So where do we go from here?

You probably got your latest ERP system in and running at least two years ago. It cost you dearly in time, effort and money. It crossed company boundaries. It resulted in some improvements, although they were probably poorly measured, if at all. You’ve spent considerable time since doing the things that arguably should have been done before – like cleaning up data and training people better to follow the new processes, assuming you were brave enough to implement many. It’s now working after a fashion, and with the scale of IT project cynicism, not to mention budgetary pressures around the factory and the business, you’re loath to do much more. That’s the textbook situation. And yet received wisdom tells you, quite rightly, that having made that massive investment, a little more could pay back in spades. Because you now have the foundation upon which most other IT ventures have to rely – integrated consistent data. And if you haven’t got that, then you haven’t finished your ERP bedding in, or the business model it was built on has changed and there’s nothing for it but to go back to the drawing board. If all this rings true, the question is what do you do next? What, that doesn’t cost much and can be implemented relatively quickly and painlessly, is going to bring measurable and really valuable benefits fast and, it has to be said, start achieving some of what you fondly imagined ERP alone would, but perhaps didn’t – invoice accuracy improvements, stock turn transformations, etc aside? Last month we put 15 manufacturing users from across UK manufacturing industries (engineering managers, manufacturing managers, operations directors, IT directors and managing directors), 11 software vendors and two consultants round a table for our sixth MCS Forum, and challenged them to agree what we should be doing. Given the range of manufacturing and business issues out there, we wanted conclusions about how we should be prioritising the various add-on modules and external suites, under what circumstances, why and what were the likely implications. We also wanted to establish manufacturing industry’s likely ability and desire to grapple with new and better systems – and for that matter their understanding of them. Some of the results probably surprised them as much as they did us. At the close of four hours of discussion, Forum was still not unanimous, but placed business intelligence (BI) software and supply chain event management (SCEM) cum fulfilment (SCF) equal first choice. These were followed by CRM (customer relationship management), then SFDC (shop floor data collection) and associated system feedback, and finally APS (advanced planning and scheduling) and FCS (finite capacity scheduling). Aspects of enterprise application integration (EAI) were also cited as a prerequisite for ensuring that systems, both legacy and departmental, as well as those from mergers and acquisitions, could communicate. The results were a surprise for two reasons. First, understanding of the terminology, functionality and applicability to manufacturing businesses was by no means instant or universal. During discussion, BI, for example, started out as a shadowy, poorly understood add-on which surely should be covered by standard ERP reports, they said. Yet at the end, it was in the number one slot of preferences. Second, stalwarts like FCS and APS, which have been hugely applauded by those that have done it (MCS, June 2002, page 12), were roundly rejected. Cynicism, misunderstanding over the system’s role, concern over management teams’ ability or willingness to invest in software that didn’t readily translate to clear cost reductions – all were evident to a far greater degree than might have been expected. Some of it might be justified, but there’s an object lesson there for us all. That said, the context for just about everyone was the expected requirement to drive down costs, cut out wasted processes and ‘streamline’ manufacturing and business in the face of worsening competitive cost and lead time pressures. The pretext was that older ways of planning, scheduling and indeed managing and running our manufacturing, like relying on excess capacity and inventory (even with ERP) are having to move down from first line of defence because, for many of us, they are simply too expensive. We are having to move to smarter, leaner, more just in time (JIT) processes (both manufacturing and business), and sustain them with better IT – and hence the ERP add-ons agenda. Or so we might suppose. But stop. It’s very important to note that if new processes are what’s required – and beyond a shadow of doubt they will be – that in itself opens a can of worms that has to do with the business and the central ERP first. David Lloyd, group systems manager for automotive components manufacturer Stadco, spoke for many when he said: “We implemented [ERP] and did it extremely well, but it’s tailed off with time as we’ve sacked senior people and replaced them and sacked them.” His answer: “We are now focusing on the processes, going back to square one. We are doing value stream mapping, identifying the processes, trying to find best practice and then going back and re implementing our core ERP system around those. The idea is to utilise the ERP package for whatever we can.” First, look at your existing ERP Forum concluded that this is absolutely the first step. Lloyd: “It’s 90% managers reorganising and simplifying the business within their own bailiwicks and about 10% software.” And that should never ever be a one-off process. You’ve no doubt heard it said, ‘ERP is a journey’. When you implement, ideally you do so against the model of your business then – but the day you