Entrepreneurship has long been the foundation of a thriving
economy. In the entrepreneurial tradition, people have brought
visionary ideas to life and innovative new products to market
through careful planning, hard work, perseverance, and smart
organizational, management and marketing skills. Using this
time-honored methodology, many manufacturers have successfully
grown larger, and a select few have evolved into global
enterprises.
With the growth of globalization and technology advances,
however, the traditional world of entrepreneurship has changed.
Today's growth-oriented businesses face challenges unheard of a few
decades ago. To compete in this fast-moving world economy,
manufacturers are under pressure to work longer and harder to
streamline operations, reduce costs and waste, and increase
efficiency and productivity. To level the competitive landscape
with competitors at home and abroad, they have to be leaner, more
agile, and capable of making fast, astute financial and operational
decisions that will maximize profitability and enable growth.
In addition, many manufacturers have built their businesses as a
reliable supply source of components and assemblies required by top
tier OEMs in the automotive, aviation, electronics, industrial and
consumer goods industries. These suppliers are increasingly feeling
pressure from their customers to meet defined price points, provide
product customization, ensure just-in-time delivery, or provide
documentation for quality control and third-party regulatory
requirements. To comply with these mandates, manufacturers often
have to reevaluate and reengineer their business processes if they
are to remain competitive, as well as profitable.
Technology is Key to Growing a Successful Business
Over the past decade or more, advances in information and
communications technology have had a dramatic effect on all of us -
ranging from our personal life and entertainment choices to how we
manage our business life.
One business technology solution that virtually every leading
manufacturer has long had in its competitive toolbox is Enterprise
Resource Planning (ERP), a suite of integrated software
applications that enable an enterprise to automate many key
business processes and synchronize operations, internally and
externally, to speed up time-to-market, cash-to-cash cycles, and
customer fulfillment. Thanks to continuing technological advances,
this "mature" technology, once designed solely for very large
manufacturers, is now available in many forms for manufacturers of
all sizes.
Typical Business Process "Pain Points"
If you were to ask the CEO, CFO, or VP of Operations of a
manufacturing firm what "pain points" the company is experiencing
and what processes they would like to improve, chances are the
responses would include one or more of the following:
- Gain tighter control of inventory accuracy and costs
- More accurately estimate product costing
- Improve materials procurement and supplier management
- Speed up sales order and purchase order processing
- Streamline product engineering and engineering changes
- Gain greater visibility of financials to optimize cash flow and
analyze business performance in real-time, rather than from a
historical perspective
In this paper, we will describe how ERP can help companies
achieve all of these goals, and much more. And, we will explain why
ERP's inherent ability to integrate and streamline information flow
across the enterprise is so critical for manufacturers today - not
merely to compete, but to thrive and grow in the fiercely
competitive 21st Century world of manufacturing.
What an increasing number of progressive growth-oriented
manufacturers are discovering is that the latest generation of
advanced Enterprise Resource Planning solutions can provide an
essential tool for achieving global visibility and agility - and
can help optimize operational and financial performance today and
into the future.
ERP Value Proposition: Integrated, Real-Time Information
Flow
As a manufacturer, you have probably already stepped up efforts
to try to improve the aforementioned business processes in order to
reduce costs, eliminate waste, and minimize inefficiencies that
result from non-value added activities. You may have upgraded your
manufacturing equipment for higher speed production, negotiated
more favorable pricing contracts with materials suppliers, or
implemented tighter quality control measures to foster an
environment of continuous improvement.
These are all worthy and effective initiatives that reflect the
"lean manufacturing" and "demand-driven supply chain" philosophy
prevalent today. However, to paraphrase what one pundit observed
during the crest of the cost-cutting frenzy, blindly slashing costs
across the board without improving business processes can cut a
company right out of business. Too often, in these cases, reducing
costs can result in reducing profitability, destroying innovation,
and downgrading customer service and satisfaction. This is not a
good way to retain customers and grow a business.
Experience teaches us that manufacturing business processes are
interdependent, from front end to back end. Every single process -
from sales order and purchase order management, to inventory
control and procurement, to engineering and manufacturing, to
accounting functions, cash flow management and financial reporting
- is essential to your business, and all have an impact, for better
or worse, on overall business performance.
If you think about it, the common thread running through all of
these business processes is information. Inquiries, purchase
orders, and RFQs from potential customers to manufacturers define
their order requirements and specifications. Information from
manufacturers to their suppliers communicates what will be needed,
where and when to fulfill production demands. Internal departments,
such as engineering, production planning and scheduling,
manufacturing, accounting and others, need to exchange information
in a timely way to trigger events in the proper sequence and avoid
costly mistakes.
For this reason, it is essential to maximize rapid information
flow and to foster collaboration across the enterprise by providing
real-time data to all who need it to make critical operational and
financial decisions, and respond quickly to customer demand. The
end goal of timely information flow is, of course, to ensure that
customer orders are fulfilled as promised and, ultimately, to
maximize profits and grow the business.
