Image: Coors Brewery, Golden Colorado, by David Fulmer, CC license

The job of manufacturing software in the modern economy is to keep track of production formulas, in terms of quantities and cost, enable production scheduling, calculate and report on efficiency measurements like machine utilization and percentage of wasted materials, and in some cases measure cost of goods sold.

These systems are usually linked to the core financial system. Subcategories include software to manage preventive maintenance schedules, spare parts inventory and ordering, and to manage and report on product defects and percentage compliance to quality standards, and labor management systems that track worker output and productivity.

One solution in this category is Oracle’s JD Edwards Enterprise One Manufacturing Management. The company’s web site claims the application “manages all manufacturing modes with a single enterprise-wide system where all manufacturing processes share common inventory, material, planning, purchasing, and financial databases.”

Manufacturing execution systems (MES), a subset of applications in the manufacturing sector, are applications that directly monitor and control the manufacturing process; for example, managing the dosing of different materials into a vat of formula, opening valves, operating PLCs (programmable logic controllers), and displaying real-time graphics of the different stages of production. These systems usually also calculate and display management-related indicators, such as cycles per second, minute, hour or day, pieces produced per man-hour, and percentage of material losses in the production process.

Wonderware is an MES software brand with a long history in real-time monitoring and control of manufacturing processes. The company is owned by UK firm Invensys, and claims more than 500,000 licenses sold in over 100,000 manufacturing plants around the world.

The company’s web site claims: “Wonderware is the market leader in real-time operations management software. Wonderware software delivers significant cost reductions associated with designing, building, deploying and maintaining secure and standardized applications for manufacturing and infrastructure operations. Our solutions enable companies to synchronize their production and industrial operations with business objectives, obtaining the speed and flexibility to attain sustained profitability.”

Wonderware’s customers include Chevron, Norfolk Railway, Nucor Steel, New Belgium Brewing Company, and Magna Automotive.

Another subset in manufacturing applications is shop floor management. These systems are used by contract manufacturers and companies that make to order specialty products. The software helps with estimating time and costs, managing schedules and resources, and coordinating material receipts and shipments.

E2 is a private company that claims to be “the authority on manufacturing software.” The firm’s web site states: “The E2 Shop System is comprehensive manufacturing software that puts total shop floor control at your fingertips. Designed just for job shops and make-to-order or contract manufacturers, E2 equips you to see your business like never before, and get the big picture on the best way to manage it.”

The ROI for these apps comes usually from basic cost control. Especially in complex manufacturing environments where many inputs and processes are involved, precisely recording machine time and materials consumed is essential to cost control. Small percentage reductions in losses or just knowing your true costs can more than pay back the investment in shop floor, MES, or other manufacturing software.

Image by David Bleasdale, CC license

Analytics is one of the top buzzwords in business software today. Analytics software is often marketed as a tool for business intelligence, data mining or insights. It’s the crystal ball software: tell me things I don’t already know, and show me ah-hahs or other exciting revelations that, if acted on, will increase sales, cut costs or produce some other benefit.

The essential elements for analytics are:

1) A design for your ‘stack’ which is just a term for layers: usually at the bottom you have a data layer, then a translation layer, then on top of that some kind of user interface layer. The translation and user interface layers are usually provided by the analytics vendor; you provide a place for data storage.

2) A way to send the data to your data storage, automatically, which is usually referred to as “ETL” or extract, transform, and load. SnapLogic and Informatica are two vendors who offer these tools.

3) Some way to “harmonize” the data, which means define each data element and how it will be used in analytics. “Sales” will mean such and such, “Gross Margin” will be defined as ……

These three components can be on-premise in your building or in a cloud hosted by a vendor.

SAS, based in North Carolina, has long pioneered this space, and now many business software firms claim to provide “robust analytics.” The problem: what constitutes “analytics”? Canned reports are not analytics. So you’ll need to shop this category knowing that probably the most serious applications will come from firms that are dedicated to analytics.

