Is the globally integrated enterprise a realistic goal for most manufacturers?
At diversified electronics manufacturer Laird Technologies, CIO Todd Rumsey is 19 sites into a global enterprise resources planning (ERP) rollout that he says will transform the way the company operates. Formed as a result of a merger, and growing strongly through acquisition, Laird Technologies’ move to QAD’s MFG/PRO enterprise platform is meant to support the transformation.
At diversified electronics manufacturer Laird Technologies , CIO Todd Rumsey is 19 sites into a global enterprise resources planning (ERP) rollout that he says will transform the way the company operates.
Formed as a result of a merger, and growing strongly through acquisition, Laird Technologies’ move to QAD ’s MFG/PRO enterprise platform is meant to support the transformation. Most manufacturers today use enterprise systems to run their basic operations, including financial, order management, manufacturing, and supply chain.
“Our goal is simple: to manage the business as a single globally integrated enterprise, not as a loose collection of independent businesses,” stresses Rumsey.
With manufacturing plants and operations in the United States, Mexico, China, Germany, Hungary, Sweden, Japan, the Czech Republic, India, Singapore, Malaysia, Korea, and Taiwan, there’s little doubt of Laird Technologies’ global credentials.
But when Rumsey came onboard several years ago, the state of the IT infrastructure underpinning Laird Technologies’ burgeoning global reach was another matter: that is, a slew of legacy ERP systems and discrete sales-oriented applications that yielded a view of the business frequently marred by inconsistent and inaccurate data.
QAD’s MFG/PRO ERP suite, selected after an evaluation that included visits to no fewer than 12 customer reference sites, not only provides the means for capturing data in a consistent manner, but is the framework to enshrine a set of enterprisewide, consistent business processes.
Moreover, it delivers data that’s not just consistent and accurate, but also viewable from anywhere in the enterprise, enabling decisions to be made in a manner that simply hasn’t been possible before.
“With the ability to take a global view of capacity, inventory, raw materials, and outstanding orders, we can respond to both threats and opportunities far more rapidly than ever before,” says Rumsey.
Shift to global multisite
|Todd Rumsey, CIO of Laird Technologies, says the company is moving away from managing its operations as a loose collection of independent businesses.|
Laird Technologies isn’t alone in its desire to run its global operations on a single enterprisewide platform. The prospect is one that is engaging some of the world’s largest corporations. At SAP ’s 2006 Sapphire user conference, for example, then-president Shai Agassi showcased the example of BP —one of the world’s largest energy companies—which set itself the goal of running its drilling and refining operations, its retail outlets, and its complex banking and financial operations all on a single instance of its SAP enterprise system.
And at this year’s bash, the spotlight was on The Coca‑Cola Company , where a single instance of SAP ERP binds together 15,000 users in 45 countries—encompassing no fewer than 175 legal entities. Moreover, many of Coca‑Cola’s bottlers are SAP users too, constituting all told a network of more than 1,000 production plants, a delivery fleet five times larger than that of UPS, and somewhere between $85 billion and $90 billion in annual revenues. Scalability—the watchword of countless CIOs—doesn’t come much more scalable than that.
Enterprise platforms of that size yield significant economies of scale, of course. A single instance isn’t just a single vendor and a single database, but also an end to the various accounting rollups and interfaces that enable the multisystem enterprise to gain a holistic view of its business. Strip those away, and you also strip away the costs of creating and maintaining them, and of the IT staff to perform such chores.
|Manufacturers see globalization as a growth opportunity, says Aberdeen Group, but to compete they must comply with international financial and legal requirements. A single global instance of an ERP system has benefits, but must be able to deal with currency exchange, inventory transfers, consolidation, localization, and translation.|
But it isn’t just cost reduction that’s generating the buzz. New York-based consultancy McKinsey , for example, talks about the “21st century organization,” citing how such giant ERP platforms can help the world’s megacorporations—businesses such as General Motors, IBM, Microsoft, General Electric, Toyota, and the aforementioned BP—manage the twin challenges of size and complexity.
“Common technology applications, consistent management processes, and standardized definitions all promote effective coordination and decision-making,” according to McKinsey consultants Lowell Bryan and Michele Zanini, writing in the McKinsey Quarterly .
That’s certainly the plan at Laird Technologies, says Rumsey. The combination of a single enterprise platform and a single set of business processes will, he hopes, yield a single enterprisewide culture—the glimmerings of which are already emerging.
