Service Contracts

Should interBiz Mean Intelligence And Prediction Beyond ERP? - Part 2: Challenges and Market Impact

2010-08-18T03:05:00.002-07:00

Event Summary

In October and November, interBiz, the eBusiness applications division of Computer Associates International, Inc. (NYSE: CA), expanded its back-office solutions with the announcement of product enhancements and a free benchmarking service. The announcements were:

* A free benchmarking service for businesses in durable goods industries

* General availability of MK Manufacturing version 8.4

* Premium Services Plans which provide maintenance for modifications and the migration of modifications to new versions of interBiz software applications

This, Part Two of a two-part note, discusses the Challenges faced by interBiz and makes User Recommendations. Part One discussed these announcements and their Market Impact.

Challenges

However, while espousing a prudent e-business strategy in line with post- ERP inter-enterprise realities and the need for interconnectivity, and while adding new functionality, interBiz has had an uphill battle to allay the perception of poor marketing owing to problems stemming from ongoing re-branding of the collection of older generation ERP products that includes MANMAN, PRMS, CAS, and MAXCIM.

While the BizWork initiative has breathed a fresh air into venerable but almost antiquated applications, interBiz must rebuild somewhat lagging momentum by attracting new users. Playing to its strengths by capitalizing on CA's huge investment in enterprise infrastructure management and business intelligence component, including predictive and pattern matching intelligent technologies makes sense. Additionally, BizWorks ability to integrate both interBiz and third-party applications across the supply-chain becomes a compelling extended-ERP tack. Unfortunately, the effort of tying these technologies back to a fragmented set of ERP applications has been colossal, likely marginalizing CA's ability to become a prominent market player.

Continuation of an unfocused, multi-product and multi-technology strategy in the markets with diverse dynamics typically multiplies and overstretches sales, R&D, and service & support resources jeopardizing the chances its products could stand a chance of long-term success in their respective niches. Geac, Epicor, Ross Systems are examples of companies where this strategy has failed: all have had to resort to divestiture and to a focus on core competencies.

While the announced premium service plans certainly give customers peace of mind and raise the bar for competitors' service & support value propositions, interBiz should consider making some bold decisions on the level of integration of the applications, possibly with a plan for developing a cross-application backbone (foundation set of common components). The market typically prefers a total solution to a "sum of the parts".

On the Postive Side

Nevertheless, InterBiz remains one of the most widely used of the upper-mid-range ERP vendors. Although it could have leveraged much better its infrastructure customer base to promote its enterprise applications (like Oracle or IBM have done in their respective database, server and middleware strongholds), interBiz has done much more to rejuvenate its acquired enterprise applications arsenal than, e.g., Geac has done to its. The job of disseminating a clear message which market the combined set of products has been targeting, as well as of delivering a strong CRM and private trade exchange (PTX) offering remains notwithstanding.

SOURCE:
http://www.technologyevaluation.com/research/articles/should-interbiz-mean-intelligence-and-prediction-beyond-erp-part-2-challenges-and-market-impact-16535/

Service Level Agreements for Manufacturers and Software Vendors in the Supply Chain

2010-08-18T03:05:00.001-07:00

Globalization and lean manufacturing are realities for today's manufacturers. As the manufacturing network increases and extends across borders, so do the complexities of moving components and tracking these goods, as well as difficulties in delivering the products on time, both to manufacturers and to final customers. This new reality of manufacturing is now facilitated through supply chain management (SCM).

SCM enables today's discrete manufacturers to produce and move goods or components more efficiently, thus arming them with a competitive edge. However, managing compliance, tax laws, internal policies, and contracts between multiple parties can be overwhelming for any manufacturer.

This article focuses specifically on contracts—better known as service level agreements (SLAs)—between multiple parties in the supply chain. It describes what an SLA entails and explains how a discrete manufacturer should negotiate an SLA with the numerous organizations in its supply chain.

Service Level Agreements Defined

An SLA is a contract between two parties that stipulates how one party will provide certain services and support within a given time frame to the other party.

A manufacturer can have multiple SLAs with two types of organizations: 1) suppliers and distributors that provide products to its location(s), and 2) the software provider.

Because supply chains and SCM software are very complex due to the nature of the discrete manufacturing business, SLAs are equally complex. Not only can SLAs be complicated, but a manufacturer might be dealing with multiple SLAs as well. For a manufacturer to not become overwhelmed by all these SLAs, terms must be clearly written out so that all parties involved know what is to be delivered and how. For more in-depth information on supply chains, please see Supply Chain 101: The Basics You Need to Know.

Many software SLAs include a service element in addition to information on how the software will perform, on upgrades, etc. The second element covers the terms of technical support and problem resolution. With this aspect of the SLA, software firms providing the technical support can be heavily fined if they do not respond within the time periods specified in the SLA (known as severity levels). This can bring large financial consequences to individuals involved, and disrupt the flow of business for all parties within the supply chain.

From a business standpoint, SLAs between companies, whether they are suppliers, manufacturers, or distributors, also stipulate the financial repercussions if components are (i) not delivered on time, (ii) defective, or (iii) not delivered at all.

Today, all SLAs must have a basic, fundamental format so that all parties involved know what is expected of them. Table 1 describes these elements.

Foundational Elements of the SLA

To clarify how to negotiate SLAs and minimize the risk of financial loss, Table 1 offers a basic breakdown of an SLA's main components. Subcomponents are identified and explained afterward.

Item

Explanation
1. Establish the names of all parties involved. This can be multiple partners together, OR the software vendor and the name of the manufacturer. This establishes who all parties involved are, and sets the foundation for the rest of the contract.
2a. Establish service levels from the provider or supplier, and the expectation from the manufacturer's side. This makes clear to suppliers what is to be delivered, where, and when, OR this will stipulate all the technical deliverables provided by the vendor, and what the manufacturer expects the vendor to provide in terms of features and functionality.
2b. Establish of how the vendor will deliver each level of service, and what the repercussions are to not providing these elements to the manufacturer. Often, financial repercussions will occur either when products are not delivered on time, OR if technical support is not delivered when critical downtime occurs.
3. Establish all exceptions. If an exception occurs, all parties will be notified, and roles and responsibilities will be defined.
4. Stipulate any and all changes to the business or the software. As the business changes, or as more functionality to the software is modified, technical aspects in the SLA will change. This change will have to be followed by what is stipulated in this section.

Table 1. Main components of SLAs.

Subcomponents of SLAs include service availability, mission-critical definitions, and response time—elements that have a direct impact on a manufacturer's bottom line. If the SLA's guidelines for these are not adhered to, not only does the manufacturer lose money, but customers can be affected as well, depending on the industry.

Other items to factor into an SLA include training, outsourcing, implementation, and consulting. These elements can have a large cost associated with them, and negotiating them into the SLA is a crucial aspect executives should keep in mind. In addition, the SLA could include industry stipulations that need to be adhered to, either by conjunction of industry standards, safety regulations, or international laws.

Considerations

Due to the complexities outlined above, many problems can occur within each component of the SLA. Whether the relationship is between manufacturer and supplier or manufacturer and software vendor, difficulties can come about with how components will be delivered, how an implementation will be conducted, or a myriad of other unforeseen situations. The following section outlines some of these issues and tries to "clear the air" in order to ease negotiating and navigating through an SLA.

Three main elements should be addressed even before negotiating each technical element (as described in Table 1): compliance, internal and external policy, and channels of communication.

1.

The legal issues of compliance need to be spelled out in an outline format so that when the SLA is being developed, each legal point is addressed, and both parties know that they are complying with both business and governmental law when conducting business.
2.

Internal and external policies need to be addressed in the same flavor as is done with compliance issues (point 1 above), in that when negotiations are taking place, both parties know what is expected of them so that business practices will not be compromised.
3.

How will communication between all parties take place? Channels of communication need to be established at the beginning of negotiations in order for all elements to fall into place. With regards to a software vendor-manufacturer relationship specifically, if this aspect is not established from the beginning, communication breakdowns will prolong implementation time.

Other challenges that need to be addressed in the beginning stages of negotiating an SLA include the following:

*

What capabilities can the software vendor or supplier provide? The capabilities of the software solution or supplier need to be outlined to ensure they match with the manufacturer's business processes, as well as to make certain these capabilities will address the manufacturer's business needs.
*

Particular to the software vendor-manufacturer relationship, the scope of the implementation, an overall definition of what is to be done, and who is to be assigned to each task should be addressed in order to clarify each aspect of the implementation and to create a road map. Each member of the implementation team (on each side) will then know exactly what they are responsible for and with whom they will be working.

Consideration Analysis

If both the manufacturer and the vendor follow these basic steps and outline their processes before negotiations begin, many unfortunate events will be happily averted, and a framework will be set in place: if anything goes wrong, processes and the people responsible will have been clearly defined, and the risk of more complications occurring will be minimized.

To be clear, a properly defined and negotiated SLA between both parties should either avert or help to resolve potential problems.

Implications for Both Vendors and Manufacturers

The bottom line is that SLAs help to reduce costs on both sides as well as to minimize the amount of technology used throughout the manufacturing supply chain. Both parties want an efficient and successful implementation or business partnership in order to 1) have the manufacturer's system up and running in as little time as possible, or to have the supplier deliver the necessary goods so that production can continue, and 2) not have the vendor lose time and money by fixing mistakes that could have been avoided if processes had been properly defined.

If the software vendor must continually fix problems and bugs, or if there is a loss of integration between software components and other items, its future projects may be affected in either of the following two ways: 1) the vendor will have less time to dedicate to new projects, having focused so much of its time on the present implementation, or 2) the vendor will receive a negative recommendation from the manufacturer because the vendor took too much time to complete the implementation, thus not winning future bids for software implementation projects.

Suppliers are also subject to the above repercussions. Suppliers within the supply chain that are negligent in providing products on time and within budget can receive poor recommendations from the manufacturers, thus losing bids to supply components to other discrete manufacturing companies.

Such issues can be avoided if every component of the SLA is clearly defined during the negotiation process and closely followed during the implementation—an approach that is in both party's interests. To not do so can result in higher costs for all parties involved.

SOURCE:
http://www.technologyevaluation.com/research/articles/service-level-agreements-for-manufacturers-and-software-vendors-in-the-supply-chain-19373/

The Complexities of Quote-to-order and Possible Solutions

2010-08-18T03:04:00.002-07:00

The Complexities of Quote-to-order and Possible Solutions

Sales channels struggle to understand their products well enough to sell them effectively. Getting sales representatives and channel partners up to speed (informed) on new and existing products is expensive and time-consuming. Furthermore, as product complexity increases, so does demand for customized products and services. For more background, please see The Basics of Quote-to-order Systems.

Even More Complexity beyond the Direct Sales Force

Although the traditional call center is not often used to sell and handle customer inquiries (or complaints) about very complex products, there will still be times when information needs to be given or received by phone. Some manufacturers of configured consumer products, such as personal computers (PCs), or Internet service providers may use telephone sales and support quite extensively, in addition to the web chat and self-service options of late. Internal sales and support staff share many of the same frustrations as their colleagues in the field, and need similar solutions. However, there are some specific issues that need to be addressed if complex or customized products are to be dealt with in a satisfactory manner via the telephone.

While communication may be bidirectional, one must realize the limitations of a solely verbal interaction with the customer, where the agent generally has the benefit of detailed systems information. Therefore, a support system for telephone or Web users must be simple to use and clear in its presentation, even for complex products. This will allow orders to be taken correctly every time, and up-selling and cross-selling opportunities to be promoted while the support system is closely integrated with order fulfillment and other downstream systems.

To help customers leverage the highly profitable, but often untapped, post-sale aftermarket and drive-increased revenue, Webcom Inc. (www.webcominc.com), an up-and-coming provider of quote-to-order (Q2O) solutions, has recently launched the WebSource CPQ Assets capability. Webcom's goal is to enable organizations to improve customer satisfaction and increase productivity of the sales force, channel partners, and back-office personnel by addressing the needs of aftermarket, field service, entitlements, and assets. The new module allows users to easily quote, propose, and sell additional products and services that are pertinent to a specific asset previously created (configured) via the WebSource CPQ (configure, price, and quote) product suite.

The need for this after-sales product came from customers frequently quoting renewals, upgrades, aftermarket service, add-ons, and so on. In industries that sell capital equipment, such as medical devices, telecommunications, instrumentation, IT hardware, and other complex equipment, companies are starting to significantly increase their focus on services revenue. For some companies, this is a strategic move to increase the top line, while other companies are looking to replace revenue from slower, new product sales in the current economic conditions.

Thus, by selecting an asset, the user will now automatically be able to see the product and commercial characteristics associated with the asset, and based upon those attributes, will be guided to offer, select, or restrict relevant services and product offerings.

The WebSource CPQ Assets module includes a number of key features:

* Asset properties convey product, installation, and commercial characteristics, including customer information.

* Asset attributes affect the behavior of a product via product rules, dependencies, and triggers, thus guiding the user.

* Workflow and permission mechanisms govern who can make changes and the timing of such changes.

* Assets can be searched and sorted via a number of fields, including “key” attributes.

* Assets can be updated manually or through the quotation process via revision control.

* A side-by-side asset comparison is available.

* Automation of repetitive processes, including annual, quarterly, and monthly services (such as warranties, service contracts), and maintenance are available.

* Automated processes linked to output document templates, such as quotes or invoices to assets, are included.

* User-defined groupings for quotation and invoicing purposes are provided.

* User-defined selection parameters for automated processing, such as all assets with warranties expiring in 60 days, are provided.

* An optional linkage to customer relationship management (CRM) systems for opportunity creation is included.

* Users can forecast revenue from automated processes.

* Batch import of existing assets eases module implementation and creates greater value.

Last but not least, while the indirect channel or the network of dealers, agents, resellers, distributors, and remote sales offices enables more effective, low-cost, and rapid expansion into new and unfamiliar markets, the above issues faced by the direct sales force are magnified for this external force. Separated from the parent organization by distance and by time zones, indirect sales channels present terrible communication and management challenges for any organization. These challenges are much more demanding when remote partners handle products that require considerable sales knowledge.

Some concerns that are very specific to this arena include the following:

* Sales cycles are lengthier because of the need to consult the master vendor over many details.

* Security and geographic concerns can make it very difficult to distribute information and keep the information current.

* Because of product complexity, agents may choose (or may only be allowed) to sell a limited range of products. For instance, companies may simplify dealer products to make them easier to sell, which, on the downside, almost always hampers competitiveness and profitability.

* Reseller quotes may be even more error prone and lack the most current information.

* Indirect training is difficult and costly, while generating forecasts for indirect business is much more difficult.

One should also not forget about the challenges that organizations selling complex products face when having to assimilate product lines and sales teams from mergers and acquisitions (M&As). For all the above reasons, the notion of a “perfect order” (an order with absolutely no errors, from order entry, to shipping, to collection—please see The Perfect Order—Inside-out or Outside-in?) might remain an unattainable goal when selling complex products.

In many traditional complex manufacturing environments, a number of factors and situations can drain order profit margins: the costs per build-to-order fulfillment are often unknown or difficult to pinpoint; the engineering department needs to keep a dedicated headcount for checking proposals and completing schematics; the “swivel-chair” integration (multiple departments entering the same data) makes errors more likely between disparate enterprise systems; proposals for complex products take weeks, making 20 percent of total sales, on average, lost orders (according to Cincom Systems); the close rate on leads for customized products are unknown or very low; and the customer satisfaction is low because of escalating lead times and an invisible “cost of sale.” Although a bid preparation is a costly exercise (which, according to Cincom, amounts to an average of up to 15 percent of the total contract revenue), specialist knowledge is needed to create the bid. This requires high levels of “expert” hours, with teams often having a dozen or more key members that spend over a thousand hours on high-complexity bids.

However, attaining a perfect order in such environments is certainly not impossible (if seamless integration and visibility is achieved within the entire supply chain), and it can result in a much more satisfied customer than in the case of mass produced products' sales. The real key to successfully selling complex products and services lies in addressing the underlying issue—the need to capture knowledge (intellectual property) from wherever it is held in the organization, and to make that knowledge available to those who need it, whenever and wherever they might be.

So What's the Possible Solution Then?

These complexities lead us to an interesting group of providers, which develop, market, sell, and support software suites that help companies with multiple product lines and channels of distribution to effectively configure, price, and quote their products and services. The Internet, by nature, is a global marketplace, and it is increasingly viewed as the major enabler that allows both central control of information and potentially unlimited low-cost access through browsers. Visionary companies are leveraging the Internet as the means to make new sales channels effective more quickly, thus significantly reducing training and information transfer costs throughout their sales networks. As indicated earlier, the global marketplace and the pervasiveness of the Internet have taken longer to penetrate and impact the world of complex product selling than other sectors. But even companies in the most protected market spaces can no longer ignore the changes brought about by these and other factors.

Over the past few years, a number of companies, such as IBM, Cisco Systems, Siemens Energy and Automation, Dell, Rockwell, American Power Conversion (APC), and GE Healthcare have implemented quote-to-order (Q2O) or opportunity-to-order (O2O) solutions. Such solutions have reportedly enabled these manufacturers to mobilize their mass customization initiatives. From reducing traditionally time-consuming quoting and ordering processes from weeks to hours, to driving down unit costs, to lowering the costs of sales, astute Q2O suites can help enterprises increase sales effectiveness across all channels. These solutions help companies that sell complex products and services by moving their focus to front-office issues (customer-facing sales and service).

In addition to the inevitable factor of cost containment, the need for this shift has been driven by trends such as

* increased competition (where technological or manufacturing excellence no longer guarantees competitive advantage), since innovative, fast-paced competitors that are more responsive to customer needs are challenging market leaders; and

* expanding market opportunity, where most companies are responding to these demands by extending product ranges and offering more variation and options within their products and services.

Such products enable customers to increase revenue and profit margins and to reduce costs through seamless, Web-enabled automation of the quote-to-contract business processes. These processes reside between existing front-office CRM systems and back-office enterprise resource planning (ERP) and supply chain management (SCM) systems. Q2O software suites can offer sophisticated methods to navigate product content and knowledge to drive education and qualification of potential customers, and can be used by both business-to-business (B2B) and business-to-consumer (B2C) companies.

The solutions typically help customers improve profitability by reducing process costs, optimizing pricing, and eliminating (or substantially reducing) rework and concessions. Businesses that deploy Q2O products have reportedly been able to empower business managers to more quickly and easily modify product, service, and price information enterprise-wide, ensuring proper margins and the ability to stay ahead of changing market conditions. Needless to say, Q2O product architecture has to be designed specifically for the Internet and has to provide scalability, reliability, flexibility, and ease of use. Additionally, such products have to be developed with an open architecture that leverages data in existing applications, such as ERP systems, which must allow for an easy-to-install application and reduced deployment time.

Companies seeking to improve their processes for selling products and services have typically implemented CRM and sales force automation (SFA) software, and have sought to improve provisioning of their products and services by implementing ERP software. Historically, a significant gap has existed between the core functionality of CRM software and ERP software. CRM software typically manages accounts (including sales service) and sales campaigns; tracks collections and qualification of prospective customers; and monitors the pipeline of existing sales opportunities. ERP software, however, typically fulfills orders (in some instances automatically interacting with the upstream and downstream supply chain), invoices customers, and tracks accounts receivables and payments. For more detailed information, see Enterprise Applications—The Genesis and Future, Revisited.

