Extending ERP Has ERP moved on?

Factors of change over medium term ERP target is a moving target – changing needs –In competition with stable system / long term return on investment What is the life cycle of an ERP type investment? Upgrade path of vendor may or may not be what’s required To what extent is the package used “formative” in terms of what new directions are investigated?

Time pressures Acceleration in cycle time is sustained in some industries –New product development (design to MKT to Manufacturing) –Order to delivery time Pressure to reduce OTD time to less than manufacturing time => manufacture to forecast / finish to order Decoupling manufacturing and demand management –Manufacturing cycle times Internal lead time JIT planning backwards But also optimising process => radical redesign of sites Purchase planning no longer driven by work orders (too late!) –Distribution channels Direct deliveries Web based logistics Outsourced logistics operations – Banta / Sercom

Presure to reduce Costs Constant since industries began –Margin for drastic reduction greatly reduced –Correlated with time pressure => do more with less –ERP cannot be left become a constraint Productivity –Transaction cost / automation Data collection Visibility –Cost management / how much does everything cost? –Costing alternatives => outsourcing –ERP must have required features to support such arrangements

Key ideas in Outsourcing Outsource costly activities Outsource non-core activities Outsource labour intensive tasks Outsource when scarce resource Simplify capital / cash flow situation Avoid when strategic dimension at stake

Example: costly labour intensive but…

Modern day outsourcing No shame approach from both sides Scope of outsourcing extends to virtual organisation => more activities are outsourced than insourced Existing firm: vision of core activity reduced to minimum New firm: creation of virtual firm Provider: only goal is to be best go getter = solve any headache for a fee

Customer service Increase demand for variety / personalisation –Loss of economies of scale / demand planning problem increased –Problems solved by traditional ERP (repetitive orders )no longer relevant Products attributes –“old type” ERP => different product code –New style “ERP” => understands notion of product attributes and provide seamless link to: Materials Costs Processes –Support for greater differentiation No extra cost Design for maximising revenues (CRM)

Globalisation 24 / 7 / borderless, MNCs, networks etc… Companies cannot be insular in their approach Responsiveness –Changes to business rules and processes How easy is it to change the ERP? Managing exceptions Being flexible in implementing local rules –Seamless coordination across sites (re run orders / schedule work etc…)

Managing Exceptions Supply exceptions –Raw materials did not arrive / are not up to scratch How can you go ahead reagrdless? Operational exceptions –Downtime / sub standard production / shortage of staff How do you recover? Demand exceptions –Customer changes / cancels / high prioritise an order at no notice How can you face up?

Reacting to exceptions How fast can you identify them? How thoroughly are they communicated to all who need to know? What business rules are already in place to handle these exceptions? –Mechanistic decision making How responsive systems are to application of these rules?

impact Effectiveness of response determines: –Can it be done? –How much it will cost? –Will you know the cost before you go ahead?

Identifying exceptions Early warning systems for missed deliveries / QA findings

Communicating about Exceptions Early warning to customers Clearer understanding of outsourcing and procurement decisions Better plant scheduling Shop floor management – eg: better maintenance (preventive but not wasteful) Warehouse management –Priorities –Optimisation Automatic s, mobile devices using “push” systems Visibility on normally unconnected activities – HR or maintenance

Business rules For or against business rules Looking to the future all the time is fine, but the past contains the answer to many questions => learning organisation Best / most desirable practices Incorporate into systems and processes throughout the firm