Having declared that everything you think you know about ERP may be wrong, our focus now moves to defining ERP as it should be for manufacturers, and how the technology needs to be reinvented to deliver value. For inspiration I turn to an unlikely source—Škoda.

For decades, Škoda was the butt of motoring humor as drivers ridiculed the jewel of eastern European technology. However, following the takeover by Volkswagen, the perception of Škoda in Western Europe changed completely. In the UK, a major change was achieved with the risky, ironic "It is a Škoda, honest" campaign, which confronted Škoda's image problem head-on. If the technical improvement and product quality of the Škoda models available at the time—the Fabia and Octavia—were anything less than excellent, the campaign would have backfired.

But by 2005, Škoda sold over 30,000 cars in the UK and for the first time in its UK history, a waiting list developed. By 2010, 762,500 cars were sold worldwide, a record for the company. So what are the lessons here for ERP?

First, there is the recognition that looks are important. For Škoda, this meant a face-lift for the exterior of the cars and a dramatic overhaul of the interior. For ERP software it means a radical new approach to the user interface.

This is not just an issue of cosmetics. According to Aberdeen Group, best-in-class companies spend 25% of the working week looking for information rather than the 40% spent by laggards¹. In addition, in these pioneers see a 30% annual improvement in time-to-decision rather than 7%. Businesses cannot make this kind of progress if they have an ERP system dogged by an obstructive interface that is not keenly aligned to individual roles.

Second, there is the critical role of added services. For Škoda, it is vital to ensure that dealers establish a relationship that will lead the customer to return to other brands in the Volkswagen Group when they wish to trade up.  For ERP, presales, implementation, and after-sales consultancy and support are just as vital. This is particularly critical in the SME market where the perceived interruption of implementing ERP is the number one barrier to uptake. But regardless of the size of the end-user business, services that show an organization how to exploit and maximize investment in ERP can be just as critical as the functionality of the system itself.

And lastly, there is the common ground of domain expertise. Prior to the initial Volkswagen stake (some nine years before VW took full ownership), Škoda had begun closing the gap on Western European automotive manufacturers. They had looked and learned so that by 2000, Škoda had a full understanding of the Western European market and could compete. 

Therefore, if ERP is to deliver—for example by consistently achieving the 20% reduction in operational costs that Aberdeen identifies as a hallmark of best-in-class companies²—it needs to be rapidly adaptable to a given industry or business; standardizing, streamlining and accelerating business processes quickly.

ERP implementations however, do not have the luxury of a decade to perfect this fit. Rather, ERP solutions need to deliver domain expertise out of the box to provide quick time-to-value without lengthy configurations. Just like a car, today’s ERP is about speed. Speed of implementation, and the all-important speed of accessing the right information for effective decision-making.

These specifics risk understating the profound strategic change that Škoda underwent—and indeed that lies ahead for ERP. By thinking differently about what made them unique, about what drivers wanted from their cars, and how to best fulfill these requirements, Škoda was able to transform from motoring joke to the entry level brand of the Volkswagen Group.  

Likewise, it’s time to think differently about ERP. For ERP vendors, thinking differently about the demands of manufacturers is now the order of the day. Because, unlike Škoda, ERP can no longer afford to be the butt of jokes in the boardroom.

 
Posted by Wolfram Schmid, Director, Product & Industry Marketing, Automotive  

¹ Kevin Prouty, Aberdeen Group, ERP: Much Better Off With than Without, January, 2011.

² Ibid.

The cost of change in the automotive industry

The phrase “connect the dots” is part of our everyday speech, but never has it seemed more relevant to what automotive companies must do to be competitive today. Typically, each department in an automotive enterprise has a narrow view of customer concerns, while disjointed business processes between departments and trading partners hinder effective decision-making. Companies waste time and resources developing products that miss the target—and costs go up.

Recent studies show that up to 80% of product costs occur in the design and engineering development stages of the product life cycle. Some studies suggest that 60% of those costs accumulate during the initial investigation and architecting of suitable solutions. One of the main hidden costs is the cost of poor quality. Failures, rework, returns, and warranty issues result in direct material and contract costs as well as damaging the company’s reputation with customers.