In between the functionality of the necessary CRM and ERP enterprise packages is a variety of back-office business functions and processes that occur from the time a sales opportunity has been defined in the CRM and SFA software, to the time when an order is placed into the ERP system. Currently, most enterprises do not have an effective method of connecting a customer identified through its CRM system to a product the enterprise can deliver through its ERP system. Although there has been much activity in the development and deployment of CRM systems, the focus has almost exclusively been on the needs of companies that sell standardized products (with a few simple options to choose from at best).

Therefore, the traditional CRM functionality has targeted areas of sales efficiency rather than effectiveness. CRM systems tend to look at the processes around the sale, but do not necessarily address the intricate (low efficiency due to complexity) issues highlighted above, often resulting in an unwanted outcome—an increase in non-selling time. A primary reason for this mismatch between expectations and results is that most SFA software packages are first and foremost sales administration systems (revolving around contact management), and they do little to improve selling effectiveness. In addition, most software packages are designed to accommodate a direct sales organization model, but cannot accommodate a complex sales channel consisting of both direct and indirect channels.

The continued growth of outsourced manufacturing, the increased focus on low-cost international materials procurement, and the heavy market reliance on vendor- or supplier-managed inventory programs to control costs all require a solid infrastructure for coordinating the extended supply network (see What Does the Future Hold for PRM?).

Also, while many ERP and CRM vendors might offer a configurator as a module of an overall product suite, many of the configurator modules embedded in ERP software suites—being mainly aimed at engineering and production (as opposed to commercial sales)—are innately inadequate in supporting the sales and service functions. Similarly, many of the CRM-based configurator modules offer effective guided selling and configuration of low-level complexity products, but with an inherent inability to handle more complex product specification or fulfillment requirements. All of the above is referred to as the O2O gap, which consists of the processes required to efficiently and accurately configure, price, and quote a product or service for a potential customer, and correctly deliver the order specifications for fulfillment and billing.

Without a comprehensive Q2O and O2O solution that operates in multiple languages, currencies, and cultures, and that caters to sales representatives, agents, remote sales offices, and customers alike, companies resort to methods for building and pricing customer quotes through a combination of spreadsheets, teams of sales representatives, and engineers searching (literally flipping pages) through product catalogs. Depending on the complexity of the products and variables, this can result in a significant error rate in customer quotes. These errors are typically the result of invalid or outdated configuration, pricing, or quotation information, and often require expensive and time-consuming customer service intervention before the order can be processed.

The ability to accurately quote product and service offerings requires enterprises to enforce such business rules as maximum discounts and margin requirements, and to ensure that items quoted are available in the required time period. An ineffective system for matching customer needs to available products and services slows the sales cycle and may lead to poor customer experience. In addition, an inefficient system makes it difficult for a company to enforce its pricing rules for selling products or services in order to optimize the solutions offered to its customers.

Some businesses have attempted to address the challenges of complexity in the selling process by building in-house solutions, which often require significant, up-front development costs and lengthy deployment periods (see Build versus Buy—A Long-term Decision). Furthermore, due to the rapid pace of change in products and business processes, companies often find it difficult and expensive to maintain these systems and to integrate new functionality and technologies. As a result, many businesses have sought to implement packaged enterprise applications, and many CRM and ERP providers have also attempted to either extend the functionality of their products, or to offer complementary modules that fill portions of the functional Q2O gap.

The current commercially available software is designed to help companies address some challenges of complexity in the selling process. CRM vendors, ERP vendors, and niche companies with point solutions may still have one or more of the following limitations. In general, many applications have not been engineered for the Internet platform and, as a result, are not easily deployed across a broad range of Internet-enabled channels or devices. Further, these applications might require significant custom programming for deployment and maintenance. These applications may also provide a limited interactive experience, or they may employ application architectures that limit their scalability and reliability. Consequently, there might be a significant opportunity for software that leverages the Internet platform to enable companies to efficiently sell complex products and services, and to bridge the Q2O gap that exists between current CRM and ERP solutions.

SOURCE:
http://www.technologyevaluation.com/research/articles/the-complexities-of-quote-to-order-and-possible-solutions-19150/

E-Procurement Is Not Electronic Purchasing - Part II

2010-08-18T03:04:00.001-07:00

Introduction

This second part of an extended note on e-procurement examines the necessary steps after a business decision to go with e-procurement has been made based on the information and criteria covered in Part I.

E-procurement is an integrated system of services and technologies that provides a seamless bridge between buying and selling businesses. The e-procurement process begins at the planning stages within the buying company and extends through to the delivery and collections services of the selling company and the receipt and payment services of the buying company. E-procurement shatters walls, enhances controls, and eliminates time delays in the requisition to receipt process.

About This Note

This Technology Note covering the e-procurement is presented in two parts. The first part covers:

1. The Promise of E-Procurement

2. E-Procurement Myths and Reality

3. Preparing for an E-Procurement Initiative

The second part covers:

4. E-Procurement Architecture

5. Selecting an E-Procurement Partner(s)

6. Implementing E-Procurement

E-Procurement Architecture

Procurement automation begins with budgeting and ends with the retirement of capital assets or consumption of raw materials. Failure (or choosing) not to include any of the following dimensions of the process de-optimizes the investment at best and opens the process for subversion at worst. Following are features found in product offerings and customer requests with examples of what each function addresses.

1.

Budgeting - is the basis for Automated Expenditure Authorization for Cost Center-based controls and accounting. When a Requisition is either initiated by an authorized individual or authorized by one, the Procurement Engine should compare the Requisition against Budget Levels and other Authorization Rules then forward it to the supplier for fulfillment.

Budgeting services include:

* Expense items

* Capital items

*

Cost Allocation Rules

2.

Project Structure - is the source of Automated Expenditure Authorization project-related controls and accounting. It establishes approval and authorization routings that override or clarify normal budgeting processes. Where Project Accounting is employed, it also establishes the hierarchy of accounts that will be used to capture project costs.

Project Structure services include:
*

Expense items
*

Capital items
*

Cost Allocation Rules

3.

Purchase Contracting - establishes commitments and agreements between suppliers and buyers. Requisitions, Receipts, and Payments leverage Purchase Contract data to set up Purchase Orders and Validate Billing. Goods Receipt and Payments post attainment of purchase commitments and consumption of sale commitments.

Purchase Contracting deals with:
*

Quantity minimums
*

Commitment levels
*

Expiration dates

4.

Bid Management - involves a series of steps from Request for Information to Purchase and Post-Acquisition activities. These steps leading up to a Purchase Order are time consuming and highly prone to contention. Bid Management is concerned with:

* Request for Bid posting (Open and Directed)

* Supplier response posting

* Standard Terms & Conditions

5.

Approval & Automated Authorization - are two distinct process steps. Approval is a statement of concurrence that no known conditions exist to prevent authorization. Authorization empowers action. A combination of automated and manual intervention steps leads to commitment of a purchase order.

Approval services include:
*

Budget comparison rules
*

Authorization Rules
*

Approval Rules
*

Workflow
*

Escalation Rules
*

Bypass Rules
*

Exception Handling Rules

6.

Requisitioning - initiates the procurement process. The more simple and comprehensive this process is, the more useable and less subverted the entire process will be.

Requisitioning services include:
*

Catalog of standard goods, services and information
*

Standard kits
*

Alternative product selection assistance
*

Order amendment
*

Custom routing
*

Shipping, handling and delivery instructions
*

Price variance allowance
*

Delivery variance allowance
*

Cost allocation
*

Order consolidation and contingency

7.

Purchasing - establishes procurement sources and coordinates standard product selection, supplier qualification and financial controls. There is a tendency to automate the traditional Purchasing function rather than re-defining it with an e-procurement system. E-procurement systems are designed to eliminate most of the traditional Purchasing department work and enhance the value of the rest.

Purchasing services include:
*

Catalog management
*

Purchase contract management
*

Service contracts
*

Order release
*

Communication of specifications, terms and conditions
*

Expediting
*

Supplier interaction
*

Request for Information, Request for Proposal and Proposal Analysis

8.

Receiving - must match packages and other modes of product receipt to the Purchase Orders that authorized their delivery. Delays occur in this process when goods received cannot be matched to expected deliveries. Often this is caused by differences in product identifiers between the purchasing and sales systems.

Receiving support services include:
*

Under-shipment and over-shipment
*

Substitute products
*

Returns
*

Recipient locator
*

Forward view of expected deliveries

9.

Inventory Management - establishes replenishment rules for stocked goods as well as for supplier-held inventory such as forms and personalized promotional materials.

Inventory Management features include:
*

Maximum / Minimum and Economic Order Quantity rules
*

Associated goods relationships
*

ECO cut-in for manufacturing and engineering materials
*

Phase-in and Phase-out rules for non-manufacturing / engineering materials
*

Alternate products
*

Stocking location identification
*

Drop-ship

10.

Accounts Payable - must match receipts to purchase orders and process payments. Accounts Payable delays can bring the process to a halt when a supplier places a Credit-Hold on the account.

Accounts Payable services include:
*

Automated invoice / receipt matching
*

Batch vouching of payments by time-period and / or payment amount
*

Automated invoice exception authorization

11.

Interfaces - provide links to other operational and planning systems. Robust interfaces assure audibility of financial and inventory systems. They also assure that notification and workflow systems keep procurement-related transaction flowing.

Interface services include:
*

Reference links between functions allow one function to collect data from another.
*

Requisitioning copies price and delivery data from a catalog.
*

Workflow selects 'next step' from Approval and Automated Authorization.
*

Update links between functions map progress.
*

Payment posts Actual Cost to Project Control
*

Receipt posts order fulfillment to Purchasing and Accounts Payable
*

Application System links connect e-procurement to other systems.
*

Procurement obtains engineering drawings from Product Data Management
*

Workflow sends messages through e-mail
*

External System links connect e-procurement to trading partners.
*

Local e-procurement and external Marketplace
*

Workflow to logistics companies

12.

Exception Processing - is essential to the efficiency and value of an e-procurement system. The vast majority of transactions should flow through the system without human interaction. When an exception (workflow delay, budget exceeded, approval declined, shipment error, invoice error) is detected, notification must take place promptly and resolution must be automatically expedited.

13.

Analytical Processing - is essential to process improvement and supplier management. Process measures and reporting that identify the source of delays and exceptions will allow processes to be improved either by adjusting rules or through training. Reporting that focuses on product purchase patterns, product delivery, and supplier factors to support price negotiation and vendor selection.

Selecting an E-Procurement Partner(s)

The marketplace for e-procurement systems is quite broad and complex. Products range from complete application suites to highly configurable tool kits. Similarly, suppliers range from capable technologists to experienced business automation professionals. To make things more confusing, there are often multiple suppliers involved in the process, each providing product components or integration services. Finally, there is great volatility in the technology used to deploy e-procurement. Suppliers, products, and processes change rapidly making the selection process quite difficult.

SOURCE:
http://www.technologyevaluation.com/research/articles/e-procurement-is-not-electronic-purchasing-part-ii-16214/

Accounting for SMBs: A Solution Beyond Entry-level Systems Red Wing Software

2010-08-18T03:03:00.002-07:00

Introduction

The market for middle-market accounting software spans a large range based on price, functionality, and the size of the target organization. Most people are familiar with entry level products such as QuickBooks, Peachtree, and Simply Accounting and they are equally familiar with higher-end products such as Microsoft Great Plains Edition, MAS 90, ACCPAC Advantage Series, and Navision. Unfortunately there is a significant gap between these two classes of products and that's precisely where products from companies such as Red Wing Software compete.

Company History

Founded in 1979 with offices in Red Wing, Minnesota (US), Red Wing Software (http://c.technologyevaluation.com/?u=/cp/TEC_article_20050121_al.asp&cl=1&i=712&c=205&l=1) offers a strong middle market accounting system, as well as industry specific products that are leaders in their respective fields. In 2001, three companies (Red Wing Business Systems, Champion Business Systems, and FMS/Harvest) merged to create Red Wing Software, Inc. (1-800-732-9464 begin_of_the_skype_highlighting 1-800-732-9464 end_of_the_skype_highlighting). The merger was strategic and consolidated two of the leading agricultural products (AgCHEK by Red Wing Business Systems and Perception Accounting by FMS/Harvest) under one corporate umbrella. Additionally the merger allowed Champion Business Systems to offer a mid-range, Windows-based accounting product (TurningPoint) to its large DOS customer base. Red Wing Business Systems developed TurningPoint from the ground up with their DOS users in mind. Consolidating resources further provided each company the ability to enhance quality support services for their product lines, something on which each company prides themselves.

Agricultural Products

Agriculture (Ag) has always been a strong niche market for Red Wing. Focusing on financial management tools for producers (farmers and ranchers) and agribusinesses, AgCHEK and Perception Accounting are Ag-specific and recommended over general purpose, small business products. Cow/Calf is a complete herd management tool with analytical reports that track individual animal information, veterinary history, weaning, yearling, etc. for bulls, cows and their calves. Crop/Chemical and Livestock Management are comprehensive production management applications that integrate with AgCHEK accounting.

TurningPoint

TurningPoint is Red Wing's premier business product. First introduced in 2001, TurningPoint targets companies with revenues of $1 to $25 million (USD). Written in Visual FoxPro, Red Wing does not provide source code, but does provide COM object technology to integrate third party applications. Five user-defined fields are provided for each master record and Crystal Reports is used as the reporting engine. User-defined reports can be created, if Crystal is purchased separately.

TurningPoint 3.0 was released in July 2004. Development of TurningPoint is based largely on the company's knowledgebase of customer requests and suggestions. In addition, Red Wing strives to develop relationships with alliance companies to form integrations, such as point of pale and dispatching services, to provide a broad suite of capabilities for customers and to drive new market development.

TurningPoint consistently receives high accolades from industry experts and publications. Standard pricing is $895 (USD) per module. A bundled core accounting system costs $2,495 (USD) while a bundled inventory suite costs $4,495 (USD). TurningPoint provides value for wholesale distributors with an expansive list of capabilities, including multiple-location inventory, drop shipments, and up to twenty pricing levels per item for customers with complex distribution methods.

It is also a prime choice for agribusinesses, due to 1099-Patronage export to payroll. The 1099-Patronage export to payroll is designed for US agricultural cooperatives that use the 1099-Patronage form, which deals with the allocation of dividends. The feature allows unlimited and customizable units of measure and customized labeling, and integration to a payroll product (Red Wing Payroll) that includes piece rate, multiple language pay stubs, and government reporting specific to migrant workers.

TurningPoint is easy-to-use with a design that follows the Microsoft Explorer hierarchy of folders. Due to TurningPoint's modular nature, users can customize their solution by purchasing only the pieces that are necessary and then grow into a more advanced solution as needed.

Currently TurningPoint supports the following applications:

* System Manager
* General Ledger
* Accounts Receivable
* Accounts Payable
* Purchase Orders
* Inventory
* Order Entry
* Red Wing Payroll (integrated or as a stand-alone option)

TurningPoint - What's Interesting

TurningPoint has been designed to serve the needs of companies with 5 to 100 employees in the $1 to $25 million (USD) revenue range looking for software that costs $5,000 (USD) or less. As such one, would not expect to find sophisticated functionality. However that's not necessarily the case here. The product is very well designed with menus and screens that are crisp and easy to understand for even a novice user. Although some training will be required, users should be able to move quickly to full utilization of the system.

Other features include pop-up reminders that can be created to alert users to meetings, tasks, and exceptions that require their attention. While these alerts are not that sophisticated, they certainly will be sufficient for most middle market companies. Also, the Document Manager can be used to link files to master records and Microsoft Office can be launched from within the system and merge documents created for announcements or even to remind customers about overdue accounts. TurningPoint can also integrate with GoldMine as its contact manager.

Menus can be also be customized or user-defined as an alternate to the main menu for specific, user functions. These personal task lists can then display only those functions to which a user has been assigned rights. Entries can also be customized by changing field labels and skipping fields.

Also, reports created in TurningPoint can be saved or e-mailed in multiple formats, printed for any time frame, and information can be exported in various formats including Excel. Also, the Order Entry screens are very well designed and allow users to move from section to section quite easily. Users can even accept deposits from an Order Entry screen.

TurningPoint also has light manufacturing and production planning features that are superior to other products in its price range. For example, while most products support assemblies, TurningPoint takes this concept one step further. It allows users to create production plans that list the sequence of events that need to be followed. This is particularly useful when an order calls for the creation of a set such as a table and matching chairs. Users can also create a production plan that combines assembly operations to create a single plan. Finally, TurningPoint allows users to include labor costs in an assembly, thus reflecting the true cost of each assembly (parts and labor). This is the only example in this price range of which I am aware that allows users to control production without having to move to what may be an overly complex MRP application.

Moreover, TurningPoint has features that are not supported by lower-end products. For example, it allows multiple substitutes for each inventory item and it tracks vendor item IDs, and will print the vendor part number on a purchase order.

Most notably, however, is that TurningPoint also has features that are not supported by many higher-end products such as multiple locations, including costing and pricing per location. It will also create a suggested purchase order based on either a forecast or the order point within inventory. In addition, users can create a purchase order from an Order Entry screen for non-stocked items or drop-ships.

Although TurningPoint does not support highly sophisticated pricing schemes, it does support product line pricing, unit of measure pricing (e.g. case and item) as well as location pricing. Users can set up twenty different prices for an item for any one quantity price point. This allows users to associate a customer to one of these price points and therefore build a fairly sophisticated matrix.

Third Party Applications

TurningPoint does not currently support a large number of third party products, but Red Wing will be adding strategic integrations over time. Currently the following products are supported:

* Contact Management: Goldmine (http://c.technologyevaluation.com/?u=/cp/TEC_article_20050121_al.asp&cl=1&i=712&c=205&l=3).

* Point of Sale: Acme Point of Sale (http://c.technologyevaluation.com/?u=/cp/TEC_article_20050121_al.asp&cl=1&i=712&c=205&l=4). Acme Point of Sale tightly integrates with TurningPoint's Accounts Receivable, Inventory Control, and General Ledger. Acme is advanced retail management software that includes barcode printing, credit card processing, and marketing features so you can do date-driven sale pricing, promotional mailing labels based on past purchases, receipt couponing, and more.

* Service Management: Dynamite Service System (http://c.technologyevaluation.com/?u=/cp/TEC_article_20050121_al.asp&cl=1&i=712&c=205&l=5). A full featured, computerized dispatching software system that tracks field service calls and installations, in-house repairs to customer equipment, service contracts, technician calendar, customer profitability, equipment rentals, and much more.

* Installation Tool: Applianz (http://www.applianz.com/turningpoint.htm). Applianz Data Vault allows TurningPoint users to get up and running immediately on any existing PC or laptop with enhanced system performance and at a lower cost of ownership than other hardware upgrade or replacement options. Plus, users have the ability to access TurningPoint from any PC anywhere in seconds. The Data Vault's plug-and-play technology enables this without any installation, compatibility, or maintenance hassles.

* Printing Tool: PDFBlaster (http://www.datafabrication.com/main_content.asp?pageid=45) PDFBlaster is a revolutionary new "smart" printer driver that bridges the gap between your customers and suppliers and the documents they need to make your business succeed. PDFBlaster streamlines the entire process of creating, printing and delivering mission critical business documents without the hardware hassles associated with analog modems.

Competitive Analysis

While it is relatively easy from an academic perspective to place TurningPoint in the competitive landscape (between entry level products such as QuickBooks and Peachtree and mid-priced products such as MAS 90, ACCPAC Pro Series and AccountMate), most users see one end of the spectrum or the other, but not products in between like TurningPoint.