International Data Corporation (IDC) reports that the business analytics software market is projected to grow at a 9.8% annual rate through 2016. IDC describes the market as dominated by giants Oracle, SAP and IBM, with SAS, Teradata, Informatica and Microstrategy rounding out the top 10 in terms of sales revenue. Although the top 10 account for 70% of the market, IDC reports that “there is a large and competitive market that represents the remaining 30%…hundreds of ISVs (Independent Software Vendors) worldwide operate in the 12 segments of the business analytics market…some provide a single tool or application, others offer software that spans multiple market segments.”

Here are some other interesting analytics or business intelligence (BI) products: Qliktech provides easy-to-develop dashboards with graphical representations as well as tabular and exportable reports. Its Qlikview software is an “in-memory” application, which means that it stores data from multiple sources in RAM, allowing the user to see multiple views of the data, filtered and sorted according to different criteria.

Information Builders (IB) is a software company classified by advisory firm Gartner as a leader in BI applications. IB’s main application, WebFocus, is a flexible, user-friendly tool that is popular with sales teams because salespeople use it while visiting customers to enhance their selling messages with facts and visual interpretations of data.

WebFocus has a “natural language” search capability, making it useful to monitor and analyze social media.
Birst, named by Gartner as a challenger in the BI space, is a cloud-based (SaaS) application that offers “self-service BI,” deployment to mobile devices, adaptive connectors to many different types of data sources, in-memory analytics, drill-down capabilities, and data visualization. The Birst tool also has a data management layer, allowing users to link data, create relationships and indexes, and load data into a data store.  Tableau is another similar vendor.

It’s useful to start small and experiment with analytics.  People in your organization with good quantitative skills and imagination can experiment with tools, usually at very low cost.  Soon you will see some interesting results and will want to do more…but make sure to put in place some rules about what constitutes sanctioned and official “analytics” in your organization, to prevent uncontrolled proliferation of un-validated information.

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Finance and accounting functions were among the first to be automated through software. The sheer volume of numbers and calculations, reporting requirements, tax filings and payroll mechanics, plus the fact that nearly every business has to engage in these activities, made the area perfect for software.

When just these basic functions are needed, not much distinguishes one finance application from another. They all post transactions to a cost center and sub ledger account, they all capture sales and costs and calculate required P&L and balance sheet data, and they all provide reports. They might distinguish themselves in terms of ease of use or report writing, or banking account integration, or cash management, or some other aspect.

Many finance applications are simply bookkeeping systems; if you want real analysis you’ll need to extract data to Excel, Business Objects, or another analysis and reporting tool. My own experience with both Oracle and SAP bears this out: even these leading finance packages are mostly concerned with accounting and financial, not management reporting.

Oracle and SAP both have what they call “business intelligence” capabilities, but they are contained in separate modules that must be purchased and integrated with the core software. So companies can easily spend millions implementing SAP or Oracle, and still find themselves extracting data into Excel spreadsheets for basic business analysis.

My experience is that most finance applications lack budgeting and financial modeling capabilities. It is one thing to know that your prior month results were over budget because of rising fuel prices, and quite another to project the future profit impact of different oil price scenarios. At what point would it make sense to switch to alternative fuels, to pass on some of these increased costs, or to buy oil futures as a hedge? A typical finance application won’t help you to answer these questions because they mostly record and categorize costs based on what already happened, not what might happen in the future.

Yes, there are “what if” modeling applications available on the market, but as a stand-alone application they aren’t very useful, since you have to enter all of your data, as if you’re using an Excel spreadsheet. The modeling application needs integration with your ERP to be most effective. Your ERP is the source of all kinds of data needed for financial modeling: production costs, formulas, material costs, transportation costs, revenue by product, as well as cost standards and budget information. This data changes frequently based on business conditions, competition, labor costs, and many other factors.

