Archive for January, 2011

ERP Investments: Not everyone is singing the same tune.

Published January 31st, 2011 by Martin Buckley 2 Comments

Yeah, there has been some positive news as of late on return of growth for ERP, but not everyone is singing the same tune.  For example, I came across an article the other day in SupplyChainReview (http://www.supplychainreview.com/Technology/2011/01/12/erp-investments-to-slow-in-2011-pc-world.html) taken from PC World : ERP investments to slow in 2011

The article states that according to a Forrester Research report, ERP investment plans will dip this year from last, even though overall IT investment plans are predicted to increase. It also states that roughly half the companies surveyed are running on product releases that are 2 releases behind current.

It is is understandable that a lot of companies scaled back IT spending in general, and ERP system spending in particular, during the recession, but 2011 is projected to be better in terms of economic growth. If you agree with the Forrester Research, it begs the question: why is ERP system investment projected to decline, when it appears that a lot companies need to spend in order to upgrade and take advantage of the latest functionality theses systems have to offer?

The answer may lie in the very nature of ERP systems themselves. ERP systems are the transactional and processing bedrock of a corporation, and as such adhere to the following characteristics:

  • Transactional stability: The user must be assured every transaction processed is recorded and processed correctly.
  • Process stability: The user must be assured that no short cuts or missed steps are allowed to occur in the system.
  • Data Integrity and Security: The user must be assured that all transactions can be audited and reported on in future dates, without any worries as to the authenticity or integrity of the data.

The features required to ensure a solid ERP system also limit its potential in the enterprise. ERP vendors have tried to address this issue by adding modules, but the functional issues introduced by trying to adhere to the criteria listed above and still have the flexibility and additional features to support nontraditional ERP requirements such as supply and demand planning, simulation, and S&OP support have proven almost impossible to overcome.

Could it be that now companies are starting to look at more than just survival? Emphasis is being put toward improving how the business works and reacts to change, versus just ensuring current processes are performed correctly? This shift of focus will naturally favor enterprise systems that can support coordination of the complete business ecology, along with the ability to act as the ‘brains’ of an enterprises system. These types of systems have a very different set of criteria needed to meet the business requirements of today’s corporations, which might explain the shift away from traditional ERP spending towards systems that can lead to significant improvements in operational performance, not just better transactional control of data.

The ability to implement control over the numerous transactional and data storage systems in the enterprise and bring the data together in a meaningful way is crucial to getting the entire enterprise to react to change faster and move in the same direction in a coordinated manner. Once this capability has been realized in the business, the enterprise becomes much more able to compete and out maneuver the competition.  This in turn leads to higher growth numbers, improved margins, and better ROI.

It can therefore be argued that there could in fact be a movement of investment dollars away from traditional ERP system maintenance because of the desire for companies to dramatically improve their competitive position by investing in systems which can lead to a ‘smarter’ and more agile corporation.

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Posted in Supply chain management


Hot ERP topics – Still hot?

Published January 27th, 2011 by John Westerveld 1 Comment

Thomas Wailgum while still at CIO.com put together an interesting list of Hot ERP topics for 2011.  I know I’m a bit late to the game on this article, but it’s particularly interesting to take a look at this now in the context of the hype as of late on the supposed return of ERP.   I would encourage you to read his original post (you’ll need to sign up first…).  I haven’t outlined all his arguments, and added my thoughts on what Thomas had posted;

1.    ERP Customers (Finally) Get More Selective.

Wailgum points out that there are many more options than offered by the traditional ERP vendors.  When looking at filling new capabilities, give other vendors a serious look.  I’d add to this a warning not to be fooled by the “suite-talk”.  As Doug Colbeth says; do a Gut Check before pulling the trigger on buying capabilities from the incumbent ERP vendor.

2.    On-Premise and SaaS ERP to Co-Exist in “The Cloud.”

“Legacy on-premise ERP vendors long sought to keep SaaS ERP upstarts to the fringe of business software conversations.  The incumbents lost.”
As an employee with an on-demand software vendor I may be slightly biased, but Thomas has it right.  “The “co-existence” cloud ERP strategy should be a catalyst for more choice and change in the ERP market in 2011…”. You don’t need to buy more hardware and drive huge capital costs to make a significant impact in your supply chain capabilities.  Look to on-demand vendors to provide a cheap and easy way to get the capabilities you need.

3.    ERP Implementation Failures Continue Unabated.
Wailgum blames many of the failures on lack of  “well-considered, practical and appealing change management programs”.  While I can’t argue that this is a contributing factor, we also have to look at the complexity of ERP solutions and the zealous overselling of features and benefits.  I’ve written about what to do to avoid ERP failures in my article;  What’s you tip for deploying supply chain software (and keeping your job).

