Connector maker makes customer connection
Integration cost avoidance seals CRM deal at Molex
By Kevin Parker, editorial director -- Manufacturing Business Technology, 8/1/2002 6:00:00 AM
When Molex, the $2.4-billion maker of connector systems, went shopping for a customer relationship management (CRM) system to help it home in on sales opportunities and work more closely with customers needing its highly engineered products, it all came down to two vendors.
Both vendors' systems had the needed functionality, and both were comparable when it came to price. But Lisle, Ill.-based Molex ended up going with SAP, the world's leading enterprise suite vendor, for CRM.
It did so because from 1994 to the present Molex has spent more than $60 million implementing SAP R/3, and subsequently migrating to mySAP, in 54 manufacturing facilities in 19 different countries in the Americas, Europe, and Asia. Molex says the investment means that, by going with SAP for CRM, Molex's systems integration costs for adding CRM to its applications portfolio were negligible compared to what they would have been had it chosen the other vendor.
Not everyone agrees that buying CRM or other type supply chain applications from your enterprise provider guarantees integration cost reduction. Best-of-breed software vendors say unless the user is running the latest version of the enterprise system, and doing so in all its locations (which in this age of acquisitions and divestitures is increasingly unlikely), then the user may face the very same integration hurdles it would with a more functionally rich, best-of-breed product.
Scott Wilkerson, director of product management with Pleasanton, Calif.-based supplier relationship management vendor Commerce One, says, "Customers without exception are running multiple enterprise systems, or multiple versions of a single enterprise system. It may in fact be easier to integrate our system to two different versions of the same [enterprise resources planning] system than it would be for the enterprise vendor itself. We have many customers resident on SAP, Oracle, or PeopleSoft enterprise systems."
Molex, however, must be the exception to the rule because it is running a single instance of mySAP across all its locations. For this and other reasons, Molex says its selection of SAP CRM was the right decision.
For a CRM project that in total—software licenses, configuration, and implementation—cost between $5 million and $8 million, says Barry McGoldrick, director, global application development with Molex, "We saved in integration and other cost avoidance somewhere between $1.5 million and $2 million. Master data synchronization was accomplished within one week. It took less than 12 months to roll out the whole system globally."
In fact, it is in just these kinds of follow-on savings, for what are sometimes called enterprise extensions, that Molex sees full justification for its original commitment to mySAP worldwide, and for all of the blood, sweat, and even sometimes tears, that such a commitment admittedly entails.
Says Gary Matula, Molex vice president, information systems, "We went to a single system worldwide for solid business reasons. But we have in fact been challenged by our senior executives to identify both the quantitative and qualitative benefits that justify the investment. These include the attainment of common business practices, and having an integrated, common database; support for manufacturing; multilanguage capability; as well as a significant number of specific areas of savings—some of them still emerging."
Matula continues, "mySAP allows our movement into areas such as data warehousing, advanced planning and scheduling, and customer relationship management. It allows the layering of new capabilities both vertically and horizontally. We're in a position to increase collaboration with our trading partners, engage in e-Business, and to do so within a common architecture that allows us to upgrade any aspect of the system without disruption to the system as a whole."
In fact, the next issue Molex faces going forward is what to do in the one significant area where it's not using SAP: its computer-aided design (CAD) and product data management (PDM) systems are from another vendor. SAP is not a CAD software vendor. But with SAP's emergence in the last few years as a leading vendor of product life-cycle management software, which allows sharing of product data on a wide range of computing platforms, and given the centrality of design-related information to Molex's use of CRM, the company will be looking to integrate SAP for PLM with its existing global PDM system. The goal is to expand design collaboration capabilities both inside and outside the company.
CRM at Molex
McGoldrick says the first CRM step for Molex was deciding what CRM is.
In 1998, as part of its rolling three-year plan for continuing systems improvement, Molex decided it could get a "360-degree view" of its customers through the following facilities: 1) Molex.com, a Web site with a wealth of information on Molex products, tightly integrated with its PDM system; 2) sales force automation, considered one of the major functional areas within CRM; and 3) customer care centers that would be a single point of contact for buyers of Molex products.
It's tempting to simplify this schema as 1) pre-sales, 2) sales, and 3) post-sales, but it's a bit more complicated than that. It's true the constantly refreshed Web site content is primarily used for information delivery, but orders can be placed at the site too.
