27 May 2011
So you want a new system?
Last month's IT round table, organised by this journal in London, provided system seekers with useful food for thought. Brian Tinham mulls over the meat
In some senses, selecting a new ERP system is easier than ever. Sadly, however, in other ways business leaders will experience quite the reverse. Why easier? Firstly because, following the scale of consolidation in the mainstream IT sector (as we go to press, yet another of the big boys, Lawson Software, is falling to the Infor stable), there are relatively few organisations and systems to choose from. So, quite simply, shortlisting shouldn't be quite such a nightmare.
Secondly – and just as importantly – the relatively few remaining ERP suites cover the vast majority of manufacturing business requirements as standard, so project groups should be able to focus solely on testing potential solutions' support for what they believe makes their company special. And thirdly, most operational and business teams have been around the block of major system purchases and upgrades before, so they're IT savvy enough to know what they're looking for and the pitfalls to avoid.
So far, so good. However, one serious snag is that, while ERP and other associated major systems have long since reached what could comfortably be described as maturity, manufacturers now need more. It's no great surprise: when any technology becomes more or less available to all, it's no longer a game changer; it's just part of the level playing field.
Hence, today, a key requirement coming from a growing number of project teams is for any new system to support what's loosely termed 'agility' or 'flexibility'. That can be construed to mean an ability to handle extremes of manufacturing style (for example, multi-mode or from pull to push) within the one solution. Equally, it can imply little more than functionality to help resolve unpredictable events – such as late customer changes and production or supply chain failures – generally handled, for example, by APS (advanced planning and scheduling), web-based SCEM (supply chain event management) and production management add-ons. Either way, the objective is better customer fulfilment.
However, increasingly, manufacturers are also starting to mean a system designed from the outset to be capable of easy reconfiguration, as needed, to support whatever unforeseen opportunity might be coming down the line. Now that's much more difficult.
More on the latter later, but on the 'customer fulfilment' front, analyst IDC sees this as probably the number one current requirement for manufacturers, particularly those in the western world. Speaking at an IT round table event organised by Works Management in London last month, Pierfrancesco Maneneti, director of the firm's Manufacturing Insights division, pointed to its latest global study among manufacturing SME's, aimed at understanding how post-recession challenges were impacting IT.
"One of our key findings was the increasing complexity of doing business in manufacturing, caused by the enormous pressures of global markets, complex products and competitive markets. That's the same for small and large organisations – but for SMEs the issue is they don't have the resources," he said.
For Maneneti, part of the solution is sorting out the differences between complexity and complication. The former is just the way it is, he explains, while the latter is largely self inflicted and receptive to improvement by, for example, integrating disparate systems to provide universal, real-time information, and simplifying business processes. That said, his view is that modern IT needs to handle complexity by assisting managers in achieving what matters most – fulfilling customer requirements, not only capacity nor even excellence in production and product.
"The factory is where customer satisfaction or dissatisfaction is created, so manufacturers need to go back to their roots," he advised. "Our study shows that manufactures see themselves as good at MOM [manufacturing operations management], but intending to invest in new systems to achieve further improvements." That's on top of planned investments in demand planning and forecasting, and supply chain management systems.
Manenti believes that investing in MOM solutions is nothing less than a survival issue, precisely because of its laser focus on ensuring happy customers by enabling real-world manufacturing flexibility. He also notes that, in the end, it's crucial to the notion of aligning IT with what the business patently needs – as long as other key software systems, including transactional systems, are also in place. And those include, in rank order, ERP (for which IDC's survey shows satisfaction and ROI figures improving significantly), followed by BI (business intelligence), then surprisingly MES (manufacturing execution systems), CRM, demand forecasting, supply chain management and, fairly low down the list, PLM (product lifecycle management).
PLM's relatively poor standing in the hit parade, Manenti explained as: "In these hard economic times, customer retention is important and innovation is less important." Which is clearly not sustainable: but that's another story and something else for business leaders to mull over as they consider how best to prioritise software acquisitions.
Just how closely IDC's analysis fits with real SMEs became clear around the table, as manufacturers outlined their current concerns and tentative spending plans. The precise language may have been different, but the messages were effectively identical. Just about everyone, it turns out, needs: more support for flexibility; better, more real-time and joined-up information that specifically links financials with production and the supply chain; and simplified HMIs (human-machine interfaces), especially on the shopfloor.
Incidentally, many were also rueing the day they signed up for what turned out to be fundamentally limited 'ERP' systems. And others again lamented the problems that resulted from committing the cardinal sin of changing their ERP code – in the mistaken belief that the system could be bent to better match their processes, and then still be upgraded when the need arose.
Crystallising the argument for integration, Oxford Engineering CEO Karim Sekkat said: "The financial system is our source of accuracy, but CEOs also need information from the shopfloor, because [the data] is different. That's where you can see the impact of issues such as waste, returns, rejects and customer fulfilment. Without it, you have no visibility… So financial and production systems have to be integrated; otherwise you get information too late to make informed decisions."