Why the Resistance to ERP?
We have all heard and read about some of the negative
experiences companies have had with their ERP implementation.
Common complaints include:
- High upfront licensing and implementation costs
- The cost of modifications and additions to the hardware
infrastructure
- Huge budget overruns due to indecision, inadequate project
management, and "scope creep" - which can easily occur when
objectives and parameters are not clearly defined
- Lengthy implementations that disrupt business operations
- Ongoing integration and interoperability headaches, even after
"go-live"
- The need to expand and support larger, more expensive IT staffs
to administer, maintain the infrastructure, and upgrade the
software when required
All of these factors can be discouraging for the leadership of a
manufacturing business seeking to find a technology-based
enterprise business solution to replace manual methods, or to
update an outdated system that is no longer adequate for their
needs.
As a result, some manufacturers continue to struggle along with
outdated legacy ERP or MRP systems that still "kind of work." Many
are still relying on manual methods for some business processes,
which can create delays or bottlenecks in process workflows -
causing orders to be held up because of minor engineering changes,
or in waiting for essential materials to be reordered.
Numerous businesses have turned to point technology solutions -
such as spreadsheet-based accounting software, product
configuration programs, or demand forecasting applications. These
non-integrated solutions may serve short-term needs but they are
seldom scalable, and they tend to create islands of isolated
information in key functional areas of the organization, which
certainly does not allow for real-time information flow and
collaboration.
In short, many manufacturers still view ERP to be a technology
tool designed solely for running very large enterprises. They
believe that for them, implementing ERP would require too much
time, money and complexity, and would also require too many
consultants, too many choices, and far too much technical
expertise.
Advanced Manufacturing Solutions
Information technology and network communications have seen
enormous advances in the past few years, largely enabled by the
Internet. As a result, many innovations have evolved and are
spurring a new era of growth. One industry analyst in the
manufacturing technology sector recently predicted that the
worldwide market for ERP applications, currently at about $18
billion, is expected to grow to $25 billion by 2011.
Today, there are more choices than ever before when it comes to
selecting and implementing ERP. As a manufacturing business, you
will want to find the right ERP for your business - one that fits
your business model, is easy to learn and use, and offers all of
the features and functionality needed to automate and manage
critical manufacturing processes, without excessive complexity.
You also want to ensure that the ERP system you select will
scale effectively as your business grows and offers an open
architecture that enables its integration at key touch points with
your existing information systems. Finally, you will want to
evaluate the solution in some depth to ensure that it has the
flexibility to be configured to your needs and business processes
as your business grows and changes.
The Emergence of Software-as-a-Service ERP
One of the most promising ERP innovations to hit the marketplace
is the packaging of a fully functional, on-demand ERP system
accessible to users on a monthly subscription basis in a
Software-as-a-Service (SaaS) delivery model. The SaaS delivery
model is a proven methodology pioneered by developers of Salesforce
Automation (SFA) and Customer Relationship Management (CRM)
software solutions.
The success and rapid adoption of SaaS SFA and CRM applications
by businesses of all sizes has led to the development of Enterprise
Resource Planning systems built on a Web-based SaaS delivery model.
This trend is gaining traction, as evidenced by the fact that
several leading ERP solution providers have developed or are
developing SaaS versions. The SaaS model provides a practical, low
risk approach to manufacturers that can give them powerful ERP
functionality at an affordable monthly subscription price based on
number of users and applications used.
Because SaaS is a hosted solution, the entry barriers of
traditional licensed ERP implementations are removed. With SaaS,
there are no upfront licensing costs, no IT infrastructure
modifications required, no lengthy implementations to contend with,
and no need to hire and support additional IT resources to
implement and maintain the infrastructure or the software
applications. These responsibilities are borne by the software
vendor who is accountable to you for the system's ongoing
performance and reliability.
In short, the right SaaS ERP, implemented properly, can provide
maximum value with minimal investment and low risk - which means
manufacturing businesses can focus their employees on their core
competencies, and their financial resources on profitability and
growth.
Improving Business Processes - From End to End
At this point, you might well ask: "Practically speaking, how
can the automation and integration provided by ERP help
manufacturing firms streamline and optimize key business
processes?" Good question. Consider the following, which represent
typical results and benefits reported by manufacturers that have
already made the leap and implemented a suite of integrated ERP
applications.