Microstrategy, Oracle Hyperion and Cognos are leading names in the financial modeling and analytics areas, but other, smaller firms are emerging. Netsuite, the ERP-in-the-cloud vendor, offers an add-on financial modeling application. Netsuite’s web site states that the modeling application features these capabilities:
• Dynamic formulas and assumptions
• “Actuals” data incorporated into new forecasts
• Workflow management
• Planning of full financial statements
• Unlimited versions for “what-if” analysis
• Multi-dimensional models for complex sales and product planning
• Multiple currency budgeting
• Graphic drag-and-drop report builder
• Multi-version variance reporting (vs. budget, vs. plan, vs. forecast)

A3 Solutions is another, smaller firm offering financial modeling applications, either on-premise or as Software-as-a-Service. A3 uses the Excel spreadsheet as the user interface, claiming it is the friendliest environment for creating what-if scenarios, and provides tools to link multiple sources of corporate data and manage modeling versions dynamically and virtually through its Spreadsheet Automation Server. A3 claims McDonalds, Honda, Toyota, T. Rowe Price, and American Airlines as clients. Simplicity, speed of implementation, and low cost are A3’s main selling points.

Once you have the “system of record” stabilized in a strong finance application, as well as good controls over product, customer, and sales data, you can start to think about these higher-level analytical tools. Define a standard model for delivering analytics, put someone in charge of the data, and tightly control the “official” analyses that are produced.

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Customer relationship management (CRM) and sales management are two fast-growing areas for software, with new applications frequently coming on the market as companies seek to know everything about their customers — what selling strategies work, which promotions produce the most sales lift, and how profitable their customers are.

Companies have used CRM-ware in their call centers for years to instantly display a customer’s account information, credit limits, preferences and order history. CRM is becoming more sophisticated, producing order pattern analysis, identifying distribution voids, and quantifying the impacts from competitors. Sales teams call on customers armed with more sophisticated data to support selling in a new line of products, perhaps showing the customer the product line’s potential profits across the customer’s 500 stores.

Consumer goods companies such as Kraft Foods and Procter and Gamble sell a lot of volume via specials and promotions at thousands of retail outlets across the country. It’s just the nature of how demand is driven in the industry. Shoppers love bargains and retailers use deals to generate store traffic. A particular product, such as Kraft Macaroni & Cheese, might be on sale for a week or more, say, at Kroger stores in the eastern region of the U.S., at a price of three for $1.00. Companies such as Kraft might have thousands of promotions in effect for a given quarter of the year.

Think of the possible combinations of Campbell’s soup (300 or more SKUs, 11 different brand categories), sold through most of the country’s 36,000 supermarkets, on special at any given time, and the different possible deals, such as a temporary price reduction, a percentage off invoice, buy x get y, 2-fers, 3-fers, 5-fers, and so on. Who is going to keep track of all these deals?

Software firms such as Siebel (once independent, now owned by Oracle) sell applications not only to manage these deals, account for the proper expenses and send the correct pricing to the invoicing system, but also to provide analytics to determine promotion effectiveness.

Other offerings in the CRM category include: demand estimating applications such as i2 and DemandTec (owned by IBM), whose sophisticated models predict demand lift from a given set of promotional activities; JDA’s Vista, which manages the overall promotions budget and ensures promotion spending control; and SalesForce.com, the leading CRM-in-the-cloud application.

Banks and other financial institutions need a more business-to-consumer type of CRM and sales management. The top firm in this category, by revenues, is FIS Global, described on its web site as “the world’s largest global provider dedicated to banking and payments technologies, providing software, services and outsourcing of the technology that drives financial institutions.”

Looking at several different vendors you will find noticeable differences: one or more may specialize in your industry, one may have a stronger focus on financial controls, another may have sophisticated models tied to disparate sources of data. These applications are not cheap; expect to pay $3 to $5 million or more for one of the leading application providers. The ROI here comes primarily from optimization of your marketing, promotion, and advertising dollars, where a small percentage of what is usually a very big annual budget — if saved or re-deployed — is plenty to achieve a successful ROI on the project.

You’ve heard the complaints: your systems are too clunky, slow, have too many steps, and they take too long to execute everyday transactions.

The dialogue plays out probably hundreds of times a day in offices throughout the world: users complain about to-hard-to-use systems and their IT departments tell them they just don’t know the right way to use them.

This can be a big problem, but costs and other impacts are not easy to measure. A rough estimate can be had by extrapolating the lost time per user across the enterprise.  A 15% hit to people’s productivity because the systems they use slow down their work actually means you need 1.176 people to do the work of one person.

