|  |  ERP - not a solution looking for a problem...
...but systems that have evolved to embrace whole new business capabilities. Sage's Andrew Buckley explains
It's little over a decade since many of the world's largest corporations embraced the fashion for implementing Enterprise Resource Planning systems (ERP) across their businesses. The appeal of the software was obvious: instead of a host of separate (and largely disconnected) applications keeping track of activities such as finance, sales, manufacturing and payroll, a single system-from a single vendor-could handle everything.
So instead of clunky interfaces between separate systems, each transaction-a sale, purchase, or completion of finished product on the assembly line-could update every relevant system with the new information. And with all their data held in a single database, businesses could deploy business intelligence and data mining tools to gain fresh insights into their activities, thus boosting sales, productivity, and profitability.
ERP for all?
At Sage, we have long believed that ERP systems should not solely be for large corporations. The benefits that they offer should be available to all. But those benefits, appealing though they are, have come at a price. For the large ERP systems implemented by these corporations aren't just expensive in cash terms, they also consume a lot of IT resources: trained staff to install and maintain the applications themselves, as well as manage the networks across which their corporate information flows, and the databases on which this information is stored.
Consequently, vendors have worked hard at creating easy-to-use systems that deliver business benefits 'out of the box' and that quickly and reliably yield a return on investment. For example, almost a thousand British manufacturing companies use the Sage Line 500 ERP system, while a further 80,000 UK manufacturers are using a Sage accounting or payroll system in their back office.
Whilst many of these smaller Sage users are extending their Sage system onto the shop floor and into the front office, that still leaves countless thousands of small to mid-sized British manufacturers without business-wide ERP systems-systems for which, more than before, there is a pressing need. |
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| Competitive landscape
Rarely has the competitive landscape faced by manufacturers been tougher. Squeezed by competitors from low-cost economies in the Far East and Eastern Europe, manufacturers also face increasing pressures to deliver to their customers more flexibly, on shorter lead times, and with ever-more innovative products. By combining a tight control over costs with solid manufacturing prowess, ERP systems can help these businesses.
The case for ERP is made in another way, too. From its beginnings as a 'transaction backbone', ERP has evolved to embrace whole new business capabilities. So the very largest ERP systems, from the very largest vendors, contain literally dozens of distinct modules-warehouse management, transport planning, and collaborative demand management software, for instance.
At Sage, too, we've developed our core offering, adding the most powerful of these new capabilities, but without compromising our insistence on ease-of-use. Capabilities such as Customer Relationship Management (CRM), Advanced Planning and Scheduling (APS), Business Intelligence (BI), and Product Lifecycle Management (PLM).
A solution in search of a problem?
If the case for ERP was pressing before, it's even more compelling now. At a stroke, manufacturers can better understand their customers' needs, quickly and flexibly develop innovative new products and services to meet those requirements, manufacture them more efficiently than ever before-and all the time, manage their businesses better than ever.
In some circles, it's become fashionable to sneer at some of these capabilities. "A solution in search of a problem," is a gibe that is occasionally heard. We don't believe that-although we do believe that some proponents of approaches such as APS and CRM have occasionally over-promised on the benefits, and under-estimated the cost and complexity of achieving them. By concentrating our solutions on the 95% of the approach that delivers the core benefit, and sidestepping the 5% that pushes the envelope, vendors believe we bring solid new functionality to manufacturing businesses that are positioned to benefit from it.
APS, for example, has been extraordinarily difficult for small to medium-sized manufacturers to achieve. Packages are out there, certainly, but require interfacing to a business's order book, its inventory systems, and its shopfloor control systems. They are a step backwards, whereas as part of an integrated ERP system, integration is built in as standard.
It's a similar story with CRM. Many manufacturers have been slow to adopt CRM, perhaps believing that it's best-suited to consumer-facing businesses, or those with very extensive business-to-business order books. That's a valid perspective, but misses the point that whatever the nature of the order book and marketplace, CRM can deliver better forecasting, and better demand management, in order to provide a more accurate (and smoother) master production schedule. Not only this, but the same tool can also help manage suppliers, yielding a double benefit from the same investment.
Likewise, PLM speeds innovation, helping manufacturers keep track of changes to designs and prototypes, and acting to reduce obsolescence. Again, its impact on profitability is often poorly appreciated. Businesses that are early to market with an innovation capture market share, earn high margins, and gain first-mover advantage. By comparison, businesses that play catch-up with a 'me-too' product gather the crumbs. Which would you rather be?
Making it happen
Among the world's largest corporations, ERP projects have become bywords for lengthy and resource-intensive implementations staffed by armies of consultants. We believe it should be a far more nimble affair, beginning with software applications that are easy-to-use out of the box, yet flexible enough to be moulded and adapted to suit.
Which is where our implementation partners come in: specialist partners skilled in implementing ERP solutions and experienced in your particular industry, perhaps also with niche industry-specific applications of their own, designed to be integrated with your particular core solution. |
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