Cindy Jutras: Globalization prompts consideration of automated workflows

Cindy Jutras -- Manufacturing Business Technology, 4/1/2007

Enterprise resources planning (ERP) is a mission-critical component of any globalization strategy, though it’s often overlooked when the focus is on global supply chain issues. The majority of companies today still rely on some element of manual effort or spreadsheets to consolidate financial reporting and fulfill global trade management, as well s legal and reporting requirements.

These observations prompted a recent Aberdeen study, The Role of ERP in Globalization, which explored the extent to which companies have global operations, engage in global trade, and the rate at which global operations are expanding or shrinking. Aberdeen looked to answer these questions: Are companies rethinking low-cost country sourcing strategies? Does offshore production involve opening up new production facilities or outsourcing? What implications do these decisions have on ERP?

Here are some prominent findings:

c The No. 1 business challenge manufacturers face in going global today is the increased complexity of the supply chain.

c In spite of these challenges, overall globalization efforts are definitely continuing to expand, not shrink. In fact, only 4 percent of companies are planning to shrink international operations, and 83 percent are planning to expand.

c Companies are slightly more inclined to partner or procure, but almost half have wholly owned sales, service, support centers, or manufacturing facilities in foreign countries.

c Manufacturers have a strong preference for supporting all international operations from a single instance of ERP, but hardly any of them actually do so.

More specifically, less than one in five companies support all international operations from a single instance of ERP. More than half run multiple ERP systems, or multiple instances of the same ERP. This translates into IT challenges—the most notable being the lack of standard implementation of ERP worldwide.

So without a single instance—or a standardized implementation—of ERP, are global companies doomed to failure, or at least a struggle? Not necessarily. We found two factors that contributed significantly to better performance in some of the metrics that count the most: reducing lead times from order to delivery, and increased global market share.

First and foremost, companies that streamline and automate workflows across multiple sites—including suppliers, partners, and manufacturing sites—in support of collaborative processes produce better operating results in all but one of the benchmarked operating metrics. These companies were able to beat the average reduction in manufacturing costs by almost 22 percent, improve complete and on-time delivery by 18 percent, and increase profitability by 28 percent above the average.

The most impressive differentiation came from comparing reduction in total time from order to delivery, where best-in-class companies reported a 66-percent improvement.

For the complete results from Aberdeen’s latest benchmark, The Role of ERP in Globalization, click on the following link for complimentary access to download the full benchmark report: http://www.aberdeen.com/summary/report/benchmark/RA_ERPRoleinGlobalization_CJ_3906.asp

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