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Yet another Case for Industry-Specific Solutions

Written By: Predrag Jakovljevic
Published On: March 9 2010



Technology is changing at a breakneck pace, and is there anyone out there who will debate me on that issue? The undeniable evidence that I am getting old is the fact that I got my engineering degree in the late 1980s. Imagine how much easier my studies would have been then had only the Internet, word processors, Wikipediapresentation softwaremultimedia products, etc., been available?

The other day I saw a TV commercial where an oblivious “back to the future” dude in a crowded coffee shop was noisily typing away on an ancient typewriter and getting strange looks and grimaces from other patrons in the shop who were all using nifty smartphones and PC’s. Well, guess what, I had to type my final paper on a squeaky typewriter, make multiple photocopies of it, and have it bound into books for the final exam committee.

At least, I wasn’t doing anything that would have been considered archaic for the time.



Yet, while traveling to a new city, do some “old fashioned” folks still pick up a phone book to find a hotel? If so, here is a newsflash: the Internet could do it more quickly and save you a lot of money and inconvenience.

When driving to an unknown destination, do some folks still pull out several maps and look at them while driving, only to run into construction sites (and detours) or, even worse, cause accidents? If so, another newsflash: an inexpensive GPS navigation device could save you a lot of time and inconvenience as well.

For those laggards that still go to airport to find out that their flight is cancelled or delayed indefinitely: not only that an ancient technology, telephone, would save you time and frustration, but how about checking out those handy flight delays and flight tracker Web sites first? While these (hopefully rare) examples of individuals can be written off in part due to someone’s ignorance, laziness, or simply the so-called “stupid factor,” what about the many enterprise executives still making terrible errors in judgment, in spite of stellar resumes (in terms of education and experience)?

How Passé Is It to Use Generic ERPs?

Namely, several years ago, TEC’s article entitled “The Fatal Flaws for Process Manufacturers” talked about the so-called "fatal flaws" that can result in anything from discomfort to disaster. Fatal flaws are defined as “the gaps between what an enterprise software product offers and the critical functions that a company needs.” These functions can range from major business processes to minor data fields or industry conventions.

Many fatal flaws are the result of a company's industry. In other words, while a company might be able to reduce time and costs every day through use of generic (horizontal) enterprise resource planning (ERP) technology, are executives handicapping the company by using solutions that are not designed for its industry?

As time, profit, and compliance pressures increase, most IT strategies are hampering their companies’ ability to effectively compete and minimize risks. While many companies have streamlined many core ERP processes and improved performance, they are not achieving best-in-class results.

Basic industry processes or conventions can be missing from transactions or data. For example, does a vendor receiving transaction allow for the entry of  the vendor’s statement of quality and shelf life? Do inventory, customer order, pricing, costing, and other modules operate within the needs of so-called "catch weight" requirements?

A better question to probe is what are the company's core competencies and competitive advantage? Is achieving slight cost reduction and best practices results enough? If your product quality, performance, and brand are your competitive advantage, how can this solution protect and improve your core competencies and competitive advantage?

If your enterprise system is not built to protect or improve competitive advantage, are you in a position to ramp up your IT staffs and extensive customization costs like your largest competitors? Or are you continually adding islands of automation and disparate data sources?

Most companies have their most critical data is fragmented in several solutions or silos. For example, in a process manufacturer, the data can be held in a laboratory information management system (LIMS)product lifecycle management (PLM) system, manufacturing execution system (MES)warehouse management system (WMS), and many other local data stores. Since many ERP are not industry-specific, they are not designed to manage those data sources that can be used to reduce costs or risks.

While companies can dump as much data as possible into data warehouses, that data is historical (after the fact) and is missing critical details such as a particular lot’s current shelf life. Since the data are not operationally oriented, this version of the truth cannot be used to make informed day-to-day decisions, let alone the decision within a shift.

Instead, folks are basically making decisions while “driving looking through the rear view mirror”, and continually hitting potholes in the road or missing key turns (or even worse). They are certainly missing opportunities to reduce costs, minimize lead times, and more profitably meet ever-changing demands.