Controlling quality and costs as a product changes may seem daunting. But it’s not impossible.

An Aberdeen report¹ shows that companies running best-in-class change processes are more than twice as likely to hit their targets for quality and product cost. And companies achieving those processes are more than twice as likely to have a product life-cycle management (PLM) system. The best solution, we have found, is PLM integrated with enterprise application analytics to stay on top of transaction information and trends in customer demand—and stay on target.

Average savings of 30%

A global automotive tier supplier is doing it right. The firm has reduced costs and increased efficiencies by an average of 30% with Infor10 Automotive Enterprise integrated with Infor10 PLM Discrete. By providing real-time access to the same information system—i.e. connecting the dots—the company standardized all its business processes: inventory management, transaction processing, purchasing, and engineering, including global engineering change orders. The ability to communicate change across all relevant areas of the enterprise has dramatically streamlined operations for the company.

What’s more, the company has achieved the transparency essential to make smart decisions for managing change:

• Each participant in the product life cycle and the supply base has a specific view and an easy way to collaborate with every other participant.
• The system clearly captures process metrics and provides timely analytics—including social media trend information—that drive effective action.
• Each change process is managed as a project to ensure that nothing is missed and that escalation occurs when issues are not resolved quickly.

Change for effective decision-making

Automotive industry leaders are moving in the right direction at high speed today. They are hitting their targets, responding to customers, and reducing the cost of product development—all by connecting the dots with innovative PLM systems. Once change processes are transparent and resilient, companies can apply continuous improvement not only to the product, but to all supporting processes, as well. This will put the company in an excellent position to see new opportunities and grasp them before the competition does.

Posted by Wolfram Schmid, Director of Industry and Product Marketing, Automotive, Infor

¹ Aberdeen Group, Engineering Change Management 2.0: Better Business Decisions from Intelligent Change Management, September 2007.

ERP has been the backbone of manufacturing IT for so long that it has taken on its own myths. The trouble is that these myths are now “accepted wisdom,” despite being anything but acceptable or wise. Destruction of these misconceptions is long overdue.

Misconception 1: ERP is costly.

For manufacturers with multiple sites, subsidiary companies, international facilities, and specialized production processes, connecting systems into an ERP framework soon builds to the point where rip-and-replace seems the easier option. For those looking to invest first-time around, the costs of an ERP expert to analyze and align business processes to match the ERP system and train employees is prohibitive.

This is simply not true. The technology to connect disparate systems and deliver the information in a clear, meaningful manner is already available. It doesn’t matter if these systems are in the cloud, hybrid, or on-premises, the lower upfront investment options of cloud computing are there for manufacturers looking to expand or invest for the first time. Expensive ERP expertise is a thing of the past. Dashboards and analytics based on familiar, industry standard platforms have replaced complex proprietary options.

Misconception 2: ERP is complex and always results in projects running over time.

Manufacturing is a complex industry. Research shows this will only increase. Analyzing business processes and developing software to automate them should eliminate complexity, but when it doesn’t, we have to throw time and resources at the project and use brute force to crack the nut.

Now we know better. First, complexity isn’t a bad thing—it’s a mirror of the business. It enables operational precision and commercial opportunity. But complexity can inhibit innovation, so focus on making processes tight and lean before they’re automated. As a result, an ERP implementation delivers value earlier and is completed quicker.

Misconception 3: ERP implementations are invasive and disruptive.

Connecting the mass of data and information to deliver a working ERP system is a huge task. It’s dwarfed only by the ongoing use of ERP that demands software upgrades, training, security patches, and much more. This is a huge drain on company resources.

Wrong again. Intelligent deployment delivers consistent, meaningful information to the end user, regardless of the deployment method, so a business can be up and running with ERP in days. A modular, event-driven approach means manufacturers can get the capabilities needed in the order they want without disrupting other areas of the business.

Misconception 4: ERP vendors are inflexible and notorious for their lack of support.