Extrapolating this, if you have a 500-person organization, an equivalent of 88 of those people are needed only because you have sub-optimal systems.  As convincing as this seems, it’s hard to get the money to improve systems based on this argument. With perfectly-efficient systems, you wouldn’t actually need 88 fewer people because the sum of wasted time is across all 500 people.

What do you do? Two relatively low-cost options are user interface (UI – what you see when you look at the screen) tools and mobile applications.

UI Tools: There is an active market for these, which are intended to be used with widely-deployed ERP systems like SAP and Oracle. These solutions modify or enhance the system’s UI for simplified navigation and a more intuitive feel, and may combine several steps in a transaction or query into one, like an Excel macro.

One company marketing UI solutions (Winshuttle) claims to “turn everyday SAP users into heroes who transform the way their companies work.”

Solutions like this are only relevant for those companies that have full control over their systems environments – companies that own their own “instance” of the ERP system, versus those who use a SaaS ERP or one that is shared across many different business units. This is because you’ll need access “under the hood” to configure these tools.

Mobile: A shortcut (sometimes) to simplified ERP transactions is via mobile applications. A mobile application, out of necessity, must have minimal steps involving minimal data entry. No one wants a Windows version of the ERP system on their 5-inch smartphone screen.

This forces the software to consolidate steps in the transaction and pre-populate fields with user data and settings. If a given ERP transaction involves 5 or 6 steps on a desktop it will likely require only 2 or 3 steps on a mobile device.

Several of the large ERP vendors already have mobile versions of the most frequently used transactions, such as purchase orders and purchase order approvals.

You can always design your own mobile applications (there’s no shortage of people creating new smartphone apps), and doing so can lead to some very creative results that have a huge impact on user morale.

Image: Island Peak, Nepal, by McKay Savage, CC license

“Scope,” or “footprint” in software terms refers to the number of business processes that an application will “cover,” or enable.  The scope of an accounting system is usually: general ledger, accounts payable, accounts receivable, fixed assets, P&L and balance sheet.

The scope has to fit the application, and vice versa, and it has to be feasible for the project team and deliver the benefits expected to pay back the investment in the new system.

Too big a scope can overwhelm the team and the application you select.  It will also cost more.  Too small a scope might not be worth the time and expense, and may not yield the financial benefits expected.  A creeping scope starts out small and feasible, then as the project progresses scope is added in the form of requests for features and functions not originally planned.

Money pits are usually found at the end of projects with too big of a scope or a creeping scope.

How do you find the right scope?

Determine which areas of the business would benefit the most from a new or better application. Can you define the specific problems that are leading your enterprise to consider new software? Where are those problems located – in what functional areas and related to which current (legacy) system? Is the problem that a) a particular application is too limiting; b) a group of applications are islands and that integration of them would yield benefits; c) none of your applications are integrated; or d) something else?

Consider a range of scope options to find the optimal one. In some cases, expanding the scope of a new application beyond “problem areas” can be the optimal choice. The process is iterative, and you should consider several alternatives. For example, implementing a new accounting system may satisfy most of a company’s needs and produce a good ROI on its own. But expanding the application footprint to, say, payroll and purchasing, may result in an even better return because it simplifies integration costs, eliminates more manual work, and may strategically be a better decision.

Set up a framework to evaluate each scope alternative. In a framework (Excel comparison) you can evaluate each scope option according to such factors as cost, complexity, length of time to implement, risk to the business, ROI, required internal resources and strategic value. Then you have a logical basis for your decision.

The scope of an ERP project does not have to be huge. You can be selective in what processes to migrate to an ERP system, and you don’t have to convert everything at once – both of these steps will reduce the overall risk of the project. For example, you can implement demand planning systems first to shake out the bugs in what is traditionally a complex and parameter-sensitive application. The core financial systems of an ERP can also be phased in first before everything else.

One easy way to improve supply chain efficiency is to automate customer claims processing. In my experience, a company making 75,000 deliveries each year will have to manage about 15,000 – 20,000 claims over that time. And while there could be a million reasons for refusing to pay all or a portion of the invoice – these are often because of damage, unsatisfactory service, faulty products or incorrect pricing.