Inventory Management
- Proactively manages all inventories from dock-to-stock
- Provides full automation of inventories, reducing work and
increasing accuracy
- Eliminates the need for costly quarterly or annual physical
inventories
- Provides flexibility to do business with suppliers and
customers on their terms, while managing inventory on yours
Sales and Order Management
- Automates and simplifies sales quote-to-order business process
between Sales and Finance
- Improves time-to-delivery by streamlining collaboration between
Sales and Manufacturing
- Increases customer loyalty and retention by enhancing customer
services and real-time collaboration
Procurement and Supplier Management
- Automates and simplifies the entire procure-to-payment process
by better managing supplier relationships and cash flow
- Reduces inventory levels to better align costs with business
while ensuring customer needs are met
- Provides procurement professionals with the tools they need to
buy the right parts from the right suppliers at the right
price
Product Management - Costing and Estimating
- Improves lifecycle cost management through fast, accurate and
flexible costing
- Enhances the ability to manage cost structures with a focus on
quality, while keeping an eye on profit margins
- Provides tools for generating faster, more accurate estimates,
quotes and bids, which increases sales and customer service, while
maintaining profitability
- The payback from a successful ERP implementation can be
significant in terms of reduced operating costs, improved
productivity, and higher profit margins - all of which have a
positive impact on bottom-line performance.
Engineering
- Helps reduce time-to-market by streamlining and automating key
engineering processes and engineering change orders
- Enables real-time collaboration between Engineering, Sales and
Manufacturing, resulting in faster time to delivery
- Improves production floor activities by eliminating waste and
errors and optimizing allocation of labor, materials, and
equipment
Manufacturing
- Automates and streamlines a host of processes, such as work
order generation, Bills of Material, production routing, and
work-in-process transactions to ensure smooth and coordinated
production
- Provides eKanban capabilities to automate the flow of materials
and components in Just-in-Time and lean manufacturing
environments
- Provides production planners with a powerful toolset for
efficient Materials Requirements Planning and Master Production
Scheduling.
- Financial Management
- Streamlines and automates financial and accounting processes
through closer collaboration with Sales, Manufacturing, Inventory
Management, Procurement,
- and Supplier Management
- Accelerates monthly, quarterly, and yearly closing
processes
- Increases financial visibility, while reducing tedious,
time-consuming data entry, tracking and reporting
- Improves cash flow management and order-to-cash cycles
ERP Payback: Total Visibility, Reduced Costs, Tighter
Control
The results cited above demonstrate that the timely and
integrated information flow enabled by an Enterprise Resource
Planning system can have a profound and long-term effect on a
manufacturer's operational and financial performance. It's
important to note that the benefits reported here pertain not just
to the CEO/owner, CFO, or VP of Operations, but also to the
professional managers and workers in each of these functional
areas.
With so many new and advanced technology solutions now
available, it is hard to fathom why today's businesses would choose
to settle for the smaller efficiencies provided by a handful of
disparate, non-integrated business process solutions when they
could easily gain an abundance of value from a fully integrated ERP
solution.
The payback from a successful ERP implementation can be
significant in terms of reduced operating costs, improved
productivity, and higher profit margins - all of which have a
positive impact on bottom-line performance. And, by increasing
competitive advantage, ERP can help manufacturers improve customer
satisfaction and retention, and open the door to new markets and
increased revenue streams - results that improve top-line
performance, as well.
Clearly, in the face of today's challenges, the time is right
for entrepreneurial manufacturers to take a new look at the state
of enterprise manufacturing solutions today - especially if their
corporate goals are to compete globally and accelerate growth.
About Glovia Services, Inc.
Glovia Services, Inc. is a wholly owned subsidiary of Glovia
International, Inc., a subsidiary of Fujitsu Limited (Tokyo Stock
Exchange: 6702), one of the world's most experienced and solidly
backed providers of extended ERP solutions for businesses of any
size-from small and midsized companies to global enterprises. The
powerful and flexible Glovia ERP suite, glovia.com, provides for
the unique needs of engineer-to-order, make-to-order, high volume
and mixed-mode manufacturing environments through comprehensive,
end-to-end functionality for the entire product lifecycle.
Headquartered in El Segundo, California, Glovia has helped
manufacturers to cut costs, improve productivity, and meet customer
demands for over 30 years. For more information please visit www.
gsinnovate.com, or call 310-563-8700 or 877-474-8896 (toll
free).
About Fujitsu
Fujitsu is a leading provider of customer-focused IT and
communications solutions for the global marketplace. Pace-setting
device technologies, highly reliable computing and communications
products, and a worldwide corps of systems and services experts
uniquely position Fujitsu to deliver comprehensive solutions that
open up infinite possibilities for its customers' success.
Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported
consolidated revenues of about 5.1 trillion yen (US $43.2 billion)
for the fiscal year ended March 31, 2007, an increase of 6.4% over
the previous fiscal year. For more information, please see:
www.fujitsu.com.
About the GSInnovate Industry Insight Series
Glovia Services strives to equip manufacturers with the expert
knowledge gained from its 30-years of manufacturing and technology
experience. Through its GSInnovate Industry Insight Series, Glovia
Services is helping to put ERP within reach for manufacturers of
all sizes. The GSInnovate Industry Insight Series delivers
resources for manufacturers that give them access to
industry-leading whitepapers, smart webcasts, easy-to-navigate
demos and more.