Some software vendors can disregard the pains of manufacturers, ignoring the realities of budget and IT resource limitations as well. Believing that the software is always right, business processes have to be changed and people retrained.

Well I can’t speak for others, but that’s not true at Infor. We spend thousands every year researching the issues and challenges facing manufacturers. We spend millions developing solutions to help solve these problems and we are in this for the long haul. That goes for both the software and services.

So, why have these myths never been slain before? There are many possible reasons, but I believe it’s because manufacturing has rarely dared to think differently. Thankfully, this is now changing. Operational directors are not just accepting what the software industry tells them they can have. 

Savvy manufacturing leaders now start with an outcome—for example a 20% cost decrease—and ask software vendors what they can do to make it happen. Thinking differently, daring to push manufacturing technology beyond current limits should be encouraged. Destroying myths and accepted wisdom will be a hallmark of those manufacturers set to succeed.

To learn more about how to think differently about ERP visit www.thinkyouknowerp.com.

Posted by Andrew Kinder, Director, Industry and Product Marketing, Infor 

Guest post by Adriana DiNenno, Business Analyst, Development, Infor

A few weeks ago, I was given the opportunity to tag along with a few members of the Infor10 ERP Process Business (Adage) team to visit to Infor customer, Turkey Hill Dairy. In the two years I’ve been with Infor, I’ve heard rumors around the office about what a strong relationship the Process Business (Adage) development team has with its customers, but, I’ve never seen it first-hand—until now.

From the first moment we pulled up next to one of the many barns at this Lancaster County location of Turkey Hill Dairy, the entire Turkey Hill staff went out of their way to make us feel at home, including phoning directions to one of our Process Business (Adage) team members that was lost on one of Lancaster County’s many windy roads. Thanks to him, she didn’t miss the Turkey Hill tour that was to follow.

The day began in a large, formal conference room where the Turkey Hill team members greeted us—all wearing matching t-shirts. It wasn’t until later that I realized that these were the same t-shirts the Turkey Hill employees had worn during the implementation of Process Business (Adage).

Greeting each Process Business (Adage) team member at the conference table was a free Turkey Hill ice cream scooper, and coupons to enjoy Turkey Hill products when we left that day! Not to mention, several bottles of the addicting Turkey Hill iced tea product.

Next on the agenda was the facility tour to see Process Business (Adage) in action. We all suited up in factory-safe clothing, from steel-toe shoes to goggles, and headed to the factories for our tour. First, we watched how Turkey Hill iced tea is manufactured. And, saving the best for last, we toured the ice cream facility to see how Turkey Hill’s creamy ice cream is made. This was the best part of the tour as we tasted fresh ice cream right off the line—there’s nothing like it.

Aside from the free ice cream, the best part of the tour for me was seeing how Infor10 ERP Process Business (Adage) helps Turkey Hill run its business. As we walked around the plant, I was able to make connections on how certain Process Business (Adage) screens actually work for Turkey Hill. On more than one occasion, a Turkey Hill employee would mention a specific Process Business (Adage) employee by his/her first name and how they work together. As I reflect back on the whole trip, this is the part that makes me proud to work for Infor. I was pleased to see that the employees at Turkey Hill Dairy enjoy working with Infor employees almost as much as we enjoy working with them.

ERP Software Economics 101 

My undergraduate degree was in economics. I know—boring, right? The basic concept of economics is supply and demand. The lower the price, the higher the demand, with all else being equal. Makes sense. In real life, this rule generally holds true. If gasoline is cheaper, you take more drives to your favorite vacation spot. If you could have a Ferrari for the same price as a Chevy, you’d probably go for the Ferrari. (Even people from Detroit would likely admit that, although the new Chevy Camaro is hot.)

In my daily business life, I see how the dynamics of supply and demand affect manufacturing companies every day. A great example is outsourcing, which has exploded in a tough economy (lower demand) and as technology for remote services has improved (more supply). Outsourcing drives prices down, which is good for business and consumers. For example, US manufacturing companies can purchase more hours of ERP software consulting services at a lower cost overseas—which is fine as long as it’s still high quality. It’s that tricky “all else being equal” part of the equation: You have to be careful that you’re getting value as well as lower costs.