The product itself is actually quite powerful for its price point, but Red Wing must continue to add functionality in order to offer users something other than just a price advantage. Name recognition may be Red Wing's single greatest challenge. Small companies like Red Wing have survived because they have been able to attract a loyal, albeit small number of resellers. Marketing is expensive, not to mention the relatively small number of middle market publications and other marketing outlets, which makes marketing harder. In short growth is difficult. The most effective growth strategy is through increased reseller recruitment as well as marketing to the CPA community that is very influential in this market.

SOURCE:

Descartes Systems Group Makes D&T Growth List

2010-08-18T03:03:00.001-07:00

Event Summary

Deloitte & Touche ranked Toronto-based Descartes Systems Group, Inc. number 21 on their list of 50 fastest growing Canadian technology companies. Descartes obtained their position on the list because of their 1247% increase in revenues since 1994.

Market Impact

Descartes' growth has rocketed over the last five years, fueled largely by a buying spree that has resulted in five major acquisitions since 1997. At an average price of over $10 million USD, these purchases have enabled Descartes to expand its Supply Chain Execution (SCE) product suite, increase its overseas presence, and broaden its vertical product market focus.
Company Name Acquisition Cost Date Business
Michael Mead & Associates, Inc. $13.2 million 2/97 Distribution software for bakery and other food industries
Roadshow International, Inc. $29.9 million 11/97 Vehicle routing and scheduling software
Lightstone Group Inc. $11.4 million 6/98 Software for delivery of goods and services
Calixon BV $7.4 million 6/98 Trading partner collaboration, order tracking software
NRM $1.4 million 7/98 Warehouse optimization software and consulting

For instance, the acquisition of Dutch software maker Calixon helped quadruple Descartes' revenue in Europe from 1998 to 1999. Its largest acquisition, Virginia-based Roadshow International, in addition to bolstering Descartes' logistics scheduling capabilities, brought a large customer base (over 600) into the fold. The MMA and Lightstone Group acquisitions gave the company added expertise in two additional verticals: baked goods distribution and delivery of goods and services. Managed effectively, these acquisitions can propel Descartes into the lead position among SCE vendors, displacing larger players Industri-Matematik, Manhattan Associates, and EXE Technologies. However, rapid growth can place a significant strain on a company's management and operations. Evidence of this can be seen in Descartes' negative profits for the last ten quarters, a timeframe that coincides with the acquisitions. While it is not uncommon for company balance sheets to dip into the red during periods of growth, continued losses can erode Descartes' financial foundation, impairing its ability to serve its customers.

SOURCE:
http://www.technologyevaluation.com/research/articles/descartes-systems-group-makes-d-t-growth-list-15578/

One Vendor's Exploit of Marrying Infrastructure with Selling and Fulfillment Applications

2010-08-18T03:02:00.002-07:00

Event Summary

Mergers and acquisitions (M&As) in the enterprise applications arena are certainly not uncommon. In fact, if a week goes by without an intra-market acquisition announcement, a market observer might even begin feeling out of sorts. Often, many acquisitions have meant outright bad news or at least anxiety for existing customers of the (usually beleaguered) acquired software provider. However, the market has also witnessed a number of mergers between relatively well-performing supply chain software companies that have joined forces to deliver even broader and deeper set of solution footprints and better value propositions to the market.

Such an example is Sterling Commerce, a $630 million (USD) subsidiary of AT&T Inc. (NYSE:T), which has long been a prominent provider of solutions that connect client enterprises' business communities, processes, people, and technology in a global economy. Over the last few years, the company has acquired a number of supply chain management (SCM) software companies that, at the time, were not perceived as companies in distress or in any pressing need of a "white knight" to help stave off a hostile takeover or abate financial woes. However, these relatively small vendors were apparently not loath to more liberal access to new funds for product development and international customer cross-selling opportunities within Sterling's huge traditional install base. This is particularly true in light of Sterling Commerce's operations in 24 countries, with regional headquarters in four geographies: 1) the Asia-Pacific region in Singapore, 2) the Europe, Middle East and Africa (EMEA) region in London, England, 3) Latin America in Sao Paolo, Brazil, and 4) the North American region in Dublin, Ohio, (US). Headquartered in Dublin, Ohio (US), Sterling Commerce has offices in 17 countries and most major cities around the world. The company also has engineering laboratories in 5 countries (France, Germany, India, Singapore, and US). Gradually, Sterling has become more of an enterprise applications vendor by diversifying its traditional focus on being a business-to-business (B2B) infrastructure provider. Namely, apart from core B2B communications and recent SCM applications, Sterling also offers application integration and network service; electronic data interchange (EDI) applications, and translation products.

Sterling Commerce's Genesis

To better judge the rationale behind the SCM acquisitions, it's helpful to explore Sterling Commerce a bit deeper. Stemming from an EDI and value- added network (VAN) communications and integration background, the company has been in business since 1976, and with decades of profitable growth and currently with over 2,500 employees around the globe. It has over 30,000 customers in virtually all industries, which constitute about $23 trillion (US) of the global economy. Amid that install base are many of the largest banks in the US. The vendor also serves the financial services, manufacturing, logistics, communications/media and retail markets.

Given its longevity, Sterling was involved in electronic commerce way back when transactions took place on closed, proprietary systems using the rigid EDI format. In its more than three decades of existence, the company has seen the emergence of the World Wide Web (WWW) and the Internet-based EDI protocols (see EDI versus. XML—Working in Tandem Rather Than Competing?); the dot-com bubble; and a share of its own corporate changes. Namely, Sterling Commerce became an independent entity in 1996 after being a division of former Sterling Software (which was subsequently acquired by Computer Associates [CA]). In early 2000, Sterling Commerce was acquired by SBC Communications Inc., which later became AT&T Inc. following the merger with Ma Bell. Then there were rumors in the early 2000s of SBC being uncertain what do with Sterling Commerce, SBC's $3.9 billion (USD) investment at the peak of the dot-com boom. For a while, Sterling was not considered core to SBC's business, so much so that at the end of 2002, SBC reportedly tried to divest it, with Sterling Commerce receiving strong interest from Bain Capital in late 2002.

However, that the spin-off never took place and EDI/VAN provision became a limited growth business (albeit still quite lucrative). Nonetheless, since the early 2000s, Sterling Commerce and its VAN service providers offering EDI transport and translation services have been engaged in the most sweeping re-engineering of their businesses and value propositions since the advent of Internet-based EDI during the late 1990s. Namely, traditional document interchange and guaranteed message delivery services have recently been enhanced with a new series of integration and application services designed to enable inter-enterprise business process execution, collaboration, and management for SCM, and customer relationship management (CRM) strategies. While emerging as a new breed of inter-enterprise integrators, these providers' services have increasingly been including data cleansing and syndication, product information management (PIM), global data synchronization (GDS, see The Role of PIM and PLM in the Product Information Supply Chain: Where Is Your Link?), cross-platform and inter-enterprise transaction management, document reconciliation and analytics, trading partner business intelligence (BI) and analytics. They have also included an array of enterprise applications to assist businesses with collaborative processes, ranging from dispute and financial process management to demand planning, supply chain visibility (SCV), and vendor-managed inventory (VMI).

As a result, a couple years ago GXS introduced Trading Grid, an EDI services business, acquired from IBM, and announced a partnership with WebMethods (now part of Software AG). It also acquired HAHT Commerce, a former partner relationship management (PRM) vendor (see GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data). On its hand, Inovis has acquired QRS (see Inovis Delves into PIM by Snatching QRS), while Perfect Commerce has acquired the Internet trading exchange Pantellos.

Realizing Opportunity from Trading Complexities

Somewhat resembling Click Commerce's approach (see Will a Tool Manufacturer and a Supply Chain Software Vendor "Click" in Matrimony?), Sterling Commerce's supply chain thinking and strategy also stems from the premise that collaborative commerce turns traditional linear value chains into multi-enterprise supply chain networks. The business challenge, which can thus be turned into opportunity, comes from the fact that selling and fulfillment across an extended supply chain have become quite complex. Namely, the word "multiple" and "cross-channel" has become part of the complicated game, starting with multiple enterprises involved in trade, whereby each enterprise will often have multiple locations with multiple brands, divisions, independent business units (IBUs), each with their own back-end systems, sales channels, etc. Most of these have come, in great part, due to frequent M&As in the market.

Consequently, multiple catalogs with products or services and multiple product choices that require configuration and guided selling have long become the matter of course (see The Basics of Quote-to-Order Systems). Further, globalization and more demanding customer expectations have resulted in the need for multiple fulfillment methods, whereby goods can be delivered from warehouses, stores, or directly from suppliers (via drop-shipping, see Drop-Shipping—Internet Retailers' "Little Helper"?), through third-party logistics (3PL) networks or the company's own fleet (in a full truckload [TL], less than a truckload [LTL], or parcel delivery), or through a service network, a third-party service network, etc.

As seen in Retailing Trends—Shopping Anyway and Everywhere, Internet-based technological advancements have caused consumers to expect interchangeable multi-channel (e.g., retail store, catalog, call center, commercial contractor, web site, kiosk, etc.) inquiry, shopping, goods return, etc. In fact nowadays, a consumer expects a true cross-channel experience, and rightfully so, where they are able to buy something online and return it to the closest retail store for a refund, without any questions asked. Last but not least, when one counts in multiple customer segments (such as consumer, distributor, or corporate customer), effective collaboration should provide visibility and transparency, optimize shared assets, and orchestrate common processes in the demand, supply, and service chains (consisting of sales force, key accounts, consumers, retailers, distributors, suppliers, manufacturers, field service, etc.).

Failing to execute well in such intricate environments typically results with lower revenue growth, declining profit margins, and declining brand equity, with the all-too-common symptoms of high operating costs, inaccurate orders, and poor on-time delivery (see The Perfect Order—Inside-out or Outside-in?). It can also result in high stock-outs (missed sales opportunities), lower customer satisfaction, or a myriad of other problems. Nowadays it's become cliché to call traditional phone, fax, and paper-based communications systems labor-intensive, inefficient, and prone to error. Yet, companies have historically dedicated significant resources and time to the manual entry (re-keying) of information from faxed or phoned-in purchase orders (PO), and on manually processing paper checks, invoices, and shipping notices. While spreadsheets and e-mail are also used to somewhat better manage partner relationships, these electronic systems can also be inefficient and difficult to integrate. The large volume of paper generated by these systems and the mass of information to be sorted and processed frequently produce hidden costs, such as errors and delays in information delivery. Moreover, timely changes can be difficult to implement in manually intensive processes and the cost related to such changes can also be significant. For example, a paper-based catalog cannot be quickly or inexpensively updated to inform customers of changes in product offerings, availability, or pricing (see Differences in Complexity between B2C and B2B E-commerce).

It is also important to integrate channel partners into the selling experience. Companies should to be able to allow their partners to not only have a web portal to purchase products and services, but they also need to allow them to be part of the quoting process and leverage quoting capabilities of a manufacturer or retailer, and allow partners to add their products along with the manufacturer's to the quotes that they send to prospects.

A manufacturer and the members of its distribution network often have limited capability to track orders, inventory, warranties, and other information (or to compile useful databases) using paper-based or semi-automated processes. These forms of communication do not permit manufacturers and their business partners to exchange information on a real-time basis, and thereby prevents easy access to key information needed to transact business. Manufacturers and trading partners may also suffer from differences in languages, cultures, and time zones, which are additional barriers that traditional methods cannot easily overcome. Yet, increasing market and supply chain complexity motivates companies to improve operations and communications with their trading partner community. The continued growth of outsourced manufacturing, an increased focus on low-cost international materials procurement, and heavy market reliance on vendor- or supplier-managed inventory programs to control costs all require a solid infrastructure for coordinating the extended supply network (see What Does the Future Hold for PRM?).

Furthermore, traditional enterprise resource planning (ERP) systems typically cannot handle these types of multi-enterprise complexities, and they tend not to provide the visibility and control required to efficiently manage and synchronize extended business processes – and were really never designed to be customer and partner-facing. Inefficient processes and poor customer service often result. Indeed, most ERP systems were not originally designed to coordinate business processes across a multi-enterprise supply chain, including outsourced manufacturing, 3PL deliveries, partner fulfillment, etc. and neither were they designed to be customer-facing. Subsequently, traditional systems often require multiple instances across an organization (see Standardizing on One ERP System in a Multi-division Enterprise). And, in many cases, this is based on entirely different processes across various divisions, sectors, business units, or regions of an organization. Yet, the ability to view complete and accurate orders, integrate data, and manage inventory and activities for effective fulfillment execution is necessary to effectively respond to challenging customer requirements and achieve a competitive advantage. Their absence typically results in orders that are stored in different systems; difficult and often manual interactions with external partners; and poor inventory visibility. Ultimately, business process changes are very expensive and time consuming. Likewise, it's not only smaller, lesser known enterprises that have fallen prey to this type of neglect. Even some of the big corporate names with automated web storefronts still have processes that require significant manual interaction. It is common, for example, for an enterprise to pass its fulfillment to a third-party transportation company with no direct electronic communication between the two.

SOURCE:
http://www.technologyevaluation.com/research/articles/one-vendor-s-exploit-of-marrying-infrastructure-with-selling-and-fulfillment-applications-19552/

QAD Pulling Through, Patiently But Passionately

2010-08-18T03:02:00.001-07:00

Event Summary

In these days of gloom, when most of the news is about rapid mergers and acquisitions of distressed vendors or alternatively about headcount and/or cost reductions-based profits of those enterprise applications vendors that are lucky to even report profits amid dwindling revenues, it is refreshing to hear good news coming from a vendor that has (seemingly) forever eluded profits, particularly when the recent success is largely based on a new revenue stream.

On August 20, QAD Inc. (NASDAQ: QADI), a global provider of collaborative enterprise applications for manufacturing and distributing organizations, reported upbeat financial results for the fiscal 2004 second quarter and six-month period ended July 31, 2003. For Q2 2004, revenue increased 24% to $56.0 million from $45.3 million in the same period last year, while license revenue rose whopping 41% to $15.8 million, compared with $11.2 million in Q2 2003 (see Figure 1). Maintenance and other revenue increased 9% over a year ago to $28.9 million, reflecting the impact of new licenses in addition to strong maintenance renewals. The service revenue grew 48% over the comparable prior year period to $11.4 million, due primarily to the TRW ISCS acquisition completed in November 2002. Net income for Q2 2004 was $1.9 million, whereas in Q2 2003, the company's reported net loss was a hefty $4.0 million. QAD's cash and equivalents balance at July 31, 2003 was $43.5 million, while for Q2 2004, cash flow provided by operations was $1.2 million, continuing the momentum of positive annual operating cash flow.

Figure 1

The improved financial performance has not come without astute moves with regard to product functionality enhancements. These moves include:

* A partnership with Johnson Controls (NYSE:JCI) to develop a next-generation Just-In-Time (JIT) Sequencing software module for MFG/PRO

* Announcement of Kanban Visualization, which enhances QAD's existing Supply Visualization (SV) solution

* More than two dozen important new functions and enhancements to MFG/PRO eB2, specifically designed in collaboration with QAD's manufacturing customers to help address their specific needs

* Announcement of healthy sales momentum in Asia, with MFG/PRO suite becoming a platform of choice for automotive manufacturers in China to automate business operations and collaborate with partners worldwide

This is Part One of a six-part note.

Parts Two will present the Company Background.

Parts Three and Four will discuss the Market Impact.

Part Five will cover Challenges and

Part Six will make User Recommendations.

Partnership With Johnson Controls

Most recently, in July, QAD and Johnson Controls (NYSE: JCI), a global leader in automotive systems and facility management and control, announced at the European Automotive News Congress conference that they have entered into a partnership whereby the companies will collaborate to develop a next-generation Just-In-Time (JIT) Sequencing software module for MFG/PRO, QAD's flagship enterprise resource planning (ERP) software.

Through this partnership, QAD should gain software components developed by Johnson Controls that incorporate more than 10 years of Johnson Controls knowledge and expertise on JIT Sequencing, and this approach should allow QAD to take advantage of its strong partnership with Johnson Controls to reduce the time-to-market for this functionality and improve the software product design using best-of-breed knowledge and advice from Johnson Controls. The QAD Just-In-Time Sequencing module for MFG/PRO is planned to be available before the end of 2003.

On its hand, Johnson Controls has standardized its worldwide manufacturing operations on QAD MFG/PRO, and through this partnership will work with QAD to define and develop the requirements for JIT Sequencing. It plans to deploy this critical functionality in its plants throughout Europe and North America.

Over the last 18 years, Johnson Controls has focused its processes not only on providing high levels of customer delivery and quality, but also on developing highly collaborative OEM (original equipment manufacturers) supply relationships. To that end, Just-In-Time Sequencing is designed for automotive suppliers seeking to respond to the increased market pressures placed on them by the automotive original OEMs whose mission is to increase flexibility in the assembly and configuration of cars and trucks while reducing the overall lead time required to deliver a vehicle to the final customer. This "Build-to-Order" concept requires that key, custom-built vehicle components be produced and delivered in the exact sequence to vehicles moving down the OEM's assembly line.

Success for a supplier in Just-In-Time Sequencing lies in providing this configuration and delivery capability while at the same time maintaining control over production and inventory carrying costs. Consequently, using the QAD JIT Sequencing module, OEM demand requirements will be communicated via assembly broadcast signals directly to the supplier's production planning and scheduling system, which should permit the manufacture and delivery of "customized" products to be performed. Finally, the JIT Sequencing module should provide "extended" sequencing capabilities so that suppliers further down the supply chain can also provide their products using "Build-to-Order" concepts.

Kanban Visualization

As for new generally available products, in May, during its annual user conference Explore 2003, QAD announced Kanban Visualization, which enhances QAD's existing Supply Visualization (SV) solution with immediate insight into kanban status.

For manufacturers using kanban production methods and seeking greater supply chain efficiency, QAD Supply Visualization with Kanban Visualization should improve vendor-managed inventory (VMI) initiatives by providing streamlined kanban management. QAD Supply Visualization extracts inventory and procurement data from manufacturers' ERP systems and stores it securely on MFGx.net, QAD's hosted exchange where authorized suppliers can access the information and initiate the replenishment process. By providing secure, near real-time insight into this data, the application should enable automotive, consumer products, medical, industrial and electronics manufacturers to better synchronize inventory with demand.

Kanban Visualization enhances inventory management for companies that use the kanban production model, since it presents the status and quantity of kanbans graphically so that suppliers can see when stock needs replenishing, enabling them to print kanban cards immediately, instead of waiting for the customer to send a copy. Its open Application Programming Interface (API) supposedly integrates with manufacturers' existing enterprise systems. Kanban Visualization also will alert managers and suppliers to relevant inventory changes, for example, via e-mail, so that they can act quickly and ensure efficient replenishment.

As QAD delivers new features and functions that address real-world manufacturing needs, it also claims that customer adoption of QAD Supply Visualization has nearly tripled and customer sites deployed have increased six-fold, while the number of facilities slated for implementation has grown ten-fold in the past year. Concurrent with customer adoption, nearly 400 suppliers have embraced the software to monitor and act on changes in inventory levels, purchase orders, schedules and schedule releases.

