Transforming to an e-business?

So it’s 2001 and the web is happening; the pace of business is getting inexorably faster; stripping out waste while improving flexibility, responsiveness and profitability have never been so closely scrutinised. This is one of the most challenging times in the history of manufacturing IT. Where should manufacturers start in developing an IT strategy to sustain both themselves and their supply chains? “The first and most important thing for any IT strategy is to get your core internal business processes understood, optimised and automated where appropriate.” So says Steve Shine, managing director of Geac Enterprise Solutions, formerly JBA, in northern Europe. “And that includes those that enable you to sell whatever you are making – so including your immediate supply chain. Exciting though e-this and CRM that might be, it’s absolutely key.” More fundamentally, he also advises manufacturers to focus back on what’s core to them and, “sell, float off or get someone else to do the rest.” That, he observes will influences the IT support required right at the grass roots. It’s a point taken up by Mark Greenwood, managing director of Baan UK: “Look at the generic issues of the industry first; you have to be real clear about the business strategy – the issues, the drivers, etc. Then you have to establish what are your processes, what are the areas of pain, what are the key drivers and how are they measured.” Nigel Cox, UK managing director at Mapics, also goes back to basics: he says IT strategy must be treated as a board level issue. “I was disappointed to find that in Benchmark’s e-business survey (MCS, December 2000, page 36) only 25% of boards had been responsible for their e-business plans. It’s essential! The business needs of departments and customers and suppliers should be an informant, but [IT strategy] has to be company-wide.” And he continues: “e-business is another of those phases of business transformation. [Users] must see if their existing business processes are deployable in the ‘e’ environment – to extend to an Internet connection for their suppliers and customers.” Oracle’s sales director Andy Sutton agrees, and points to one of the specific big issues. “Supply chain models are changing fast to the many-to-many model, the best current example being in e-procurement. But that’s the froth on the ocean: it’s very important but not where the real big benefits are going to be had.” And he points to Ford’s drive to reduce design times from concept to car from 36 to 14 months using collaborative web hub working – and similarly manufacturing and distribution. “It’s all about getting rid of the bottlenecks in serial supply chains,” he says, “and moving to parallel networks with current live managed data and information accessible to everyone.” In fact almost all enterprise IT vendors I speak to cite this as the single most urgent aspect of manufacturing IT – enabling for supply chains. Mapics’ Cox puts it well: “There’s a need for increased collaboration. Manufacturers and their suppliers need internal systems to be open to others. Integration is the most important thing – and that also means a much higher degree of integrity and clean data.” Geac’s Shine notes that whereas hitherto most manufacturers’ strategies have been around internal integration – supported by enterprise resource planning (ERP) systems – now supply chains have become critically important to businesses’ ability to make profit. “Internal integration is less the way going forward. Now it’s more a combination of businesses being integrated [loosely over the web].” And for the smaller manufacturers, Vin Murria, managing director of Kewill Systems, says: “For SME’s that are inevitably spokes within the bigger wheel have to communicate with larger companies. Make no mistake, web exchanges will increase competition as they seek to drive more cost out. It’s going to get tougher. So SMEs must invest in web and email capability and get into ‘hub working’ – not just orders and invoices, but collaboration with design and product delivery.” But web focus doesn’t mean it’s only about the web. John Rogers, SSA’s general manager for Europe, says web working actually means that manufacturers can’t afford to take their eyes of the internals. “They should now be looking at making improvements with lean manufacturing and becoming better players in the supply chain: that’s a major focus,” he says. “Lean manufacturing has to be at the core of enabling business on the web. Companies should be expanding out top and bottom of their ERP – and they don’t have to spend a fortune.” And Andy Ferrar, managing director of Japanese Asprova advanced planning and scheduling (APS) software UK affiliate Profax, is emphatic that this is the starting point. “Connecting is not the issue,” he says, “it’s what information, what data, how it’s constructed, how good it is. You