So how do you make an informed choice?

Manufacturers may well need to focus on reducing the cost of their IT through consolidation and the like, but they should also be looking to get more out of the investment – tuning it, augmenting it, whatever it takes to get that system cutting business costs and improving competitive advantage. That's the unsurprising common thread from the ERP and supply chain software and service providers. How you go about it – the detail – is up for debate, and hugely dependent on the size of your company, industry sector, position in the supply chain, complexity, customer and supplier numbers, current IT status and so on. What follows is the collected wisdom of a dozen or so from the IT vendor community, attempting to spell that out, and provide some guidance for those considering IT investment priorities, initiatives and technologies now and over the next 12—18 months. Of course, there's motherhood and apple pie, but the goal here has been to dig beneath that to what's useful – what will confirm, change or add to your thinking, at the very least give you ideas to put into the mix. Taking it from the top, the trick in 2004 is to consider your system requirements not in terms of modules, but "improving the architecture of your business processes," according to Simon Harrison, UK chief technology officer at SAP. In a sense, we've always tried to do that: we're unlikely to have put it in those terms, but that's what recording, automating, integrating and the rest is for. The point: by thinking of our system decisions as about changing and streamlining our end-to-end business processes (order to cash etc), rather than configuring as best as possible to automate around problems, we can make strides. The problem: that takes some company-wide review and analysis, and while there are software tools to help (graphical business process modellers), an issue for any but the larger organisations has always been resource. There aren't teams of business analysts and an IT department able to devote time to the kind of research, development, piloting, education, training, change management and so on. That aside, Harrison suggests it's going to get easier – although he's unspecific about when – to create the kind of business-centric systems we all might like. Integration and interfacing technologies and standards will make enterprise applications bigger in scope, simpler to develop and deploy, and more flexible, such that they cease to be the barrier to radical business change they still arguably remain. And we sense, quite rightly, that he's leading us towards SAP's Netweaver interoperating concepts and technologies. You have to swallow hard here because whatever the technology enables – and no matter how 'easy' it gets to manipulate – people and culture at the receiving end can also be severe constraints, and managing this dimension is a serious sticking point. Nevertheless, packaged ERP – as in an integrated set of manufacturing business modules – from most of the vendors, has grown immensely in scope, even over the last two or three years. Supply chain management, CRM (customer relationship management) and the rest is largely there – and most IT vendors now encourage potential users to think first about business strategy and then harness their investment to make it happen. Priority add-ons Now we're into the 'if, thens'. If you've 'done' the financials and manufacturing, then Harrison suggests: "Now you need to use the same system to consider, for example, optimising your supply chain, or integrating CRM, or looking at HR and getting that integrated so that production planning is more streamlined." All the vendors like that one – unless it's not their system. Seriously though, Doug Miles, marketing manager at Infor Business Solutions puts it slightly differently. "Companies need now to focus on integrating all their processes that ERP didn't get rolled out to, and get away from 'ERP avoidance' with databases, spreadsheets, all the workarounds and non-integrated add-ons." And why? "Because without full integration there can be no uniform reporting, no real time 100% view of the company – and directors and managers may be making important decisions on the basis of incomplete and wrong information. From a strategy point of view, I would say, don't allow ERP evasion." Jeremy Roche, chief executive of Coda, agrees and says that, first and foremost, it's review time. "Manufacturers need to look at their base systems to see if they're doing what they're supposed to be doing… People should take time out to do that exercise every two or three years: spend some weeks reviewing their business strategy – and do that in part with their IT suppliers." And PeopleSoft's UK managing director Crosbie Burns adds: "The end game is that you have to have an integrated system; you can't take it or leave it. If the integrated backbone isn't there, it's very difficult for other applications to work. You can start small with tactical forecasting or shop floor initiatives, materials procurement, whatever; but you've got to aim for an architecture that covers the whole organisation… Many manufacturers have achieved big improvements in productivity, but with market volatility can they respond quickly and get their factories and supply chains pull-based?" Legacy systems They're both absolutely right. Miles goes on to make the point that some early ERP systems may simply not be worth additional spend, and he accepts that, for whatever reason, in some firms there simply isn't the stomach for the job. It's also the case that there are plenty of manufacturers with bespoke and legacy systems that haven't invested in new IT at all, perhaps because of Y2k fixes or the economic situation. Alastair Sorbie, managing director of IFS UK, is one that says: "It's important that companies know they ought to be moving off old systems." We'd expect him to say that, but he gives good reasons. Like your old systems bursting at the metaphorical seams; others that are fast approaching not being supportable. The cost savings and business benefits that can accrue from consolidating on modern packaged systems and platforms are real. Sorbie adds that companies need a modern IT architecture to take advantage of some of the newer and increasingly important add-ons enabling, for example, online supply chain management, or CRM. "There are increasingly statutory and commercial requirements," he adds. "Think of the automotive sector and