MFG/PRO eB2 Functions and Enhancements

Earlier, in March, QAD announced that customer adoption of MFG/PRO eB2, the company's Web-enabled latest release of suite of enterprise applications, is occurring at a more rapid rate than any prior release of MFG/PRO. More than 230 customers have reportedly bought or upgraded to MFG/PRO eB2 in the first 150 days of its availability. Released September 2002, MFG/PRO eB2 incorporates more than two dozen important new functions and enhancements specifically designed in collaboration with QAD's manufacturing customers to help address their specific needs. New application functions address lean manufacturing for greater responsiveness to customers; efficient collaboration; service/support management (SSM) for more customized service contracts; streamlined international financials and profitability analysis; and a desktop interface that provides even greater ease of use and minimizes user training.

To maximize its interoperability with legacy systems and minimize cost of ownership, the MFG/PRO eB2 suite is built on an open, standards-based architecture including Open Applications Group Integration Specification (OAGIS) messaging conventions, Business Object Documents (BODs) and eXtensible Markup Language (XML). QAD industry user groups specified additional features to address manufacturers' real-world needs and various production environments in the automotive, food & beverage, consumer packaged goods (CPG), medical devices, industrial products, and electronics sectors. Customer participation in tailoring QAD products is one area the vendor takes very seriously, since it has a development group for each of its six verticals made out of 10 prominent QAD users, who prioritize future development for each vertical.

China Sales Momemtum

At about the same time, QAD announced its healthy sales momentum in Asia, with MFG/PRO suite becoming a platform of choice for automotive manufacturers in China to automate business operations and collaborate with partners worldwide. As a result, QAD believes it is well-positioned to capitalize on continued growth in the emerging regional market.

Since opening offices in Shanghai nearly a decade ago, QAD now reportedly serves 300 customers in China including leading automotive, electronics and consumer products manufacturers. Sixteen of the world's top 25 automotive manufacturers depend on QAD's advanced technology to manage their business and operations, and in China 53 automotive joint ventures and customers such as Ford, Daewoo, Lear, TRW, Delphi, Visteon, Hyundai and Eaton have chosen QAD's MFG/PRO suite. Global electronics producers such as Applica, Lucent, Mitsubishi and Philips, and consumer products manufacturers including Avon, Coca-Cola and Sara Lee rely on the QAD platform for manufacturing enterprise operations as well.

The automotive industry has witnessed explosive growth in China as foreign manufacturers seek to profit from favorable economic conditions and the lower cost of operating there. According to the China Association of Automobile Manufacturers, domestic output of motor vehicles between January and November 2002 jumped 36% from production in 2001. The association reported sales of China-made automobiles also rose by more than 36% in the same period, due in large part to the increase in new products launched by local manufacturers, especially Sino-foreign joint ventures. The surge in activity has jump-started competition, too, putting pressure on Chinese manufacturers to upgrade their ERP systems to function on par with their foreign partners and new entrants to the market. Many of these companies are choosing QAD applications to create a foundation for consistent operations and communication across multiple locations, new and old plants, and different manufacturing models.

To support customers and continued growth in the region, QAD has established alliances for technology and implementation. QAD is one of IBM's preferred software providers for Japanese customers with manufacturing operations in China, and has been selected by IBM as a key solution provider in the automotive vertical. QAD has partnered with hardware providers Hewlett-Packard (HP) and Sun Microsystems in the region as well. Distribution partners include Atos Origin, SCS, Softspeed, eSun, TSnT, and Dalian Hualu. QAD is also expanding its staffing as its customer base grows, to ensure a higher quality direct support for its software.

SOURCE:
http://www.technologyevaluation.com/research/articles/qad-pulling-through-patiently-but-passionately-17061/

Solomon Stands the Test of Time Despite Changing Masters

2010-08-18T03:01:00.000-07:00

Microsoft Business Solutions Solomon, formerly Solomon IV and Microsoft Great Plains Solomon IV, a prominent business management and e-business suite of applications for small and mid-market companies, and the product that some had prematurely written off after being acquired first by one of its erstwhile greatest nemeses, former Great Plains Software in 2000 (see Will Solomon Finally Satisfy Great Plains' Insatiable Appetite?), and particularly after its new owner subsequently ended up under Microsoft's roof in 2001 (see Microsoft And Great Plains — A Friendship That Turned Into A Marriage), only soon after to share the fraternity home with yet another former nemesis, Navision in 2002 (see Microsoft 'The Great' Poised To Conquer Mid-Market, Once and Again), seems to be doing just fine, if not even much better than that. It appears that the product has several truly differentiating traits, which cannot be easily or quickly replicated by its seemingly more robust brethren products within Microsoft Business Solutions (MBS) division. Thus, Microsoft has reason to continue to bolster the product for Solomon's loyal customer base and resellers instead of promoting less popular options (e.g., stabilization and replacement).

Most recently, in summer 2003, Microsoft Business Solutions (MBS) announced the availability of Microsoft Business Solutions Solomon 5.5, which includes several new features and enhancements in the product's Foundation Series, Financial Series, Project Series, and Service Series of modules. Owing to the product's renowned sweet spot of project accounting, MBS has further developed Solomon 5.5 to meet the needs of small to midsize project-driven organizations, specifically in the industries of business services, management and engineering services, social services, special trades contracting, general contractors, and wholesale trade (durable goods). To that end, Solomon 5.5 includes Microsoft Business Solutions Professional Services Automation (MBS PSA) product features that combine the power of MBS Project Accounting Solomon and the new enterprise version of Microsoft Project 2002 to provide externally focused, project-driven organizations with an integrated financial, project and resource management, knowledge management, time and expense, project accounting, financials, and reporting and analytics solution, based on the Microsoft .NET platform. Additional enhancements to the project accounting capabilities include new indirect rate calculation and new audit trail tracking abilities for contractors of the US federal government, particularly those subject to Defense Contract Audit Agency (DCAA) audits.

The MBS PSA vertical solution became generally available in North America at the end of 2002, following its quite vocal announcement during the Stampede 2002 partner conference (see Microsoft Lays Enforced-Concrete Foundation For Its Business Solutions).

This is Part One of a four-part note on the MBS Solomon product.

Part Two will discuss the market impact. Part Three will cover product differentiators.

Part Four will present the vendor challenges and make user recommendations.

Other Features

Solomon 5.5 is now also integrated with Microsoft Business Solutions Retail Management System (MBS RMS), a retail management and point-of-sale (POS) solution designed specifically for the independent merchant. The integration allows for the easy sharing of information between Microsoft RMS and the proven financial capabilities of Solomon. Built on the award-winning QuickSell line of products, it offers a solution that automates a retailer's operations from the cash register right through to the company headquarters. Also announced during Stampede 2002, the solution already featured integration with MBS Great Plains and MBS Small Business Manager financial applications, bringing a sophisticated (POS, inventory management, pricing and promotions, reports, and analysis) yet easy-to-use and cost-effective offering to small and medium-sized retail businesses.

Additionally, with Solomon 5.5, users of Microsoft Office XP will find the capabilities of Outlook, Word, and Excel expanded through .NET Smart Tag capabilities, which should allow users to easily incorporate structured and unstructured information, or information from multiple systems, into a single document. To that end, the Smart Tag Manager lets Office users drill down on customer, vendor, inventory, account, salesperson or employee detail information stored in the Solomon 5.5 database.

Last but not least, Solomon 5.5 includes several new features within the following series of modules:

* Financial Series — The suite exhibits enhanced time entry screens and the tools needed to print multiple checks per employee per pay period or payroll run, which should be particularly useful for construction companies.

* Project Series — New features include additional modules in the Solomon Standard edition, revenue allocation rules based on a maximum, Solomon Desktop Web time entry modifications, the ability to enter and adjust labor costs over the Web, automatic synchronization of new project IDs by using Solomon's next available project ID, and ease-of-use enhancements for data entry.

* Service Series — Additional modules are now available, including equipment maintenance and Service Contracts.

* Foundation Series — Features enhanced report management capabilities within the Solomon desktop, as well as online user manuals.

Hence, MBS Solomon 5.5 shows continued MBS investment in the advanced distribution, professional services automation (PSA) projects, service, and e-business capabilities of the product and its continued focus on vertically-oriented functionality while balancing strategic investments in broadening the functional footprint. The future should bring the delivery of Microsoft Business Portal (formerly shortly referred to as Microsoft Business Desk) as a replacement for the Solomon Desktop portal application, as well as the delivery of Microsoft Customer Relationship Management (MS CRM) integrated with Solomon, increased integration between Solomon and other Microsoft products, and accelerated development of business applications and the independent software vendors (ISV) platform using the Microsoft .NET platform.

Consequently, MBS Solomon 5.5 represents a natural progression from Microsoft Great Plains Solomon IV Release 5.0, which was delivered in summer 2002, and featured significant new capabilities and enhancements across its advanced distribution, financial, project, e-business, and service series. The release particularly built on the strengths of its advanced distribution capabilities with the addition of the following three new modules:

1. The Inventory Replenishment module is used to track inventory usage data and vendor performance, as well to plan future requirements in order to optimally set inventory stocking levels and automate generation of purchase orders. By replenishing inventory more accurately through historical use, vendor performance, and planned future demand, organizations should be able to deliver better customer service while improving cash flow and balance sheets.

2. The Order to Purchase module should benefit customer service and sales representatives through a one-step process of taking a customer order and then placing a purchase order with a vendor to fulfill stock needs when the company does not have inventory on hand to fill the order. A streamlined fulfillment process should provides salespeople with the tools they need to satisfy customer demand and deliver higher levels of customer service.

3. The Landed Cost module enables distributors and manufacturers to account for additional costs beyond the merchandise cost incurred in purchasing inventory items. This should allow these organizations to effectively manage profitability by rolling the shipping, handling and import fees into the total cost of goods.

Solomon IV 5.0 also delivered on continued investments in its Finance Series with payroll capabilities for construction and other businesses. These include union reciprocity (portability), service dispatch integration to advanced payroll, project time and expense integration to advanced payroll, and web-based advanced payroll time entry. In union reciprocity, a new screen has been added to automate the calculation of fringe benefit amounts based on a reciprocal agreement between an employee's home local union and work local union. Unlimited reciprocals can be set up and maintained, and are automatically calculated, saving time for payroll managers who previously had to manually calculate complex union reciprocal agreements each week.

In the Project Series, organizations performing projects or services for customers in other countries can use the new multicurrency project invoice enhancement to have customers' invoices presented in a foreign currency. Amounts from the foreign currency invoice are automatically translated into the system's base currency for postings.

In the e-Business Series, Solomon Desktop now has multi-company capabilities, enabling Web self-service applications and reports to interact with data in all established companies, either in a single database or in multiple application databases. Each Solomon Desktop user will have the opportunity to sign in to any company for which rights have been given, providing remote managers and salespeople with quick and easy access to the full multi-company capabilities of Solomon IV while simplifying administration for the information technology department.

In the Service Series, dispatch integration with Microsoft MapPoint has been added, allowing dispatchers to quickly and accurately locate the address of service calls, plan technicians' routes, and determine alternate routes if needed. The enhancement enables general and specialty trade contractors to better dispatch technicians for higher utilization and profits. However, to use this feature, customers must purchase a license for Microsoft MapPoint separately, and the product must be installed on the dispatcher's computer.

As a recap, MBS claimed at the time of the Solomon IV 5.0 release that the following parties would benefit from the new product's capabilities:

* Distributors or manufacturers who
— Require enhanced inventory replenishment capability
— Want to improve fulfillment by efficiently creating purchase orders from sales orders
— Require landed cost inventory valuation
— Manage production plans with material tracking and cost accounting

* Finance officers and controllers who want improved financial reporting, such as improved actual versus budget reports, and improved budgeting tools

* Construction companies who need a better payroll solution

* Customers who require advanced payroll processing such as union reciprocity (portability)

* Specialty contractors with mobile field service technicians who want an easy and effective means for directing their technicians to the correct location

* Organizations that require the ability to represent customers' project-driven invoices in foreign currencies

* Customers with large off-site work forces that need to report chargeable labor and expense activity.

* Organizations with multiple accounting companies that want to affordably provide remote managers and employees easy access to reports and applications via the Internet.

Customization Tools

Again, the Solomon IV 5.0 release was a progression from Microsoft Great Plains Solomon IV Release 4.50, which was launched in summer 2001 and which featured more tightly integrated financials, supply chain management (SCM), project management, and field service management applications. In addition, Solomon IV 4.50 introduced to customers the more powerful tools to customize the solution to meet their unique business needs.

Project Management Enhancements — Solomon IV Release 4.50 provided project managers in the construction, engineering and other service-related fields with the ability to more closely track project details for improved profitability, due to the available views into project profitability, analysis capabilities, and project workflow tracking and management. Several new project management modules were also made available, enhancing review and approval of time sheets and expenses as well as detailed analyses of employee utilization, which offers customers an enhanced interface between projects and chargeable-time employees, all via the Internet. With the addition of the Solomon IV advanced payroll module, general and specialty contractors with union payroll needs also will be able to utilize Solomon IV for project management.

Supply Chain Management — The Solomon IV Release 4.50 SCM Series added two new modules, bill of materials (BOM) and work order, which, combined with the enhancements to Solomon IV's order management, inventory and purchasing modules, further eased use and configuration flexibility. The work order module was also tightly integrated with the project management series.

Field Service Management — Enhancements to the Solomon IV field service management series offered companies with large field service staffs a comprehensive solution that automates all operations and accounting areas of a service business. The new graphical dispatch board allows organizations with mobile field technicians to easily dispatch technicians through a graphical user interface, with access to each technician's job schedule, locations and more, ensuring accurate scheduling and enhanced customer service.

Customization Tools — With Release 4.50, Solomon IV delivered a new Object Model, providing flexibility in automation and integration of third-party applications, as it makes any Solomon screen available for automation, including standard screens and new screens created by developers with the Solomon Tools for Visual Basic. It also will incorporate any customizations in the object without additional or duplicate work. In addition, Visual Basic for Applications (VBA) increases the familiarity and usability of Solomon Customization Manager, enabling developers to extend, integrate and personalize Solomon IV to meet businesses' unique needs.

Again as a recap, former Microsoft Great Plains division claimed at the time of the release that the enhancements were made with the idea to move Solomon IV up the value chain and that the following parties would benefit from the new product's capabilities:

SOURCE:
http://www.technologyevaluation.com/research/articles/solomon-stands-the-test-of-time-despite-changing-masters-17049/

Maintenance Software--How to Negotiate Successful Contracts with CMMS Vendors

2010-08-18T03:00:00.000-07:00

Introduction

When negotiating a contract with a computer maintenance management system (CMMS) vendor the guiding principals and definition of the project must first be determined. Deliverables, pricing options, payment terms, continuance, product and service quality, and liabilities are additional areas that must be considered in negotiations.

Many people find negotiating contracts intimidating, regardless of which side of the table you happen to be on. This is understandable given what's at stake—a price, quality of product and service to be provided, and a long-term relationship. As a result, some companies prefer to retain a lawyer, accountant or consultant to help them through the process.

The following are some key elements found in a typical contract with a CMMS vendor. This by no means, however, constitutes a legal opinion. Rather, it provides a basic understanding of what might go into the contract from a technical perspective.

Guiding principles

*

Mutual gain: Building a true partnership with your CMMS vendor requires a solid contractual foundation that's fair to both parties. It's too easy to draft terms that favor one party over the other, especially when there are major differences in the size of the companies entering into the contract. A contract, therefore, should allow either party to back out of the relationship at any time and remain whole (value for the customer in exchange for reasonable profit for the vendor).
*

Single contract: As much as possible, strive for a single contract, even if multiple vendors are involved. This avoids vendors pointing fingers at each other, while you get caught in the middle lacking satisfactory service.
*

Clear roles and responsibilities: What are the expected deliverables from the vendor? What's the timing and at what cost? In turn, make sure the expectations of the vendor are well understood, such as what needs to be completed ahead of implementation.
*

Keep it simple: The document should be easy to read and understand. Maintainers are frustrated having to wade through pages and pages of complex legalese.

Definitions

Every contract should begin by defining common terms used throughout the document. For example, "software materials" might be defined as "the XYZ company software in object code and source-code format, and all documents—including but not limited to—specifications, flow charts, diagrams, and user manuals, provided by XYZ company to the supplier under the terms of this contract." The document can then define some of the terms within the first definition.

Deliverables

The contract must specify what goods and services are being purchased. A detailed software specification is usually attached as an appendix. Other deliverables include documentation, hardware, data conversion services, implementation assistance, training, and ongoing support.

It's essential to be as clear as possible in terms of what you've purchased. For example, how many copies of the software did you buy? Which sites within your company can use the software? Can you sell access to the software by suppliers and customers? What type of training comes with the package, for what audience, at which location, for how long, at whose expense?

Pricing options

Price is fundamental to any contract. Some of the more common pricing options include the following:

*

Per module, per concurrent user: Some CMMS vendors have adopted this scheme for larger installations. It's the closest thing to paying only for what you use. For example, suppose the vendor charges from $100 to $200 per concurrent user per module. If a maximum of forty users will be logged into the maintenance module at any given time, twenty people working on the inventory control module and four people maximum for the purchasing module—your cost would be 40x$200 + 20x$150 + 4x$100 = $11,400.

When the twenty-first user tries to log into the inventory control module, access is denied and a polite message explains that you've reached the maximum number of users for that module. Some systems will automatically log out a user, if the activity level drops to zero for a pre-determined period of time.
*

Per concurrent user: One of the most popular pricing options is based on the maximum number of users expected to be logged onto the CMMS application at any given time, regardless of which module they're currently using.
*

Per seat: Many CMMS vendors still insist on a per seat charge, regardless of how many users may be running the application concurrently. There may be a volume discount available for companies with a large user base. One difficulty is how much to charge remote users with limited access to the software via the Internet, for example to submit work requests).
*

Site license: Although there are many variations on the theme, a site license provides a ceiling on what you have to pay, regardless of how many users you have. The price may be based on the expected average number of users annually. Large multinational companies should obtain unlimited use and worldwide rights.
*

Other: Hourly rates should be agreed to for consulting, training, software customization, implementation, etc. Out-of-pocket expenses are usually extra. Maintenance charges are typically 10 to 25 percent of base software costs, including minor upgrades.

Payment terms

There aren't any rules governing how a CMMS is paid but one approach might be to have four payments. The first is a small amount given as a deposit while you conduct user-acceptance testing or a small pilot. Five to ten percent of the base software cost might be a fair amount. The next payment of approximately 30 percent covers shipment of the software. A further 30 percent covers a successful install. The final 30 percent comes after a reasonable "warranty" period of 90 days.

Some companies successfully negotiate an incremental per seat fee, for example, as the number of users increases, the CMMS vendor is paid more, to a maximum of the site license ceiling. An expiration date or back-out clause for the license fee is handy, in case you don't grow to the number of users originally anticipated.

Continuance

In today's dynamic environment, it's essential to cover the possibility of vendor or customer mergers, acquisitions and divestitures. The contract should protect both parties from rendering the license and warranty void, if either party grows, shrinks or changes ownership.

In the case of vendor bankruptcy, make sure the source code is at least held in escrow. Some CMMS vendors ship source code with the application, or make it available at additional cost. In this case, make sure you always have source code for your current version.

Product and service quality

Regarding the quality of products shipped and services rendered, ensure that expectations are well articulated, whether buried in detailed specifications or described in the body of the contract. Examples are hours of operation for on-line support, response time for on-site support, hardware uptime guarantees and acceptable sub-contractors to be used by the vendor.