For manufacturers buying ERP software, the key to success is choosing a solution that has a track record of success in their industry, and that can be implemented quickly by an experienced team. These days, manufacturing companies can’t afford the huge IT budgets and cost overruns of the 1990s. For ERP software companies, there’s no compelling event like Y2K to drive demand for their systems. Nowadays they have to provide a modern technology that’s easy to use, cost-effective, and fast.

Notice that I didn’t mention best-of-breed functionality, cutting-edge technology, Tier 1 ERP vendors, or any brand names. Surprisingly, study after study has proven that IT project failures have very little to do with the functionality of the ERP or the prestige of the consulting firm. Paying more for a brand name is absolutely no guarantee of higher quality or success with your project.

At the same time, you don’t want to cut corners and skimp on an ERP software implementation. Paying less in the short term to save money now can backfire in the long run. Buying enterprise software should be a strategic business decision. You want to address the root causes of your business pain, streamline business processes, manage the project properly, and prepare your company for growth. Fortunately for CFOs, this doesn’t have to break the bank.

Tips on “getting what you pay for” with new ERP software

Why is all this relevant when you’re evaluating ERP software? Well, obviously you have a lot of choices when it comes to ERP vendors and consulting partners. Here’s a list of tips and tricks to help ensure you get a good deal.

1. Take a holistic approach. Consider not just the ERP package itself, but integrations with the entire “ecosystem” around it. This may include third-party packages that fill gaps in the ERP vendor’s offering.
2. Look for a track record in your industry “vertical.” Don’t just accept claims from traditional media and big-name software evaluators. Consult your business and social networks.
3. Get a trustworthy consulting partner. Talk with other customers about their experience with services, not just the product. The consulting firm’s relationships and network are also important to the success of a software project.
4. Do your homework. Google searches, Toolbox for IT, research papers, Focus.com, ZDNet, communities like Manufacturing Executive, LinkedIn groups, and Twitter are some great free sources on the web. The ERP software market is competitive, so you can get a great fit and a good deal if you’re thorough with due diligence.
5. Engage an independent software evaluator. It’s OK to be skeptical about the paid advice that’s out there. Surprisingly, you may find that unbiased advice is available within your price range. In the long term, good advice can really pay off.

Whether you’re replacing an existing ERP system, upgrading, or evaluating new ERP software packages in the future, I sincerely hope you get exactly what you pay for—in other words, your money’s worth.

What do you think? We would love to hear from you.

If you’re interested in connecting, I’m on LinkedIn, and i-app is active on Twitter (@iAppERP) every day. As an old buddy of mine used to say—pardon the grammar— “Don’t cost nothin’.”

Posted by Dan Aldridge, President, i-app

Remember when your only supply chain worries were mechanical malfunctions, unreliable suppliers, and natural disasters? Not that any of those couldn’t cause serious problems, particularly natural disasters (see my recent blog), but at least unknown parties weren’t actively out to sabotage deliveries and hurt citizens.

In a world of increasing uncertainty and chaos, you need to manage complexity and make your supply chain more resilient. The US government is working on a holistic, government-wide plan to improve the security of international freight transportation, but you need to do your part. Cutting-edge, business-specific technology can help.

Think about it. Not only do you need a clear view into your supply chain, you need to model and design your network, create “what if” planning scenarios, make the most of trade-offs, and manage your contract/supplier/supply base.

It all starts with network design

To address risk complexities, you need to continually evaluate and strategically align your assets, reconfiguring your network to leverage changes in demand, supply, labor, transportation, and terrorist risks, as well as outsourcing options.

Next up: demand planning

You’ve got to analyze, model, and strike the right balance between target service levels and your inventory investment. You can redistribute inventory according to the predictability of customer demand, risk of terrorism, and how best to meet tailored service levels.

Supply replenishment

You need tools that automatically align replenishment with demand across your entire manufacturing and distribution network. You’ll be able to prepare different demand scenarios and ripple them throughout your supply chain to realign inventory, transport, manufacturing, and buying plans as needed.

