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Finding the Key to Small Manufacturer's Profits - Part 2

Written By: Predrag Jakovljevic
Published On: January 6 2012

Part 1 of this blog series discussed the genesis of ProfitKey International, one of the longest-standing enterprise resource planning (ERP) providers for small to midsize discrete manufacturers that has never been merged with another peer product. After the protracted bankruptcy saga of its former parent company, HALO Technology Holdings, ProfitKey was recently bought out by Phoenix Asset Management, and is now keen on starting a new chapter.



What Is ProfitKey Exceptionally Good At?

As described in Part 1, ProfitKey's flagship Rapid Response Management (RRM) product is more than 90 percent "home grown" and mostly offers "out of the box" functionality, which is critical to attaining new customers in the company's "sweet spot" market segment – conservative small and medium discrete make-to-order (MTO) manufacturers. In spite of the turbulent times that ProfitKey has experienced for over a decade (see Part 1), its critical executives and employees have had long tenures. Thus, the vendor has dedicated and industry-knowledgeable personnel with significant manufacturing expertise.

Two-way real-time integration of manufacturing execution system (MES) capabilities with the core ERP offering, which also entails advanced planning and scheduling (APS) capabilities, is a differentiator in ProfitKey's market space. Manufacturing companies whose businesses are all about delivering orders to their customers in promised time (to avoid penalties and customer attrition) highly appreciate the RRM's available-to-promise (ATP) and capable-to-promise (CTP) capabilities.

One additional difference is the native quality management module, and the user's ability to know, at any time, the exact status of any particular order and its related items, whether they are work in progress (WIP), completed, or in a "quality vault" (or quarantine, if you will), or whether the operation is down for whatever reason, etc. The system provides the manufacturing personnel with the "net new exception report by day" to act upon swiftly. In a nutshell, the ERP-MES integration simply works like the good old Volkswagen “Beetle” car.

Also impressive is the Quality Provenance feature that resides throughout the entire system, and has less to do with some kind of built-in (hard coded) workflow, and more to do with electronic (paperless) dispatching. Producing move tickets (a.k.a., shop-floor traveler documents with necessary multimedia files) or populating an inspection report with the purchase order receiving information are done electronically rather than manually writing out a tedious report or document. Thus, user confidence in the integrity of the data flow is very high.

RRM has some workflow-based flexible logic in a couple of modules. For instance, the engineering change management (ECM) module lets the authorized user define a sequence of other users and steps in the process. For example, upon the release of a suggested engineering change, the process will start at person one, wait for approval, then go to person two, etc. The same holds for the Cause and Correction quality feature, where user-defined assignment of defects, based on the defect code, is how the records are sent around via on-screen "To Do" lists.

The product offers basic time & attendance (T&A) and Product Data Management (PDM) capabilities. RRM assemblies can carry multiple revision histories, with an audit trail of change orders and approvals. Because ProfitKey can import bills of materials (BOM) and routings via text file; as long as a computer aided design (CAD) engine can export it, RRM can probably import it.

Last but not least, a loyal customer base, although not that large (200 customers), is willing to provide references at any time. These conservative companies could care less for the latest bells and whistles – all they want is to keep their "delivery trains and trucks running on time." Even some delinquent customers that are no longer on maintenance contracts (and are on older products by a few generations) have lately decided to come back to the fold and migrate to the latest release, RRM 7.6.5, as brand new implementations.

Notable Product Weaknesses and Company Challenges

Needless to say, the company has a number of gaping challenges, and its management has no intention of sugarcoating the reality. After all, the poor corporate structure of the former owner placed ProfitKey in bankruptcy for nearly three years. ProfitKey is quite upfront and candid about its lack of marketing presence and lead generation programs. Its limited marketing of any kind for the last 10-plus years has often resulted in many market observers and pundits even wondering whether the veteran ERP company was still in business.

The company openly admits the lack of both direct and indirect sales resources – currently having one direct sales person and four resellers. There is a lack of resources in product development and quality assurance as well, which slows the release of new or enhanced products.