An effective way to promote a long-term relationship with vendors is to provide both a performance incentive and penalty for non-performance. This should cover delivery promises, service levels agreed to, and product quality guarantees. Remember, this is a two-way relationship. Any performance clauses, therefore, should be subject to customers fulfilling his or her end of the deal, such as proper back-up and recovery procedures, preparation of facilities for implementation, adequate documentation of errors, timely notification of problems, and other requirements.

Liability

Any legal contract should deal with liability issues. From a technical perspective, make sure that use rights and limitations of the software license are well understood.

SOURCE:
http://www.technologyevaluation.com/research/articles/maintenance-software-how-to-negotiate-successful-contracts-with-cmms-vendors-17195/

Should You Consider Deltek? Well it Depends…

2010-08-18T02:59:00.000-07:00

Introduction

Based on Deltek's responses to the Technology Evaluation.Com (TEC) request for information, TEC determined what sort of customer could make good use of the type of solution Deltek provides. This analysis is useful to both Deltek in determining the prospects likely to benefit from Deltek's solutions and to companies looking for the type of solution Deltek offers.

The ideal candidate for Deltek's Costpoint solution will need a high-level of financial management support. This candidate will also require support from all the other modules, though not necessarily at such a high degree. Finally, this candidate will need a full feature-set from certain manufacturing management areas, but not necessarily need every possible feature that could be provided.

All the data used to compose our graphs is directly from Deltek's responses to the TechnologyEvaluation.Com (TEC) request for information. We measure the vendor's level of support for over 3,000 criteria and then compare these, from a high level, to see what sort of customer could make good use of the type of solution Deltek provides.

Profiling the Ideal Candidate for Deltek

There are two types of information that we graph for each of the high-level criteria TEC uses to analyze a product. One type of graph is a baseline graph. In the baseline graphs, we normalize all criteria to an equal relevance, which allows you to see how a vendor's product scores on its own merit and without regard to any one module taking precedence over another. By comparing a graph of the vendor's supported functionality against a normalized baseline, you can see the modules the vendor most emphasizes.

In the other type of graphs, we prioritize by adjusting the baseline to correspond to the vendor's focus. You can see if the functionality you need in an ERP solution is equivalent with the areas in which the vendor focuses. In the prioritized graphs, Deltek's strengths visibly stand out against its weaknesses.

Examining Deltek

From the high-level view, most of the modules in Deltek's Costpoint solution provide a nearly equal level of functionality. Deltek's highest rated functional area is its financials module but as we examine the other areas more closely, their differences surface. The areas that, at first glance, appear to contribute the least to Deltek's scores are its manufacturing management module and the product technology support. Deltek's solution is not necessarily weak in the manufacturing management area; it has several points that are very strong, such as its product costing and product management. The company however, relies mostly on third party customization to support its field service and repairs, and product/item functionality.

The following graph (Figure 1 below) shows the high-level ratings of Deltek's modules against a baseline that has equal weight given to each module. By examining this graph, one can see that if every module is equally important, Deltek Costpoint would fare closely in accord with the baseline for almost every area. This graph however, is not the most useful for discovering how well your company's requirements might match what the Deltek product provides. To see if your company's requirements match well with Costpoint's features, we need to look at the graph that is prioritized to show the strengths and weaknesses of the product.

Figure 1.

In Figure 2 we've modified the graph's baseline so that it follows the strengths and weaknesses of Deltek's Costpoint product. The blue-block line now follows the solid line, which means that in the financials module, for example, as an area with very strong functionality, the module receives a higher weight, or contributes more to the product's functionality in relation to the other modules. In adjusting the product's scores this way, we match areas that contribute a lot to the product's functionality to what a company would most need from its implementation. Essentially, the graph shows that if your company has strong requirements for financials, purchasing management, and inventory management, you would want to look more deeply at the Deltek solution.

Figure 2.

Consider the Criteria in More Depth

Let's consider the criteria in more depth. We'll start with financials since it stretches the furthest to the edge of our graph (see Figure 2). The reason Deltek's financials module is so strong becomes clear when we see the financial criteria graphed on their own. In this case, just about every group of criteria in the module is well supported. Upon adjusting the baseline to fit the product's levels of support, we can see that most of the groups of criteria come equally close in their contribution to the module's overall strength. Figure 3 shows a bar-graph view of only our adjusted global priorities for the criteria, and this is matched with the actual functionality in Figure 4.

Figure 3.

The only noticeably significant changes are in the cash management and accounts receivable criteria groups. In this case, cash management is simply not an area with many criteria so its score does not contribute much to the graph. Deltek, in fact, supports eleven of our sixteen criteria for scoring accounts receivable. Remaining criteria, such as calculation of expected cash resources and uses, the company makes available mostly through modifications.

Accounts receivable however, holds a large group of criteria that contribute to the graph and Deltek does support most of these criteria. The one area that affects the vendor's slightly lower result in this particular group is its lack of support for various credit and collections management functionality. According to Deltek more than half of the criteria in this section will be included in a future release.

Figure 4.

Like a number of ERP solutions, human resources (HR) functionality is not an area that the company emphasizes the most. Nevertheless, Deltek does support quite a few features for human resources. If your company requires certain HR functionality such as benefits, personnel management, payroll and data warehousing support, the Costpoint product would provide your required features. All things being equal, let's check, in Figure 5, on the areas that Deltek supports.

Figure 5.

Costpoint's results are high in a few areas, for example, it supports almost every criterion in the payroll group and anything not supported outright, Deltek can provide in the form of a modification.

Manufacturing Management

One area that contrasts against Deltek's other modules, is in the manufacturing management group of criteria. This group contains a variety of features with fluctuating ranges of support. Deltek emphasizes some features—but to the other extreme the company does not support certain groups of criteria at all. See Figure 6 below:

SOURCE:
http://www.technologyevaluation.com/research/articles/should-you-consider-deltek-well-it-depends-16875/

Solomon Stands the Test of Time Despite Changing Masters Part Two: Market Impact

2010-08-18T02:58:00.001-07:00

Market Impact

Microsoft Business Solutions Solomon, formerly Solomon IV and Microsoft Great Plains Solomon IV, is a prominent business management and e-business suite of applications for small and mid-market companies. Most recently, in summer 2003, Microsoft Business Solutions (MBS) announced the availability of Microsoft Business Solutions Solomon 5.5, which includes several new features and enhancements in the product's Foundation Series, Financial Series, Project Series, and Service Series of modules.

Clearly, the MBS Solomon product has had more than an interesting voyage since its inception. Its former proprietor, privately held Solomon Software, Inc., which was founded in 1980, with headquarters in Findlay, OH, had experienced a steady growth throughout the 1990s, with estimated revenues of $60 million and over 400 employees in its last fiscal year as an independent entity, 1999. Our estimate is that MBS Solomon nowadays also contributes over 10 percent of total MBS' revenues of ~$550 million.

From a founder-driven company of over 20 years ago, with a traditional focus on accounting software, former Solomon Software had evolved to a vendor run by professional corporate management and that eventually offered a much broader and deeper product portfolio prior to being acquired in 2000. Solomon designed, marketed, and supported its flagship product Solomon IV, a financial and business management system for small to medium enterprises (SMEs), which it introduced in 1994 as a suite of over fifty standard modules, running solely on Microsoft SQL Server and Windows NT/2000 platforms.

Focused on the low end of the mid-market (the enterprises with up to $250 million in revenues), Solomon had also achieved a worldwide base of more than 25,000 customers in 400 different industries in more than 100 countries exclusively through its extensive network of independent sales and support organizations—value added resellers (VARs). The company also had over twenty affiliate offices worldwide and derived approximately 25 percent of its revenue from the international market. Further, in 1998, Solomon opened four regional Solomon Technology Centers (STCs) in North America to support its distributors. These centers provided applications and installation support for its indirect channel in order to provide efficient service and support for customers and some economies of scale for distributors at the same time.

Especially during the last few years of its independent operation, Solomon had accelerated the release of new functionality and attempted to create a new market perception of not being only a best-of-breed accounting software provider. Since 1997, Solomon had also acquired a number of independent developers and launched partnerships with a number of ISVs, which today amount to close to 150 and which have significantly broadened its product line. During 1998 and 1999, the company released its distribution, manufacturing, service, project management, and e-business product components.

The last product release before the Great Plains acquisition, Solomon IV release 4.21 in 1999, introduced some landmark features, that have remained its differentiators till nowadays, such as Solomon Desktop (a portal application providing 100 percent Internet access anytime, anywhere), Service Series (featuring Field Service, Service Dispatch, Equipment Maintenance, Service Contracts and other modules), E-Commerce Gateway — EDI Edition, Advance Shipment Management, and Web Order (a B2B e-commerce component). As a result, the product now comprises the following series of modules: Foundation, Financial, Project, Service, Distribution, Manufacturing, and E-Business.

This is Part Two of a four-part note.

Part One detailed the recent product enhancements.

Part Three will discuss product differentiators.

Part Four will present the challenges and make user recommendations.

New Functionality Accelerated

Still, due to its quite belated expansion into the ERP world (let alone extended-ERP), the vendor had suffered the reputation of a best-of-breed accounting software provider only. While former Solomon had accelerated its delivery schedule of new functionality, it was also hard pressed with tight "time-to-market" constraints and limited resources at the time. The following intended functionality delivery schedule in 2000 would have been a tall order for even much more resource abundant competitors, given that some of these have seen the daylight only within the above-mentioned releases within Great Plains and MBS, well after 2000—repetitive build and MRP modules within the Manufacturing Series (yet to be released natively); replenishing, commissions, and shipments modules within the Distribution Series; employee utilization and time and billing within the Project Series; additional e-business functionality like eVoucher; and Solomon Object Model within the System Tools suite.

However, given that all is well that ends well, MBS Solomon, due to its distinct differentiators (e.g., project management, advanced distribution, and field service capabilities, the product flexibility, having integrated but modular applications, powerful reporting capabilities, multi-company accounting features, etc.) and weaknesses (e.g., rudimentary manufacturing functionality), has been blessed in disguise with possibly the most distinct niche and the least overlap (gray area) with the other MBS ERP products (i.e., MBS Great Plains, MBS Navision, and MBS Axapta). Indeed, MBS Solomon remains the choice for organizations that seek flexible financial systems, integrated with distribution, project, or service operations. The strongest customer base thus comes from construction—special trade contractors, wholesale distribution—durable goods, business services, engineering, accounting, research, and management service organizations.

CRM Strategy

Although the product has suffered CRM strategy vacillations as a result of changing owners and their differing CRM ideas at the time, it should eventually benefit from the next release of Microsoft CRM, version 1.2, which is slated for the end of 2003, and which will supposedly support nine languages in total, will feature stronger reporting capabilities based on Crystal Decisions' Crystal Enterprise 9 product and improved setup and development capabilities. The integration will supposedly be provided for the MBS Solomon 5.0 and 5.5 releases.

Prior to opting for the in-house CRM product integration following up on its release in January 2003 (see Microsoft Convergence 2003 portrayed an Enterprise Solutions crossroad!), Solomon was going to be integrated with SalesLogix in 2000 (see Yet Another ERP/CRM Partnership), and subsequently with a mid-market CRM product that was called Microsoft Great Plains Siebel Front Office (see Winner Takes All - Siebel Ousts SalesLogix From Solomon's Deal) during the "time of love" between Siebel Systems and Microsoft Great Plains. At some stage, Great Plains was also toying with an idea of enhancing Solomon IV SCM capabilities with a partnership with Logility (see Great Plains Supply Chain Series To Be Powered By Logility), which has meanwhile fallen by the wayside due to the vendors' different target markets (i.e., larger Logility's customers versus Solomon's focus on SMEs) and given Solomon's customers' needs could often be well met with Solomon's meanwhile enhanced native distribution capabilities.

SOURCE:
http://www.technologyevaluation.com/research/articles/solomon-stands-the-test-of-time-despite-changing-masters-part-two-market-impact-17050/

Support and Maintenance: No Longer the Software Industry's "Best Kept Secret"?

2010-08-18T02:56:00.000-07:00

For the longest time, the traditional pricing strategies of software vendors have included a reliance on support and maintenance (S&M) contracts, which is where most vendors could be assured of meeting, if not surpassing, their margins. The sizable profit made from S&M contracts (with customers paying more over time) has been one of the software industry's best kept secrets. Furthermore, user enterprises have not had the option of turning—that is, not until recently. To learn more, please see part one of this series Will User Enterprises Ever Get onto an Easy (Support and Maintenance) Street?

To be fair, some vendors, such as Oracle, do not require customers that are purchasing license agreements to purchase software support as well. But, for any customer that is implementing a new software system, software support is similar to an insurance policy. Software support ensures that customers will have access to technical support, regular updates, and new releases of the vendor's purchased applications.

In the past, software buyers have been mostly focused on bargaining over the up front, one-time-only license fees, and have not been paying enough attention to how much they will be paying in software maintenance fees thereafter. This has prompted many vendors to offer ludicrous discounts during the final negotiations, if not even give away free software, knowing full well they will recoup any losses from these "freebies" through support and maintenance agreements.

Sure, a software support contract is usually charged as a percentage of the software's net price, meaning that if a vendor gives a 50 percent discount on the up front license fee, the customer gets an ongoing 50 percent discount on the price of the maintenance. Still, over the entire life cycle of the system, most customers ironically pay far more in maintenance fees than they ever pay in up front license fees.

Lately, however, feelings of "being had" (taken advantage of) are slowly but surely sinking in among user enterprises. Vendors are beginning to see that corporate buyers of enterprise software are taking a much closer look at what they are paying for their applications' S&M. In other words, while information technology (IT) managers have traditionally only moaned about the S&M tab, lately more and more IT managers are intent on finding ways around ever-increasing S&M costs.

Vendors will quickly cite that the bulk of software support fees is related to upgrade rights. Customers receiving S&M instantly acquire an appreciating asset, as they receive access to all future innovations at no additional costs. Furthermore, vendors will point out that this practice is common in other industries.

For example, Best Buy, the consumer goods retailer, offers two types of maintenance contracts: a service repair contract and a service replacement contract. The service repair contract promises only to fix the product the customer bought. The service replacement contract means that, for the life of contract, the consumer can bring in the product and have it replaced with a brand new one—no questions asked. This latter policy is logically much more expensive, and it costs about 1020 percent of the original price.

But this is where the similarity with enterprise applications ends. Everyone realizes that trading in an outdated enterprise application, or replacing one that is malfunctioning, is far too difficult and inconvenient (if even possible) for the customer than doing so with an appliance or a car.

In reference to the previous analogy of shopping for a new TV, appliance, or car (see Will User Enterprises Ever Get onto an Easy (Support and Maintenance) Street?), some vendors point out that a customer does not get a new and improved TV set, appliance, or car for free every year or two from the vendor that the customer purchased support programs from. If one could purchase a car at 3050 percent off the list price, and then pay 20 percent of that per year to get the latest, newest version of the car every year, then that would actually be a pretty good deal for the customer. Application technology is advancing at a far greater rate than automobile technology is. Therefore, upgrades should be seen as even more valuable, albeit only to the minority of customers that really need the "latest-and-greatest" technology, complete with all the "bells and whistles" (with every feature possible).

Vendors also cite that their research and development (R&D) costs are constantly going up as software becomes more complicated, and that any profit and loss (P&L) view of their support businesses has to include all costs for R&D, and should amortize the cost of the original sales effort. But again, it is the free market that should determine the fair price, as is the case in other industries (given that retail has been mentioned for comparison).

To be fair, many software customers radically alter the products they receive, making support for those products infinitely harder. Staying with the retail goods example in Will User Enterprises Ever Get onto an Easy (Support and Maintenance) Street?, when a consumer buys a TV set, the purchase agreement generally states that any tampering with the product itself (even opening the back panel for a peek inside and consequently breaking a security seal) negates any warranties, and automatically cancels any service contracts.

The question is, why then have software vendors not been that strict in enforcing such clauses? Perhaps the answer is that vendors are tacitly conceding that customers cannot wait for lengthy upgrade cycles, whereby often the needed improvements for some customers will not come in the next few product releases. Also, vendors realize that an enterprise system is a mission-critical infrastructure or platform for an entire business, as opposed to a mere appliance purchased for individual use.

In any case, vendors' "best kept secret" status (see Will User Enterprises Ever Get onto an Easy (Support and Maintenance) Street?) is no longer tenable, given many recent quantitative findings and analyses. One such finding from International Data Corporation (IDC) shows that, in US dollars, businesses will have paid nearly $100 billion in software maintenance fees in 2006, whereas maintenance fees accounted for $86 billion (or 41 percent) of the $210 billion in revenue collected by software vendors in 2005. These figures for software maintenance fees are expected to grow 9.6 percent per year, and reach $137 billion (USD) by 2010, accounting for nearly half of software vendors' revenues.

One should note, however, that the growth in software maintenance fees is due to a combination of license revenue growth (which in many cases includes software maintenance) and inflationary adjustment increases in support revenue fees. The expected increase in revenue of 9.6 percent annually is not totally due to increases in support fees. It is useful to note that as more software is sold each year, the installed base becomes larger, resulting in more customers receiving more software for free through upgrades. For instance, more Oracle customers will receive Siebel 8 for free (no additional charge beyond their support fees) than any prior release of Siebel Systems' software (as well as the new releases of PeopleSoft and Oracle E-Business Suite [EBS]).

This growth also reflects a consolidation of vendors and the widespread adoption of enterprise software among businesses. With more customers continuing to work with their existing vendors (that is, the installed base revenue taking a larger share of the pie), the revenue stream will shift from new revenues to recurring revenues. This is natural and does not necessarily reflect diminished value either for customers or vendors.

A bigger installed base, like Oracle's or Infor's, should also help vendors (and arguably, customers) by spreading development costs across a larger customer pool, and lead to quicker identification of best practices for many customers. As vendors support larger and larger installed infrastructures, their recurring bills will naturally increase, while at the same time, the relative spending on "new stuff" will decrease.

Certainly, while this state of affairs is great for vendors, it is definitely not so great for customers. To that end, a Business Technographics survey of 436 IT decision-makers in 2005 found that 70 percent in North America and 60 percent in Europe cited high software maintenance costs as their biggest challenge related to software licensing models.

Further, according to a recent Forrester Research survey, the current number one IT initiative is to reduce software costs in any way possible. S&M, which consumes one-third of all software costs, becomes a logical line item to consider when reducing costs. IT entitlement costs, such as enterprise software maintenance, have (at some companies) soared to a record average of 70 percent of total annual IT budgets.

Logically, as the maintenance costs become a larger percentage of spending, users want to look at how to reduce those costs. But many chief information officers (CIO) also know that the software bill he or she receives can be minor in comparison to the costs of running an internal IT department. This is particularly true within larger companies, where both items need to be thoroughly reviewed to make a real impact on the bottom line.

Oracle cites its attempts to take on a bigger role in helping to reduce overall costs for user enterprises. As an example, prior to the Siebel acquisition, customers needed to build and support customized integrations between Siebel and other Oracle applications. Now, as part of the Oracle Fusion integration strategy, the vendor is building engineered links between Siebel and key modules of Oracle EBS. This means that the vendor will assume the development and support duties for these integrations (thereby freeing the customer from investing in this effort) without increasing fees to the customer. While highly commendable, this effort on Oracle's part is certainly not a universally useful development for many other customers with many other applications in place that will not benefit from these ready-made links.

