Manufacturing Systems with an IQ: Beating the Odds, Mightily - Part 1

Some time in mid-2005 TEC published a six part article on IQMS, a relatively small and obscure enterprise resource planning (ERP) vendor based in Paso Robles, California (US), with offices across North America (i.e., in Chicago, Canada, and Mexico), Europe (i.e., Sweden and with recently announced indirect presence in the UK) and Asia (i.e., China and Taiwan). Some readers were likely wondering why I “made so much mileage” out of a seemingly unimportant vendor of fewer than 70 employees and with only a few hundred customers at the time.

Well, I might have been somewhat vindicated in early 2009, when IQMS announced that it closed 2008 with double-digit profitability and a 10 percent increase in new customer accounts. Even as manufacturing markets have tightened and  doom-and-gloom sentiments have pervaded the globe, IQMS has accumulated revenue gains for several years. Namely, in 2005 and 2006, the company grew by about 25 percent each year (which was a multiple of the industry’s average growth), demonstrating its value proposition to selected manufacturing industries worldwide, including medical devices, automotive, aerospace, plastics, and consumer packaged goods (e.g., appliances, electronics, computers/business machines).

IQMS (whose name alludes to “manufacturing systems with an intelligence quotient [IQ]”) was incorporated in 1989 and has been privately held ever since without any venture capital (VC) money involved. Having been based in California and founded (and still majority-owned) by a married couple, IQMS somewhat resembles its bigger fellow ERP peer, QAD. But the differences between the two vendors are also apparent starting with QAD being publicly held for over a decade. QAD is also a much larger vendor, with typically larger customers (although overlapping and possibly competing with IQMS in many similar industries and regions), and has an incomparably better global presence.

For its part, IQMS boasts a 98 percent customer retention rate and continuous profitability and growth, which traits have not always characterized QAD. Currently, IQMS has a total of over 500 corporate customers at over 1,000 locations in 4 continents and 11 countries. These user companies range from a single site with only 5 users to companies with 10 sites and an unlimited number of users.

IQMS focuses on small-to-medium enterprises (SMEs) in make-to-order (MTO) and make-to-stock (MTS) operations in the discrete manufacturing, repetitive manufacturing, and process manufacturing environments. These companies tend to embrace lean manufacturing (and overall "lean business") principles and thus require low-maintenance and cost-effective (but fully functional) ERP systems. To that end, perpetual licensing provides the rights to all future upgrades and includes database licensing too.

Master of Its Own Destiny (and Its Own Domain)

Being privately held and not burdened with the stifling demands of private equity firms, venture funds, or public shareholders has proven to be a blessing for IQMS. Namely, not only has IQMS stayed away from the disturbance of the ongoing vendor consolidation bonanza, but it has also been able to control its own destiny and make independent decisions about product development.  IQMS customers are also intimately involved in product development via annual user meetings, an online user group, and participation in focused development teams.

In keeping with growth and its commitment to delivering leading-edge solutions, IQMS added employees to every department in 2008 (with a total head count now well over 100), and created new work units including the Automation and Oracle Data Services groups. These groups are focused exclusively on system advancements, customer satisfaction, and bridging shop floor equipment directly into functional ERP applications.

For instance, IQMS’ Automation Group’s charter is to expand the interface capabilities of IQMS’ flagship EnterpriseIQ ERP [evaluate this product] system with manufacturing equipment on the shop floor. The newly formed group, comprised of engineers and programmers, has as its goal working with existing IQMS customers to create greater efficiency and automation between shop floor hardware and ERP software. This integration is expected to result in leaner manufacturing operations.

The IQMS Automation Group was launched with several custom programmable logic controller (PLC) interfacing projects developed with customers’ input at a number of customer beta sites. Implementations included capabilities such as:

  • two-way communication with PLCs to control and initiate conveyor systems, vertical lifts, scanners, palletizers, photo-eye sensors, and other pieces of equipment;

  • two-way communication with stretch wrap machines via relay/digital input boards to automate final packaging of customer product;

  • automated first-in-first-out (FIFO) pick/store warehouse applications for forklifts; and

  • directly interfacing with work centers to automatically report scrap and production.

“Not Invented Here” Attitude

One of the key tenets of IQMS’ success has been a laser-sharp vertical industry focus, of which I have always been a big proponent, in general. Namely, when the company started in 1989, it initially catered solely to injection molding manufacturers. This focus has allowed IQMS developers to focus deeply on the requirements of this esoteric market segment and really gain subject-matter expertise on the idiosyncratic problems and issues of those customers.

Namely, if a system doesn’t understand and support tricky requirements such as family molds or multiple cavitations running at the same time, it will cost the customer dearly in terms of system customizations, lowered efficiency, and heavy-lifting maintenance. Since 1989, IQMS has judiciously expanded its focus to SME companies in related industries such as automotive suppliers, packaging manufacturers, and medical device makers.

But other tenets of IQMS’ success have seemingly been at odds with conventional wisdom and the practices of vendors of IQMS’ size and means. Namely, IQMS' niche focus has driven the company to try to address as many of the needs of its target customers as possible. As a result, the EnterpriseIQ suite has (surprisingly to a first-time observer) a pretty wide footprint of functionality (coming from such a small vendor with limited means).

