Archive for the ‘Products’ Category

I recently read the article “Coming Dominance of On-Demand Supply Chain Software” by Dan Gilmore and it got me thinking about the history of SCM software implementations and where the industry is going.  Just on a lark I Googled “failed supply chain software implementations” and got 33,000 hits.  To me that is an indicator that this is a hot topic.  The past years have been a wasteland of high profile failed implementations with such companies as Nike, Waste Management and Hersey (to name a few).  Obviously all the failures were for very different reasons, but a failed supply chain software implementation can have a dire impact to a manufacturing company, such as not being able to manufacture or ship new product!  What could be worse than that?  Make no mistake about it, the business problems that supply chain software solve are difficult and complex, so perhaps it is time for a change.

I agree with the author that the future of supply chain software is on-demand.  But the real question is why? 

I personally think it stems from the fact that companies no longer want to risk huge, costly, time intensive implementations of software with no predictable end result.  On-demand software can offer the customer a whole new future. 

Low up front software costs (no huge multi-million dollar investment), no hardware cost and generally speaking the subscription pricing is user-based so customers have the ability to try the software with a few users, get some user adoption before committing to a huge roll-out across the organization.  This helps to de-risk the investment.  And honestly, customer executives would no longer have to potentially put their job on the line for a supply chain solution. 

Also, I believe on-demand software companies have to provide better customer service than traditional on-premises licensed software because the software vendor is constantly trying to earn and retain a customer’s business.  There is no perpetual forever license. The software company must listen to customer needs and adapt to them or face the customer going off subscription.  As everyone knows, the supply chain industry is dynamic so the way to solve a problem today can be different tomorrow.  Wouldn’t you want to work with a vendor that would actually listen to your customer requirements and put them into the product rather than to have a bunch of custom code the vendor won’t support?  I think you get more of that with an on-demand software vendor.

The author also made a very interesting comment “Increasingly, you will be able to try the software before you buy it! What a dramatic, game changing impact that will have.”  Just think about that for a minute.  What a huge statement.  If all those companies who had failed supply chain implementations could have just tried it before they made a huge investment would it have made a difference?  For some, yes and others maybe not, but the key point is that consumers of supply chain software can be more educated prior to embarking on a software implementation. 

What would be even more provocative would be a company who is willing to not only let you try the software for no cost, but also perform the implementation with no initial services fees and no cost at all if you don’t like it…  That would really change the game, the customer could completely de-risk their supply chain software decision.  Now that would be bold.

I can’t believe it’s already been 6 weeks, but it must be true because the last “Suitemates” webisode is out – Speak E.A.S.Y.

Have you been following Bilk-Moore executives (played by notable actors Kevin Pollak and Ray Wise) as they navigate the perilous world of prison life and legal appeals?! So… was their guilty verdict overturned? You have to watch to find out!

We’ve had a lot of fun with this. And the fun will carry on as the videos continue to be passed around and viewed. Not to mention the blooper reel comes out next week! And the ‘Elephant in the Room’ contest is still open.

But while the videos were done in jest, they come with a serious message. The corporate landscape is littered with failed ERP-SCM projects. Companies no longer have the IT budgets to support large implementations of complicated licensed solutions…. nor the consulting engagements required to make all the pieces work…. or the maintenance fees that accompany it. Recently, there have been signs of a push back (and we hope we are a part of that). Those in the industry are no longer being seduced by the suites. As we have professed before on this blog, CIOs and supply chain executives deserve to have more confidence in the success of the solution, more accountability on the part of their vendor, and certainly better ROI.

In fact, just yesterday I saw this blog post by Panorama Consulting. Based on results of a recent survey they found that

the average annual cost for companies implementing on-premise ERP packages is $6.2 million, and average business benefits realization is 37.2%. So what do these numbers mean to your business? …In general, the total cost of an ERP system includes software costs, service costs and annual maintenance fees, which are typically about 20% of the cost of the software licenses. Based on these assumptions, when we consider an average cost of $6.2 million, an average payback period of 2.7 years, and average benefits realization of 37.2%, the model shows that the benefit loss from the ERP implementation is $4.3 million! Additionally, it takes you 2.7 years to recover these costs while it should have been only 10 months!

Enough is enough. The model is flawed. It’s time for a new paradigm right? We think so. We’re doing as much as possible to break the mold and move away from the old software model (the tired and failed supply chain software model in particular). We’ve only begun to shake things up. Don’t believe it?…well, stay tuned for some bold moves ahead.