retail. Modern systems provide a business backbone, not just transaction recording systems; they help companies to transact better. That's the sort of thinking we need to encourage." And he also underlines the importance of flexibility. "We have customers who start in one direction and then go off at 90 degrees, by getting more into after-sales than original product manufacture, or moving most of their production overseas. Companies need systems that are going to enable important business changes like that." Agreed, so a few words about systems and future-proofing are in order, beyond the obvious requirement to assess the financial credentials of potential suppliers. Sorbie makes all the points about system scope, multi-currency, multi-language, localised systems – and the need to check out local support if you may be planning to outsource manufacturing, or build a warehouse in Costa Rica or China. Technology is important But Dr John Ellis, chairman of Exel Computer Systems, champions the cause of technology itself – something that many prefer to leave under the bonnet. He makes the point that all IT is not the same, and that your underlying technology decisions can seriously impact what you can and can't do in the future. "For example, having a component architecture is extremely important," he says, unsurprisingly given the nature of his latest efacs ERP system iteration. But his point is that by being software component-orientated, you gain flexibility – ultimately such that 'packaged' ERP looks more like bespoke, but without the penalty we associate with customisation. "Users can get add-ons like part numbers for this feature, that form, this report, industry-specific requirements." In a similar vein, he also bangs the drum for systems offering cross-platform support – the point being one of keeping your options open, and not locked in to any IT supplier. His is a call to go back to basics – it pays not to take too much for granted. That said, when it comes to choosing additional applications, you're right back to reflecting your business objectives – and then looking at appropriate initiatives, like lean thinking to help determine IT priorities to match. For Infor's Miles there are six key areas. First is delivery performance, and if that's not working well enough you may need to consider advanced planning and scheduling (APS). Second concerns the efficiency of your sales processes all the way from generating and tracking leads to managing the sales force – and if that's the area needing assistance, you're into CRM. Third is enabling customers and also suppliers to work with you more efficiently, and then you're into the whole supply chain e-business arena. Fourth is the after-market and improving provision of spares, knowing where your products are and managing all that, for which you need to be rather smarter with your systems – it's not just 'service CRM'. Fifth is overarching business analysis – getting the company better able to understand its own drivers. And sixth is improving sales forecasting – always a problem, and certainly an area that modern IT can assist with, notably in terms of getting the information closer to the point of sale and real time. Let's take those one at a time. First then, APS, and the connected subject of e-business and supply chain management. PeopleSoft's Burns is one that reckons APS tools are still misunderstood and underrated – in part due to previous damaging hype and some early adopters' overly-grand plans. He reckons it's time manufacturers looked to their supply chains for competitive advantage, not in terms of adversarial cost-cutting – but what can be achieved through collaboration, performance metrics, online contract management and the like. "Manufacturers need to focus on this as the next way to take out the lag and the inventory … to cut costs and get suppliers more efficient." And Dick Cook, president and CEO of Mapics, agrees. Both his flagship Mapics and Frontstep Syteline extended ERP systems sport good APS engines, and he says that if you've done the equivalent of lean thinking on your core manufacturing and ERP, then it's time for APS and the supply chain. "Users need to get connected, know where all their commodities are and get the functionality of APS on their factory floors so that if something in their supply chains goes awry they don't miss a beat, whether that's tooling or people." And he adds: "We need to shorten our supply chains by getting connected electronically so that we can take out time and inventory, with its overheads, carrying costs and potential for obsolescence. You know, with the amount of engineering change today, inventory is much more perishable than it used to be." What's holding it up? Burns: "There's been some activity in the last four or five years, but users want more evidence of a return on their investment." He suggests going for smaller pilot projects: "That way they can prove the concepts and the ROI (return on investment)." Which is good general advice. Incidentally, the technology itself is not expensive, and for those that have got it right, ROI has been fast and almost invariably greater, and from more quarters, than they had expected. There is more to it than simply finite capacity scheduling the shop floor. Says Coda's Roche: "It's not a new idea, but the cost of doing it has fallen dramatically in the last three years. Companies have spent many millions, but you can start today for a few thousand. In some cases the technology may well be available in your systems – you're just not using it." Jaquie Boast, Kewill's European COO, concurs with that, and she also suggests that manufacturers revisit their "order-to-delivery cycle" understanding that electronic interaction isn't restricted to EDI over VANs (value-added networks) now. "The Internet, web technologies and emerging standards make a huge difference in terms of providing a low-cost medium for all sorts of communications and data interchange that's real-time and secure." Supply chain visibility Her message: we're not just talking about planning and scheduling, or orders, cancellations and ASNs. "This is about providing supply chain visibility, as detailed as you like, so that you can be responsive to change and events as early as possible." And with a hosted web hub and services like those provided by Kewill, issues around data translation, costs of integrating your supplier community and the rest, are taken care of – which makes a very big