Successful implementations do happen
Sticking to critical success factors gets new PLM, e-Business, and ERP systems up and running with few glitches, quick payoffs
By Malcolm Wheatley, contributing editor -- Manufacturing Business Technology, 8/1/2004 6:00:00 AM
Sometimes it seems the phrase successful software implementation is an oxymoron—you know, a contradiction in terms, something that never happens. It seems that way because the horror stories—such as the now infamous tale of Hershey running short on inventory just before Halloween because it couldn't get its new ERP system running properly—make front-page news.
But the truth is, the amount of companies completing successful implementations today outnumbers those that fail. Dedham, Mass.-based ARC Advisory Group recently completed a survey of 158 companies that had finished installing supply chain management systems and found nearly two-thirds of those projects met or exceeded expectations.
For this report, MSI spoke with users, analysts, and consultants in an effort to tell you what it will take to make your next implementation successful. We received many suggestions, but we narrowed the list to three key success factors:
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Positioning the project appropriately within the enterprise;
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Taking a process-centric view; and
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Choosing the right implementation partner.
Following are three case studies that show how adopting these approaches led real companies to successful software implementations.
A properly positioned project
The most successful software implementations, says Jim Shepherd, senior VP of Boston-based AMR Research, aren't pitched as software implementations. Instead, he observes, "They're positioned as business transformation projects that just happen to involve new software." The difference might appear to be small, he adds, but it's nevertheless a critical strategy by which to gain the support of senior management and end users that is essential to any implementation's ultimate success.
That view strikes a chord at Rich Products, Buffalo, N.Y., a $2-billion company that also is one of the world's largest family-owned food manufacturers. "Getting new products developed faster, and getting them to market faster, underpins our entire corporate strategy," says Rich's CIO Paul Klein.
Initially, Rich thought it could improve its product development process by purchasing a stand-alone product formulation and specification system that would be used primarily by product engineers. But as the search for such a system dragged on for five years, Rich's management realized it actually was looking for a system that could transform the entire business.
Ultimately, Rich chose a product life-cycle management (PLM) package called Optiva from Formation Systems, because it not only offered the ability to automate the process of formulating new products, but also made it easy to share information on new developments across the enterprise.
Implementation began in late 2000, and took 18 months—a timescale influenced by the fact that Rich was one of Formation Systems' earliest customers, and also by the fact that putting all of Rich's product data and process flows into the system took longer than anticipated. "There were a lot of very detailed calculations that had to be built in," recalls Formations' VP of product management, Rory Granos.
During the manufacturing process of a doughnut, for example, water is driven off through evaporation, while fat is added from frying. The yield loss resulting from batter sticking to the sides of containers and processing vessels is another complication. The result: a complex, multilevel calculation is required to ensure that the correct consumer nutrition information appears on the product label.
Complicating the process, adds Klein, is that as a new product weaves its way from the development laboratory to the production line, subtle (and sometimes undocumented) changes can be made to its formulation to either streamline or lower the cost of the production process. To tie together all these stages, explains Klein, multifunctional teams had to work closely—which simply wouldn't have happened if the true business-transforming nature of the project hadn't been recognized.
"It's difficult to think of an activity that's more cross-functional than new product development," he says. "In the past, we might have treated it as an R&D-based formulation system, and not involved manufacturing to the extent we did." But retrospectively, having done so, the benefit is clear: smooth links between Optiva and the MFG/PRO package from QAD, which controls the production operations in Rich's 10 plants, right through to the enterprise suite from SAPthat tracks the flow of finished goods and manages all financial processes at the corporate level.
"There's one set of books," says Klein. New products are developed in Optiva, "and the information then populates the other enterprise solutions."
What's more, the "as-manufactured" information about existing products is available to researchers working on new products, leading to more rapid product development. Insight to the formulation changes that have been made to improve manufacturing processes have become the starting point for new products. The result? A project originally conceived of as a means of automating laboratory processes has morphed into a business-transforming initiative.
A process-centric view
In 2002, Leica Microsystems—a manufacturer of industrial microscopes headquartered in Wetzler, Germany—recognized a need for more visibility into its supply chain. But Leica faced two key difficulties. First, the enterprise systems deployed in its nine manufacturing plants and sales operations in 19 countries used different flavors of the SAP enterprise software suite. Second, while some key supply chain partners and customers in nearly 100 countries also used SAP, many did not.