He cited any board's clear requirement to make investment and innovation decisions for the mid- to long-term. "If you take a high risk strategy, then you need to know whether it's paying off or not. If you don't align data on the shopfloor with the financials you might think your supply chain, for example, is performing badly, when in fact your missing components have been sitting in goods-in for a week."
But for Sekkat there is more to this than integration. Another key aspect is education. Another is finding systems that can genuinely handle multi-mode manufacturing. And yet another is that all-important agility. Referring to his logistics example, he said that Oxford Engineering solved the education, information flow and process issues by implementing a manual visual system.
That sounds extreme, until you hear that he also needed to introduce single piece flow (integrated into the supply chain) on high-value bespoke products for customers such as Siemens and Karl Zeiss – and that his existing ERP system couldn't cope. Meanwhile, his system remains stubbornly resistant to handling multi-mode manufacturing – self evidently lacking the agility that Oxford demands of it.
To Rod Clarke, director of Rickinghall Executive Consulting, the difficulties identified are not particularly new. "In the best ERP implementations, the software is seen as creating an opportunity for the business to drive operational improvements. But that's all dependent on the people who do the real work on the shopfloor responding properly and accurately recording what happens, because that's what drives the physical product and information flows."
The problem, he said, is not that ERP systems don't work and support good levels of connectivity – 20 years ago they didn't, but today they do. The issue, he insisted, is that organisations generally face inadequate or poorly used operational systems (MOM) and, as a result, there is little or no useful connection into financials from the real world.
Solving this, according to Chris Needham, manufacturing specialist with the government's MAS (Manufacturing Advisory Service) South East, is about analysing, streamlining and simplifying processes before you select, much less implement, new software. "The best systems we see are those where management has set the IT and business strategy and deliberately removed all aspects that could make it go wrong, and then followed that up with good training."
All that said, Samir Sekkat (Karim's brother and IT advisor to Oxford Engineering) had another take on some ERP systems' inability to directly support business decision making. "Most [ERP] systems are built around processes, whereas management would like to have systems built up around decisions. These systems were not conceived around decision flow, which makes it very difficult to get the information they really want – even if they can integrate them – and even more difficult to get the agility they say they want, on top."
It's a moot point, and many might argue that's one of the reasons for the success of add-ons such as APS and BI, geared to operational and management decision support respectively. Equally, there is an argument for focusing attention on the 5—20% of processes and information flows that really merit the attention – not attempting to get wholesale integration supporting automated processes and decision support.
And there is another way. Philip Stride, commercial director with Microsoft partner eBECS (which specialises in manufacturing ERP and sponsored the IT round table), suggested that, while older ERP systems "didn't talk", most reputable ERP systems today allow users to 'drill down' and gather information on any event in support of decision making. "Our system, for example, has the ability to mange processes, but then managers can go in at any point and work out the links – whether it's information about the supply chain or finance."
Returning to the issue of system agility, however, Neil Genders, production control manager at kitchens manufacturer KWP Interiors, gave two versions of his wish list. On the one hand, he lamented the fact that no system is likely to be adaptable enough to solve the problem of late and changeable orders that ignore suppliers' lead times. On the other, he wondered if there are systems flexible enough to be expanded to take on production for other very different firms – in his case, following an acquisition.
Karim Sekkat believes not: "When you go live with a system, you think of it as your new Ferrari but, seven years on, it's not a new Ferrari any more. I am yet to see a salesman of any ERP system who can show me that what I now want is already in my [old] ERP system."
Is that too much to hope for? Stride insisted that some ERP systems do come close. "At the highest level, Microsoft Dynamics, for example, is designed to offer a vast range of options. So users can select down the list and configure the system for their needs. Below that, instead of bespoking code or integrating external applications, this system allows us, and other Microsoft partners, to develop [compatible] functionality specifically for, say, an industry requirement.
His points? Firstly, when Microsoft delivers a new version, only its kernel changes so all the extras follow an easy upgrade path. Secondly, the system is always ready to be flexed to changing requirements as they arise – and with the benefit of a very large pool of functionality."
However, the last word goes to Clarke, who suggested that a lot depends on the degree and nature of flexibility you are likely to want. "The issue of agility is different from a business perspective than from an IT perspective. Software companies may say they have a tool that can configure the system to meet the business requirements – and while that wasn't true 20 year ago, it is now. But what many businesses mean is that in, say, five years time they might need to run their companies very differently.
"Experience shows that when you come to implement any system, a lot of time, effort and cost isn't in buying the software and configuring it: it's in testing, training people and implementing it. So, even if you're lucky enough to find a system that can theoretically cope with your new requirements, you will still have to go through the testing, training and implementing stages. I don't think we're likely to see a system that instantaneously adapts to, say, a new business sector."
Clearly, selecting any major business system requires an organisation to gaze into an uncertain future. But second guessing what may be right for you in a decade is a fool's game. So the key points to watch include: current technology status; existing approach to flexibility; and the likelihood of your preferred IT supplier still being around in 10 years.
DTI-Manufacturing Advisory Service
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