Make the connection

In which aspect of their operations are British mid-sized manufacturers missing an opportunity to improve their profitability, capacity utilisation, on-time delivery performance, and productivity? Neil Rushby, supply chain divisional manager at ERP vendor Access, reckons he not only knows the answer, but has hard survey evidence to support it, as well. In short, he says, what's holding many manufacturers back is taking a disjointed approach to IT – and specifically, IT integration. "What many manufacturers are missing is the link between improvement and enhanced integration," he explains. "They'll have an ERP system, but only implement its core functionality – and never progress to extend that ERP functionality, or supplement it with third-party 'best-of-breed' specialist systems." And the result, he says, is that businesses are forced to compete while permanently on the 'back foot' – lacking information, insights and capabilities that could transform their competitive stance. The difficulty in reversing this paradigm? The fact that for many manufacturers, it's a failure of vision that disguises itself as success. "Talk to manufacturers, and they often don't see the problem," says Rushby. "They have an ERP system; it works. They have spreadsheets for production planning, and they work, too. They have a desktop contact manager for CRM – and that works, as well. And if they've got a niche cloud-based software as a service (SaaS) application, well, that works, too. 'Where's the problem?' they ask." The answer, he suggests, lies in an inability to gain a 'big picture' perspective of the business. Within their functional silos, in short, such standalone niche solutions probably do deliver on the limited set of objectives that have been set for them. But the truth is that these aren't the same objectives that senior management might set, were they only aware of the potential. "Take production planning," says Rushby. "Within the production silo, the prime task is to plan the production of orders already on the books. A spreadsheet simply isn't going to be able to take a view of the factory floor as it sits within the overall supply chain, optimising constraints and material flows to maximise due-date performance and profitability – and yet that's where the opportunity lies. But to grasp it, a specialist planning and scheduling capability is required." Likewise, a simple contact manager-based approach to CRM isn't going to be able to deliver the functionality of a full CRM solution, identifying customer profitability profiles, suggesting sales opportunities, and replicating the rich revenue-boosting potential of cloud-based enterprise applications. And these are areas where standalone solutions are often actually in place, emphasises Rushby: there are even greater opportunities for business improvement where no such solution is in place at all. "Our point is that a lot of manufacturers are yet to expand their ERP solutions beyond finance, production and warehousing into areas such as service and project management," he stresses. "As individual managers, many management teams know that aftersales service is often more profitable than manufacturing and selling original equipment – and are reminded of it every time their car is serviced or their printer needs a cartridge. But at the business level, it's an opportunity that can't be tapped without the right systems: service management, CRM, inventory management and so on." Less strategically, but with just as big an impact on overall performance, he points to the costs, wastes and inefficiencies of a manufacturing organisation that is reliant on a mix of standalone niche systems loosely – if at all – tied to a small core central ERP capability. "Because it's the status quo, managements often aren't aware of the costs they're incurring in terms of information duplication, critical pieces of information being made available to just one or two key individuals, and the extra cost and effort entailed in trying to tie these various systems' outputs together for reporting purposes," he notes. "It's not just that it's difficult to get at that 'one version of the truth' – it's that it's often not even clear what is the truth." So why, then, is change so difficult to achieve? As it happens, says Rushby, it turns out that Access Group – in conjunction with Works Management – has recently conducted some research impinging on just that issue. The findings are available for download from www.theaccessgroup.com/mfgtrends, and they make clear just how significant is the scale of the opportunity that is facing manufacturers. It's no surprise, perhaps, that 54% of manufacturers manage their finances through an ERP system, or that an identical proportion do the same with production management: finance, and basic MRP1-style bill-of-material explosions are of course at the core of what ERP systems do. But look at the figure for CRM: just 20%. Or service management: 19%. Or continuous improvement: 8%. Or, for that matter, manufacturers who use ERP for none of these things: 20%. Now, in-built ERP functionality in these areas isn't always the best option. If a manufacturer simply wants to explore if, say, a project management solution could add value, locking themselves into an ERP-style implementation process and upfront non-refundable licensing costs isn't ideal. Hence the attractions of the cloud, and software as a service deployment models: try something; stick with it if it delivers value – and discard it if it doesn't. Yet just 20% – one in five – of those manufacturers surveyed had considered using cloud-based software, which these days is one of the most obvious ways to deploy standalone functionality. And of those few who had considered using it, the evidence seems to suggest a lack of appreciation of the strategic imperative on offer. Over two-thirds of companies, for instance, saw cloud-based software as a route to document management. Timesheet management was identified by a quarter (26%) as something for which they had considered a cloud-based solution. 20% of companies had considered it for expenses management. And so on. Cloud-based opportunities to improve the business in more strategic areas, on the other hand, were left unregarded. Procurement management, for instance, had been considered by just 17% of respondents. Collaboration management, by 17%. And business intelligence, by 29%. And when asked about the advantages of cloud technology, the bulk of respondents – 63% – simply didn't know, and couldn't comment. Depressingly few manufacturing managers, in short, could point to benefits such as efficient communication (17%), fast deployment (7%), low cost of ownership (20%) and rapid ROI (2%). The point, stresses Rushby, isn't to bang the drum for the cloud. Instead, he emphasises, it's that improvement opportunities do indeed lie there, and with a fast deployment time and rapid ROI. And link those standalone solutions back to the business's core ERP capability, he enthuses, and that resulting ROI is compounded. As, indeed, Access Group is seeing again and again in those of its customers who actually build those links. In one recent case, a customer's manufacturing- and finance-centric ERP capability had originally been supported by a manual planning and scheduling system, spreadsheets, and a separate CRM solution. A move to a well-known third-party planning and scheduling solution, and an equally well-known CRM solution – both located in the cloud and tightly linked to Access ERP – delivered gains in productivity sufficiently significant as to surprise management with their scale. "They simply hadn't realised how inefficient and sub-optimal a standalone approach to IT could be," he sums up. "And sadly, that's true of many other manufacturers, as well."