4.    Oracle (ORCL) Fusion Apps to Debut with a Thud.

“Oracle’s next-generation suite of enterprise applications has had more stops and starts than a Times Square traffic light”.  According to Thomas, Oracle’s customer base is simply not looking to migrate their systems to Fusion…given the  migration and maintenance costs, can you blame them?

5.    SAP Business ByDesign: Lukewarm Reception, Then Good Reviews.
“This is the make or break year for Business ByDesign , SAP’s suite of on-demand ERP applications. ByDesign went GA in summer 2010, and SAP and its customers are still in the honeymoon period right now. “
Time will tell how successful this offering will be.

6.    ERP Licensing: More Options, More Confusion, More Gotchas.
As more ERP companies offer multiple variations on an on-demand offering, there are many more licensing options available.  I can’t say it better than Thomas did in his 2011 prediction;  “Those CIOs and companies who neglect due diligence when buying ERP software in 2011—whether going the on-premise route or moving to the cloud (or some variation on it)—will open themselves and their companies to greater risk and financial exposure. A handful of CIOs will get burned and could lose their jobs. “

7.    Midsize On-Premise ERP Vendors Get Squeezed.

Small SaaS vendors are gaining traction with medium sized customers,  Large ERP vendors are looking to move down market . The mid-market vendors are feeling pressure on both sides.   Thomas says the key is differentiation; the mid-market ERP vendors must show that they can differentiate themselves and be all things to all customers.  My take is that mid-market ERP vendors must leverage their agility to beat the larger companies to the punch.  My advice to the mid-market ERP vendors;  if you aren’t on-demand already, go…go now…don’t stop till you have your first customer on-demand.  You’ll thank me later.

8.    Mobile ERP Momentum Stalls and Falls.

While mobile apps are all the rage in the consumer space, mobile in the ERP / supply chain world needs some careful thought.  This is a classic product problem that software companies often fall prey to; you introduce a capability because it’s cool, not because it actually solves a problem.  A word of advice for would-be mobile app developers;  understand your customer.  Understand your market.  Understand the problems that need to be solved.  Then determine the best way to solve that problem.  If the best way to do this is a mobile app,  if you execute well, then your app could be a success.  If not, then Thomas has it right;  “The mobile hype for business apps in 2011 will hit a fever pitch, and too many companies will invest foolishly and without any real business strategy. The inevitable “trough of disillusionment” (thanks Gartner!) will soon follow. “

9.    Vendors Attempt to Make ERP More Like Other Consumery Apps.

Wailgum describes two ways vendors are trying to make ERP move like Consumer apps;  One way is making data more accessible through better business intelligence tools and the other is using social tools to solve business problems.
I’m all for  making ERP data more accessible.  This has been one of the key benefits of our RapidResponse product.  If however, making ERP more “consumery” means adding “social” capabilities. I’m not as sure.  I’m not saying that there is anything wrong making ERP more “social”.  Similar to the Mobile craze, my concern is that the vendor is jumping on the hype without understanding the market, the customer or the problem.  Again, if social tools can add real value (and done right, they can) and the software company implements well, the product could be a success.  If the vendor is just jumping on the hype,   well , I think Thomas puts it best; “When your vendor rep tells you his legacy financial or supply chain application is now more “Facebook-like,” just leave. Fast.”

10.    Third-Party ERP Maintenance Under the Microscope

The big ERP vendors have been charging huge dollars for support and maintenance and customers are simply not satisfied with what they are getting.   SAP and Oracle just aren’t listening to what their customers are saying;
“Oracle, SAP and others have gone to extraordinary lengths to protect their maintenance and support golden eggs even while their customers have voiced frustration and threatened revolt.“
I couldn’t agree more.  As I pointed out in my post Perpetual ERP software – a broken model?, many companies are looking for alternatives to paying the extortion-like support and maintenance costs demanded by SAP and Oracle.

11.    My ERP-Themed TV Reality Series Does Not Come to Pass.

Don’t give up so easily Thomas!  Supply chain CAN Be entertaining if you give it a chance. You can have comedy with “New Kinexions.”  You can have drama;  with “Suitemates”.  You can have variety with the “Late, Late Supply Chain show” and educational content with “Uncle Jay explains”.  All can be found here.

Now that we are into 2011, do these hot topics still resonate.  Anything new to add? Comment back and let us know.

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Posted in Supply chain management


Heating up supply chain analysis.