difference. Where does it make most sense to do this? Gavin Page, Kewill's UK sales director, suggests focusing first on higher value, or longer lead-time items. "Depending on the sector you're in, if you don't start thinking about supply chain execution this way in the next 12—24 months you're going to have something forced upon you… It's already being forced on suppliers and manufacturers in the retail and automotive sectors, and it's going to spread rapidly." What about CRM? Clyde Bennett, manufacturing and logistics specialist at Microsoft Business Solutions, puts it thus. "Make sure you are focusing on pleasing the right customers, and don't waste time on activities that are not profitable or not strategic." He points out that much of the value of CRM is in helping manufacturers do this, zeroing-in on their profitable and strategic customers by measuring win rates, effort per sale, length of sale and design cycle etc. And he turns it around: "Who are the customers that are 'in your lens' strategically? If you can't characterise them, then you can't figure out which are the core competencies you need to build the business around… Any sensible manager should routinely review customers and customer types to ensure the strategy is criticised intelligently." In a similar vein, there's your after-market: Rob Garratt, managing consultant in IBM Business Consulting's industrial sector group, asks: "What happens after production, packaging, despatch and delivery? How much do you know about where your goods are installed, the versions and the rest? What does availability of spares look like? How easy is it for after-market customers? How easy is it for you?" Putting good ticks in all those boxes isn't going to be just about getting CRM working (although that is important); it's likely to require attention to the links between CAD documents and ERP with web-publishing and so on for help desk, part identification and so on. Talking of under-sung systems, business intelligence should be on your agenda – not just improved reporting, but providing your managers with their own routes to queries without assistance from IT, and encouraging collaborative working between departments. Roche sings the praises of tactical level BI, but also champions it for corporate performance measurement. "Companies need to draw data from a range of sources to see, for example, which customers are their most profitable, and which are their most profitable lines. If you rely on spreadsheets you'll have different answers from different department heads with different criteria. Companies need a single view of the truth to get real competitive advantage." Corporate governance And similarly, he advises firms to look at applications to improve corporate governance – around closing the books, providing audit trails and managing social responsibility, for example, with its knock-on impact on brand management. His view: doing that in tandem with corporate performance management adds perceived value; stops it from being simply something that must be done. Mopping up on some ideas, we need to be aware that forecasting algorithms are getting cleverer – and that having internally integrated systems and better electronic connections with your customers in particular, but also your suppliers, means you can take the opportunity to get much better raw data. And communicating that is useful all round. As Infor's Miles says, then you can make worthwhile improvements in everything from forward planning to procurement, who owns work in progress (WIP), deliveries, bottlenecks, and so on. "It's too much of a headache for too many organisations right now, but they could be doing better." Exactly. Other key areas mentioned included asset management, that dreadful acronym MES (manufacturing execution systems) and outsourcing. IBM's Garratt puts asset management, supporting production, as his third priority. He suggests that many manufacturers have a lot to gain by going beyond initiatives like TPM, predictive maintenance and the rest – by integrating MRO (maintenance, repair and operations) planning, people, processes and purchasing with ERP. Not only do you get the efficiencies and economies of scale; integration and visibility mean an important ability to sing from the same hymn sheet. Always a good thing, and I've seen operations where the cost savings, not only in terms of admin and HR, but time to repair and thus downtime reduction, have been very impressive. MES and outsourcing Looking at MES, it's also Garratt that suggests that if you're looking to make manufacturing improvements within 'the four walls', the emphasis should probably be on tying together shop floor data capture, electronic production management, electronic documentation, finite scheduling, machinery monitoring and so on. Why? Because again, with a holistic, real-time picture at your managers' and operators' fingertips you can make yourself more efficient and responsive with your existing resources than perhaps you realise. Again, I've seen great examples of that, and others where the gains probably wouldn't be worth the investment. You know your own factories. And outsourcing? Garratt agrees there have to be limits, but insists there's a great deal of value to be had from current offers. "Manufacturers need to be acutely aware of their core skills – and then anything that's slightly more peripheral needs to be looked at for outsourcing." Specifically on enterprise IT, he suggests that organisations could save a lot of money and get better service this way. "Rather than investing in the hardware, software licenses and so on that they may or may not use all the time, today they can go for pay-per-use." He concedes that it's difficult to generalise, agreeing that for many the management of the knowledge and data around their products and routes will be perceived to be core – and brand management and their relationships with customers even more so. But asset management, for example, could be outsourced, he says. He also urges business leaders to remember that outsourcing doesn't necessarily mean sacking all your IT staff and shipping responsibility "to a suburb in India. Mostly outsourcing is about organisations like IBM taking on the HR responsibility for the existing IT people so that the manufacturer arguably gets the best of both worlds: no direct responsibility for the people or the IT assets, reduced costs and all the performance and business understanding it always had."