Nonetheless, it is still surprising to see most vendors continue to (oblivious to the general users' feelings or not) increase maintenance revenue in many ways, starting with increasing maintenance fees directly. A decade ago or so, an "upper teen" percentage of the nominal (price list-based) software license fee was a typical benchmark for maintenance fees, but this percentage has slowly but surely crept up into the "lower twenties," or even higher.

For those not yet dismayed by these figures, maybe the following notion will make some of them wince: in less than five years, user enterprises pay the amount of their entire license fees once again in maintenance. In other words, software customers effectively "re-buy" their applications every four to five years through maintenance fees, while enterprise software vendors continue to raise annual S&M fees year over year and well beyond the inflation or consumer price index (CPI) adjustments (which could be justified, at least).

Oracle, for instance, recently reported its highest revenues ever for software license update and product support, with corresponding profit margins of a whopping 90 percent. The estimate is that about 14,000 licensees of Siebel, PeopleSoft, and JD Edwards software combined are paying Oracle more than $1.5 billion (USD) in annual support and maintenance fees. With support margins running as high as 90 percent, what does this mean for the rest of Oracle's business?

To Oracle's credit, the greatest value of the vendor's annual software support fee (over 70 percent) is associated with the product development that leads to new releases of the customer's licensed software. The costs for R&D and "bug" fixes are not included within the above-mentioned 90-percent margins. Also, it is not too difficult to believe that the combined maintenance fees for all Siebel, PeopleSoft, and JD Edwards customers are $1.5 billion (USD), given that under these previously individual entities, that amount was even higher.

Based on the above numbers, the average customer is then paying $107,000 (USD) annually, and one should note that many large companies could not hire their own staff to maintain, research, and develop regular updates; fix errors (24x7 and in multiple languages); and continue to provide new features and enhancements to the software for $100,000 (USD) annually. But what about the smaller companies that have stable, mature systems in place and that do not need the latest features that their larger brethren might require?

Another interesting (yet more general) question here is this: what would happen if vendors did not make their biggest margins on maintenance? At best, vendors average margins of 1015 percent on the entire business even after the larger margins made on maintenance are taken into account. The vendors' stockholders demand 1015 percent profit, so if vendors' revenues from maintenance were to decrease, where would that leave these vendors?

The original price of the software (license fee) is really quite arbitrary, since vendors charge only what they can, given customers' tolerance and what the competition charges. Maintenance dollars do pay for product development, so one could imagine the consequences should profits in this area decrease.

On the other hand, sales and marketing expenses (aimed at getting more revenue) may actually go up if the expected maintenance dollars do not come in. The logical "victim," besides product development, would then be support services, since fewer available dollars would mean fewer offered services. But given the current high margins for maintenance, vendors can still afford to provide services with fewer dollars. So in summary, vendors need the S&M money. But what if the customers rebel en masse and refuse to pay it?

Second, vendors have been tightening enforcement of existing agreements lately. In the past, vendors were quite lax about pursuing customers that exceeded agreed-upon, concurrent, or named user counts, which usually form the basis for software pricing. But lately, it is "no more Mr. Nice Guy," as vendors have been enforcing their contractual rights to audit customer usage of software. Vendors are now charging customers license fees for additional seats, plus the maintenance fees on those seats.

Furthermore, vendors' support policies keep customers from removing unused user or product licenses (see Application Erosion: Eating Away at Your Hard Earned Value) from maintenance contracts. Specifically, in the case of users that want to remove unused, functional modules or users, some vendors then simply and tacitly (if not sometimes furtively) reprice any remaining licenses at higher rates to ensure total maintenance fees remain virtually intact. As a positive example of this practice, Oracle has always had a license management services group that works collaboratively with customers to ensure proper licensing and intellectual property protection. Most customers reportedly want to be compliant and welcome this kind of assistance.

SOURCE:
http://www.technologyevaluation.com/research/articles/softbrands-to-institute-fourth-shift-for-sap-business-one-manufacturing-work-plan-part-one-event-summary-17269/

Manufacturing Environments and Integration with Other Functions

2010-08-18T02:54:00.002-07:00

Design Factors Shaping System Usage in Manufacturing Environments

In addition to the factors mentioned in Part One for distribution environments, the major factors shaping system usage in manufacturing environments include the definition of product structure, variations in production strategy, and lean manufacturing practices.

Definition of Product Structure Information. Master bills and master routings define product and process design, with optional bill and routing versions. Their identifiers are assigned to relevant manufactured items and specified on production orders. Planned engineering changes are identified using date effectivity for each bill and routing version; date effectivity can also be identified for material components. The master bill and routing information provide the basis for costing and planning calculations. Routing information is optional, and some firms coordinate production activities without it.

The order-dependent bill and routing for a production order initially reflect the assigned master bill and routing, and can be manually maintained to identify a custom configuration. The system models a multilevel custom product configuration using order-dependent bills and multiple linked production orders tied to the sales order.

Variations in Production Strategy. Selling stocked product involves a make-to-stock production strategy, where sales forecasts typically drive end-item replenishment. A make-to-order production strategy often requires stocked components, where replenishment may be driven by component forecasts. The production order for a make-to-order product is typically linked to a sales order. A make-to-order product may have make-to-order components, so that multiple linked production orders are tied to the sales order. The linked production order(s) can be generated during sales order entry, by planning calculations, or by manual assignment.

Lean Manufacturing Practices. Lean manufacturers often require auto-deduction of material and resources, bin replenishment of floor stock material, order-less reporting of production, or constraint-based scheduling of manufacturing cells.

This is Part Two of a two-part article reprinted from Managing Your Supply Chain Using Microsoft Navision.

Part One covered design factors related to the user interface, customization capabilities, and distribution environments.

TEC previously reprinted a chapter on "Sales and Operations Planning".

This excerpt of the "Summary" chapter is presented in two parts.

The book can be ordered on amazon.com or books.mcgraw-hill.com.

Integration with Warehouse Management

Integrated warehouse management functionality is already included, thereby avoiding the need for a supplemental application. It supports both order- and document-based approaches to warehouse management, and a natural growth path to more advanced functionality. For example, suggested put-aways can account for item characteristics (such as weight or cold storage requirements) as well as bin characteristics (such as weight limitations or cold storage capabilities).

Integration with E-commerce

E-commerce builds on the natural design of an ERP system since it provides electronic communication of basic transactions. Integrated e-commerce functionality is supported in several ways, including Biztalk transactions, reverse auctions, commerce portals, and user portals.

Biztalk Transactions for Sales and Purchasing. The symmetry of sales and purchasing functionality is reflected in Biztalk transactions, as shown in the following figure. For example, an outbound Biztalk sales quote and sales order confirmation can be sent to a customer. Conversely, an inbound Biztalk purchase quote and purchase order confirmation can be received from a vendor. Each inbound transaction can have an optional e-mail notification sent to the internally responsible person.

E-Commerce Sourcing via Reverse Auctions. A reverse auction provides an electronic approach to sourcing a purchase. It includes sending a request for quote to multiple vendors, obtaining vendor responses on a web site, reviewing the quotes, communicating to vendors whether their quote was accepted or rejected, and creating a purchase order from the quote.

Commerce Portal and User Portal. Supply chain activities often require interaction with remote users and external personnel. The commerce portal supports creation of web pages for electronic access to information, such as handling requests for quotes and sending quotes. The user portal supports information retrieval and task performance by remote users, such as sales tasks to create new quotes, sales orders, and customers.

Integration with Relationship Management

The ability to manage relationships with customers, vendors, and others is fully integrated with standardized functionality for supply chain management. This level of integration contrasts sharply with add-on functionality such as a third-party customer relationship management (CRM) application. Illustrations of integrated functionality include the following:

* Contact interactions reflecting supply chain activities. The system automatically records contact interactions involving sales and purchase documents. For example, an interaction may represent sending a document for a sales quote or invoice, or a purchase quote or order. Each document is treated as an interaction.

* Contact interactions reflecting outgoing calls, e-mails, and cover letters. The system automatically records contact interactions involving outgoing communications initiated from within Navision, such as originating a phone call. Outgoing e-mail becomes an attachment to the interaction. Incoming e-mails can also be automatically recorded as a contact interaction and attached to the interaction.

* Contacts. You can create contacts from existing information about customers and vendors (and vice versa), and automatically create contacts when adding customers and vendors.

* Create sales quotes and orders for an opportunity. A sales quote can be defined for an opportunity (where the opportunity represents a potential sale to a contact) and converted to a sales order.

* Contacts and commerce portals. Business with a contact can be conducted through a commerce portal.

Other relationship management capabilities go beyond these integration features. As part of generating and qualifying leads, for example, you can create a campaign, assign a subset of contacts to the campaign, define a template for sending information (such as mailings or e-mail) or making phone calls, and track responses for the campaign. The system automatically records the sent information and responses as contact interactions. Contact interactions can be manually added, and contacts can include banks, accountants, lawyers, travel agencies, government authorities, press, and others. The system supports the identification and tracking of opportunities within user-defined sales cycles, and recording the related contact interactions. Contact information can also serve other purposes, such as printing labels or exporting data for external telemarketing.

Integration with Service Management

Service management typically involves maintenance and repair of products either in the field or at internal repair shops. Firms involved in service management may work on products they have sold, or products manufactured and sold by others. A typical example involves an equipment manufacturer that also performs installation services, maintenance on installed units, or repairs on returned units. Each unit is termed a service item. Integration of service management with other supply chain functionality is illustrated below.

* Linkage between a service item and shipped product. The shipment transaction automatically creates a service item for each item shipped to a customer, with information about the serial number (if applicable), warranty period, and ship-to location. Service items can also be manually added, which is especially important when working on products not recorded as shipped.

* Material and resource requirements for a service order. A service order can be created with one or more line items identifying the service items to be repaired. Material and resource requirements can be specified for repairing individual line items or for the entire service order. The product's original assembly list can be used to identify needed materials, and the system retains the latest configuration of the repaired unit. Loaners can be sent and received.

Other service management capabilities go beyond these integration features. For example, resource requirements can be identified by skill level and location, which is especially helpful in scheduling field service personnel using the dispatch board capabilities. The system supports service quotes (which can be converted to service orders) and service contracts, troubleshooting diagnostic capabilities, and the identification of faults, symptoms and resolution related to a service item.

SOURCE:
http://www.technologyevaluation.com/research/articles/manufacturing-environments-and-integration-with-other-functions-18044/

Important Sarbanes-Oxley Act Mandates and What They Mean for Supply Chain Management

2010-08-18T02:54:00.001-07:00

SCM-related Mandates: Sections 404 and 401

More and more, enterprises are realizing the importance of adopting a holistic approach to their businesses from top down, and are beginning to harness an emerging strategic software category—governance, risk management, and compliance (GRC). To this end, their attention so far has been greatly focused on ensuring compliance with the US Sarbanes-Oxley Act (SOX). Chief financial officers (CFOs) and chief executive officers (CEOs) of publicly traded companies are now very much aware of the impact SOX has on their firms, as failure to comply with the law's strict standards and policies, even unknowingly, can essentially end the career of any executive, and often in a disgraceful manner. For a discussion on the relationship of SOX to other regulatory laws, see Thou Shalt Comply (and More, or Else).

Although the law included a number of new mandates, two sections have had clear implications for corporate information systems, while some are especially relevant to supply chain management (SCM). Namely, Section 404 (management assessment of internal controls) requires management to assess the effectiveness of its own internal controls and procedures for financial reporting each year. Section 409 (real time disclosure) requires companies to disclose material changes in their financial conditions or operations on a rapid and current basis. Section 404, which requires audit of internal controls, has made executives reexamine and sometimes replace operational systems that are not well integrated with their financial systems.

Section 401a (off-balance-sheet obligations disclosure) is an addition to the Securities Act of 1934. Section 401a requires disclosure of "material off-balance-sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the issuer [that is, the company itself, an issuer of securities] with other entities or persons" if these arrangements may have a current or future material effect on the firm's financial condition, operations, and so on.

This particularly affects service contracts, such as those typically written with ocean carriers and vendor managed inventory (VMI) arrangements undertaken to hedge risk and move assets off the balance sheet. Increasingly, businesses that adopt VMI practices to reduce current inventory assets may include some form of penalty clause in their contracts for failure to use materials or early cancellation of agreements, and Section 401a clearly requires time-phased listings of these potential obligations. Also, market conditions might change and cause firms to cancel long-term purchase agreements with suppliers, with cancellation penalties or restocking charges as a result. SOX requires enterprises to outline the precise details of these potential charges and penalties. Along similar lines, companies must report and document any early termination or cancellation fees in any lease agreements or letters of intent (which are sometimes used to aid with delivery schedules and manufacturing lead times for critical items).

While Section 401a has limited applicability to some supply chain contracts, Section 404 is broadly relevant to many SCM processes, including outsourcing arrangements. Outsourcing of processes and transactions comes under both Sections 401 and 404, whereby off-balance-sheet agreements with suppliers need to be reported (401) and subjected to effective internal controls (404). SOX is more demanding in this regard than traditional auditing standards. For instance, Section 404 directs the US Securities and Exchange Commission (SEC) to prescribe rules that require annual reports to include an internal control report. This internal control report must contain two elements: 1) it must state management's responsibility for establishing and maintaining controls (including policies, procedures, and processes) for financial reporting, and 2) it must contain an assessment of the effectiveness of these controls and procedures.

If the supply chain is to be truly controlled to the level required by SOX, then there must be a well-structured process that runs across multiple functions, and not merely a series of transactions pretending to be a process. CEOs will thus look to all leaders corporate-wide, including the SCM managers, to take a proactive and collaborative role in corporate governance, since everyone has to realize that passing audits is only one step to the improvement of corporate governance, and that auditors will never understand areas of the supply chain the same way SCM professionals do (and vice versa).

Firms that move aggressively in the direction mandated by Section 404 might even have a chance to improve the management of their supply chains (that is, achieve supply chain excellence), and to gain a competitive advantage on their rivals. This is particularly true given that other disclosure requirements (those instituted in the European Union [EU], for instance) can also support a more efficient and credible, competitive environment for businesses and their supply chains.

Control requires visibility across the process (from ordering components to delivering finished goods and services to customers), and information technology (IT) may be a necessary aid to achieving this total visibility. Yet IT alone is not sufficient to constitute SOX-level control. Meaning, the mere tracking of inventory cannot substitute for efficiency and effectiveness in all SCM activities. For example, with regards to inventory management and inventory write-offs, most enterprises still have the responsibility of controlling inventory and fixed assets. However, SOX implications would now instill the requirement that inventory values are correctly stated, whereby CFOs can no longer "defer" inventory write-downs to avoid write-off losses on quarterly income statements. In other words, SOX demands more accurate and timely accounting to ensure that the material is physically present, its condition is correctly stated, and inventory values are accurately recorded within the accounting system.

As for material transfers and poor inventory accuracy, most enterprises still have the responsibility for material control activities. In the past and all too often, material transfers and inventory transactions would not be processed in a timely manner, thereby creating a true inventory that is "out of kilter" with the expected-on-records situation. SOX, however, states that all movements of inventory or fixed assets must now be recorded in a timely fashion. In other words, all movements will have a definitive financial impact on the company, and the recording of accurate financial information is the foundation of SOX.

Further, an accounts payable (AP) system that does not systematically match purchase orders (POs) and receipts to vendor invoices prior to payment might be vulnerable to fraud, or even to a situation where someone creates fictitious employees or suppliers to then "pay" them, and pocket the money himself or herself. Traditionally, SCM departments within enterprises (for example, engineering departments) have accommodated "internal customers" to "sanitize" so-called "after the fact purchase order" commitments. Under SOX regulations, however, if policies and procedures specifically outline requisitioning and procurement authorities, and if these clearly state that SCM departments are not authorized to issue confirming commitments, then such actions by SCM departments would be an apparent SOX violation. The "charge" would be failure to adhere to internal controls with regards to commitment of company funds and in accordance with company policies and procedures.

All this accentuates the importance of instituting the so-called segregation-of-duties (SOD) for possible conflict-of-interest practices in the procure-to-pay processes, which include receiving, order placement, invoice processing, and establishing vendor (supplier) master data and setups. Section 404 is all about ensuring that companies have adequate approval processes and procedures in place to preempt fraud or theft, as well as making sure what controls and testing are performed to guarantee that these safeguards are working.

Other examples of good SOD practices are to not allow an engineering manager to both select and pay suppliers, because some of these suppliers could, for instance, be family members or best buddies of the manager. Software developers should not perform quality testing on their own applications. Also, an invoicing system that is not integrated with shipping might allow a manager to improperly recognize revenue that has not yet been earned. Many enterprises now also use numerous contemporary tools, such as procurement cards, e-procurement applications, and blanket order releases, to either assist or monitor execution of company expenditures. The aim of SOX is to ensure that businesses institute adequate controls to monitor expenditures and commitments to make certain that company assets are safeguarded and policies are complied with.

Documenting Activities Affected

SOX has also had an effect on the obligation of public companies to document their activities. Since changes in their activities could affect companies' bottom lines, companies must provide all relevant information about any changes to their shareholders within ninety-six hours (see Claudia Delto's 2005 article Checking It Twice -- Basel II, Sarbanes-Oxley Act, International Financial Reporting Standards). Therefore, the timeliness requirement of Section 409 seems to call for a much more transparent and integrated financial reporting system than many companies have today. For example, companies that are accustomed to working on a ten-day financial closing period would seem to be at risk for noncompliance with the real time disclosure requirement, which is currently interpreted as demanding disclosure of material events within four business days.

Logically, when key or critical supplies or services are late, they inevitably have an impact on a company's revenue. And if late deliveries result in a material financial impact, this must be reported in a timely fashion. Also, given the trend towards more outsourcing, companies are held responsible for good business decisions and for execution of agreements and supplier relationships. Section 409 is to make sure that in case of supply disruption, there is a process in place to report the financial impact of the disruption on a timely basis, if of material nature.

An SAS 70 Type II Report may also need to be included within the outsourcing proposal request. For those not familiar with the report, SAS 70 is an auditing standard designed by the American Institute of Certified Public Accountants (AICPA) to enable an independent auditor to evaluate and issue an opinion on a service organization's controls. The service auditor's report contains the auditor's opinion, a description of the controls placed in operation, and a description of the auditor's tests of operating effectiveness (if the report is a Type II).

The audit report can be shared with the service organization's customers (user organizations) and their respective auditors. The service organization is responsible for describing its control objectives and control activities that would be of interest to user organizations and their respective auditors. In other words, the report allows each outsource provider to have a single assessment account, and precludes the need for them to have each client review their processes on an individual basis. It is a mechanism for outsource providers to demonstrate the sufficiency of their controls design and to verify that their controls are operating effectively.

The problem of SOX reporting is particularly acute for firms with multiple operating units and decentralized systems. This is because in recent years, many enterprises have grown both organically and through acquisitions, and thus, accurately reporting on these business units requires a significant number of "manual" accounting processes and adjustments. Such companies will either need to adopt a common financial reporting system, perhaps integrate multiple systems with a financial reporting layer at the corporate level, or implement a performance management solution to provide near real-time analytics (see Financial Reporting, Planning, and Budgeting As Necessary Pieces of EPM).