In terms of functionality, the protracted lack of true multifacility capabilities eliminates ProfitKey from approximately 25 percent of requests for proposal (RFP).  This capability is on the company’s roadmap, and will no longer be delayed due to resource constraints under the new ownership. For now, ProfitKey is able to offer some workarounds by treating each facility (division, warehouse, etc.) as a separate company with inter-company transactions, and then the system is able to do financial consolidation.

Another major challenge comes from reliance on the outdated and non-mainstream Unify Gupta technology platform (see Part 1), whose look-and-feel and navigation methods look archaic of sorts, and are reminiscent of the client-server era of the 1990s (remember the old Beetle analogy from the previous section). The current Gupta release doesn’t offer Web Service-based integration, which necessitates inelegant flat files and comma-separated values (CSV) files-based integration, and a Citrix or Microsoft’s Remote Desktop Services (formerly Terminal Services) for Web enablement. There is no native Microsoft Office documents integration either, which has lately become a "matter of course" feature in the market.

In addition, any rearranging of the fields on the screen requires custom programming (via internal IT staff or ProfitKey’s professional services), which must then be taken into consideration during upgrading to a next RRM product release. Again, this is quite at odds with today’s expectation of end-users being able to personalize their views in a simple drag-and-drop and point-and-click manner. As a contrast, here are some nifty integration and navigational capabilities that SYSPRO and Epicor offer via their Microsoft .NET-based environments.

These shortcomings come on top of the more universal threats such as the dour economic conditions in the manufacturing space. Moreover, consolidation of competitors, in some cases, has resulted in stronger competition, while much larger players such as SAP, Oracle, and Microsoft Dynamics have long been trying to come down-market. Needless to say, competition has been using the bankruptcy state against ProfitKey in sales opportunities, which creates a tougher sell for the embattled vendor.

New Charter under a New Owner

With the blessing of the new owner, ProfitKey’s go-forward strategy starts with expanding marketing campaigns by subscribing to multiple ERP evaluation listings, occasional print advertising, contracted telemarketing, and social media campaigns. The latter community-building initiative in particular has been noted of late at Twitter, LinkedIn, and Facebook.

The vendor also intends to increase its product development staff, which should result in quicker turnaround of new products and additional custom programming revenue. The intent is to increase the direct sales staff as well, and thus put more feet on the street. Last but not least, ProfitKey plans to hire a channel development manager to recruit more resellers.

Glass Half Empty or Half Full?

While the aforementioned challenges seem daunting, the optimistic company, which as a business unit remained profitable throughout all the upheaval, is looking at possible opportunities that can result from overcoming those hurdles. For one, the move to the latest Gupta 6.1 release should allow for a .NET-compatible version of ProfitKey RRM. Reportedly, this release of Gupta is Web Services-enabled and the look-and-feel and navigation is much closer to modern Web 2.0 tools. The complete migration to Microsoft .NET Framework is a possibility down the track.

ProfitKey is pondering carving out its scheduling and MES product, and offering it as an add-on to competitive ERP solutions that lack those native capabilities. Another idea is to pursue opportunities in the UK with its existing local business partner to expand ProfitKey’s presence there. The completion of the multi-warehouse/facility solution should additionally expand market opportunities.

ProfitKey is also thinking about exploring the Software as a Service (SaaS) avenues (once the product is on the latest technology platform) as well as a “RRM Lite” entry version for even smaller prospective customers. For now, there is not much demand for SaaS and cloud-based solutions in the target market, but the company is cognizant of the success by Plex Online, NetSuite, and even SAP Business ByDesign.

As for the "social" tools in its product, ProfitKey has conducted a lot of research from its customer base indicating that this area of "new media" for small manufacturing is really not on their radar screen. Indeed, in small manufacturing sites with a dozen users, most of the collaboration can be achieved by shouting to the next work cell, instead of endlessly micro-blogging in the system. Most companies (with a savvy IT staff) actually prevent user access to the social media sites.

But the company is working feverishly on delivering Android-based mobile applications for shop floor management and data collection through bar coding. In fact, ProfitKey's upcoming user conference in the spring of 2012 should be an interesting event with many news announcements.

Dear readers, what are your views, comments, opinions, etc. about ProfitKey’s newly minted strategy, its recent moves, and your experiences with the vendor and its products? Do you think the tenacious company stands a good chance in this cutthroat competitive environment?
 
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