Advanced planning solutions

Your greatest challenges lie at the heart of the production processes themselves. With advanced planning solutions, you can optimize the use of your production resources, improve efficiencies, increase throughput, and lower your costs. Here’s where "what-if" scenarios come into play—things like plant shutdowns caused by terrorist activity.

Event management: real-time alerts

You need to detect conditional change anywhere in your supply chain and communicate it instantly to those who need to take action—whether they’re inside or outside your organization. With an advanced supply management application, you’ll be able to manage terrorism-related exceptions such as delayed shipments and damaged goods.

Sales and operations planning

Finally, you need to tie all this together into a unified sales and operations plan that aligns the strategic direction of your business with the operational and financial plans that deliver against it. Advanced practitioners of sales and operations planning (S&OP) use the strategic S&OP business process to complete risk assessments for terrorism, natural disasters, and other threats to their plans; a number of these companies have endured the effects of such disasters while barely missing a beat in their operations.

Has your company had terrorism-related threats to its supply chain? How did you handle it? Please post your feedback and comments.

Posted by Wolfram Schmid, director of industry and product marketing, Infor

Japan’s March 2011 tsunami and other recent natural disasters got me thinking about supply chain planning—specifically, how automotive companies need to proactively plan for such disasters. But how can you proactively plan for a natural disaster, when you don’t have any idea what it will be, or when or where it will take place?

You need to think seriously about multi-sourcing vs. single sourcing, a lesson learned from the Japan tsunami and the succeeding shutdown of a Hitachi plant that produced airflow sensors for automakers around the world. If you rely on a single supplier and that supplier has to shut down due to a natural disaster, you’re obviously going to have major problems producing your product and meeting customer demand.

So, how quickly can you change from single sourcing to multi-sourcing, and be prepared to reroute production? Small- and medium-sized auto manufacturers have traditionally under-invested in IT, not recognizing the role IT can play in operational excellence.

Network design

First off, you need a network design tool that lets you model your supply chain and analyze your company’s sources of risk, and quickly determine when and where to buy, make, store, and move products through your network.

“What if” scenarios

Second, you need advanced supply-chain tools so you can create different “what if” scenarios. For instance, what if one of your suppliers shut down indefinitely? Could you source products from different regions or suppliers? If so, what would the costs be, and the impact on sales? Using “what if” scenarios, you can minimize costs and delays, and maximize your margin.

Supply chain collaboration

Third, you need advanced, ERP-neutral supplier collaboration tools, whether you’re Tier 1, 2, or 3. I can’t state this strongly enough: Electronic supply chain collaboration is a necessity in today’s global business environment. With an advanced, web-based solution that incorporates traditional electronic data interchange (EDI), you’ll be able to collaborate with your suppliers no matter what language they speak, or which replenishment method they use. You’ll also be able to discover issues as early as possible, and know exactly which shipments are on the way as well as their expected time of arrival at your plant (global track and trace).

Business integration

And finally, you need tools that allow you to integrate your supply chain into your business system, so production isn’t isolated from the rest of the business. As a manager, you’ll automatically receive an alert when there’s a problem, and get all the information you need to make a decision.

How has your company coped with supply chain disruptions due to natural disasters? I welcome your feedback and comments.

Posted by Wolfram Schmid, director of industry and product marketing, Infor

I speak with a lot of people in the manufacturing industry every day, and I wanted to address one of the common themes I hear from these folks: Their frustration level with manufacturing software system implementations.

The people I speak with have been directly involved with the purchase and implementation of manufacturing ERP software. Many of them tell me stories about near failures—and, in some cases, total failures—when it comes to these implementations. This is when the finger pointing begins and the relationship between vendor, consultant, and client begins to deteriorate. Not a good scene.

So why can these implementations be so frustrating and risky? One of the main reasons I see is the effectiveness and fit of vendors’ consultants who are deployed on the project.

