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scorWith technology being everywhere today from the WiFi in the coffee shop to the Fit Band on our wrists, it’s not a stretch these days to say that today’s ERP and CRM systems are the equivalent in the business and manufacturing world: the band that ties the enterprise together through technology.  In a rapidly changing marketplace and supply chain, the input, feedback and data provided by these systems allows companies to keep up, or even get ahead, in the market.

The APICS Supply Chain Council has created a series of over 250 metrics known as SCOR (for Supply Chain Operations Reference) that helps manufacturers to measure these solutions.  These metrics are organized into a hierarchical structure starting with the organizational level, moving up to the process level and finally the diagnostic level.  They focus on: reliability, responsiveness, agility, costs and asset management efficiency.  Those first three attributes are mostly customer-focused, while the latter two are internally-focused.

The challenge then for any company is to analyze and define, then align and prioritize, the market and competitive requirements for each of these attributes.  Ideally then, a company wants to decide where it thinks it can be “best-in-class” and where it thinks it can at least adequately compete.

As a whitepaper by a firm called Edgewater points out, there is a second organization that goes by the name of MESA, the Manufacturing Enterprise Solutions Association that provides similar metrics.  In their Guidebook they point out the importance of the measurement process:

“Production companies are quite complex, so most need to work through the process of articulating goals and crafting a system of metrics that is effective. Each company may need to create its own correlations and linkages from corporate objectives to financial metrics to operations key performance indicators (KPIs) and from aggregate KPIs to very specific metrics at the individual, line or unit level.”

The point of all this as it relates to ERP is simple: It’s about a lot more than simply strapping on an enterprise fitness band, so to speak.  The managing of the people, the processes and the data, and getting the client company to embrace all these, is a bigger challenge than appears at first blush.

In our next post, we’ll take a look at a couple examples cited by Edgewater where firms had to throw out the old in order to bring in the new – as in, a new ERP system – and some of the challenges they faced.

Stay tuned…

erp-upgrade-pic_2Our prior post attempts to answer the question captioned in our title by suggesting the first three, commonly accepted steps in the process: Preparation; Process Review; Fit/Gap Analysis.  Today we’ll conclude with the last three steps.

Step Four: Architecture.  In this step, which may be a part of one of the next steps, you identify the hardware foundation for your solution.  It could be cloud based for certain well-defined verticals and for more generic (i.e., pure accounting) solutions, or it may consist of hardware, either on-premise or off, that will serve as the underlying architecture for your solution.  The hardware however is always a byproduct of – and dependent on — the desired software solution.  This step is the natural follow-on to any potential solution identified in the earlier fit/gap analysis.

If you’ve decided on standing pat or upgrading your current solution, you still need to ensure that the hardware it runs on is up to the task and offering you the speed, functionality and scalability you require today.  If you’re considering new technology, new or upgraded hardware will be a part of that overall consideration.

Step Five: Scope definition.  Just as it’s important to define what your choices will do, it’s important to define what they won’t – at least initially.  Here you determine the bounds of your new implementation.  This is the place to look at where you potentially will, and will not, modify the workings or code of the proposed new solution.  We often advise clients to work as much as possible with their new software “out-of-the-box” and to forego all but the most critical, business-necessary modifications until they’re up and running and have had time to truly understand the capabilities of their new system.

We find most companies are a bit overwhelmed initially with what their new system can do for them.  It’s almost too much to wrap your head around all at once.  So initially, take it one step at a time.  There’s plenty of time later to decide where you want to fine tune your system (assuming your selection can be fine-tuned and modified – some systems are better at this than others).

Finally as to scope, remember, this is where you can best identify and control costs.  A good, tight scope definition helps your software partner quote more accurately, and helps you ensure the budget is both realistic and achievable – in both dollars and time to implement.

Step Six: Proof of concept.  Once you’ve reviewed your processes, identified gaps and potential solutions, defined requirements, hardware, scope and acceptance criteria, you need some assurance that the proposed solution will work.  If you’re already familiar with a trusted adviser and software partner, they can step you through this process with either basic PoC demonstrations, or a combination of referrals, conversations and software high-level reviews.

This is not user training and does not involve porting over of existing data (aside from perhaps a few sample records for demo purposes).  It’s not a full prototype or a complete system test.  Proof of concept simply means a general acceptance that the overall processes you have identified as key to your flow can be accommodated in the proposed solution.  There may be some cost associated with this step, depending on the depth of your requirements for proof.  The key thing is to have established trust between your firm and your implementation partner for the long road ahead.

 

There are any number of variations on the steps and flow of your selection process, but the outline we’ve provided covers the fundamentals of an accepted method for determining your requirements, and whether your current solution will get you through, or a look at new technology is in order.

In all cases, keep an open mind… be honest and open about your expectations and your budget… and remember that ERP is, above all, a strategic investment in business improvement.  We may be biased after 30 years of doing it, but the relationship with your provider – and their business and technical capabilities and understanding of the business environment in which you operate – are the keys to success.  Remain honest and open with one another throughout the process, keep the expectations realistic and the lines of communication open, and you will ultimately be one of the success stories.

