Jibe specializes in helping small startup companies implement systems to effectively manage future growth. This made the Oracle partner a perfect fit for USC’s requirements. “Jibe was local and invested in being a long-term partner with us. Most other ERP experts we spoke to were used to converting customers from an existing system to a bigger system. We needed a partner who could sit with us and understand what we were doing, and then recommend best practices as we move forward,” says Hutchison.
Jibe also helped USC ask critical questions, honing in on how the company’s leadership should manage procurement and manufacturing lead times. “We focused on helping them determine how they should be reviewing quality and how they should receive parts and decide if the parts are good,” says Shane Moncrieff, president at Jibe.
With Jibe’s guidance in the areas of process leadership and application expertise, USC selected Oracle’s JD Edwards EnterpriseOne solutions as its ERP backbone because those solutions could meet the company’s anticipated manufacturing needs as a startup operation and easily scale over time.
USC decided to do a phased approach with its ERP system. Phase 1, which was completed in August 2010, focused on implementing procurement and financial systems functionality. Phase 2, slated for completion in summer 2011, will implement materials management and manufacturing features as well as full job-costing functionality, while Phase 3, planned for 2012, will include order management and service.
“We did an accelerated implementation that took around four months for Phase 1. Businesses change so fast and priorities change so quickly that we feel it’s really important to sculpt the project to a size that allows us to do it quickly, ” says Moncrieff.
Moncrieff says Jibe has seen many smaller companies that in the beginning don’t tend to have processes in place to handle things such as purchase agreements, engineering change orders, and inventory control. He says that a well-managed ERP project can help a maturing organization develop stronger processes, management reporting, and leadership, because the system provides measurable results—and it can also set the tone and direction for an organization as it grows.
In USC’s case, the ERP implementation project has helped establish a financial foundation in Phase 1 to track costs, since the company has already received more than US$50 million in orders for 13 cars. Some of the cars will be used in a streetcar extension project in Portland, while other cars are for a brand-new streetcar project in Tucson, Arizona.
The JD Edwards system is helping USC management address this demand. Hutchison says that the system allows him to easily set up a new project and charge all the costs to that job. Because USC is competing against larger companies, he needs to be able to count on such tools to be successful. “As we build cars, the ERP system will allow us to pull in the engineering portion as opposed to just the cost portion, so at the end when we deliver a car, we will know exactly what is on it and track it over time,” says Hutchison.
The company is just beginning the production process and is already reaping benefits with the software. It has been a big challenge to establish a completely new supply chain with U.S.-based suppliers, but USC is depending on JD Edwards EnterpriseOne Procurement and Subcontract Management to help manage its subcontractors and more than 200 vendors.
The software enables USC to set up classification codes to track certain attributes to make sure the company is in compliance with government regulations for Buy America or disadvantaged business reporting requirements. “With these filters, I can run a report and pull, just using those criteria, the information we need. We can compile and review a large amount of data, such as delivery history, which is valuable in building and evaluating vendor relationships,” says Hutchison.
After Phase 3 is implemented, USC will have the ability to offer aftermarket sales and service for customers who may need service contracts, or accessories such as components, lamps, and chairs. The ERP system is also helping USC management plan for the future. “We’re building 13 cars now, but we have the capacity to do more than 20 cars a year. We’ve already planned for that ability to expand. The ERP system definitely helps us, especially as we look at the procurement of things and help with the planning and scheduling,” says Brown.
Using a phased approach was really important to USC because it allowed the company to determine what it needed initially and to look ahead to plan for future requirements. Equally important, the company could accurately determine what could be delayed to make things more manageable in terms of resources, staff, and budget. “For any company, ERP is a big implementation,” Hutchison says. “For a new company, it can be daunting.”
One lesson learned for USC has been that ERP implementation is an ongoing process even after the go-live date, making it imperative to have local IT support and expertise. Fortunately, Jibe is committed to providing the support services needed to maintain USC’s JD Edwards ERP application over the long term.
“It takes a village to build a streetcar and to create a new industry. So, while USC is very proud of what we’re accomplishing, it’s important to note that it hasn’t come easily,” Brown concludes. “There have been a lot of people helping us, as well as us investing our own money to make this project successful. One of the things we’ve done better than everyone else is build relationships and build partnerships with vendors and political leadership. I think that’s a big competitive advantage.”