Let’s face it; many of the software packages from the major players on the market today are very good.  However, what differentiates a good implementation from a bad one is the consulting team responsible to help a company implement the system. That’s not to say that if things aren’t going well, the blame could lie with the vendor. I’ve seen plenty of implementations go south due to the lack of commitment and participation on the client side, but that’s a matter for another post. In this post, I’d like to address what you should look for in a consulting team to make sure your implementation goes smoothly and maximizes your benefits. 

So what can you do? 

The fact of the matter is, many times clients don’t take the opportunity to get to know their vendor’s team and interview them during the buying cycle. Today’s ERP software is sophisticated, and implementations can be very complex in nature. You need to do your homework to ensure success. 

This homework involves more than evaluating the software fit and function. I’ve seen hundreds of RFPs, and rarely is any emphasis put on implementation personnel. Companies sit through weeks of software demonstrations and spend countless hours going over spreadsheet checklists, yet they don’t really know the folks who will actually come into their company and implement the software. And that’s a big mistake. Here are a couple of common-sense suggestions to help you with one of the biggest selection criteria in implementation projects—selecting the right consulting team.

Get to know them

You need to get to know the consultants your vendor is recommending for the project. These folks will be spending a lot of time with you. It’s not uncommon for them to interface with you for months at a time. 

Do they have the necessary experience with the product and with your particular industry? For example, if they’re comfortable in process manufacturing and you’re a discrete manufacturer of aerospace and defense products, you should reconsider. You’ll find yourself spending too much time educating them on your industry. This will become a large point of frustration.

Do they fit with your culture?

If your people are fast-paced and quick, make sure your consultant is a good match. Nothing is more frustrating than someone who is slow and boring as an instructor. But the opposite is true, too. If your consultant just wants to blow through the implementation, your folks won’t grasp the new concepts and workflows. Again, your consultant will be spending a lot of time with you and your team. One way to think about it is: Would I hire this person as a new employee? To make that decision, you need to check consultants’ references from other implementation sites with which they’ve been involved. 

Manufacturing knowledge

Earlier, I mentioned the experience factor. Along with that you need to be comfortable with a consultant’s manufacturing background. Someone with a strong retail or distribution background that “subs” for manufacturing implementations will be another challenge you don’t need. I’ve seen plenty of this in the past, so remember, it’s all about your company. You don’t want to settle for second best due to a vendor scheduling its “A” team at another company—perhaps a competitor. 

Trust me, I know selecting ERP software is a long journey and a lot of work. Just don’t leave the most important details—your consulting team—off the table. Do your homework on all the levels and your implementation will be rewarding for your company and your people.

What do you think?  Do you have a story to share on choosing an implementation consultant?  We would love to hear from you.

Posted by John Singer, Sales Executive, i-app

Did you see last week’s post?

After you viewed the first webinar, were some of your common misconceptions of ERP squashed? What did you think of our next generation of ERP? Did you find it to be more collaborative and personalized? Lots of questions, I know, but your opinion matters, and we want to hear from you.

This week, I’d like to talk about complex manufacturing. Complex manufacturers face some of the same challenges as other manufacturers, but also some unique issues. If you’re a complex manufacturer, you know you must contend with a highly engineered environment that requires much more collaboration both internally and externally, with customers.

Aberdeen has conducted research among 127 complex manufacturing companies that reveals that best-in-class complex manufacturers drive more ERP usage and push IT and business leaders to operate in a collaborative and cooperative environment. We want to share these results and others from the study. Check out part two of this series, on-demand.

Posted by Mark Humphlett, Director Product Marketing, ERP

When you hear the word “ERP,” I’m sure it brings up myriad emotions. You’re not the only manufacturer to feel that way. But you can change your way of thinking about ERP. Instead of viewing it as an inflexible and costly beast, you’ll begin to see it as a necessary component in your organization, no matter how simple or complex your organization may be.

We’d like to share the latest research that explains why you need an ERP system. Learn all about it in a two-part webinar series that covers common misconceptions and demonstrates the true value of an ERP solution. We discuss how the next generation of ERP will do an even better job of helping manufacturers like you tackle the challenges you’re facing today.

View part one of the webinar series. After you view it, please leave your comments and questions. We always love to hear from you.

Posted by Mark Humphlett, Director Product Marketing, ERP