Published January 26th, 2011 by Bill DuBois 1 Comment

Venturing out on the morning of the coldest day on record this year in Ottawa to play hockey may not have been the smartest thing I’ve ever done, but I did it anyway. The last word you would use to describe my movements on the ice would be “flexible.” Everything was frozen and I bet they had to turn on the heat in the hockey arena just to get back to a temperature between freezing and bone chilling. When frost bite is the result, you tend to learn your lesson. This led me to wonder why there is a continued use of tools for supply chain analysis that are “frozen.” Even after being “frost bitten” by the lack of flexibility when it comes to analyzing and responding to both planned and unplanned events, the heat does not seemed to get turned up on the existing tools.

Let’s take the SCOR Upside Supply Chain Flexibility measure. This measure is described as, “the amount of time it takes a supply chain to respond to an unplanned 20 percent increase in demand without service or cost penalty.” This begins with knowing about the change, understanding the risk associated with the change, and then determining how best to respond to the change. Knowing sooner means having all of the right data along with the analytics that will not only highlight the risks, but also provide insight into your response alternatives.

Your ERP system may give you most of the data, but some customer and supplier data may still exist outside ERP. Getting all the data and then applying the analytics, can be difficult, especially if you want to run multiple what-if planning scenarios.

Of course, the other popular option is Excel. It may be easier to get data into Excel but it is unlikely you would have all of it. The analytic piece of the equation is the most difficult to replicate in Excel. The one advantage of Excel over ERP is that it tends to be easier to use. However the challenge becomes similar to using a heating pad to warm up at the rink, it is only good for one. As soon as the Excel file gets passed around, changes are made and then the “right data” question comes back into play. This is important because in most cases any response to the change, for example the unplanned 20 percent increase is not going to happen in isolation.

In order to increase the analytic side of your “Upside Supply Chain Flexibility” measure, the wish list begins to look like this;

  • All of the right data in one place.
  • Supply chain analytics in the same place as the data.
  • Easy access to the data and the analytical tools for all required participants.

Look for these attributes to heat up your supply chain analytics capabilities. I guess only a frozen hockey player would come up with this analogy.

Keeping on the lighter and warmer side of flexibility, be sure to check out this week’s New Kinexions video on flexibility. Poor Ari Cole can’t bend like he needs to! Click here to watch Episode 2 and don’t forget to enter our “New Kinexions” contest! To learn how you can win an Xbox 360 with Kinect, visit https://community.kinaxis.com/thread/7369


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Posted in General News, Response Management, Supply chain management


Another year of double digit revenue growth for Kinaxis.

Published January 25th, 2011 by Lori Smith 1 Comment

Hope you don’t mind us stepping outside our typical ‘no vendor hype’ style of our blog, but we announced some business performance stats for 2010 today and wanted to share some highlights here, along with a short message from our CEO.

Over the last 5 years the company has grown revenue sequentially each year, and 2010 was no different having achieved:

  • double digit revenue growth
  • continued profitability
  • double digit free cash flow (FCF) growth

Doug Colbeth, our CEO, shares why he thinks Kinaxis is enjoying record financial performance…

Posted in General News


Supply chain responsiveness: the top competitive advantage for fabless semiconductor companies?

Published January 24th, 2011 by Trevor Miles @milesahead 1 Comment

The semiconductor industry has experienced rapid growth over the past few decades driven by leaps in innovation. To meet demand for specialized application devices, US based semiconductor firms realized they needed to become more agile and focus more resources on product development, which was their key point of differentiation. The innovations in chip design and the ever shorter product life cycles were making manufacturing ever more complex, which the semiconductor companies recognized was not their key differentiator. Having started outsourcing wafer fabrication in the 1960’s, by the early 1990’s most semiconductor companies had outsourced the bulk of their production to third-party foundries, which allowed fabless semiconductor firms to focus their resources on creating new, industry-changing products.

As can be expected, semiconductor chips are critical components in consumer electronics products from desktops, to laptops, to smartphones, to tablets, to e-readers, to cameras, and the convergence of all of these into hot new gadgets such as the iPad.  Given the success of smartphones, the iPad, Amazon’s Kindle (est 8-million units sold and currently out of stock worldwide), electronics is one of the few bright spots in the economy where consumers will gladly dish out large sums of money on a device that has less than a two year lifespan. Nothing captures the explosion of the devices required in consumer electronics better than the massive Morgan Stanley report titled “The Mobile Internet Report”, which, because it was published in 2009, doesn’t even capture the explosion of the iPad.

In addition, an increasing number of traditional products are going high tech like cars, washing machines, dishwashers, refrigerators, etc.  In many cases, the primary differentiation between dishwasher models from the same manufacturer is no longer the physical mechanics but rather the control chips that add different cycles and options.

