ERP: what next?

Fact is most of us have ERP systems, or something that passes for them. They've probably been in and running for several years, probably upgraded, possibly changed completely, or we're still running on that old ManMan system. Some (how do they manage?) still have nothing as comprehensive even as that. Anyone that has ERP will have been scarred for life by the effort, time and money they and their teams invested in the implementation and go-live – and won't be rushing to repeat the experience. However, you're also likely to concede that, while it resulted in some improvements, you didn't achieve everything you expected. Those are the common scenarios. The question is, how are we going to better that? Given ongoing business pressures to cut costs, inventory and the rest, while also improving competitiveness and customer satisfaction through the usual reduced lead times, better on-time, in-full delivery metrics, greater agility and so on, it's a tricky one. Yes, manufacturing is seeing an upturn, but given the beating that business confidence has taken in recent years, investment is likely to be cautious – and, given the ERP experience, particularly in IT. Nevertheless, there's no doubt that we do need to streamline our manufacturing and business processes: move to more profitable and efficient, lean yet flexible and lower cost operations, probably centred on more make/configure-to-order and that over-used word, 'collaboration'. If you've been reading this journal you'll know there are all manner of systems out there to help you do exactly that, also stripping what is now effectively waste from our organisations. So the job is to understand how best to spend a little to gain a lot, ideally building on our existing ERP investment with a goal of making that foundation deliver more – even some of those failed expectations. In short we need to apply good Lean thinking to our IT. We have to prioritise 'ERP add-ons' (extra modules and enhancements) by getting a grip on which can best deliver against our particular business needs (in light of what can now be done) while also fitting in with our existing IT infrastructure – a point that market researcher Benchmark finds striking a chord with around 60% of senior manufacturing readers. Included in our thinking should be everything from rolling out our existing ERP into production, where that (far too often) hasn't been done, to improving sales order processing, integrating estimating and quoting, even cleaning up data, and certainly auditing our training and current system use. It's also important to note up-front that, for many, a large part of their improvement direction is already in your hands: either you already own modules that should be deployed, or your people have started falling back to the 'lowest common denominator' and there needs to be some re-training and cross-training. Either way, cost of ownership is ridiculous if you're not using the system properly. Back to basics It's back to basics. And in that vein, it's also the case that we should be checking whether we're on the right software release, not just for support but assistance with development initiatives and new fixes, features and modules to which we may well be entitled. Similarly, we ought to be keeping our server hardware up to date. As Stephen Clarke, IT manager at macerators, screening and dewatering equipment manufacturer Haigh Engineering, says: "PCs and workstations get upgraded, but the server gets forgotten. After we'd upgraded, MRP, which used to take eight hours, now takes 35 minutes and we run it every night." True to his word, he's also currently looking at going for the next release of Exel Efacs ERP. That said, what are the options? And how should we rank them? Key options are: business intelligence (BI) software, including enterprise management, dashboards etc; advanced planning and scheduling (APS) and finite capacity scheduling (FCS) systems; supply chain management – outbound and inbound – including supply chain event management (SCEM) cum fulfilment (SCF); shop floor data collection (SFDC); production management/execution systems; and customer relationship management (CRM). Other primary initiatives include: warehouse management (WMS) extensions; sales and engineering product configurators; environmental health and safety systems; operations and workforce analytics modules; capacity and capex planning assistants; and engineering CAD to ERP links. And we mustn't ignore application and legacy data integration: that, too, is part of our investment. Perhaps the most encouraging observation is that we can indeed now think of most of these as 'ERP add-ons', rather than specialist applications necessarily from specialist software vendors and/or with a price tag to match. It absolutely is the case that all of these are low in cost and effort, certainly compared with original ERP. And they'll oblige you with significant returns that will make that original investment well worthwhile. But Susie Davison, consultancy director at SAP implementation specialist Absoft, agrees that prioritising, given the dependence on where you are now and what you want to achieve, is impossible. She comes down on the side of 'back to basics' first. "Even in 2004, many manufacturers with ERP in terms of financials haven't gone on to implement production planning or inventory management. They're still using legacy systems, spreadsheets and backs of envelopes. Some don't even know their systems do MRP. They've spent all that money and they're not getting the benefit." Indeed. "Production planning is the key to efficiencies and effective use of their systems. It's also an agent of change in itself." For her, MRPII is thus most important, followed by supply chain systems, with integration between entities within the organisation as the crucial starting point. Beyond those, she advises getting up to speed on portal technology (more of that later), particularly given increasing edicts from large OEMs and retailers. And she rates business intelligence – making getting and disseminating role-based information easier – to improve decision-making. She's cautious over CRM ("I have yet to see a CRM system that integrates well when it comes to billing. If you want to raise sales orders you have to go back into the basic ERP. Good CRM should replace the sales and distribution module."), but unequivocal on SFDC. "If you haven't got it then you should be explaining why you think your company doesn't need it." We're all familiar with the 'reasons' for lack of investment in factory systems ('the shop floor wouldn't know how to use it'; 'production whistles through so fast, there's no point'; 'data accuracy is a problem'), but she's not impressed. Near real-time information and finite scheduling are keys to order – and also improvement. Beyond the motherhood and apple pie though, she also makes a plea for environmental health and safety monitoring systems, pointing out that companies are leaving themselves vulnerable to litigation through ignorance and lack of auditable systems. And she suggests thinking about systems that look at workforce analytics – applying IT to rejuvenate your people. She