 

 

erp-upgrade-picIn this brief, two-part post, we’ll look at the commonly accepted process steps for answering the question in our title.  While there are many formats and variations on this process, there are essentially about six key steps a company can take to gain clarity on whether to upgrade, purchase new, or stand pat.

The first step is preparation: This is the information gathering phase where you define the internal skills and staff required to staff the process.  You’re doing this, presumably, because you question the utility or capabilities or robustness of whatever system you’re using today.  So you’re about to engage, possibly, in some real transformation.  Therefore, you want to look for a few thought leaders in the company who can help you map out what you’ll need in the future – and whether that will come from what you have, or require something new.

Here you want to identify the purpose of your assessment, and try to gather your subject matter experts.  How well can you identify and map your current business processes, in each department?  Do the participants have some ideas about what the future processes might look like?  Once you have an internal team established, and you’ve asked some of these questions, then consider bringing in the external subject matter experts.  These are typically folks who do this kind of thing for a living.  Fellow business people (owners, managers and grizzled veterans) are good referral sources.

Be sure you investigate and document your KPIs (key performance indicators) – those few key business benchmarks that you rely upon to determine the overall health of your business.  Try to begin to map your business processes at least at a high level, to share with the consultant you later engage.

Step two: Review your processes and requirements.  You want to identify, at least at a high level, the key requirements you require of a business management system, regardless of whether you’re inclined to keep or replace.  The business process review will largely define the scope of your ERP requirements, and serves as a tool in your selection process.

(At our firm, we use the term Business Process Analysis, or BPA, to describe a process for identifying workflows, mapping processes, identifying key technology touch-points, mapping current and possible future process flows, and ultimately creating a written Summary of Recommendations that serves as the “roadmap” for most of what comes after.)

Step Three: Perform a fit/gap analysis.  Just like it sounds, in this step you identify the gaps in your current methods or system between your business requirements and what you have today.  Reporting is often one key area.  Often, entire swaths of the business are untouched by the current system if the required technology simply wasn’t available when the system was implemented.  We often find this in the manufacturing/shop floor and warehousing/distribution realm.  Technology exists today that was uncommon ten or twenty years ago that allows companies to better manage product configuration, production and movement within the plant.  These technologies open up vast areas for process improvements and cost reductions across the board – and they simply didn’t exist (at least in economical form) a decade or two ago.  The fit/gap analysis is intended to identify all these shortcomings, and offer suggestions (including possible software selections) for how to fill them.

In our concluding (next) post, we’ll take a look at the final three steps.  Stay tuned…

 

erp-reportsThe business world is now over twenty years into the adoption of what today we call ERP systems – Enterprise Resource Planning.  The term ERP is actually derived from its predecessor – MRP, or Material Requirements Planning systems.  The term is said to have been coined by someone at The Gartner Group around 1990 as an extension of MRP intended to encompass a larger vision of the organization as a whole.

A survey conducted a while ago by Thomas Wailgum of IDG Communications noted that CIOs indicated that ERP systems were “essential to the core of their businesses, and that they could not live without them,” as noted in a recent white paper from an outfit called Edgewater Technology.

But as also has been often noted, many of these systems have grown out of date and long in the tooth.  Some still harken back to the old green-screen days, and a good number of companies today still run on antiquated (and increasingly more difficult to maintain) systems like the AS/400 and other legacy platforms.  In many cases, these systems’ shortcomings, cost and complexity can often work against the very efficiency goals they were once meant to improve.

If you are among these dinosaurs, we’ve found a few questions from others (but with which we concur and often ask them of clients ourselves) that you might want to ask of your own organization, like…

Should you continue with your current system?… Is it time to upgrade?… Is it time to change?

Following are a few questions from a white paper from Edgewater Fullscope (a software reseller with offices in the southeastern U.S.) that we thought provides a good starting point for looking at how effective your current information and reporting system is.

  • Are you getting the reports and information you need to run your business effectively?
  • Can users run their own reports queries or do they need to turn to IT for support?
  • If so, what are those costs in terms of time and labor to develop these custom reports and inquires?
  • How easily can you access reports and inquires?
  • How easily can you export them to desktop applications like MS Excel?
  • Is the information you’re getting real-time, actionable, and easy to understand?

There are many more similar questions you could ask, and there is a lot more drilling down to the fundamental WHY questions that are so important in this process.  But we think Edgewater’s questions are a good start.

Companies who are not satisfied with their answers are ripe for a doing a little self-examination.  That’s best done when assisted by competent subject matter experts from outside the firm who are well-versed in asking – and help you answer – those questions.

But until you start asking and analyzing, and then reviewing processes and conducting a fit/gap analysis, you may only be extending your current pain, and not moving toward a better solution.

avalara_picAs manufacturing continues to mature through lean initiatives, ERP and other strategies aimed at improving their focus and delivery, new channels and strategies for finding and delivering value are arising.  Three such areas have their own taxing implications, worth noting by manufacturers intent on growing the business profitably.