While there has been an explosion in the number of chips required to serve the increasing digitalization of products, there has also been a massive increase in custom chips required for specific purposes, as well a huge pressure to reduce the product life cycles.  It is this pressure to innovate that has driven many semiconductor brand names to focus on design, marketing, and sales, and to outsource manufacturing.  However, semiconductors are in the middle of a very long and complex value chain – one that is not very responsive to demand swings because of long manufacturing lead time, high capital costs and time to increase fab capacity and numerous supplier relationships throughout the different stages ―from wafer production to fulfillment.  Building a new foundry typically requires about $4-billion and takes two years from ‘first shovel’ to ‘first wafer’.  Given the rapid development of new wafer manufacturing technologies that improve the power consumption to speed ratio as well as ever smaller circuitry and ever larger wafers, fabless semiconductor companies are increasingly dependent on a few large foundries.

Fabless semiconductor companies that can be responsive to customers while remaining cost efficient will gain an advantage over their competition. At our recent user conference, Mark Utter, Sr Dir for Qualcomm, spoke about how Qualcomm has been able to achieve a 98 percent on time delivery rate and an 85 percent order flexibility rate (i.e. being able to fill an order on the customer’s initial requested date). Qualcomm has been able to perform at this level with only four days of on-hand inventory, which is extremely impressive given the increasing demand volatility and long lead times from the foundries.  How does Qualcomm do it?  They work hard at creating a fast, reliable, flexible, scalable and cost effective supply chain through investment in better manufacturing process (postponement strategy), close collaborative relationships with suppliers and customers, excellent visibility to their entire supply chain and solid processes that allow them to be proactive and respond quickly when something unexpected arises, either in the long-term or in the short-term. Click here to watch a video from Qualcomm’s presentation at Kinexions ’10.

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Posted in Milesahead, Miscellanea, Response Management, Supply chain management


A short history of Kinaxis.

Published January 21st, 2011 by Duncan Klett 1 Comment

We continue to have a few new hires around Kinaxis and part of their orientation is to meet with me and get the history of Kinaxis. I always enjoying sharing the history of how the company began and thought it would be interesting to share on the blog.

There were three of us who started the company and we had been working at Mitel, which at the time was a producer of telephony PBX equipment and also offered key integrated circuits that facilitated its core product functionality.

We were all in the Computer-Aided Design area, providing and supporting software used by electronic circuit designers.  We observed that wonderful things happened when designers could run multiple, interactive, simulations of circuit performance.  Optimizers were available at the time but had two huge barriers for utilization – we could not practically provide all the rules and alternatives to the optimizer, and for any problem involving more than a few decision points, run times became so long that our designers did not want to use the optimizers. Instead, we observed designers using simulation to experiment with factors they thought might be significant.  After a few simulations, they often discovered breakthrough solutions. We were having great success with one particular piece of special purpose hardware which ran logic simulations about 1000 times faster than our software-only solution.  Remember, 1000 times faster turns three hours into 11 seconds!

At the same time, we had been given responsibility for the corporate MRP system.  The key process, Material Requirements Planning, was run on weekends because it needed about 40 hours to run. And more frequently than anyone really wanted to admit, there would be a problem with the weekly run.  At that point, the operations organization was faced with a huge decision:  stop ongoing transactions and re-run MRP for the next 40 hours or continue to execute from last week’s results.  Also, due to the long run times and weekly processing, users couldn’t decipher the relationship between changes they made and the results they saw the following Monday.

We believed there was an opportunity to make supply chain planning into an interactive process, complete with truly iterative simulations.  On this belief, we resigned our positions at Mitel and started the company that is now Kinaxis.

The Kinaxis RapidResponse product now being used by our customers represents at least five complete redevelopments of the product.  Our first product was single-user custom hardware housed in two 6-foot, 19-inch racks.  Today, the product is purely software, runs in Windows Server, is accessed from anywhere on the Internet, and can have thousands of users simultaneously seeing information and simulating potential changes.

What we learned along the way is core to the differentiation our product holds today.  We learned that:

  • It is indeed possible to calculate full MRP at least 1000 times faster than any other approach.
  • The system must easily integrate and process data from multiple sources including the user’s own ERP environment plus data from customers, suppliers, and other sites in each of those organizations.
  • The sheer volume of data available can only be turned into actionable information through a user interface that provides limitless capabilities in aggregation, sorting, selection, analysis and comparison.
  • Users need a multi-scenario environment that supports both independent simulations and sharing of scenarios amongst various users.