insists it's not about beating people up with performance measurement: "It's about best practice and guided training, getting the best out of your people." RFID extensions The other big one coming is RFID (page 24), and Davison joins others warning us to at least take notice. She's not just talking about responding to retailers' edicts in terms of supply chain tracking: "We've just completed a big RFID project for Total with hand-helds offshore." Her message: the technology is ripe for exploitation in everything from plant maintenance and safety monitoring to production and supply chain monitoring. So far, so good; but what about supply chain management, warehouse management and that now unfashionable word, e-business? They're powerful tools in the move, for example, towards policy-based inventory management – attempting to deliver on the opposing requirements of cost reduction and improving service. Key concerns here are how much do you want to put your ability to produce at risk, by cutting inventory on the materials side, or to deliver, by cutting finished goods inventory? If you can get real-time information flowing around the business and supply chain, harnessing e-business add-ons, you can make this, and similar initiatives, work. Duncan Payne, IT manager at PCB manufacturer TT Electronics Prestwick Circuits, reckons portal technology is the way. The firm, which is a microcosm of allindustry in its manufacturing and plant range, and, coincidentally, is another Efacs ERP user, started its portal development 18 months ago. Says Payne: "We had built some of the elements of integration with legacy applications. But we needed a common way to develop our applications, and a common way to interface with ERP. We also wanted a way to provide KPIs and reports for management. Our portal system is doing all three." Dale Kirkwood, Prestwick's development manager: "The web metaphor is simple and quite flexible; it requires less training and it's also quick for data entry and getting data out." He says the project is delivering business benefits on top of the ERP. "It's pulling all the pieces together. For example, we can now go from a works order to a part number to a routing to a bill of materials, all in a single window by clicking links." It's not difficult to work out the power. "We'd recommend doing your information sharing under the portal environment," insists Payne. "We've got the browser on the shop floor already, and there's access to MRP and to all the systems available to everybody." Looking outside your organisation, portals are also an excellent way to get near real-time supply chain information for those with complexity, because of the simplicity, flexibility and cheapness of the interface, and its power to automate processes. You can use CSVs, flat files, attachments, automatic system-to-system transaction links, and there are excellent examples of it all working smoothly – like that at Sterling Fluid Systems (MCS, April 2004, page 30). Whatever you decide, Mark Allcock, IT manager at Denby Pottery, has excellent advice. "There's great value in being a dynamic and active reference site. It's in both parties' interests. If you give them time, you get looked after, and you get the opportunity to feed back your requirements." Big system, big add-ons £40m Denby Pottery, which back in 1997 had to migrate from its legacy systems at short notice, now finds itself in an excellent position for extension because, surprisingly, it chose a big system – Oracle. Says Mark Allcock, IT manager: "We had built our previous system with a small supplier, and they'd stopped support. So we wanted to be confident that we were buying from a big, stable company that would be here for the long haul, that had very wide ranging functionality and a big R&D team." At the time, there weren't many SMEs dealing with Oracle on the business systems side, and most manufacturers I speak to prefer to be reasonably big fish in their suppliers' eyes – so that on the one hand they feel they'll get looked after, with people rather than an impenetrable edifice to talk to, but on the other, with comparable business cultures, they'll feel at home. "We looked at smaller organisations, and overall Oracle was the lowest cost," says Allcock. Why? "Because there's so much functionality that the need for customisation and development from the ground up was virtually zero. People might think they're going to get better customer service from a smaller ERP supplier, but with Oracle, the quality of advice and quality of the consultants was excellent – even though we were very tiny for them as a customer in revenue terms." Where to now? So where's he going from here? The company recently went live with Oracle's WMS (warehouse management) extension, also making warehouse information, then in its ERP system, available to other functions. "All customer-facing staff can see everything they need to answer enquiries. They can see what stage orders are at, for example, whether it's at pick release, it's being picked now, it's in packing, or it's been despatched. Next we'll also be linking into the third party logistics provider so they can see where product is – even that it's been delivered to the store." So what next? "We need to implement purchasing, and then we're moving on to management reporting on top of the ERP. We've got good transaction level reports off the system, but our management reporting is a legacy system. So we're going to build a data warehouse in Oracle, with discovery tools, and publish reports on the intranet using web and browser technologies." And the reason for these developments now: market-dictated complexity. Denby is now sourcing and branding more product from around the world – product built to its specification by others. Examples include glassware, tableware accessories, porcelain and so on. Hence purchasing's changed and more demanding requirements, and hence also the issues around management reporting – trending and market analysis, for example, around the additional manufactured and branded product ranges. What about supply chain management? Allcock says that's not for Denby, mainly because key suppliers tend to be sole suppliers in this craft industry, meaning also that lead times are long. "For us, this still has to be about building and maintaining good working relationships, with regular dialogue. Also, it has to be said that a lot of our supply base isn't that sophisticated… The way we have to attack that problem has more to do with managing our long-range forecasts – and that's another issue altogether." Incidentally, he also makes several other very valid points. "Like many other companies our size, we only have a very small IT department – myself plus three others. We do everything, which is quite a challenge. The key thing is you have to be multi-skilled, a jack of all trades and do it all to a very high standard. "So one of the keys to success is having good, able people. Another is management commitment and having key senior managers as your main system users. We took them on the training courses with us. They could be very effective Oracle implementation consultants if they wanted to be."