ERP gets redefined
Manufacturers including Osram Sylvania, Solatube, VBrick, and J & H Machine Tools harness outward-facing, extended enterprise systems
By Roberto Michel, Editor -- Manufacturing Business Technology, 2/1/2001 7:00:00 AM
The road to outward-facing, Internet-based applications at Osram Sylvania reached a milestone last year with the launching of a Web-based supply chain portal, but it's also a road built on a foundation of enterprise resources planning (ERP) software. While ERP packages are being knocked by some experts as a dead product category, ERP is alive and well at Osram Sylvania, playing a key-though less up-front-role in the company's strategy.
Danvers, Mass.-based Osram Sylvania, a manufacturer of lighting products, launched its portal, known as mySYLVANIA.com, on Oct. 9, 2000. The portal was built using customer relationship management (CRM) software functions from SAP, Newtown Square, Pa. The portal also integrates with R/3, an ERP package from SAP that the company has been using for years.
"R/3 acts as the brains of our portal," says Mehrdad Laghaeian, Osram Sylvania's CIO. "From both the vendor side, and the customer side, when someone interacts with the portal, they're interacting with R/3."
The company, which has multiple divisions, began deploying R/3 back in 1994, when client/server ERP systems were still a relatively new proposition for large enterprises such as Osram Sylvania. The system went live at one division back in 1996, but it took until March of last year for the system to be deployed fully across all of the company's divisions. Laghaeian says Osram Sylvania has continued to enhance the system and keep up with new versions, while also recognizing that the Internet holds the potential to open up enterprise information to supply chain partners in a way that electronic data interchange (EDI) never could.
"When you think about it, companies implemented ERP systems as a means of running their businesses," Laghaeian says. "Well, no one's business is isolated. Business systems have always attempted to support some means of external communication. In the past, that means of communication was EDI, but it was too limited in its reach. Today, the ability of portals and Web-based solutions to support information exchange makes ERP systems seem like much better systems than they might otherwise be."
Indeed, it's widely recognized that software offerings from ERP vendors are more outward-facing, and more attune to supply chain collaboration than before. Today, enterprise system solutions have evolved to such an extent that new terms are being applied to these offerings, which incorporate extended applications in areas such as CRM and e-Business, and use componentized software for added flexibility. Gartner, the Stamford, Conn.-based analyst firm, uses the term "ERP II" to define such outward-facing enterprise systems.
"ERP II is no longer concerned just with the enterprise itself," says Brian Zrimsek, a Gartner research director. "Solutions have to be able to reach out to other organizations, whether those organizations be customers, suppliers, channel partners, or e-marketplaces. ERP II solutions must support external connectivity to all these entities, and beyond that, they must support collaborative commerce."
Enterprise system vendors agree with the notion that support for inter-enterprise collaboration is essential. "Where the battle is being waged now in the software industry is in offering systems that help companies optimize the business processes and communications that take place between companies," says Scott Galloway, a vice president with PowerCerv, a Tampa, Fla.-based vendor of extended enterprise systems. "The inter-company processes are where most of the waste resides in supply chains today, not within the four walls of the enterprise."
Perhaps most important, companies already are implementing extended enterprise systems. Osram Sylvania, Solatube, J & H Machine Tools, and VBrick have implemented enterprise systems with integrated CRM capabilities. Such companies are finding that enterprise systems with extended capabilities play a vital role in supply chain management.
e-Business dominates
Extended enterprise system solutions provide a foundation for e-Business, say some software executives. "We say ERP alone is not enough, and that CRM alone is not enough," says Lisa Burris Arthur, a vice president with Redwood Shores, Calif.-based Oracle Corp. "It's really a question of turning to an e-Business suite."
Oracle contends that its e-Business software suite, which includes e-commerce, supply chain planning, ERP, and CRM applications, offers a level of integration that can't be matched by a best-of-breed approach. For instance, says Arthur, Oracle is on the fifth generation of its integrated ERP/CRM solution, and today offers 200 points of integration between these application sets.