“By implementing QAD, we’re enabling cultural integration,” he says. “We’re not just integrating ERP in a stand‑alone mind-set; we’re creating global processes and a global footprint. And that begins to have a much bigger effect on your whole culture than just implementing ERP per se . You start a whole process of working together as one global culture, and not as individual companies.”
Collaboration within and between the sites that have implemented QAD also is on the rise, adds Rumsey.
“Plants that did not have similar business processes or a common nomenclature for products, customers, or vendors now have that, so we’re seeing business functions working more closely together,” he explains.
What’s more, the ease with which such collaboration takes place is facilitating development of “best‑of‑breed” solutions to common challenges. Finance managers in different countries, for example, can easily compare how they do things like cycle-count programs or variance analysis.
Some observers point to globally integrated enterprise platforms facilitating not just existing business processes, but bringing into existence whole new ones. Writing in Foreign Affairs , for example, Samuel Palmisano— IBM ’s chairman and chief executive—cited phenomena such as the transfer of back-office functions to low-cost overseas locations as instances of economic activity not possible without a globally integrated structure to support them.
“The global integration of operations is forcing companies to choose where they want work to be performed, and whether they want it to be performed in-house or by an outside partner,” Palmisano observes.
But if—as the example proffered by such megacorporations suggests—the globally integrated enterprise is redefining the corporate art of the possible, the goal being pursued by less exalted businesses is more prosaic: merely creating some kind of global platform in the first place. While a single instance of a single ERP platform is the desired end state, “halfway houses” offered by application integration tools are certainly an alternative option.
At Boca Raton, Fla.-based security and alarm manufacturer SimplexGrinnell, for example, mergers and acquisitions have left the business with no fewer than three enterprise suites: Oracle, PeopleSoft, and Baan.
“Global integration is a Utopian vision, and a desire that a lot of CIOs share,” observes Sanjay Lall, the company’s CIO. “But the challenge is how to get there, and the larger, more established organization has the bigger challenge, thanks to embedded infrastructure and existing legacy systems.”
Formerly with Coca-Cola for many years, and in a role that brought him in close contact with that company’s own efforts to establish its global single-instance ERP platform, Lall is well aware that the realities of the day job force many CIOs—and their businesses—to settle for less lofty achievements.
“In practice, if there’s nothing actually wrong with your systems; the temptation is to build bridges between them,” says Lall.
For example, Lall adds, while Oracle’s planned Fusion product should eventually combine the Oracle and PeopleSoft platforms, there are no plans to replace the Baan system.
“It’s not broken, and it does the job it has to do,” says Lall. “Through data warehousing and business intelligence, you can get a lot of the analytics you’d get from a single system. A warehouse receipt is a warehouse receipt, whatever the system that’s recording the transaction. Our inventory visibility may not be up to the minute—but that’s the compromise you accept when you choose to build bridges.”
Decisions along the way
QAD’s chief marketing officer, Gordon Fleming, points to the practical difficulties—and costs—involved in trying to sustain a single instance for companies that have plants in parts of the world where high-speed communications links are neither reliable nor economic. It might make sense to run plants in North America and Western Europe on a single instance, but in more remote parts of the world—including parts of Asia and Africa—companies could be better served by plant-level instances.
|While hardly a midsize company, the Coca-Cola example does illustrate the scaleability of today’s leading ERP systems. If independent bottling operations are included, the number of users of the extended system grows to 70,000 people in 80 countries.|
Look pragmatically at anticipated gains from running on a single globally integrated platform, Fleming suggests. “In general, our customers report significant benefits—but you have to be realistic. If one division of a business makes park benches, and the other makes bricks, then the opportunities for synergies and shared learning are going to be limited. But where it does make sense, the benefits can be substantial.”
To achieve results, a measured pace and plan often yield the better result, adds Jon Chorley, Oracle VP of supply chain management product strategy. Pointing to Oracle’s own single instance of its own enterprise platform—which embraces more than 70,000 users and comprises 13.2 billion rows of data—globally integrated systems “are absolutely achievable,” he insists.
“It requires management commitment, and it won’t happen overnight,” he says. “Think of it as something to shape your policies. With the goal of eventual integration in place, you’ll reach different decisions from those you would have reached otherwise—and gradually move closer and closer to turning that goal into reality.”