Kinaxis has been unbelievably fortunate that most of our original developers continue to develop new product functionality.  They have learned through each redevelopment resulting in the incredible functionality available in RapidResponse today and new functionality that will become available in the future.  We are also incredibly fortunate to have many field personnel who have worked with RapidResponse for many years, often as our customers, and have deep understanding of the markets we serve.

So there you have it – The background of how Kinaxis began. Many things have changed over the past years but it’s always been fun and always leading edge!

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Posted in Miscellanea, Supply chain management


The secret sauce for achieving continuous and collaborative S&OP.

Published January 20th, 2011 by Trevor Miles @milesahead 0 Comments

I’ve got another presentation on the go.  We are participating in the Sales & Operations Planning Summit taking place on January 27 – 28, 2011 in Las Vegas, and I will be presenting a session called, “Continuous Sales and Operations Planning for High-tech/Electronics Manufacturers.”

Here’s an abstract from my session:
Planning has long been segmented into different isolated activities that reflect organizational structures and functional goals, leading to long, ineffective, and inefficient planning cycles. For maximized value, sales and operations planning (S&OP) must be a truly cross-functional activity that can directly and simultaneously address both individual departmental goals and joint corporate objectives. In this session, attendees will learn about the specific technology and process requirements to achieve a continuous and collaborative S&OP capability as it applies to the high tech and electronics manufacturing industry in particular.

Despite being pretty busy next week with two events (I’m also presenting at the Bio-manufacturing Summit 2011 earlier in the week) I will be tweeting so follow me at @Milesahead. And stay tuned to the blog after the event for a round-up of my news and views.

Also, if you’re at the event, please stop by the Kinaxis booth and say hi!

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Posted in Milesahead, Sales and operations planning (S&OP), Supply chain management


Mobile is the future; Apple is the leader.

Published January 20th, 2011 by Trevor Miles @milesahead 0 Comments

In November 2009 Morgan Stanley published “The Mobile Internet Report” that outlined the massive uptake of mobile devices over the past few years, particularly Apple’s iPhone. While there is some indication that Android phone activations have caught up to iPhone activations, the market as a whole is growing so quickly that yesterday Apple reported stellar results for the last quarter. According to mobiThinking.com

1.    Mobile subscribers will surpass 5-billion in 2010 (that’s over 70 percent of the world population) and growing rapidly, led by China and India.

• What other medium offers that reach?

2.    Half a billion people accessed mobile Internet worldwide in 2009. Usage is expected to double within five years as mobile overtakes the PC as the most popular way to get on the Web.

• But with 277 million mobile Web users just in China, this estimate is sounding a bit conservative

How I wish I had bought some Apple shares as little as 12 months ago. They blew away market estimates in terms of both revenues and earnings with a consequence bump in stock price. With a market cap of approx $320 billion they are the most valuable tech company and one of the most valuable across all industries. Exxon Mobil is the biggest at around $400B.

What’s remarkable about the results is that they could have done even better if they had been able to manufacture more products. CFO Peter Oppenheimer told investment analysts:

“We continue to have a sizable backlog, and believe we could have sold even more iPhones if we had been able to supply them.”

While it’s not clear whether their backlog is due to assembly capacity or component supply, one thing that is abundantly clear is that Apple is in the enviable position of being able to report a backlog. This is very rare in a consumer market and testament to Apple’s brand loyalty. As can be seen in the graph above, the volumes, growth rates, and new product introductions that Apple’s supply chain organization manages were impressive and continue to be impressive. For example iPhone capacity was increased by 2-million units in Q4 for a total volume of 16-million units per quarter. That’s a 14 percent increase in a quarter. At a time when other companies are scrambling to get sufficient capacity and components to maintain existing shipment levels, let alone increase them by 14 percent over a quarter.

Given their current backlog, things are about to get tougher for Apple with the iPhone now just becoming available to Verizon’s 93 million customers. COO Tim says

“We do still have a significant backlog. We are working around-the-clock to build more. I feel great that the demand is so high, but at this point, I’m not going to predict when supply and demand will meet. We believe the reaction and results from the Verizon customers will be huge, and so I don’t want to give a prediction right now when the supply and demand will cross.”

Apple has been able to ramp production without sacrificing quality. They have top customer satisfaction ratings in their industry, which is a big reason for their brand loyalty. Given their amazing performance it is no surprise that AMR has names them the #1 supply chain for the past 3 years.  I can’t think of anyone that will take the #1 position away from them this year.  I wonder how they do it?

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Posted in Milesahead, Miscellanea, Sales and operations planning (S&OP), Supply chain management