finish your business has already changed. So if you want any system to work for you, there’s little choice: you have to continually reassess and re-implement ERP. A couple round the table went as far as to say that might mean turning it off. Mike Collins, operations director of medical ventilators manufacturer Pneupak, and Paul Thomas, director of site operations for printers firm Videojet, both praised Bull control cards. Collins: “These cost about 5p each as opposed to several hundred thousand pounds for an ERP system. We moved our stock turns from about 1.5 to 7; we reduced inventory by 50% and doubled our productivity in three years. I’m here to see what ERP systems can do that you can’t with simpler systems.” His quite fair contention: the information being fed into ERP is probably never good enough to keep them up to date anyway. But for the majority that isn’t an option. As Sarah Cobb, business systems director with industrial components manufacturer Moss Plastics, said: “We view our systems architecture as very much necessary to provide information. And that’s from historic for financial analysis, to operational, to customer relationship management – being able to provide information to the people interacting with customers quickly is a driving force.” She, like most around the table, was adamant: over the next 18 months she would be developing particularly CRM, business intelligence and the rest, partly to get more cost out of the business and partly to get more benefit from the existing IT. That said, the differences of choice and priority for ERP add-ons from user to user reflect the differences not just of personal preference and understanding, although those are certainly there, but also differences between the detailed organisations themselves and what’s expected of them. Generalising is difficult: key parameters centre on manufacturing complexity (BoM levels, numbers of processes, machines involved, etc), scale of product ranges (both numerical and standard versus make-to-order options and, at the limit, engineer-to-order), bottlenecks, desired throughput rates, lead times, forecast/call-off accuracy, and amount and rate of product change. And without a formula you just have to get what information you can on hype versus reality, successes and failures, ROI and appropriate methods and measures. Business intelligence So starting with business intelligence (BI), a useful definition given was “a system that sits on top of ERP drawing data from disparate areas and other systems and giving business decision makers, whoever they are, fast access to derived information to help them make better informed business decisions.” Instantly the fur started to fly. “That sounds like buying a car and getting sold a dashboard later as an optional extra,” commented David Williams, senior manufacturing engineer with BEA Systems, setting the tone for much of the ensuing discussion. The point is, many of us believe that ERP should always have delivered that kind of information, not merely reports for which IT has to write individual database queries. Others round the table simply had no idea there was any other way. Others again commented that Microsoft Office, spreadsheets and Pivot tables (like them or hate them) could do all that. Some were worried that providing this level of information, perhaps without context or experience to managers with too much influence could actually be a dangerous thing. And there were the cynics who pointed out that MRP systems classically deliver a “pyjama pack” of paper with a thousand problems which, when you look at the real world, amount to none. Shenanigans aside, the power of BI and its OLAP (online analytical processing) ‘cubes’ is in the fact that departmental heads, or anyone else, can get answers to questions and then answers to questions begged by those answers and on down as far and wide as they need. And that can be querying financial, market data, sales, manufacturing, supplier performance, whatever. They don’t need to know about data structures, syntax or sources and they don’t need to keep running back to IT. The power of information is with the business. Sarah Cobb summed up her experience with sales history analysis through BI. “We take invoice line data at a customer and item level every night into an OLAP cube and make that available for the next morning for all our sales and marketing users… They say the project is the single biggest win. To them it’s worth all the pain of going through the implementation of ERP for the level of cross-company data it provides.” And she cites being able to quickly identify customer profiles, customers in decline, customers growing, products growing, new business opportunities. “It starts to relegate the ERP system to a transaction engine throbbing away. We’ve only scratched the surface: I’m responsible for production planning and I’m desperate to do the same thing for inventory.” She does say it was more expensive than she expected, and warns prospective users to “get someone to tell you what specification of server you need and multiply it by four and double it again just in case.” And she insists you mustn’t underestimate the consultancy, you must involve the users, and expect a timescale of around four months – assuming you find good people to help you, and for most of us that will be via our ERP vendors. Indeed, many of the vendors today either bundle OLAP functionality into their systems or partner with software suppliers that do so for them. What can I tell you? Minds were changed. Fewer minds, however, seemed to be changed on FCS and APS. Malcolm Bruce, European operations director with radar and navigation equipment maker Litton Marine Systems, was one who said