The first of these of course is ecommerce.  Today, the share of U.S. consumers purchasing product direct from the manufacturer has risen to 70%.  Customers are enamored of the ease in ordering parts, goods and services online.  Manufacturers like the improved margins of forgoing middlemen.  But while manufacturing has typically been a tax-exempt endeavor, selling to end-user customers changes that.

There are 45 state and 12,000 taxing jurisdictions in the U.S.  Depending on their location and your business nexus, you may have a taxable sale situation when you sell to end customers.  In fact, over two dozen states now have “click-through nexus” aimed at capturing sales tax from internet sales and online marketing activities.  It’s a bureaucratic thicket requiring careful management.

Going global creates the second taxation challenge.  It’s easier than ever to deliver parts and materials to distant, overseas locations.  As sales tax experts Avalara note in a recent white paper: “In the US, sales tax is charged at the final point of sale on the full retail value of the product. Under the value-added-tax (VAT) system (used across Europe and other overseas territories), tax is charged at each stage of distribution on the value added between each transaction. So while the end user pays US sales tax, multiple parties involved in the supply, manufacturing, distribution, resales and retail sale of goods are responsible for paying a portion of VAT along the supply chain.”

Add together the VAT, the GST (Goods & Services Tax) and any special tariffs, the total cost is called “landed cost” and the taxing requirements can once again be daunting.  Errors can lead to costly shipping delays, not to mention penalties and added scrutiny.  Here again, diligent management is crucial.

Finally, selling more services – an increasing slice of the American economy to be sure – are becoming more essential as customers view the sale of a product often as just the beginning of a relationship.  Eighteen states now tax services.  The sourcing rules can be tricky and each taxes services differently.  Nexus becomes an issue in crossing state lines, and sometimes third-party service people can create nexus.  Again, it’s a lot to keep track of.

That’s why Avalara offers its cloud based tax and compliance software to companies across the U.S.  If you find the rules affecting you, and daunting as most do, they’re worth talking to.  (Full disclosure: we are an Avalara referring partner and would be happy to put you in touch with them.

 

Everyone at PSSI wishes you — our customers, partners, family and friends — a happy ending to 2016, and high hopes for a wonderful year ahead!

hny17_2

Happy 2017 Everyone!

ai_picTwo recent articles, one from Christopher Sims of the Wall Street Journal, and another featuring IBM CEO Ginni Rometty (also writing for the Journal), provide glimpses into where Artificial Intelligence – AI – is likely to take us.  And from both, one conclusion is clear: it’s all in the data.

The end of the year is a great time to be thinking about the future.  And AI will increasingly be a part of everyone’s future.  The gist of the arguments from both Rometty and Sims make clear that data – big data – will be what makes AI truly possible.

While today’s newer smart assistants, like Alexa and Siri, are entering into our everyday lives, they represent only the beginning.  Already, Alphabet (Google), Amazon and Microsoft are making their AI smarts available to other businesses on a for-hire basis.  They can help you make a gadget or app respond to voice commands, for example.  They can even transcribe those conversations for you.  Add to that abilities like face recognition to identify objectionable content in images, and you begin to see how troves of data (in these cases, voice and image) are being transformed into usable function.

But all this data and technology, notes Sims, are not going to suddenly blossom into AI.  According to data scientist Angela Bassa, the real intelligence is still about ten years away.

Why?  Three obstacles:

  • Not enough data. Most companies simply don’t have enough data to do deep learning that can make much more than an incremental difference in company performance.  Customers are “more interested in analytics than in the incremental value that sophisticated AI-powered algorithms could provide.”’
  • Small differences generally cannot yet justify the expense of creating an AI system.
  • There is a scarcity of people to build these systems.

All that being said, Ms. Bassa, noting that there are only about 5,000 people in the world who can put together a real AI system, says that “creating systems that can be used for a variety of problems, and not just the narrow applications to which AI has been put so far, could take decades.”

IBM CEO Ginni Rometty notes that the term artificial intelligence was coined way back in 1955 to convey the concept of general intelligence: the notion that “all human cognition stems from one or more underlying algorithms and that by programming computers to think the same way, we could create autonomous systems modeled on the human brain.”  Other researchers took different approaches , working from the bottom up to find patterns in growing volumes of data, called IA, or Intelligence Augmentation.  Ironically, she notes, the methodology not modeled on the human brain led to the systems we now describe as ‘cognitive.’

Rometty concludes, fittingly, that “it will be the companies and the products that make the best use of data” that will be the winners in AI.  She goes on to say… “Data is the great new natural resource of our time, and cognitive systems are the only way to get value from all its volume, variety and velocity.”

She concludes with a noteworthy commentary: “Having ingested a fair amount of data myself, I offer this rule of thumb: If it’s digital today, it will be cognitive tomorrow.”