SAP also positions its current product line in the context of e-Business. "The term we've adopted [for our offerings] is an e-Business platform," says John Wurfl, director of CRM communications for SAP. "An e-Business platform provides a company with a common, integrated means of engaging with customers, suppliers, and partners, so that it knows what its customers want, and so that it can respond to these needs effectively. In the end, what we evolve to is a platform for demand-driven supply chain management."
Laghaeian agrees with the concept of an e-Business platform. "We never bought into the whole idea of front-office versus back-office applications," he says. "We've looked for a way to build systems that are seamless and can economically share information. The front-office and back-office distinctions don't matter much to end-users. They are simply seeking information."
The mySYLVANIA.com portal provides a common window to information and transactions for the company's customers and supply chain partners. Specifically, mySYLVANIA.com uses SAP's CRM Internet Selling capability to provide on-line ordering and sales execution functions.
Using a log-on, authorized users such as suppliers, distributors, and customers-including retailers or maintenance organizations that buy lighting products-access the portal. Once they enter the portal, they can browse the company's general catalog, they can see their specific pricing, they can process an order, or check the status of orders.
While there are limits to what partners and customers are allowed to see, Laghaeian says that essentially, the information sources are the same for either internal or external users. "Customers and customer reps navigate and interact with the system in the same way," he says. "It's all built on a common look and feel, supported by systems with common business processes."
Backbone for fulfillment
ERP systems always have handled production planning and order fulfillment, but typically from the perspective of keeping internal departments and transactions in sync. Today's enterprise systems, by contrast, focus on order fulfillment from more of a customer perspective.
Syspro Impact Software, a Costa Mesa, Calif.-based enterprise system vendor, has coined the term Strategic e-Fulfillment to describe its approach to ensuring supplier competitiveness. Using Syspro's Impact Encore ERP system as a core engine, as well as Syspro's extended applications in areas such as CRM and advanced planning and scheduling (APS), manufacturers have an infrastructure with which to drive fulfillment decisions, contends Joey Benadretti, a Syspro vice president. "At the end of the day, customers' needs are paramount," says Benadretti. "The critical element in addressing those needs is having a solution that ties together information so suppliers can make better decisions."
Solutube, a Vista, Calif.-based manufacturer of tubular skylights, is using Impact Encore in conjunction with Syspro's integrated CRM solution as an extended enterprise solution. The company implemented Impact Encore two years ago, and began using Syspro's CRM solution last June. "Back when we were evaluating ERP systems, one of the main reasons we decided to go with Syspro was that we knew they were going in this direction [offering integrated CRM]," says Joe Ammon, Solatube's MIS manager. "We knew we needed not only the core ERP applications, but customer-facing applications as well."
Previous to using Syspro's CRM solution, Solatube used a PC-based contact manager application, but according to Ammon, it was difficult to keep information-such as customer master data-in sync between the contact manager and the ERP system. With Syspro's CRM application, Ammon says, the integration has not been a worry, and the CRM application also offers deeper functionality than a contact management program. "There is a wealth of information available through the CRM application," Ammon says. "Managers can look up information by salesperson code, by customer code, and by other criteria. It's really a system for sales execution, not just a contact manager."
Collaborative backbone
Vendors taking up the ERP II banner say that the ability of an enterprise system to handle external connectivity is a hallmark of ERP II. "The key is that systems should be supply-chain focused," says Rob Rennie, CEO of theSupplyChain.com, a Newport Beach, Calif.-based vendor of a hosted enterprise system solution. "Our solution provides one common foundation that handles both internal transactions, and transactions with trade exchanges or partner systems."
John Bridges, a vice president with IFS, a Tucson, Ariz.-based enterprise applications vendor, says the ERP II definition fits IFS well because the extended capabilities of IFS's product suite facilitate collaboration. "If you start with the premise that the market is migrating from internally oriented enterprise systems, to ones that are externally focused, that means that enterprise application suites should support portals, connectivity to multiple data sources, and multisite, multicountry operations," Bridges says. "Additionally, extended applications such as CRM or APS should be an integral part of the offering, not just interfaced."