simply: “We would never allow capacity to be a limiting factor for our business.” And Steve Read, manufacturing manager with aircraft ducting systems manufacturer Meggitt, said much the same, adding: “Things are moving and changing so fast we’d spend as much time keeping the finite scheduler up to date as getting the job done. I can’t see an advantage to it.” Advanced planning and scheduling Other manufacturing strategies, like charging higher prices when capacity is tight, flexing capacity, or running with spare capacity, even inventory were still considered adequate answers. More users than not were convinced that the last thing they needed was a system that would tell them they were going to fail. So, try as vendors did, they seemed unable to persuade them that the whole point of FCS/APS in this context is to provide early warning, decision support and best solutions, not excuses for failure. Questions, like, “Would there be benefit in eradicating all late orders?”, or “would there be benefit from saving the costs of excess capacity or carrying so much inventory?”, seemed to fall on deaf ears. Similarly, FCS’ ability to act as a tool to improve manufacturing processes and sequencing, to deliver ‘what if’ power, to potentially save on additional capital expenditure and to provide automatic supply chain ‘available to promise’ (ATP) answers in pseudo-real time, cut little ice. To be fair, some wanted to see evidence of success that would suggest where FCS/APS would be most advantageous (by industry, manufacturing style, throughput, complexity, product rates, lead versus order times and so on). But the fact is success is widespread and resists generalisation. It’s hard to escape the conclusion that documented cost savings way beyond simple scheduling, including constraint-based scheduling, and the coming requirements of ‘collaborative commerce’ seem not yet to have registered – and to be meeting the resistance of cynicism. Shop floor data collection The same, however, does not apply to SFDC. Easy cost justification, simple implementation and several undeniably beneficial applications, as well as falling costs, are making this very attractive. The reason for its lower position in the Forum rankings may have been the fact that many had already done it – or they felt that BI and SCEM were capable of delivering even more. But Forum absolutely agreed that much of ERP-integrated SFDC is fundamental to moving forward. It is the best way of ensuring that you get right away from the traditional ‘black hole’ of the factory, where from material release to finished goods packing there is no clear picture of progress or priorities. Roger Balsom, project manager at furniture maker Leaderflush Shapland, for example, said: “We bar code all our work tickets, tool lists, etc… if you are printing a work-to list you get a bar code for nothing. Guys on machines scan themselves on with a remote docking scanner and scan the work list. Everything is made to order and we can tell remotely from the screens exactly where everything is on the shop floor, how long it is likely to be, run arrears lists, etc.” And it goes back to the ERP system so everything can be tracked, benefiting planning, schedule adherence management, WIP (work in progress) management, inventory management, customer service … the list goes on. Peter Hopkinson, principal consultant at system implementer Atos Origin, added SFDC’s ability to improve manufacturing consistency, troubleshoot machine and operator problems, cement in and improve on best methodologies – all through simple and, most important, immediate correlation. And Sue Stevens from SKF also added automatic machinery health monitoring, trendily referred to as asset management, into the mix, which Stadco’s Lloyd confirmed was already a great success on cheap touch screen systems in his plant. Forum agreed there was also value in improving labour management with associated time and attendance system integration, but that expensive materials and manufacturing management is head and shoulders above it. Robin Smith, with Tandberg Television, said systems he had implemented enabled stock control straight off bar coding, making stores redundant to the extent that stock moved to the shop floor, while automatic materials purchase order raising also meant eliminating millions of pounds’ and several months’ worth of inventory. His estimate of cost was less than £50,000, and of benefit, £5 million! Just one other final point made excellently by Steve Read. Don’t just leave your SFDC to do its job. He was running a shop floor with 700 batches and 3,500 operation completions a day, 90% of which were going through bar code SFDC. “When we got good at it, we stopped data collection totally… at the end of the day we got the cell leaders to tell us manually what they didn’t finish on their work-to lists. It was hugely more effective: it focused them on what they hadn’t done which is what I was really interested in.” But you have to go through the first stage to get to the second. Supply chain fulfilment Moving on, supply chain management, the web, ‘collaborative commerce’, are at last coming to maturity – in the form of pragmatic ‘supply chain fulfilment’ and ‘event management’ systems. It’s not dissimilar in concept to extended Kanban, called by some ‘Scanban’. Ian Carrington, engineering manger for vacuum pump manufacturer BOC Edwards, gave the classic example: “When we’ve used a bin we scan it and that automatically goes back to the supplier who then replenishes it.” Evidently even this took some suppliers a little getting used to, but the real issues are, first, you’re not in control – if the supplier sends the wrong or damaged parts you don’t know till too