need an internal solution that can cope with what you have to do.” OK, so how do you prioritise? Murria says the key is integration – to the exchanges and to customers. “If they haven’t done internal integration with the shop floor, they have to do that now so they can deliver faster, more efficiently and get better control of materials and production. If they’ve got that, then it’s the web – XML or similar will be the driver for collaboration.” This is a contentious issue – and there’s more to it. Geac’s Shine says: “Manufacturers need to look long and hard [at their operations]. In 12 months or two or three years we will get to a situation where more and more materials – and that will include engineered components – will be bought and sold via web sites. Top tier companies will say ‘I want 10,000 of these per month: who wants to give me the best offer?’.” And he contends that whereas, cutting cost has been the standard business model, “they’re going to have to respond more quickly, be more in touch, or not survive.” For him that means, “the traditional MRP approach will not support the reactivity needed. Manufacturers will need to move to APS to get faster reactions – scheduling of the manufacturing that’s done. MRP will not be enough.” Mapics’ Cox qualifies this, saying: “MRP II is still appropriate – depending on the environment you’re in. But APS becomes far more necessary where manufacturers are building to order – and we envisage a world where MTO will become far more the norm.” Cox expects Internet ordering to drive this as mass customisation gains in importance. “But a lot of companies aren’t at that point yet: MRP II will continue for some time to come; APS will come in over the next five to seven years.” Oracle’s Sutton believes that the year 2000 saw a wholesale change in the scope of enterprise systems to ‘ERP II’ – in which he includes the buying side (e-procurement), inside the four walls (original ERP) and the sell side (CRM). “It’s a fundamental change: manufacturers are now waking up to the importance of getting it right in all three.” His point is that we must choose between pre-integrated suites and ‘best-of-breed’. “We know, because we’ve been there, that managing all the interfaces in a best-of-breed scenario is a dogs dinner.” Whatever, Cox concludes, “ERP most certainly is still an essential part of any IT strategy. Any company offering Internet services without secure, high integrity integrated ERP would be doomed to failure. Look at all the horror stories already around failed fulfilment.” He repeats that the most important aspect of IT beyond this is the framework for communication out into the supply chain. “The first thing is portals for collaboration. The second is superseding EDI with electronic interaction using XML.” Coming back to shopfloor integration, Cox contends it’s not immediately essential to become an e-business. “In an ideal world, you’d do it straight away because it’s a necessary extension of APS to get factory information for real time ‘capable-to-promise’. But it’s a question of priorities: I would recommend that if your competitors are going onto the web, you should get the e-backbone in first.” Ferrar is pragmatic: “The bottom line is payback – that’s got to dictate the investment decision. That and the strategic requirement, like what customer forces you’re facing.” But he puts shopfloor data collection high on the list of priorities. “It’s surprising how many do it on paper,” he says. “It’s ridiculous. Everyone used to say you can’t put a PC on the shopfloor: it’ll break or get nicked. We’ve done it time and again and it hasn’t.” So far so good: but what of new IT? And what about new delivery methods, like application service provision (ASP)? How might these affect our strategy? To what extent can we future-proof ourselves? Most make the point that as IT improvements and alternative delivery methods come along, enterprise software vendors will be among the first providers. So long as your maintenance agreements are good you’ll be able to take advantage. However, in a world where backwards compatibility between releases cannot always be guaranteed, there could be an issue here. Looking at a couple of specifics, Geac’s Shine says of WAP, for example: “We see WAP as just another input mechanism for mobile computing. But we’ve not seen demand from our customers wanting to do [it] with our systems.” Of the Bluetooth wireless infrastructure initiative, however, he says, “it has significant implications for the ease with which IT infrastructures will be implemented in a business.” When it’s rolled out in the next year or two, he says, “companies won’t be putting in cable – and that’ll make an awful lot of difference.” And he adds: “I can foresee a situation when no manager will go anywhere without his PDA which, wherever he goes … will pick up a signal and he’ll be into his