Preface
Chapter 6: The SupplyChain of ERP Programming Products
6.1 Value-Added Solutions Improve the Benefits from ERP Software
ERP software comes from such vendors as SAP, Oracle, J.D. Edwards, PeopleSoftware, and Baan, as noted in the introduction to this chapter. Companies go for ERP programming products because it has been found that they are instrumental in tying factory operations to other corporate functions such as
purchasing and inventory management. As with most computer operations, the goal is better
coordination of internal functions. Whether or not this is being achieved, however, is a different matter.
User organizations that wish to be ahead of the curve are not necessarily satisfied with the current supply chain of ERP software. They do not fail to connect with their vendor(s); but neither are they satisfied with what they get. Here, in a nutshell, is a scenario of what they would like to obtain.
The good news first, starting with the statement that ERP's supply chain applications have enlarged the concept of off-the-shelf routines to include both internal and external functions. For example, having parts ordered for just-in-time delivery, which is not necessarily part of most ERP routines, bridges the gap between ordering, production scheduling, and inventory control. The ideal would have been a manufacturing execution system that reaches the vendor's ERP online, coordinating shop-floor
operations between vendor and client, and providing a real-time picture of how the plants are running on both sides of the partnership.
Another improvement to current packages would be the incorporation of autonomous knowledge artifacts. If a problem arises, agents under a knowledge-enriched planning system would analyze its impact. Then they would modify production schedules to make the best use of whatever resources are available at that very moment to meet established plans.
Is there an example of a real-life application of this value-added solution? Sure there is, but not with programming products off-the-shelf. Cisco has one; it is an in-house development that built upon the facilities supported by ERP programming products and significantly extended their functionality.
Other companies also have done add-ons. The message from this value differentiation effort is that both the more sophisticated approaches and their ingenious usage are a level above what is offered off-the- shelf. This does not mean that commodity ERP software is useless. Quite the contrary, it will be crucial to handling tomorrow's steady stream of custom orders from the Internet. However, the customer must take the initiative for further advances, until the vendors come up from under. Typically, each option will have trade-offs that make one approach more desirable (or more comprehensive) than the other. An advanced solution today is the use of system dynamic technologies to create new approaches that are easier to integrate and have minimum side effects.
Further advances are largely based on cross-fertilization among different skills. J.D. Edwards teamed up with Camstar Systems, which specializes in manufacturing execution routines, to help Lexmark International slash production cycles for computer printers by 90 percent. A printer that previously took four hours to assemble now gets made in Internet time: 24 minutes.
No matter what the tool's origin, wise management put its attention on ease of use, simplicity of training, functional capabilities, and on ways to enhance them. The goal is to implement the best available tools to create virtual enterprises, with online links that span the entire design, manufacturing, and delivery chain. As far as human resources are concerned, a good test for a new tool, or off-the-shelf
programming product, is the learning curve shown in Exhibit 6.4. In principle, no two ERP commodity software offerings have the same learning curve. Differences exist because of the way an
implementation is made, the skill of the people doing it, and other factors.
Exhibit 6.4: A Learning Curve Identifies the Level of User Difficulty with New Methods, Packages, and Tools Diversity among suppliers increases the time needed to reach a level of comfort with the new software.
If a company can coax its suppliers into a streamlined implementation environment, the learning curve would be compressed. With this, even the most traditional firms could soon be exploring new realms that give them an edge on the competition. Many experts look at the broadening of ERP functionality from the angle of its ability to bring about seamless integration of all vital data streams that flow through a company, including financial, manufacturing, supplier, and customer information.
Cornerstone to a successful approach along this line of reference is the word seamless. For more than two decades, since deregulation unleashed fierce competition, large companies have struggled to blend incompatible systems into a workable whole, while spending large amounts of money on custom-made software that frequently failed to deliver what was expected of it.
The difference now is that a new generation of applications software comes off-the-shelf, and it covers many of the basic functions of the procurement-manufacturing-inventory delivery cycle. Examples other than ERP and CRM include Microsoft's Exchange Server 2000 and BizTalk Server 2000, which provide a bridge between applications that may run within, or across, organizational limits.
Exchange 2000 Server is the most recent version of Microsoft's messaging and collaboration server. It provides a single infrastructure for working with messages, documents, and applications to increase productivity of knowledge workers. BizTalk Server provides for a document routing, transformation, and tracking, and is designed to enable companies to integrate and manage business processes by
exchanging documents such as purchase orders and invoices.
By sensing current and upcoming business opportunities, vendors increase the breadth and scope of their offerings; still for competitive reasons a company needs sophisticated software add-ons,
particularly modules with knowledge engineering characteristics and integrative capability. The strategy underlying this statement is illustrated in Exhibit 6.5.
Exhibit 6.5: A Wise Strategy Would Be to Buy Off-the-Shelf Basic and Intermediate Software, but Provide In-House Value Differentiation
Many experts put on the negative side of ERP's balance sheet not the lack of advanced type modules that address specific knowledge-intensive needs in management information, but the fact that the successful introduction of off-the-shelf routines may require an inordinate amount of time, skill, and effort — along the line of the learning curve discussed at the beginning of this chapter section.
True enough, the downside with any software package is that it can require many months — sometimes years — to implement in full. When this happens, it winds up costing several times more than bought software because of the needed amount of corporate reengineering. As Chapter 2 explained, corporate reengineering is the price of entry to the new IT world with its integrative real-time culture. However, ERP does not always require an inordinate amount of time, skill, and effort unless its implementation is inept. The better organized the company is when it buys the ERP programming products, the less will be the preparatory investment. And the wiser the management of the firm, the more it will use this preparation as an opportunity to revamp and restructure.
Plenty of examples point in this direction and help to identify the benefits derived from preparing for the use of ERP products in a consistent, purposeful way. For instance, to get ready for the new solution that liberates it from old data processing chores, Asea Brown Boveri (ABB) has divided its entire purchasing process into the following discrete activities:
Negotiating with suppliers
Updating the database
Issuing purchase orders
Handling complaints, etc.
It also divided its engineering activities into well-defined functions, and did the same for marketing as well as for finance. This revamping allowed for doing away with overlaps in authority and responsibility between different departments, identified the best links for information transfer, and streamlined management's accountability.
The implementation timetable, however, does pose some questions. To make the new system work, ABB spent three years rethinking its business, rather than turning the entire IT process over to programmers. This decision was sound? Three years is an eon in technology.
The good news is that, once applied, the new ERP solution saw to it that it serves top-management business strategy rather than restricting itself to a lower management profile. Indeed, as I never tire repeating, this cultural change is the top benefit companies receive from enterprise resource planning, customer relationship management, exchange servers, and the other products reviewed in this chapter.