late – and second, you have to size the bin loops for optimal scheduling, and with cyclic customer demand that’s far from easy. What SCF/SCEM does is at a stroke get away from fixed physical systems and provide multi-way customer/supplier feedback – real time communications, alerting and full management all via the web. John Luscombe, CEO of SCF vendor Wesupply, put it thus: “It provides process and information integration across multiple businesses via the web, taking expression of demand and its fulfilment, and managing that rather than trying to integrate data or synchronise systems.” You can have order placing, monitoring, goods-in acknowledgement, QA pass/fail notification, appropriate reaction and supplier recovery – in short managing what’s happening throughout the supply chain, including within your own organisation, with the web and workflow driving people and systems to deliver. And it’s all flexible –better than EDI and without the horrendous price tag. Costs, according to Luscombe, are around £200 per premium supplier per month and even less for smaller suppliers, with the whole system hosted by his firm. And in terms of IT requirement, all they need is a PC and a web connection, so anyone can afford to get connected. Leaderflush Shapland’s Balsom confirmed the concept. “We post [make to order] purchase order details onto a website; the supplier goes onto the website, downloads the details and all the information we need about which orders they go on, makes the [product] and bar codes it. As it comes through, our ERP is automatically notified that the purchase order is fulfilled; it goes onto the shop floor and gets used.” The benefits – no more trying to match goods received with purchase orders and work orders, which for him resulted in a full week shaved off lead times. Aside from obvious concerns over suppliers’ and customers’ willingness to go over to this kind of operation, Forum agreed this was going to be a ‘no brainer’, and would go further. As Richard Hinds, managing director of electronic connectors manufacturer Bulgin Components, observed, “It would be perfect… we’d have better visibility… In terms of making money we’ve got to supply customer service, and the more information we’ve got that’s updated, the more we can serve them.” And that’s without counting the clear inter-company and admin savings and efficiencies. ROI is difficult to assess: many organisations that get involved with SCEM see it as simply a necessity and intuitively a pragmatic solution to obvious and well known problems. But one automotive company apparently achieved payback of 580% in one week – against an expectation of two to three months! Now finally, lets move to CRM, that most hyped, most over-scoped, most misleading of all acronyms. Surprisingly, with some reservations, many round the table liked and actually wanted it. David Tudor, senior principal industry sector consultant with Oracle, defined it for us as, “covering everything from marketing and opportunity identification, to the selling process, in terms of making that information available out into field sales … and from whatever angle and channel you want … managing that whole process. Then right through to after sales service and service management, managing all your contracts, problem-to-resolution… product configurators…” Customer relationship management He and other vendors round the table conceded that much of this was formerly held within ERP and that, just as with the IT around ‘service management’, it’s been bundled off to this CRM grouping – for reasons best left to your own imagination and perhaps cynicism. Be that as it may, Tudor and others also agreed that CRM is now being sliced back up again, “because the size of the elephant is frightening some people off.” So now we’re seeing ERP vendors notably either offering their own or their partners’ product configurators, for example, as both manufacturing tools to guide orders through to what’s permissible, and sales tools to deskill that process and provide up- and cross-selling, appropriate pricing, scheduling dates and so on. BAE’s Williams was one who clearly wanted it, saying that he had been specifying just such functionality to his IT people and being roundly refused. Leaderflush Shapland’s Balsom confirmed the value to him. “Each time anyone from the company deals with a customer they can see the history of the whole dealings with that customer, what projects there are, etc. In our case we also track planning permissions; when an architect comes on to the CRM he can see what permissions he has in the pipeline and therefore projects coming up.” Moss’ Cobb added that, for her, CRM is turning out to be a very large project and, with the benefit of hindsight, probably one of the most important. Her ultimate goal is, for her very large customer base, “to link in other systems, like quality management that capture customer complaints. There is nothing more frustrating to our customer service people than to be talking to a customer about something, unaware that yesterday they placed a complaint with our quality department because a product we supplied was out of spec.” Two points followed that demonstrate CRM’s arguable separateness from ERP. First, Balsom: “None of that really is ERP’s business until the project has got to the stage where it’s gone onto the product configurator which doubles as a sales configurator and a production configurator.” Second, CRM’s widespread availability has raised the game: customers now expect that we will know all about them and be able to treat them in a joined up fashion. It’s been said before, but those that don’t get to grips with this will be doing themselves and their employees a disservice.