Also, while the first few years since SOX enactment have been devoted mostly to financial issues, in 2007 and beyond, the law's mandates will likely delve deeper into organizational structures and significantly touch SCM, human resources (HR), and IT departments. Even now, SOX requires disclosure of risks and strategies that will go into effect after such disruptive events as hurricanes, accidents, and threats or actual instances of terror, to mitigate their effects.

The Challenge of SOX Compliance

Of all the laws and regulations, SOX presents some of the greatest technical challenges for businesses, since the additional requirements of the law increase the amount of required manual processing. This, in turn, significantly increases the cost of compliance. The ongoing cost of testing manual financial controls to comply with SOX requirements, as well as the ongoing compliance risks associated with those controls, is forcing companies to move towards financial management and accounting systems that not only record transactions, but that also manage the entire SOX 404 compliance process.

The early adopters of SOX compliance have reportedly learned some hard lessons. SOX programs have highlighted manual, paper-based processes as being very costly to audit compared to automated processes. It is quite time-consuming to reconcile and correct errors in manual processes. They run a higher risk for human error and (possibly vile) omissions, have high ongoing audit costs (as compliance in one location does not necessarily imply compliance in another location), and require detective controls to search and identify errors after they have occurred. Yet, if a company is found to have disregarded or violated its reporting duties, its chief information officer (CIO) could also be convicted (see Checking It Twice). Even privately held companies that are not legally bound to comply can be indirectly impacted by SOX. Examples of such companies are customers that manufacture or supply goods to large public organizations, such as auto companies; these organizations often require their suppliers to be SOX-compliant.

The logical question is—how is any organization with limited resources (particularly a smaller one) supposed to cope with all of this? Even more important, how do such organizations stay abreast of the additional changes that are certain to be on the way? One sensible answer to these questions is IT, since many software tools have been developed that can greatly simplify the process. It all comes down to managing and monitoring an organization's internal processes. These preventive, detective, or mitigating compliance controls ideally span users, roles, and processes, which all require access and authorization evaluation, testing, and remediation.

For instance, some of these solutions compare a company's current controls to compliance "best practices," and offer solutions on how to shore up weaknesses and better segregate duties. In other words, the software governs who has clearance to perform such tasks as writing a check to a vendor, paying an employee, or adding revenue in a given quarter. This software might not only set up who can do what, but it would also enforce the rules (that is, alert the compliance watchdogs should an unauthorized person attempt to "monkey" with anything, and thus prevent fraud before it occurs). Other software may help managers to document policies and procedures, creating electronic archives of those policies along the way, while several packages could flag internal transactions that look suspicious

SOURCE:
http://www.technologyevaluation.com/research/articles/important-sarbanes-oxley-act-mandates-and-what-they-mean-for-supply-chain-management-18906/

Project Portfolio Management for Service Organizations: Bridging the Gap between Project Management and Operations

2010-08-18T02:53:00.001-07:00

Introduction

In the last couple of years, the enterprise resource planning (ERP) industry has changed the landscape of the project portfolio management (PPM) marketplace. ERP vendors, such as SAP, Oracle, and Microsoft, have recognized the value of developing and delivering services to professional services organizations (PSO). Faced with this new reality, the best-of-breed vendors that once dominated the PPM marketplace must either shift their focus or defend their market share from the ERP giants now entering the market. As a result, the PPM industry is divided into two major camps:

1. Vendors servicing PSOs
2. Vendors servicing internal information technology (IT) departments

This article will examine PPM for PSOs and the vendors that service this market segment.

The Operations Side of PPM

The PPM industry's mixed messages are due in large part to the idiosyncrasies that separate PSOs from internal IT departments. Although most PPM vendors offer functionality for both types of organizations, most PPM solutions do not address both sets of needs in their entirety. Consequently, a number of vendors competent in portfolio management and project management have repackaged themselves for internal IT departments, while numerous vendors that originated in the billing and financials software market have focused their efforts on the billable services sector, where they can provide ERP functionality to meet the unique needs of PSOs.

PSOs want complete PPM solutions that address their business as a whole. For service organizations, efficiently capturing time, billing, and expense data is a key component to bridging projects and operations. Thus, PSOs look to PPM vendors to provide either complete solutions or niche applications that will manage and distribute data across the entire organization. In fact, Peoplesoft (acquired by Oracle) and Epicor have adopted the label "enterprise services automation (ESA)" to more accurately describe the technological needs of PSOs. ESA focuses on the operational needs of billable services organizations and on the management of the internal and external resources that deliver service contracts.

PPM Components for Service Organizations

Beyond the core components of managing portfolios, projects, and resources, PPM solutions for PSOs have extended functionality to manage the bid-to-bill cycle, external resources, and client demands. Major ERP players entering this space are swapping their manufacturing and distribution components for portfolio and project management functionality in order to stake their place in the PPM market. In response, the niche players that continue to service this PPM market segment target small and medium businesses (SMB) by proposing more affordable PPM solutions that tightly integrate with an organization's existing IT infrastructure (ERP, customer relationship management [CRM], human resource [HR], and financials systems). In either case, PSOs demand the following core components.

* Portfolio management. This functionality allows service organizations to monitor the health and profitability of projects. For service firms, portfolio management is critical to maximizing revenue streams by leveraging the best resources for the most profitable projects. On the other hand, service organizations do not demand the same detailed level of analysis as internal IT departments, and can forego extensive risk management and earned value management capabilities.

* Project management. This is the engine that runs a PSO. Service firms are project-centric by nature. The successful delivery of services is dependent on the project management methodologies and tools adopted. Key project management features include project scheduling, task management, and budget management. Bi-directional integration with Microsoft (MS) Project is also highly recommended, since approximately 80 percent of the project management world still uses it as the standard tool of choice.

* Resource management. Resource management is another core component for services organizations. PSOs need to be able to manage internal resources and contractors across multiple projects and portfolios. Contractor management, recruitment management, and resource planning, scheduling, and utilization are key features of this component.

* Time and expense tracking. This bridges project management and operations. It ensures that an end user's work details, captured by the time and expense module, will update the status of work completed in projects, as well as the billing information in accounting. For many service organizations, the ability to remotely submit time and expense details (via the Web, off-line, and wireless devices) is critical for efficiently capturing and accurately tracking the delivery and execution of services.

* Project cost and billing. Service firms require flexible project cost and billing options. The tracking of billable and non-billable information, and the generation of customizable invoices are key features. Moreover, the integration of project costing and billing with accounting is necessary to provide the integrated solution that PSOs need.

* CRM. This is extensively employed by professional services firms. Service organizations require complete customer support, demand management, and pipeline and opportunity management capabilities to capture and analyze client and contract details prior to a project engagement. CRM functionality also allows organizations to prioritize opportunities and to forecast pipelines.

* Knowledge management. These capabilities serve as the hub of a PSO. Service firms demand collaboration and analysis of data by both internal parties (management and staff) and external parties (customers and partners). PSOs demand robust knowledge management capabilities that access all components of their business.

In addition to these core components, workflow capabilities and integration to back-office systems (HR and financials) are critical components of the complete PPM solution for PSOs.

Vendors: Best-of-breed versus Integrated Solutions

There are essentially two types of PPM vendor solutions for PSOs: best-of-breed solutions and integrated solutions (a more in-depth review of these solutions will be covered in future articles).

The majority of best-of-breed vendors offer hosted solutions to SMBs in the professional services sector. Small consulting firms can benefit from the quick deployment and affordable total cost of ownership proposed by these vendors. In addition, best-of-breed vendors provide strong out-of-the-box integrations with popular project management, accounting, HR, payroll, and CRM systems, thus easily adapting to an organization's current IT infrastructure. PSOs considering a best-of-breed solutions approach should bear in mind the PPM vendors below.

Compuware's Changepoint is a best-of-breed vendor that has competitive functionality for both professional services firms and internal IT departments. For service firms, Changepoint PSA offers a mature product that has been around since the early days of the professional services automation (PSA) market (referred to today as PPM). Since its acquisition by Compuware, Changepoint has shifted its focus to the IT governance market. Nevertheless, as a PPM vendor still catering to service firms, Changepoint provides a very mature best-of-breed solution with comprehensive CRM, engagement, and resource management features, as well as time, billing, expense, and invoice modules that tightly integrate with packages such as Great Plains, Oracle Financials, ADP Payroll, and MS Project.

Autotask provides a hosted option to SMB service organizations. Marketing itself as a PSA platform, it offers a modular solution that can be turned on and off according to an organization's business requirements. Specifically targeted to small organizations, Autotask provides a complete PPM solution including CRM, resource management, project management, and time and billing functionality for smaller organizations, along with basic integration with Quickbooks accounting.

Openair also provides a hosted solution. However, it positions itself as a middle-office (i.e., the group of employees in a company that manages risk, calculates profits and losses, and is generally in charge of IT) application that integrates front-office CRM with back-office functionalities. Currently, Openair offers out-of-the-box integrations with Salesforce.com and Quickbooks. Openair is a strong contender for small firms that demand wireless capabilities to remotely access data. The hosted option also ensures a quick deployment for smaller organizations with limited IT infrastructures.

Tenrox PPM solution for services organizations is built on Microsoft .NET technology. Targeting primarily the SMB sector, Tenrox offers complete time and billing functionality, and has developed solid out-of-the box integrations with Microsoft solutions, such as MS Project, MS Great Plains, and Sharepoint. In addition, Tenrox supports integrations with SAP, ACCPAC, and Quickbooks. For smaller service firms that do not necessarily want to host a solution, Tenrox also offers middle-office functionality supporting multiple databases and applications.

QuickArrow offers a hosted, on-demand PPM model specifically designed for billable services organizations. Positioned as a middle-office solution, QuickArrow provides out-of-the-box integration with Salesforce.com, MS Great Plains, and Quickbooks. QuickArrow delivers project planning, resource allocation, time tracking, and expense reporting functionalities, as well as billing functionality for multiple industry verticals offering billable services.

Unanet Technologies has carved out a niche in the government contractor sector. Unanet offers bi-directional integration with MS Project, as well as resource management, time and expense reporting, and workforce collaboration functionalities. Unanet also provides additional functionality for regulatory compliance. The areas of compliance covered include Defense Contracting Audit Agency (DCAA), Sarbanes-Oxley Act (SOX), Federal Deposit Insurance Corporation (FDIC), and Federal Drug Administration (FDA).

When it comes to integrated PPM solutions, many of them have emerged from the ERP space, providing the complete back-office systems (financials, HR, procurement, etc.) that many mid-sized and large PSOs prefer. PSOs looking at the integrated solution approach should consider the vendors below.

SAP provides PPM functionality to service firms through its xRPM offering, which supplies resource and portfolio management to large PSOs. Powered by SAP Netweaver, xRPM works with both SAP and non-SAP infrastructures. It provides time and billing, project costing, collaboration, and resource planning capabilities. xRPM is currently used by SAP's system integrators for time, billing, and collaboration.

Oracle offers a PPM solution that adheres to its "fusion" strategy, integrating PeopleSoft, JD Edwards, and Oracle Projects (all of which are currently under the Oracle banner). Oracle's Fusion middleware provides standards and protocols to ensure that its applications are seamlessly integrated. The Oracle Project suite of applications was originally adopted, and continues to be adopted, by large, project-centric organizations and departments that require project-intensive capabilities in project management, resource planning, CRM, and financials. With the acquisition of PeopleSoft, Oracle's stated application strategy is three-fold, as follows.

1. To protect customers' current investments in all Oracle and PeopleSoft products by offering support through to at least 2013 or for life, if they choose the lifetime support policy

2. To extend the customer value of these applications by continuing to release new product enhancements, such as Oracle Projects Family Pack M, which was released in May 2005, PeopleSoft ESA 8.9, which was released in August 2005, and JD Edwards version 8.11, released in October 2004. Work on the next versions of these products (Oracle release 12, PeopleSoft 9.0, and JD Edwards 8.12) continues.

3. To evolve the "best-of" functionality of all product lines into a new generation of business applications called Fusion

Oracle will continue to focus on key industries and market segments, including professional services, the public sector, engineering and construction, and internal IT.

Lawson Software provides an integrated PPM solution by combining its best-of-breed back-office functionality (offered in the ERP space) with its best-of-breed front-office functionality (gained through its acquisition of Account 4 in 2001). Though catering to a wide range of PSOs, Lawson primarily targets the mid-market with its Service Process Optimization (SPO) suite. SPO's features include resource management; time, billing, and expense management; portfolio management; and comprehensive workflow capabilities. In addition, Lawson provides complete back-office functionality and seamless two-way integration with MS Project.

Unit 4 Agresso (U4A) is a PPM vendor that primarily addresses the needs of service firms in the healthcare, education, and government sectors in Europe. U4A provides a modular product offering called Agresso Business World, which is focused on service delivery organizations. Project costing and billing are at the core of this PPM solution, while additional functionalities include financials and HR.

Epicor is a mid-market ERP vendor that offers its PPM solution under the Epicor ESA banner. Built on the Microsoft platform, Epicor's PPM product offers an end-to-end solution that covers everything from CRM and resource planning to engagement management, financial operations, and business analytics. Moreover, Epicor provides bi-directional integration with MS Project, and integrates with Sharepoint for collaboration.

Deltek is a mid-market ERP vendor that offers a PPM solution targeted primarily to small and medium PSOs. Deltek's flagship PPM product, Deltek Vision, offers a complete end-to-end PPM solution that provides CRM, time management, expense reporting, resource planning, project planning, financials, HR, payroll, and business intelligence (BI) functionalities. Deltek also offers additional modules to serve government contractors.

Microsoft has positioned Solomon as its flagship PPM solution for the SMB marketplace. Built on Microsoft technology, Solomon offers a combination of robust back-office functionality and tight integration with Sharepoint and MS Project. In addition, its user interface is familiar to those accustomed to working with MS Outlook.

SOURCE:
http://www.technologyevaluation.com/research/articles/project-portfolio-management-for-service-organizations-bridging-the-gap-between-project-management-and-operations-18340/

Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts SCM

2010-08-18T02:52:00.002-07:00

The Business Challenge

Growing pressure to improve customer responsiveness and profits has lately changed the traditional role of service management for spare and replacement parts. As competitive pressures push more products to a commodity-like business model, many manufacturing companies are increasingly relying on customer service to retain or establish a competitive advantage. Many manufacturers and distributors are also beginning to recognize that there are significant revenue stream and ways to increase customer satisfaction in the aftermarket once their product has been sold.

The aftermarket has traditionally been a lower priority, a sort of "necessary evil" for many, particularly manufacturers, who historically view themselves purely as product companies where their brand new or well established products are "cash cows" consistently generating revenue for the company. However, the singular focus of developing and selling products ignores the fact that maintenance costs can easily be several times greater than the purchasing cost of the product. As a result, this additional revenue has often been left to various third party companies, such as third party parts, service, and repair providers.

Lately, the aftermarket is becoming a major driving force for many original equipment manufacturers (OEM) as opportunities are created when original parts include additional and often heavy customizations designed to ameliorate the operation and care of products and services. The value of the aftermarket is highly dependent on the type of product and the industry. In industries that sell capital equipment such as medical devices, telecommunications, instrumentation, information technology (IT) hardware and other complex equipment, companies are starting to significantly increase their focus on services revenue. For some companies this is a strategic move to increase the top line, while others are looking to replace revenue from slower new product sales in the current economic conditions.

Immaculate service has also been directly correlated to improved customer satisfaction and loyalty. Many manufacturers are discovering that maintaining account control of their customers and differentiating themselves from intense, global competition, means offering enticing and creative service, maintenance, repair, and warranty programs. Managing spare parts is a critical part of accomplishing this. Some firms like third party service providers even offer to manage the spare parts inventories of their customers, often with a consignment payment or vendor managed inventory (VMI) arrangement. In such arrangements the customer does not own nor is invoiced for the part until it is used.

General Electric (GE) is an excellent example of a company that has focused on aftermarket opportunities, going so far as to call itself a "services" company as opposed to a "products" company. GE has proved the value of serving the product aftermarket. It has been widely reported that the company has significantly increased both its total revenue and profitability by focusing on service opportunities in addition to developing world-class products,

APICS Dictionary (the 11th Edition) defines service parts (synonymous with repair parts and spare parts) as those modules, components, and elements that are planned to be used, without modification, to replace an original part. They differ from replacement parts, which are parts that can be used in place of original parts, after some physical modification (e.g., boring, cutting, grinding, or drilling). Likewise, replacement parts differ from interchangeable service parts. In any case, both service and replacement parts are delivered to end users by a diverse network of partners including OEMs, distributors, retailers, third party logistics providers (3PL), and other third party service providers. Also, for asset-intensive industries, asset owners might deliver these parts to various locations.

Associated with these are service parts demand, which is the need or requirement for a component to be sold by itself, as opposed to being used in production to make higher level products or finished goods. To that end, service part planning requires dealing with a sparse and certainly uneven, volatile demand. For example, two units per year, may be requested. It also requires dealing with supply chains that are much more complex than those in new product manufacturing, wholesale distribution, and retail, because knowing in advance when, where, or what kind of equipment breakdown (or any other reason for a service part requirement) will take place, is difficult for anyone (other than clairvoyant fortunetellers). Estimating typically low, yet highly stochastic demand; exploiting multinode opportunities to determine optimal safety stocks within the supply chain; incorporating parts substitution (e.g., interchangeable and rotable parts) and assembly options; and integrating repair streams with replenishment require quite different supply chain management (SCM) methods.

The challenge is having the right number of spare parts to meet demand. This is a precise process, because having too many parts will unnecessarily increase and tie-up investment, overhead, and other inventory carrying costs; however, having too few parts will impede swift replacement and contractual service level agreements (SLA). Inventory carrying cost (synonymous with holding cost) is the cost of holding inventory, usually defined as a percentage of the dollar value of inventory, per unit of time (generally one year). Currently, the technology component within parts, such as programmable logic memory chips, has increased and has changed the parts cost structure. Namely, stock items with embedded expensive technology can each cost a thousand dollars or more. Consequently, associated inventory carrying costs have increased to the point where intelligently planning parts inventory has become a financial necessity for many enterprises.

Carrying cost depends mainly on the cost of the capital invested and of maintaining inventory. These include taxes, insurance, obsolescence, spoilage, and space occupied, and cost between 10 percent to 35 percent annually, depending on type of industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory. Storage costs is a subset of inventory carrying costs, including the cost of warehouse utilities, material handling personnel, equipment maintenance, building maintenance, and security personnel.

This is Part One of a four-part note.

Part Two will discuss the changes in service and replacement parts.

Part Three will continue analyzing service parts planning.

Part Four will cover players and benefits and make user recommendations.

More Complications

Further, holistic service and replacement parts supply chains should provide support to end users of serviceable products via several channels, including

* call centers (with necessary information on hand and call-in assistance for self-service);
* available service and replacement parts, where and when required;
* field service or after-sale service (the functions of installing and maintaining a product for a customer after the sale or during the lease, which may also include training and implementation assistance); and
* provided carry-in service support (service centers/repair depots).

Therefore, service or spare parts have lately become both a blessing and a curse for many manufacturers of complex finished products. On one hand, contract manufacturing, maintenance repair and overhaul (MRO), depot repair activities, and aftermarket service parts and sales can generate additional revenue streams with higher margins (even at multiple levels of original product sales). They can also contribute significantly to corporate profits and thus offset typically lackluster growth in other mainstream operations. Yet, on the other hand, these companies must maintain large inventories of highly expensive, often slow-moving parts. At the same time, they are dangerously susceptible to obsolescence, as they satisfy customer demands for immediate delivery and action. Shrinking margins are placing greater pressure on all manufacturers to operate with leaner inventories (including spare parts) throughout their complex supply chain networks. At the same time, many enterprises are realizing that a good way to increase margins is to offer MRO services. In fact, a number of high tech and electronics companies make the most of their profits from repairs and upgrade kits. Industrial equipment manufacturers often earn more than half of their gross margins on complex spare parts, without incurring much sales costs (given that most equipment users are captive audiences for spare parts anyway).