In a non-automated environment, claims processing works like this:  

• Collect paperwork
• Look up data in systems
• Copy delivery and invoice documents
• Investigate claims that matter
• Assign a status to the claims for future credit (or not) to the customer.

Apart from investigating the root causes, the only value that a human adds here is to make sure that data is where it’s supposed to be.

On the other hand, in an automated environment, all relevant documents are: 

• Scanned
• Analysed
• Sorted
• Filtered through business rules
• Categorised into a database.

All of this happens without human touch. However, once this data is in a database or system, that’s when humans can glean valuable, actionable information, such as which customers have a pattern of making claims for the same reason month after month.

This is when your supply chain team adds the real value – critical thinking, analysis, and creative problem-solving. The result is actually a reduction in the cost of claims.

In a non-automated environment: human added value = processing claims.

In an automated environment: human added value = reducing claims!

In automated environments, it really is possible to redeploy staff to more profitable work, and these roles are bound to be more satisfactory because of the added challenges and greater opportunities for creative thinking. And that can make all the difference in attracting the supply chain leaders of the future (because talent management could actually give your supply chain a competitive edge).

How do you make the shift from non-automated to automated environments?

In 1992, the Harvard Business Review published the influential and now famous article: Staple Yourself to an Order, a piece about how organizations can eliminate inefficiency and bad customer service by following each step an order takes across the supply chain.

This is what you need to do when it comes to order and claims processing…read more

Image: Al Drago/CQ Roll Call Via AP/Associated Press

The FDA has appeared at one of your plants and would like to see your records showing how much of which products were manufactured using a particular lot of raw material, where those products were shipped, and to which customers they were sold.

(Hint: you’re supposed to be able to do this, in about two hours, preferably faster).

Many companies can’t produce what the FDA is asking for, in a complete and accurate form, and in the time the FDA expects.

Supply chain executives assume their warehouse management system (WMS) will provide the traceability they need, but many WMS applications in use today are either limited in scope or not integrated to the rest of the upstream and downstream supply chain.

The average WMS inside a plant, for example, is good for tracing lot codes of raw materials coming in and following them into batches of finished goods and out the door to customers.

But many consumer goods companies use third party logistics services and sell to multiple channels where manufacturing lots are further and further subdivided until product reaches the retail customer and the consumer. All of these handoffs occur outside the scope of your enterprise systems, including your WMS.

The trail is easily lost because downstream from the plant the product may take on several different identities – without retaining lot information — as it passes from one player in the supply chain to another.

Without all the data in one place, companies rifle through purchasing receipts, production records, and bills of lading, send urgent requests for reports from trading partners, and assemble something resembling a lot code bridge in an Excel worksheet. This might take days.

The ideal track and trace system is an information repository into which data is automatically dumped as your product travels through the supply chain – the chronicling of all the places your product went after you produced it. And for that you need connectivity to all the downstream events through which your product travels, and a place to put all the data.

Companies without the full picture are betting on dodging the bullet somehow. While the odds of a recall of your product may be low, the odds of an FDA visit are much higher. And the FDA does send warning letters for an inability to demonstrate full traceability – letters that wind up online in a very public way.

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It’s getting harder to determine which software vendors have what capabilities. This is because:

• The number of technology startups has increased;
• Big software companies have been acquiring other firms to increase the breadth of their capabilities;
• Established firms are rapidly making changes to their suite of applications – adding capabilities so quickly that it’s difficult to land on a static evaluation and comparison vs. other vendors.

The branding of specific functionality continues to proliferate. Firms don’t define their software’s features all the same way – they give them a brand name, which only adds terminology that is unnecessary and gets in the way of a clear comparison of features.

Firms are offering products and services that overlap what other firms offer, making it more difficult to weed out who truly offers what you want.

It used to be that, if your company needed software in some form – packaged or custom – it was “installed” on a server. Then a “client” for the software – a relatively small piece of software – was installed on desktops so that the software on the server could communicate with the user on the desktop.

In between the two was a local-area network (LAN), which is jargon for a wired connection. In this configuration, a user could launch the client software on a PC, and the client would, via communication over the LAN to the server, enable the user to fully use all the features of the software.