More significant, order processing was never meant to be the primary function of sales force automation and CRM at Molex. For that, more than 80 percent of purchase order line items come to Molex via electronic data interchange (EDI), and go directly to the enterprise system. Instead, CRM supports direct sales and marketing as a collaboration platform for identifying and managing significant sales opportunities.
You might not think of an electronic connector as being a complex, engineered-to-order product, but, as with so many things, there's more to it than meets the eye. In fact, Molex has in its time sold more than 100,000 unique products, and annually introduces 400 to 500 new products—the output of 25 design groups stationed in 20 locations in 12 countries.
McGoldrick says the CRM selection team was convinced one big reason CRM implementations failed was because projects were isolated in sales and marketing, with no larger stake in the greater enterprise. For this reason, integration, and most especially integration between CRM and demand management, was clearly required.
Business capabilities identified as needed by the selection committee were validated by company focus groups, and then translated into technical capabilities. SAP CRM was chosen, as stated above, because it had the needed capabilities and reduced integration costs, says McGoldrick, "but there also were savings in reduced maintenance costs. Ease of integration with SAP Business Warehouse was seen, and has proved to be a big plus as well."
The global rollout of CRM began in May, 2001 and was complete by November.
Using CRM, sales and design teams identify or generate product bills of material; identify existing or generate new requests for quotation (RFQ); generate proposals; set pricing, and arrange for the building of prototypes.
Today, within Molex, there are 729 on-line and 305 mobile users of SAP CRM, as well as 600 users of SAP Business Warehouse, for analytical CRM, to glean trends related to bookings, billings, and customers based on regions, sales channels, or other modalities.
According to Molex, additional CRM return-on-investment includes improvement in program-tracking capability, resulting in a 5-percent revenue increase for global accounts; pricing coordination; program transfer coordination; sales revenue planning; and forecasting capabilities integrated with the enterprise suite.
Potential customers can start by shopping at Molex.com, where search facilities are available for research devoted to more than 100,000 products. More than 30,000 3D models can be downloaded. Registered users can check price and availability on-line. Ordering samples alerts the sales engineer to the activity, and as the engineer becomes more involved, the CRM system becomes the collaboration platform, used in tandem with the PDM system.
Worldwide rollouts
A global implementation team, still in existence to this day and varying in size from 30 to 60 people, put the first pilot R/3 system in Molex's Singapore facility—considered ideal because all relevant functional areas were resident at that single site, and having the additional benefit of being a long ways away from corporate headquarters.
"We used SAP and some other consultants for knowledge transfer, but did the implementation ourselves. We wanted to fully understand the system because it is so key to everything we do," says Matula.
Over the course of three years, with global and regional implementation teams working together, the enterprise suite was rolled out in all other facilities. "We tried to standardize any process we felt was global," says Matula, "while recognizing that genuine regional differences meant there had to be trade-offs and a balance."
Throughout a given site engagement, responsibility was given to the local implementation team, with the global team empowered by executive management support. Adjudication of conflict escalated through the CIO to executives on the original selection committee. "Decisions had to be quick," says Matula, "because when these critical issues surfaced, we tended to be close to the go-live date."
Within six months of implementation, all legacy systems were gone in about 90 percent of Molex's facilities. Today, Molex runs a single instance of mySAP—including a 2-terabyte database—and does more than 2 million transactions daily. There are about 9,000 users worldwide.
The same methods were used in staging Molex's changeover from R/3 to mySAP, and for the CRM implementation.
It isn't over yet, though. Having extended the system on the customer side, Molex says it's next thinking about supply chain management, and how it could optimize its available-to-promise capabilities using SAP APO, an advanced planning & scheduling solution, as early as the second half of this year. In this area, too, the same dynamic plays as for CRM, with the market divided into enterprise and best-of-breed vendors.
Going forward, Molex sees itself as layering collaboration and e-Business over the core enterprise functions. Concludes Matula, "Molex continues to build on its global integrated systems model and looks for further integration opportunities as we implement PLM, supply chain planning, and extensions for our e-commerce strategy. The strategic direction set back in 1996 continues, leveraging off that original investment in SAP applications."