I recently read a blog post titled “Beware Supply Chain Excel Users—YOU are DOOMED!!!!” by Khudsiya Quadri of TEC.  I completely agree with the author that there is a big risk to SCM Professionals who rely too heavily on Excel.  There are all the reasons listed in the article such as  lack of collaboration, visibility, control and no ability to perform “what-if” scenarios.  I would like to add some additional thoughts to this discussion.

A big limitation of Excel in my view is that it cannot mimic the analytics in the company’s source ERP system.  Why is this important?  If someone is using Excel to make business decisions without all the capabilities the ERP source system has, then they may not be making the right decisions.  How can you make planning decisions if your spreadsheet doesn’t take into consideration functionality like sourcing rules, constraints and order priorities?

A company’s supply chain map is very complex, typically there are internal manufacturing data sources, external manufacturing data sources, inventory site data, etc.  It is possible to get data from multiple sources into Excel, but the big challenge is that the data is not always the same from each source system, so many organizations may have multiple spreadsheets to perform the same function/analysis.  But can any of those spreadsheets be truly accurate if they don’t show a true picture of the whole supply chain?

It is almost impossible to control the integrity of spreadsheet data and access to the spreadsheet.  With multiple people accessing the spreadsheet and no security, how can anyone have any confidence in the data?   In addition, most spreadsheets need to be reviewed by many people which typically requires pushing the spreadsheet around.  Without system standard security, data integrity could be an issue and auditing who made changes could be an issue.   How can there be a high level of confidence in the data and subsequent business decisions made?

I have known many supply chain companies who do make critical business decisions based off of spreadsheets.  For example, one company would use spreadsheets to analyze big order drop ins.  If they had a big order drop in they would use their spreadsheet(s) to determine the effect on their business and when they could commit to the customer to deliver the order.  This would typically require multiple spreadsheets getting data from multiple sources, tons of manipulation, trying to tie data together, and many different users from the organization looking at their piece, which would take several days and by then the data had changed and the end user would only have a 50% confidence level in the answer back to their customer.  This can be crippling if your products are very expensive like in the aerospace industry where the products are multi-million dollar and the customer is the government who may impose penalties if orders aren’t delivered when promised.

You need to:

• get all the supply chain data in one place for visibility (with frequent data refreshes),
• mimic the source system analytics,
• have all the system standard security functionality and
• output data in a familiar “Excel-like” format.

True nirvana is: one source of the truth, multiple users having access at the same time, data integrity, “what-if” capability with the power and flexibility of “Excel-like” outputs.

As we announced last week, we launched “Suitemates” – a new comedy video series with accomplished actors Kevin Pollak and Ray Wise, who play two imprisoned executives of the fictitious ERP vendor, BILK-Moore. Episode 2 (“Suites are Sour”) of the 6-part series is out today.

“Suitemates” parodies some of the experiences and frustrations with big ERP vendors. It is a satirical look at what has become a very serious issue: the systemic failure of ERP vendors to solve their customers’ business challenges – supply chain management problems in particular – through a collection of complex and disjointed modules. The industry is littered with too many examples of costly, failed implementations and a backlash against ERP vendors has started to build. And since laughter is often the best medicine, “Suitemates” is our creative way to raise the issue…because only when the problem has been identified and accepted, will people recognize the need and benefits to finding a new way.

So, what’s the problem?
Investing in a patchwork approach for integrated supply chain management is a gamble, at best. The industry as a whole is starting to push back and seriously question the ERP model and practices. “Suitemates” is an exaggerated and embellished story of course, but we believe the fundamental message behind the videos will resonate with the business executives and CIOs that are coping with ERP suites on a daily basis.

After all, the limitations of ERP SCM suites are very real:

• ERP systems, given their history as accounting packages, have a very “inside out” perspective of the world and struggle to incorporate data from external organizations as anything other than reference information. The information flow latency, and therefore decision latency, in this arrangement is enormous.
• In today’s dynamic market, you must be able to evaluate situations in seconds, not hours or days, and the evaluation must include the extended supply chain of contract manufacturers and component suppliers. When a single MRP run takes 8 hours or more, there is little opportunity to investigate and evaluate alternatives, let alone quickly reach consensus and alignment across the entire supply chain.
• Even within your company’s own operations, ERP suites provide multiple, separate modules, almost always with different data models and therefore different user interfaces and requiring integration between the modules. Relying on batch processes to convert data between modules, each of which incorporates outdated assumptions about the market, is time consuming and does not lead to alignment across functions, let alone between trading partners.
• What is required in today’s supply chain is a unique marriage of human judgment coupled with machine processing power. A quick and “better” answer that is arrived at through consensus is immeasurably better than the slow and “optimized”?? answers of your ERP’s advanced planning tool.