Players in this market looked like this:

• The firm that wrote the software;
• The firms or independent consultants that support the software;
• The firm(s) that helped you to install, configure, test and launch the software you bought;
• The company from which you bought your servers;
• The company that supplied your LAN and wide-area network (WA)

All of this has changed. Now there are vendors that can do all of the above, without stepping inside your building, through a web portal.

How do you get what you need in this environment?

1. Find the software vendors that know your industry and understand what they offer. Software companies are usually organized according to what they call industry verticals, such as health care, pharmaceuticals, consumer goods, banking. A company with lots of clients in your industry is a good start
2. Find the software vendors that are the best for your targeted functional area such as sales, manufacturing, finance, etc.
3. Focus on the firms that are well represented in #1 and #2 above

Image: Singapore Finance District, by Joan Campderros-i-Canas, CC license

“Financials” is a term used by software vendors and others that normally includes accounts payable, accounts receivable, balance sheet and P&L. There can be extensions of this definition to include such areas as payroll, treasury (bank account inflows and outflows), and tax management.

In an ERP system, all of the required financial postings are made as other transactions take place. A shipment to a customer generates an invoice and posts the accounts receivable for that customer. Production of finished goods creates inventory with its corresponding value on the balance sheet. Benefit: reduction in administrative labor needed to manually post transactions from one system to another.

Because the Finance module in an ERP system records all the operating transactions, that data resides in the main ERP database, which means it can be extracted for reporting and analysis purposes.

If the Finance module is “robust” enough, it will already have built-in queries or user-defined reports to analyze the basic transactions such as sales by customer, manufacturing costs by product, and other “intelligence” needed to manage the enterprise.

But my experience is that a standard ERP system never satisfies the analytics needs of a good finance department. In this case, you have two choices: spend a good part of your budget building custom reports in the ERP system (not recommended), or invest in an application-neutral reporting database.

This means more information is available that is critical to evaluating the performance of the business. Calculating actual dollar benefits of a new ERP system here can be difficult, but consider what you could save if you knew things like how much overtime pay you incur and in what areas of the business, how much profit or loss you are trending year to date, and which products generate the least profit margin.

ERP systems usually define authorization levels for different types of users, allowing control of sensitive transactions. The Sarbanes-Oxley law and other regulations require separation of duties to ensure financial controls are followed. Benefit: centralized control of transactions users have access to and a system infrastructure that satisfies auditor requirements.

An ERP system can enable you to match invoices with receipts and purchase orders so that what you pay for is what you ordered and what you received. The purchase orders, receipts, and invoices are all in the same system, so the system can compare them and immediately determine if the invoice is valid and should be paid or if it’s not. Benefit: elimination of overpayments or duplicate payments to vendors, reduction of paperwork and manual comparisons reducing administrative overhead.

An ERP system can also manage your contracts with vendors, including pricing and terms of payment. This means that data from invoices can be instantly compared to contractual terms to make sure the invoice is correct. The benefit is the same as above – elimination of overpayment. If your enterprise is large and is processing a large volume of vendor invoices you are bound to have at least a small percentage savings – say 5% of the amount you spend — and 5% of a big number may be enough to pay back at least part of the ERP investment.

A price-shopping or auctioning application or an online buying service can be an extension of the ERP system so that you can search for the best price for your materials, goods, or services, select the vendor, and place the order. Usually these apps and web-available services are specialized according to what you are buying, such as transportation and delivery services, office supplies, basic materials such as standard corrugated packaging, shrink wrap, paper stock, chemicals and industrial supplies, and more recently energy sources such as electricity and natural gas. Benefit: getting the best price and terms and automatically creating a purchase order which is integrated to your financial system for proper payment. Again, the dollar benefit can be a percentage of your total spend, especially if you think you haven’t opened up your purchasing to alternative vendors for awhile.

When purchasing is part of your ERP the proper postings to financial accounts are automatically done. When you issue a purchase order an entry is made in the ERP system that authorizes receipt of whatever you are buying. When you receive what you are buying a payable is created which goes on the balance sheet as a liability. All the accounting is taken care of.