Another Fatal Flaw: Sub-lot Control

To continually improve and make more timely decisions, which can reduce costs and ensure regulatory compliance, the mission-critical ERP system must be industry-specific and manage all of the critical data. Integration of business processes, critical data, and applications provides the solution, which can minimize the cost and reduce the risks of every transaction.

To highlight the risks, an enterprise has to look further than every receipt of raw materials. Almost everyone agrees that controlling material variability is a daily challenge.

Yet, most ERP systems’ lot control modules can track status, start date, end date, standard cost, and possibly average actual costs of a lot. But if you handle materials that are perishable or whose specifications and quality vary with each shipment, use of more detailed sub-lot data can provide valuable information that can minimize the cost and ensure compliance of every transaction.

As an example, a regional North American dairy processes 10,000 sub-lot transactions every day. The company claims that 70 percent of its most critical information is stored in sub-lots. By tracking at a more granular sub-lot level versus just a lot level, the company has reportedly provided itself with 80 percent more opportunities to optimize its business performance.

In another example, a regional meat processor has 1,600 sub-lot transactions on every delivery truck. With every transaction, lot allocations can maximize shelf life and minimize costs. Longer shelf life provides longer selling time and reduced chances of unsalable (write-off) costs.

With sub-lot tracking from receipt through production (with a several possible production routings and costs) and into packaging, a company can improve its brand protection and more accurately cost every production and package variation. With “right time” access to this information, companies can make strategic product mix decisions.

With the ability to identify when variable input costs will require re-pricing, companies can minimize the time to protect margins or ensure competitiveness. With sub-lot transactions, these companies can track all of the information that can improve each transaction. They also equip themselves to more effectively respond to potential lot recall mandates.

Nothing But Industry Focus

Industry-specific ERP systems with integrated quality control can integrate PLM, LIMS, and MES data, and provide a coveted operational “single version of the truth.” Based on the type of material or product, this truth can include the following info: actual costs, status, current shelf life, and many other key attributes such as butter fat (milk fat), milk solidsorganic certifications, and allergen info.

Without this unified information, operational decisions are made based on the least common denominator: standard lot data. If you are looking at historical standard cost data, do you know the actual cost to produce every product variation?

With variable input costs continually bouncing up and down, how do you know when to re-cost and re-price? When costs are dropping, can you react to protect margins and improve competitiveness? How about when input costs are increasing?

With every sub-lot transaction, actual tested performance data minimize the use of materials of every batch. With actual cost, shelf life, performance, and compliance data (e.g., allergens), companies can make more informed and timely trade-off decisions to improve profitability and compliance

If one could effectively shave costs and ensure compliance on every transaction without sacrificing quality, how much could one save? If this data were available to advanced planning and scheduling (APS) optimization functions, could a company drive even more cost savings, e.g., in milk production runs of each day or in optimization of meat trims?

Many process companies have used Infor ERP AdageInfor SCM Advanced SchedulerInfor SCM Advanced Planner, and Infor PLM Optiva to continually drive out costs, improve customer service, and meet more stringent compliance mandates. Other products worth mentioning here would be Lawson M3Microsoft Dynamics AX (bolstered by the recent acquisition of FullScope)Ramco Enterprise Process Manufacturing by Ramco SystemsRoss Enterprise by CDC SoftwareOrion by 3i Infotech, SYSPRO, Plex Online by Plex Systems, and so on. You can conduct some research of your own in TEC’s Process ERP Evaluation Center.

Dear readers, what is your take on industry focus and actionable information: can you really continue to compete by driving while looking in the rear view mirror? Can you justify any company’s laggard use of non-industry-specific ERP products? Also, what real-life experiences have you had with sub-lot traceability and what solutions have you used in that regard?

As someone once said, the devil is in the details. For most industries, generic ERP does not allow you to deal with the details. Unless your ERP systems allow you to operate at the detail level--and take advantage of the details--you will never conquer the devil.
 
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