email, diary, alerts, whatever.” But Shine gets most excited by workflow – for delivering business process automation. “Where people need to be involved in a process, it forces them to do what they have to do in a timely fashion – and that’s vital for today’s fast supply chain model, driving from e-commerce driven orders right through to back end production and fulfilment.” What does he think of ASP? “You know, I’m astounded at the amount of venture capital that’s invested, and I use the term loosely, on ASP start-ups. It’s just like the old bureaux, except for the Internet which mean it’s not as constrained.” And he predicts, “take up will be very slow.” This despite the practised argument from the ASP vendors that for most manufacturers IT is not core – and getting and keeping IT staff is expensive. “In my experience, they would still rather run their own systems because they’re mission critical.” And Cox agrees: “[ASP] is an essential component of any vendor’s portfolio: if you like it’s another tick in the box.” But he points out that the abiding issues remains integrity of networks and systems, and adds, “we aren’t seeing momentum yet.” However, the jury remains out: SSA’s Rogers says. “The world’s largest pharmaceutical company has asked us to produce a bid for outsourcing all its legacy systems – BPCS and SAP R/3 – and part of that is an ASP proposition.” So we’ll see. The bottom line, says Michael Hallen, IFS’ president of R&D, is “manufacturers need to pick an ERP and implementation partner very carefully to help them through the mess. Look for a partner who can take the burden off you and pick the next right technology for you – not just a management consultant.” Hallen has an interesting suggestion: “5—10% of any budget should be held back, so that five months after go live, we can go back in and review and see where improvements can be made to drive more benefit.” He accepts that it’s unlikely to fly, but it could conceivably transform many an ailing project – and make sure that businesses keep moving forward. Consulting and partnership remains a thorny issue. Most in the manufacturing market aren’t keen on huge spending with ‘the Big Six’, but if pushed recognise they need consultation to prevent them from implementing the old style processes they already have – just with newer faster technology! Geac’s Shine puts it thus: “If [the manufacturer] can’t articulate what they want to achieve, we can’t deliver an appropriate system and they end up disappointed customers. So we feel we have to get involved.” Which makes Geac and those like it both poacher and gamekeeper? “Yes completely, that is our problem: the user’s and our expectation is that our recommendation will include software supplied by us!” But, says Shine, we have to be adult about it and recognise, “there isn’t a consultant out there that doesn’t have a pet solution in their back pocket.” And we’re back at the beginning again: the critical issue is to avoid wasting all the effort of implementation by simply rebuilding the firm ‘as is’ without thought for what can be done, or what should be done. Geac, like most of the big boys (Baan, IFS, Intentia, SSA, etc), offers business process modelling tools to assist with definition and understanding. “It means there’s a consulting mechanism and procedure they can go through,” says Shine, “that exposes their requirements for everything – manufacturing, logistics, the lot.” And while he accepts it gives an advantage to Geac because the tool maps directly into System 2, it is nevertheless extremely useful in its own right. So where do the enterprise software vendors think we should start? Manugistics’ COO Greg Owens sums it up thus. “Integrate so you get full visibility of what orders you have on a real time basis. Then you make only what only what the customer wants and that gives you internal efficiencies as well. Second, the level of customer service has to be improved so you can beat the competition and grow market share. From there, companies should be looking at collaborative demand planning: then optimise manufacturing and production around your new visibility, and hook up to all suppliers with automated e-messaging – making that more responsive with APS and integrating with the factory floor. IFS’ Hallen agrees: “The winners will be the ones who can produce best and deliver to their customers, so supply chain stuff for available to promise is important. You need visibility related to the demand chain as well as the supply chain – that way you can shorten lead times and promise more with more profitability.” He too mentions connecting to the shopfloor, but adds: “That’s not where the focus is at the moment.” And for the last word, Mapics Nigel Cox says: “First, ensure you have a high integrity backbone ERP. Then assess where you are going to get the biggest return and/or competitive advantage. Third, do something – get your feet wet.”