Bottom line: The supply chain has transformed, so too must the technology approach to solving the emerging challenges.

So, what do you need?

• One service…not many modules.
• An integrated view of the entire supply chain…not just your internal operations.
• Analysis in seconds…not days.
• Collaboration and human judgment…not black box optimization.

Kinaxis RapidResponse is a single service that delivers on the promise of integrating information, capabilities and people.

We share more here (SCM suites vs. RapidResponse) and here (RapidResponse Enterprise) if you are interested in understanding our alternative view of modern-day supply chain management.

 This month’s IndustryWeek’s Manufacturing Business Challenge discusses a manufacturer of commercial and industrial lighting fixtures  that embarked on an enterprisewide software implementation.  Need I say more?

Our very own, Monique Rupert (vice president of professional services) offered her solution to the case-study challenge.  And to our great delight, so did Kevin Hume, a principal at Tompkins Associates.

Does the following situation sound familiar? 

One year ago my company embarked on an enterprisewide implementation, selecting an ERP system and a suite of software to address our primary business functions. This decision was not made lightly. Lestornia Lighting is a $120 million manufacturer of commercial and industrial lighting fixtures and components (e.g., sockets, lampholders, wiring harnesses, reflectors). We’ve grown incrementally over the past two decades, and our business practices and processes — and the information technology (IT) that supports them — has grown piece by piece as well. I finally concluded that the Frankenstein IT infrastructure we had cobbled together needed to be destroyed. Now I greatly regret my decision.

Literally from the outset of our enterprise implementation, the scope of functionality, customizations, and departments and personnel engaged in the effort have spread like wildfire. Lestornia expected to be operating with our new systems six months ago; now we cannot get a projected date for when we will hit the switch. The escalation of costs specific to software licensing and the implementation have blown beyond anything I’d ever imagined. And with the infectious spread of applications and department-specific functionality and customization, our training and maintenance costs are doubling by the day.

I swear that every person in the company is working on this system and software implementation in some way or another, and no one is focused on making lighting products or focused on our customers. I am afraid that this project will, quite simply, kill Lestornia before we ever see a dime of return from our investment. How can we subdue the new monster we’ve created?

Find out what Monique and Kevin recommended….  Better yet, share your stories of hard lessons learned…

CIO.com has a very funny (in a sad but true way) post by Thomas Wailgum outlining the 5 steps to ERP software success.  From his post;

1. Meet with ERP vendor, get taken to expensive sporting event/dinner by sales rep, and select appropriate software package. (And don’t forget to send the check!)
2. Install ERP system!
3. Integrate with other systems. (Repeat as necessary.)
4. Provide thick “How To” manuals—chock-full of Clipart—to users!
5. Sit back, relax and enjoy your new ERP system!*

Thomas has included all sorts of “fine print” around step number 5.  Check out his post to get the details.

I’d like to add a couple of points that Thomas may have overlooked (I’ve also posted this as a comment to Thomas’s article);

3b.  Integrate with other components of the “Suite”  (You don’t think that just because you bought software from the same vendor that you wouldn’t have to integrate it, do you?)

3c.  Make sure that you use high priced integration consultants recommended by the ERP Vendor…this is WAAAAYYYYY to complicated to do yourself.

4b.  Provide lot’s of “happy pills” to your executive team (they are NOT going to be happy with the loss of productivity as people stumble around trying to figure out the new system)

5b. Don’t forget to send in that annual extortion maintenance check.  It’s important to pay so that your ERP vendor can fix their existing bugs – and add new bugs features.

5c.  Invest in some earplugs…you really don’t want to hear the howls of anguish from your users.

Do you have other advice?  Let’s hear it!

Recently, this message from SearchSAP.com hit my email… “SAP, Microsoft align against Oracle in business software market”.

I couldn’t help but have this vision of these big dinosaurs fighting each other while completely unaware of the potential danger of their extinction. The rest of humanity is hard at work redefining how to work and play without them, and quickly coming to realize that there is a better, faster, cheaper way, thanks to cloud computing, Google, and the pioneering work of Salesforce and Amazon. These clumsy slow-motion giants don’t seem to get it. They are quickly running out of people willing to sign $250,000,000 checks to deploy what is supposed to be a “software product” on their own hardware. This change couldn’t come soon enough.

In a LinkedIn group recently, I had someone question one of my blog posts challenging an ERP vendor. He said he wasn’t interested in a vendor criticizing another vendor in that forum. I completely respect that opinion. Point taken.