The solution: Gentrans integration software from Sterling Commerce to link critical data flows among Leica and its trading partners.
"We wanted to create processes that crossed boundaries: integrated processes that allowed the supply chain to be managed from the point of sale right through to invoicing and cash collection," recalls Derek Payne, technology fulfillment manager at Leica's Cambridge, U.K.-based operation, where the system was piloted before it was installed in the company's data center in Hamburg, Germany.
In this, Payne was helped by a process-centric view that is endemic to Leica's culture. The IT function, for example, is the "Process Support Group," and is staffed by specialists familiar with the company's business, embracing logistics and finance people as well as programmers. Payne also cites Sterling's implementation methodology for its simplicity, as well as its ability to reflect the needs of external trading partners as stakeholders in the project.
But one of the most important factors behind the project's success was Leica's pragmatic determination to focus on one supply chain process at a time. The first process to be tackled—spare parts provisioning—began in October 2002, and went live in December 2002. Subsequent processes have included Web-based ordering by dealers, finished goods inventory management, and logistics. "It's very much been an implementation built around identifying a process, getting it up and running, and getting the value from it," says Payne. "By going for bite-size chunks, we were getting a positive return each time."
It's an approach to automating business processes that's very different from what was in vogue a few years ago, when weeks or months of a project would be spent carefully documenting the "as-is" processes and then designing their automated "to-be" replacements.
"These days, we recommend that companies actually use their new software to design the processes that they'll use," says Jim Shepherd, senior VP for Boston-based AMR Research, "because most vendors are embedding a lot of industry best practices into their systems."
Payne says Leica's new processes typically are two to five days faster than their predecessors, thanks to a reduction in manual rekeying. Automatic hourly updates are now the norm. "When we look at an SAP inventory report now, we know that it's accurate up to the last hour," he says. "For us, that's as real time as we need."
Choosing the right partner
According to Dedham, Mass.-based research firm ARC Advisory Group, almost 20 percent of users would work with a different implementation consultant if they were to repeat the implementation of a supply chain management suite.
"Plenty of companies regret not spending as much time on consultant selection as they do on software selection," says Simon Bragg, European research director for ARC. Bragg says to ask references to identify the consultants who worked on the assignments, draw up a shortlist of those named, and specify those individuals to the consulting firm. "Don't buy the consulting company—buy the individual," he advises.
It's a strategy that paid off for Bob Scheidt, director of operations at Rochester, N.Y.-based NexPress, a wholly owned subsidiary of Eastman Kodak that makes digital printing equipment. When NexPress upgraded its SAP enterprise suite in early 2003, Scheidt selected SAP's own integration consultants—SAP System Integration America (SAP SI)—for the job, partly due the group's implementation methodology, and partly due to the experience of the consultants it offered.
SAP SI's fixed-price rapid implementation methodology, called MaxValu, had appeal, says Scheidt, because NexPress "already was SAP-literate and very familiar with its business processes. Most of the other methodologies we looked at [required] weeks of workshops, meetings, and cross-functional teams for documenting the 'as-if' scenario. We didn't need that."
NexPress also didn't need consultants who were going to learn on the job. The four-person SAP-SI team assigned to the project averaged eight years of SAP experience and 15 years of industry experience. "Consultants with less experience tend to want to explore SAP's functionality, which slows things down," says Rick Ogburn, executive VP of SAP SI. "We employ consultants who have explored that functionality."
What's more, says Scheidt, the consultants in question already knew NexPress. "They had worked in our business before, which was key to our partner selection process: identifying people who were familiar with who we were, and what we did."
The result? In just 16 weeks, NexPress went live with an implementation that embraced two companies, three business units, and 180 users. The project took in a varied range of SAP applications, including finance, material management, production planning, quality management, plant maintenance, warehouse management, and sales & distribution.
In all, says Scheidt, thanks to a 30-percent reduction in support costs, a 50-percent reduction in MRP operations costs, and a 33-percent reduction in order management operations costs, "We took $1 million in ongoing annual operating expenses from the business in 16 weeks." That counts as a successful implementation in anyone's book.