To be concrete, the suite natively provides extended-ERP applications such as enterprise asset management (EAM), customer relationship management (CRM), electronic data interchange (EDI), and warehouse management system (WMS). As if these capabilities were not impressive enough, then how about adding the abovementioned intrinsic shop-floor equipment automation and monitoring, time-clock, and quality management system (QMS) functionalities?

These features mean that all these modules run on a single database and feature out-of-the-box integration with a consistent user interface (UI) or look-and-feel. Furthermore, we are talking about real-time transactions here, rather than delayed (and thus after the fact) batch processing (e.g. data transfers) and necessary interfaces when “alien” third-party applications are involved.

Many IQMS customers have indeed benefited from an EnterpriseIQ production management application called RealTime Machine Monitoring. This application connects each work center to the EnterpriseIQ database, allowing users to follow jobs as they move through production. Because production data feeds directly into the ERP database, job status is automatically updated down to the minute. The system also supports graphical scheduling screens and reports that can be used by stationary and remote users to assess job status, track downtime, and view quality data. Pager and public announcement (PA) system alerts are also available for the plant.

Single-source Strategy

Now, there is certainly nothing wrong with the “single source,” “one-stop-shop,” and “a single-throat-to-choke” strategy. Smaller manufacturing companies especially appreciate a strategic business application that integrates financial management, human resources management system (HRMS), manufacturing systems, and other corporate software functions into a single system.

However, such homogeneous offerings are yet to be offered even by vendors that are incomparably larger. Even the market leader SAP has recently given up on its traditional “not invented here” attitude (think of the Business Objects or Visiprise acquisitions), but not tiny IQMS.

In fact, IQMS’ management strongly believes that the company has not only survived but also thrived by serving a few targeted industries with a full-function system. The system has been developed organically (in-house and with no acquisitions) to fulfill most (if not even all) of customers’ needs, while also providing a hands-off system (in terms of minimal ongoing maintenance) but with a decent technical performance.

Believe it or not, IQMS professes a strategy of being the single source for virtually everything a customer might need beyond software development and programming. Namely, “single source” also refers to sales and implementation services, training, and customer service and technical support. With some minor exceptions in optional fringe functionality (i.e., embedded Crystal Reports, Global Software for financial reporting and spreadsheet automation, Actify CAD Viewer,  or CLEO for EDI communications), IQMS touts no need for using third-party applications for core-competency modules, and no third-party implementation providers.

For example, in the automotive industry, EDI is a major component in a supplier’s ability to deliver exactly what customers want. To that end, the IQMS EDI Translator module is embedded within the EnterpriseIQ system, which operates entirely within a single database, so that customers have no need for pesky third-party hardware interfaces. Incoming EDI files are automatically translated into the ERP system, thus instantly updating all of the pertinent records, while outgoing files are automatically transferred back to customers and suppliers. Since there is no need for manual data entry, suppliers (IQMS customers) can be confident that they are disseminating accurate, timely information across their supply chains.

With third-party EDI systems, which transfer EDI data via dedicated modems, automotive suppliers not only face hefty costs, but also often have trouble finding and correcting any problems associated with orders. Some IQMS customers talk about their inability (even over 80 percent of the time) to respond fast enough to EDI errors because the data transfer was slow. This problem would ironically be magnified with some accounts that are geographically close to the plant. Namely, if the customer’s plant is only 40 minutes away or so, shipping errors will be arriving at the customer’s plant before the shipping department could catch them.

This native EDI module allows a much greater degree of integration for processes such as outsourcing (subcontractor) management, where products may move through multiple nodes in the supply chain. IQMS provides visibility to this material moving within the supply chain, relying on advanced shipment notices (ASN) in its EDI capabilities to track the movement.

I Mean, Single-source in Every Aspect

When it comes to sales and implementation services, IQMS Sales and Professional Services provides complete project management and implementation services in North America (and through resellers/partners in Europe and the Far East).  The involved IQMS employees are APICS-certified, which helps to deliver a typical implementation in three to six months time. IQMS claims that 95 percent of its customers meet their target “go live” date, with implementations taking on average less than 40 percent of software spending.

As for training, in February 2009 IQMS introduced Virtual Training Classes that supplement other training options offered by IQMS, including classroom training, on-site facility training, single-customer Internet-based training, and free online videos. Virtual training classes bring together the best of two worlds (class training and the online user forums), in one convenient place. Finally, the multilingual customer service and technical support includes expected channels such as the telephone, the Internet, e-mail, and online user groups.

Part 2 of this blog series will continue with the analysis of the product’s architecture and the latest developments at IQMS. In the meantime, what are your views, comments, opinions, etc., about IQMS’ strategy and approach?

Do you think a homogenous enterprise applications suite is possible and desired, or that heterogeneous IT environments are simply today’s reality and how the ball rolls? If you are EnterpriseIQ users, I would appreciate you sharing your experiences with the product and the company.
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