But my goal was to weigh in on what appears to be a growing industry discussion on the frustrations with big ERP vendors.   I believe people need to raise the issue and voice their concerns in multiple ways and forums.  Take for example this blog post http://advice.cio.com/thomas_wailgum/bringing_down_the_house_of_enterprise_software, where Thomas Wailgum says:

Large software vendors are, essentially, casino owners. They make the chips. They make the rules of the game. And as much as they talk about “taking care of the customer,” they know the odds are so heavily tilted in their favor that they’re always going to win.  When their customers win, the vendors win. But when their customers lose, the vendors still win. Unfortunately, there aren’t enough voices in the business world saying: “That’s not right, or fair, or logical.”

I personally agree.  What do the other voices out there say?

I am attending Dreamforce 09 in San Fran and trying not to get too caught up with the hype. And I don’t really have the expertise to “get” a lot of the technology stuff behind the “cloud” anyway.  But it is really great to hear Marc Benioff, the CEO of salesforce.com,  make fun of the current software business model, especially amongst the ERP vendors.  He referred specifically to the idea of charging 24% maintenance as a “tax”.  Marc’s keynote from Thursday morning is well worth watching. You might ask “So what, Marc has being saying this for years?”

What is new is the development of enterprise applications on force.com to satisfy a variety of processes, including an ERP solution.  And these are being developed in 3-8 months from initial concept to go-live.  Vetrazzo developed production planning, inventory management, order management, returns, warrantees, and ton of other ERP capability in 4 months!!  At a fraction of the cost that would have been required to purchase let alone implement SAP or Oracle. Even better, the CEO of Vetrazzo used to implement SAP systems, so he knows the full (in?) capabilities of SAP. OK, OK, so it does not have any accounting capability. But who cares, accounting packages are a dime a dozen and not related to your operational effectiveness.  Plus there are any number of applications available on AppExchange for linking salesforce.com to accounting packages.

I can only imagine how SAP and Oracle execs are sweating. Even if we discount the technology story, the change in the business model is profound and is going to rock them to their foundations.  In our own customer base, customers that a year ago flatly refused to go on-demand are now discussing the option with us.  And these are companies over $20B!!  Yes, that is a B as in billion, not an M as in million.

What do you think?  What is the timeline before we see full ERP systems developed native to the cloud?

Having spent many years selling and delivering services for a major ERP vendor, I can say with experience that just implementing a module (or suite) just because it comes as part of your ERP solution doesn’t always make sense.  The ERP vendors are always selling the “vision” of single vendor accountability to an organization and if you buy into that then it comes naturally just to implement all the software from that vendor.  Generally speaking, this is not usually a problem if you are performing basic functionality such as Human Capital Management (HCM) or Financial Management, but where the breakdown occurs is when implementing software that is associated with the company’s strategic direction and competitive differentiation such as Manufacturing and/or Supply Chain Management (SCM) software.

During my tenure implementing the true ERP suite vision (everything included; HCM, Financials, SCM, Mfg, CRM, etc.) for a company, the company would always struggle  during the SCM and manufacturing part of the project.  This was generally because every manufacturer runs their company differently in order to maintain a competitive advantage and trying to fit a one size fits all product into a company doesn’t work.  In addition, the ERP vendors would sell the company on a single platform for integration, and many times some of the SCM products were really acquired products that are more like bolt ons and the integration doesn’t necessarily exist.  So, not only is there generally more work to integrate the product, but the functionality may not exist that the customer requires for their business.  These were difficult customer situations to manage.

I believe that customers should really do a thorough vendor selection when looking to procure SCM or manufacturing software, and I don’t think I am alone in this belief.  In an ErpPandit.com article entitled “Basic ERP Features” the author gives a primer on comparing mid-market ERP providers and when discussing SCM module states “Of all the ERP modules, SCM has the greatest variability between vendors: It is vast and varied, yet often adapted to the needs of specific industries.”  If that is true (which I believe) then how can a company not do their due diligence when selecting software?  Certainly you don’t want to be a food and beverage manufacturer and implement a product which is designed for the high tech industry.

This of course doesn’t mean that the SCM software from your ERP vendor won’t work for you, all I am suggesting is that it is worth the time to look at alternatives.  Companies should not fall into the trap in assuming that just because the SCM software was part of an ERP solution that fits your company that the SCM software either works for your unique business or is tightly integrated into the back office ERP functions. 

There is another post on the Adexa blog entitled “Cost of ERP vs. Best-of-Breed Supply Chain Planning Systems” which also does a nice job educating the reader as to what to consider when performing a software evaluation data integration, planning analytics and configuration cost.  There is now a lot of evidence out there of failed SCM implementations and I personally don’t want to have to be on the hook to deliver an SCM software implementation for a company where the software doesn’t match the requirements.