J & H Machine Tools, a value-added distributor of machine tools based in Charlotte, N.C., is using IFS's product suite, called IFS Applications, in a collaborative manner, starting first with internal collaboration. The company is a distributor, but performs what can be extensive configuration and customization work on machine tools for end-customers.
After deploying several core functions from the IFS suite, J & H deployed IFS/Sales Configurator, a sales configuration application. According to Cindy Gossett, manager of finance and information technology at J & H Machine Tools, the integrated CRM solution is popular with J & H's managers and salespeople. "We knew we needed a system with all the core requirements of ERP, but it's definitely the tools on the sales side that have created the greatest excitement," Gossett says.
The configurator's rules engine captures knowledge about how specific machine tools should be configured and installed, and turns sales orders directly into work orders. "Basically, it keeps us from having to reinvent the wheel every time we're faced with a new project," says Gossett.
The configurator is deployed on sales representatives' laptops, says Gossett, allowing the sales reps to build accurate quotes at customer sites. "We're shortening our overall sales cycle, reducing the chance for errors, and we're better able to meet delivery promises," says Gossett.
Besides product configuration, other CRM functions within IFS Applications also help J & H work more collaboratively, says Gossett. "We log projects with certain milestones, notes, attached engineering drawings, and other types of information that we use to create hot lists," says Gossett. "This provides us with a history of project interactions that we can use both inside and outside the company. It really impresses our customers when we can give back to them so many details from prior meetings, discussions, and projects, right from their locations via our laptops."
Extending automation
For Bryan Neumann, vice president of operations at VBrick, a manufacturer of video networking products, CRM brings much of the same efficiencies to sales processes that ERP software brings to back-office planning and transactions. Based in Wallingford, Conn., VBrick uses Fourth Shift 7, an ERP system from Minneapolis-based Fourth Shift, integrated with Fourth Shift's CRM offering, called Fourth Shift BRM.
"Our goal was to automate sales," says Neumann. "We have a nationwide sales force that needs a lot of information, and we don't have the manpower to be constantly on the phone with the sales force, tracking down information. With CRM, all the information the salespeople need is right in front of them, in the form of a to-do list. No one is wasting time tracking down information."
The company began using Fourth Shift's ERP system in July 1999, and went live with Fourth Shift BRM last October. Although the CRM product is offered through an alliance with Pivotal Corp., based in Vancouver, Canada, Neumann says the integration is effective, and he likes having one enterprise application vendor. "The fact that Fourth Shift did the implementation to the back-office system, and that there was one source to call for all the problems, is one of the reasons we chose the solution," he says. "With a single-source approach, there can be no finger pointing."
Neumann says VBrick did not conduct a formal return-on-investment (ROI) study on integrating a CRM solution with its ERP system, but he believes the system has been effective in reducing communication with field salespeople, speeding order entry time, sharing knowledge about customer accounts, analyzing the effectiveness of marketing campaigns, and improving sales forecasting. "We weren't looking at this project from the traditional ROI perspective," he says. "I think if you look at everything through those glasses, the world will pass you by. We knew that we needed the tools to compete with the big boys, rather than trying to do things manually."
Transparent solutions
While integration worries tend to drive the market toward single-vendor solutions, the advent of Web-based portals tends to make the choice of application vendor less of an issue for end-users. At Osram Sylvania, for example, SAP is the main applications provider, but the company built an employee portal for human resources information using Lotus Domino from Lotus Development Corp., Cambridge, Mass.
"The whole idea of a portal is that users don't have to concern themselves with which application the information they need comes from. The information they need is just readily apparent to them," says Osram Sylvania's Laghaeian.
In the future, the company may use the mySYLVANIA.com portal to facilitate collaborative forecasting and planning. The company also is evaluating data warehouse and APS solutions. Whatever direction the company goes, it is confident its current e-Business platform, leveraging ERP functionality underneath, will serve as a solid foundation. "Do we have all the pieces of a extended solution? No, not yet," says Laghaeian. "But we've built a platform that has all the hooks in it for building further extensions."