Additionally, the need for better service parts management is finally gaining top-level management attention in many aerospace and defense (A&D) companies, and in similar complex manufacturing or asset intensive industries, including automotive, high tech/electronics, medical equipment, office equipment, specialty equipment, telecommunications, utilities, etc. The basis for this new found interest is that excessive inventory carrying costs and obsolescence losses are now being recognized as an unexploited opportunity for savings and a means to better bottom-line performance. Companies with extensive spare parts needs include manufacturers that service products (e.g., IBM, Philips Medical, Nortel Networks or Cisco Systems), provide parts for dealers or others to service products (e.g., Ford, Nissan, or Boeing), or own a large number of assets which they maintain themselves (e.g., United Airlines, US Airways, DHL, Delta Air Lines, or FedEx).

With increased customer demand for a quick response, often within hours, manufacturers, and service organizations must plan inventory to proactively respond to changes in customer requirements or material availability. Many manufacturers and service organizations have service contracts with their customers to provide service in a fixed amount of time, often in as little as two to six hours with guaranteed parts, and service technician availability across the globe.

To further complicate things, product lifecycles are becoming shorter to better accommodate ever-changing customer demands, which has further muddled the challenge of weeding out obsolete parts. In many cases, it becomes necessary to know, for example, which and how much equipment have extended warranties in a particular region in order to allocate the appropriate number of discontinued parts in regional and satellite warehouses, or to determine if substitute parts can be used. Also, increased equipment uptime and guaranteed parts availability are directly correlated to higher customer satisfaction, as customers increasingly demand reliability and responsiveness.

The move to just-in-time (JIT) and demand-driven manufacturing styles makes equipment uptime even more critical, as many enterprises can no longer afford large and costly inventory safety stock buffers and risk complete production line shutdowns if repair parts are not available when needed. Moreover, customers expect equipment, appliances and so on, to be restored on the first visit instead of having to wait for replacement parts to be ordered. Thus computer and appliance service firms have long introduced "swap and replace" programs rather than asking customers to wait (seemingly endlessly) for their equipment to come back from the repair shop.

Ultimately, the quintessential business challenge is to minimize downtime on assets while minimizing the cost of spare and replacement parts inventory. To meet these challenges, heavy investments have been made in extensive spare and replacement parts networks. Here, inventory is staged at central or regional supply centers, local maintenance shops, or field service centers and even in the trunk of service technicians' cars and vans. Multilevel and multi-echelon inventory locations are critical to the balance between rapid part availability and curbed inventory cost. For instance, it makes more sense to deliver some parts from a second or higher tier rather than from the central warehouse, whereas expensive items or slow-moving non-critical ones should often be better held at central locations to reduce the overall safety stock carrying costs.

This concludes Part One of a four-part note.

Part Two will discuss the changes in service and replacement parts.

Part Three will continue analyzing service parts planning.

Part Four will cover players and benefits and make user recommendations.

SOURCE:
http://www.technologyevaluation.com/research/articles/lucrative-but-risky-aftermarket-business-service-and-replacement-parts-scm-18084/

SouthWare Excellence Series: Making Excellence Easier Part One: Company Background and Product Overview

2010-08-18T02:52:00.001-07:00

Introduction

The process of selecting mid-market accounting software usually starts with products that have achieved some name recognition, and that's fine as long as the search does not end there. SouthWare Innovations (www.southware.com) has created in its Excellence Series a worthy competitor serving a number of industries and offering users a surprising array of functionality, either directly as SouthWare applications or through one of their independent sales vendors (ISV).

Founded in 1984 and based in Auburn, Alabama (US), SouthWare is a relatively small company of very dedicated people (80 percent of its employees have at least twelve years seniority), which has created what may be one of the best examples of a true business management system, not just an accounting system. What may be even more important to companies of all sizes is that the Excellence Series operates on many platforms and databases, giving users the option to select the environment that best suits their technology requirements rather than forcing them to accept a single option.

This is Part One of a five-part note.

Part Two will look at what makes SouthWare different.

Parts Three and Four will discuss the applications and development environment.

Part Five will provide a competitive analysis and make user recommendations.

Product Line Summary

The Excellence Series supports a significant number of applications, most of which complement its historical strengths in the distribution industry. However, users should not eliminate the Excellence Series simply because they are not in this single industry. In fact, the Excellence Series supports accounting, distribution, e-business, service management, rental management, and job costing out-of-the-box. Together with its third-party developers the Excellence Series also supports manufacturing and a whole host of other industry verticals.

Currently, SouthWare supports 6,000 sites in the US—it has no plans to expand internationally. The largest site supports 500 users—a cellular telephone company—with the next largest site supporting 300 users—high-end photographic equipment.

While we will discuss some of SouthWare's applications in more depth a little later, let's start by summarizing what's available out-of-the-box. I have elected to segregate this list into four categories

* Business Management Functions
* Accounting Applications
* Productivity Tools
* Technology Features

The Excellence Series, and every other business management system for that matter, is not all-powerful, but it does offer advanced functionality in several areas and outstanding business management support.

Business Management Functions

* ExecuMate II is a powerful executive information system that presents to executives and managers user-defined summary data (expressed numerically and graphically) that allows them to take the company's pulse. If more detailed information is required, extensive drill-down is available. The system even posts alarm warnings for key financial areas (Note: These same alarms could also generate a standard alert in TaskWise, SouthWare's unified task, relationship management, and exception management system).

* ExcelReport: This unique application helps users establish both subjective and financial goals and grades progress toward achieving them. We will discuss this in more detail later.

* TaskWise: Combines into one application business processes such as task management, relationship management, exception management, and information sharing (collaboration). SouthWare has taken the concept of user-defined menus, which it supports, to the next logical level whereby the concept of a menu has been replaced by a completely integrated task management system that helps users carry out their jobs both more efficiently (do it cheaper) and effectively (do it better). This will be discussed in more detail later.

* Collections Adapter: Full-featured collections management application. This will be discussed in more detail later.

* AnswerReady is a tool that lets users set up a searchable database of topics, instructions, company policies, documents (e.g., employee handbooks), as well as questions and answers. The system has but one purpose and that is to help people do their jobs better by giving them ready access to the information they need. Users can create a table of contents to form the basic framework of the information management system, and add or modify topics (with appropriate access controls) as required.

Accounting Applications

* General Ledger: Standard functionality.

* Cash Flow Ledger: Bank reconciliation and powerful cash flow monitor. This will be discussed in more detail later.

* Accounts Receivable: Standard functionality.

* A/R Invoicing Adapter: Simplifies the invoicing process rather than using the more comprehensive order entry screens.

* Accounts Payable: Payment processing that includes cash requirements reporting, invoice and vendor holds, and cash basis accounting. The application will support over 99 pay-to addresses per vendor. If there is any question about an invoice (questionable charges, total amount that exceeds a specified value, etc.), the invoice can be placed on hold automatically and handled by TaskWise, SouthWare's exception management application.

* Purchasing: SouthWare has created a comprehensive purchasing system that is significantly more robust than other middle market accounting systems. This will be discussed in more detail later.

* Order Entry: Standard functionality.

* Inventory Control: Comprehensive inventory control including substitute items, vendor part numbers, RF receipts, and landed cost tracking. Although SouthWare provides significant functionality that relates to inventory management, these more comprehensive controls are contained in separate applications. If users require only basic inventory control, that's all they have to purchase or see.

* Warehouse Tracking: SouthWare has adopted a unique approach to warehouse management by creating an application (November 2004 release) that offers sophisticated day-to-day controls that are actually outside the formal accounting process while at the same time maintaining full quantity and cost tracking. This will be discussed in more detail later.

* Browser-based Handheld Processing: To complement its Warehouse Tracking application, SouthWare supports RF processing using handheld devices. This will be discussed in more detail later.

* Item Group Matrix Adapter: Complete inventory matrix (row and column) support for clothing, lumber, landscape plants, and any other item that uses multiple units of measure per item. Users can assign their own part numbers or the system will automatically generate part numbers to fit the row and column combinations. The system will also generate different price multipliers per row or per column.

* Marketing Catalogs: This feature allows users to group items into logical categories that can then be used to improve lookup speed, create logical ordering systems on web sites, or to improve inquiries. As an example, users can post items on web sites using multiple categories (e.g. coats / boys' coats / winter coats / long sleeve / blue) that make the ordering process for users far easier. This same feature is available on the buy side to improve lookup of required items. Finally, Marketing Catalogs can be combined with a tree view of stock items to vastly improve the search and inquiry capabilities of the system.

* Point of Sale: Standard POS system plus a fast and efficient method by which sales transactions can be input without having to cope with the complexity of a more robust order entry application.

* Assembly Work Orders: Rather than having to rely only on bills of material in a sophisticated distribution environment or conversely forcing users to purchase and contend with full-blown manufacturing suites, SouthWare provides users with a middle ground. Assembly Work Orders allows users to record a customer's order (standard or created on-the-fly), note any special instructions, calculate a final price if optional items or processes are added to a standard assembly, check availability of all components, and create applicable work orders for a simplified make-to-stock or make-to-order environment. Fixed and variable costs can be allocated to each work order and profitability checked against the price quoted.

* Shipping Interface: Interface configurator for third-party shipping systems. Current integrations include StarShip and ClipperShip.

* Delivery Scheduler Board: This utility allows users to examine daily and monthly views of scheduled deliveries.

* Return Authorizations: Handles both customer and vendor returns, detailed warranty and problem descriptions, reimbursements due from vendors for labor charges, purchase orders (if required) for vendor returns, even vendor return label printing.

* Rental Department: Supports all rental activities, including availability and scheduling conflicts, overdue contracts, serialized equipment tracking, delivery and pick up scheduling, and long term contracts with periodic billing. Rental and normal sales transactions can be included on the same invoice. The Rental Department integrates with SouthWare's Service Management applications to provide complete maintenance for all equipment available for rent.

* Service Management Series: This is a complete service management system that is comprised of four specific applications to help companies manage service contracts, track service histories and required preventive maintenance for each piece of equipment under service contract, daily planning and dispatch, and service invoicing. This will be discussed in more detail later.

* Payroll: Standard functionality.

* Fixed Assets: Standard functionality.

* Job Cost: Standard job costing including revenue recognition, master jobs for grouping of related jobs, AIA code set up and invoicing, certified payroll reports, and time sequencing for job shops.

* International Transactions: Record, track and report multicurrency transactions. The Excellence Series is not fully multicurrency compliant in all applications, but it does support basic currency transactions.

Productivity Tools

* Tree View Menu: Allows users to create an Explorer style menu organized by business process, application, or user-defined, including user created reports.

* Tree View Inquiry: This applet helps users group and review key information according to rules they set. As an example users can review and manage open sales orders, open purchase orders, stock items, or any other aspect of a business by grouping information according to user-defined rules and then drilling down as far as necessary (e.g., sales orders can be viewed by location, billing operator, salesperson, order type and order status). This gives users the ability to zoom in on a small but important slice of all sales orders. One example of this technology would be a salesperson identifying and reviewing all sales orders waiting on back orders. As the user sifts through each layer, the system will display totals for reference purposes and at the last level will display each line item on a specific order. The same application could be used to examine specific stock items, their status, applicable vendor catalog pricing, cross-reference part numbers, substitute items, and even tracking or serial numbers.

* FileView: This applet provides users with a built-in lookup, query, reporting, and export function. Users can selectively build a list a records that meet specified criteria in a grid, sort that list, group the list by one or more fields, preview each record in an attached pane, export the data in Excel or HTML format, and create customized reports once the records have been selected and sorted.

* WebView: Resellers or knowledgeable users can create a complete browser'-based accounting and business management system with hyperlinks to call SouthWare programs and objects.

* Handheld Device Access: Through its NetLink technology, SouthWare gives users access to system data and processes using handheld devices. Specific support has been provided for customer account management, a service technician portal, TaskWise task management, lookup contact information, executive review portal, order entry, stock item status check, receiving entry, and physical count entry. One of the really nice things about this new tool is that the applications have been sized so that they display in the standard handheld screen (no scrolling).

* HTML and PDF Reporting: Grid views and reports can be exported or printed in either HTML format for posting to web sites, or in PDF format.

SOURCE:
http://www.technologyevaluation.com/research/articles/southware-excellence-series-making-excellence-easier-part-one-company-background-and-product-overview-17707/

How One Vendor Addresses Support and Maintenance Issues

2010-08-18T02:51:00.000-07:00

Problem Setting

SAP is one of the major enterprise resource planning (ERP) vendors that is addressing the concerns of its user base regarding support and maintenance (S&M) issues. These issues are detailed in a previous series on S&M: Will User Enterprises Ever Get Onto an Easy (Support and Maintenance) Street?, Support and Maintenance: No Longer the Software Industry's "Best Kept Secret"?, What Is the Value Proposition of Support and Maintenance?, What Are the Support and Maintenance Options?, and Alternative Software and Support Maintenance Options.

Among these issues are

* High support costs—particularly for users of heavily customized, and thus highly functional, mature enterprise systems
* Costly upgrade requirements—an issue for users not interested in new "nice to have" features added to their older, stable systems
* Extended or lifetime vendor support programs—these programs can force customers to pay more over time for less service
* Penalty fees—to be reinstated on the current stable release after a customer discontinues maintenance

To summarize: Customers need support, but the vendors are often not providing them with what they need. And if they are providing support, the price is often unjustifiable. For these customers, the "one-size-fits-all" vendor approach to S&M is unacceptable. At the same time, many customers realize it will take at least a decade for market battles to play out over system architectures, new middleware, and service-oriented architecture (SOA) technology standards, as experience teaches us, see Architecture Evolution: From Web-based to Service-oriented Architecture. Lastly, many customers are concerned that choosing one vendor will leave them with a potentially weak or unviable solution in the coming shake out.

Although existing enterprise systems' customers are a locked-up audience, they can be only to a point. If vendors continue playing hardball, the repercussions will likely be defections. Ultimately, enterprise software licensees should understand that they have a choice of software S&M providers. Options do exist for any company contemplating discontinuing the maintenance of an application product, and users should first talk to their vendors to review their options.

What Then Are SAP's Options?

In an effort to maintain the customer status quo, SAP's top S&M program, SAP MaxAttention, is offered to customers whose operations demand mission-critical customized support. The tailored program for each customer includes a permanent on-site support team, an executive sponsor, and SAP Safeguarding, consisting of a service portfolio that is able to manage the risks involved in complex implementation projects.

The SAP advisory personnel will have to exude deep industrial experience, business insight, and multidisciplinary skill sets. They will not only have to be well versed on the mix of SAP's functional and technical features and interdependencies, but they will also need to have similar knowledge of partner products. If possible, it would be ideal for the advisory personnel to have knowledge of the complete playing field, including the competitive offerings.

Early in 2006, SAP expanded its support services to meet customers' changing demands. SAP introduced SAP Premium Support to mitigate some of the above conventional S&M contractual pitfalls, and to underline its commitment to continual S&M evolution and growth. Premium Support provides a new option between SAP Standard Support, a fairly competitively priced basic support package, and SAP MaxAttention, the vendor's high-end support package, tailored to meet the very specific needs of large global enterprises. The Premium Support plan offers quick issues resolution, annual information technology (IT) assessments, and a designated support advisor who serves as a personal, day-to-day contact for support-related topics.

For users interested in "pick and choose" options, SAP is able to cover a subset of a landscape with its option Partial Landscape Coverage, while the components of the Premium Support offering remain intact. For more information, see No Yawn Intended: Enterprise Applications Giant Introduces a Mid-tier Support Choice

To mitigate the challenge of forced upgrades, early in December, SAP announced its first enhancement package for mySAP ERP, and disclosed further details of innovations being delivered under its evolved roadmap for the flagship product suite. This enhancement package is part of the license and maintenance agreement, and is now available to customers running mySAP ERP 2005. Customers are now able to use new enterprise services and functionality in an uninterrupted way. This allows the customers to direct business process innovation while maintaining the stability of their core ERP systems.

Further, SAP enhancement packages for mySAP ERP meet customer requirements for support innovation without disruption to day-to-day business operations. This makes it simpler and faster for SAP's clients to adopt new product functionality, industry-specific features, and enterprise services, while protecting them from the complexity of multiple upgrades.

Enhancements to mySAP ERP will be made available through 2010 as extensions to mySAP ERP 2005 in a series of optional enhancement packages. SAP hopes these enhancement packages will stabilize its planning cycle by cutting future migration costs for new releases and give customers the time to get used to enterprise SOA technology. The foundation must be laid by implementing mySAP ERP 2005. When this is accomplished, businesses will be able to leverage the next generation of ERP software and enterprise services architecture.

User enterprises will have to conduct a thorough analysis to decide whether to upgrade to this foundation product from their current platforms. However, this release cycle and strategy simplifies the implementation of new upgrades, and it matches the needs of customers that typically want to plan and perform an upgrade every five to seven years.

The optional enhancement packages enable customers to "switch on" only the new features and functionalities they want, and can be configured in a modular fashion. This should enable SAP clients, without the disruption of multiple major system upgrades, to easily take advantage of nonstop innovation. SAP's first upgrade package includes hundreds of enterprise services that enable functional enhancements for human capital management (HCM) and financials applications, as well as specific industry upgrades for retail and manufacturing industries.

SAP plans to provide two or three enhancement packages per year that will contain functional and technical upgrades as well as enterprise services for mySAP ERP. Each of these so-called value packs will focus primarily on addressing specific customer business requirements. The packages will concentrate on areas such as simplifying user interface (UI), helping companies effectively manage their enterprise talent pools, improving financial collaboration, and expanding on the broad, industry-specific capabilities in mySAP ERP.

The enhancement packages will also include enterprise services (software components) for particular business scenarios. The explanation of these services is included in the enterprise service repository. This repository includes not only the definitions of the services, but also composites where available, and all the information required for SAP clients to get up and running quickly.

This information is delivered via an interactive Wiki format. In addition, there is a variety of software tools to implement, manage, and upgrade the applications. SAP bundles the above software tools into SAP Solution Manager, while, in contrast, other vendors provide a variety of separate tools for upgrade management.

Depending on the extent of the tools provided, customers may use third-party tools for requirements such as change management and performance monitoring. Upgrade tools, however, may have limited (if any) value for customers that upgrade infrequently.

Conclusion and Recommendations

More choice, non-enforced migration, and personalized attention are definitely good signs. Prospective and existing customers, especially those with a majority of IT assets belonging to SAP, should evaluate their service agreement options.

It is advantageous for every customer that their vendors thrive. The vendors are then able to keep abreast of the latest product developments. The difficulty is in the details. Every user company should conduct thorough studies to determine whether it is worthwhile for them to opt for the entire package, considering that SAP support is available in a piecemeal format. Customers would benefit from approaching SAP and asking for more concrete examples of product developments, such as advisors' deliverables, proof of concept, early adopters' benefits, or conflict of interest preemption, for example.

There is no universal solution to the problems inherent in customer software S&M contracts, but prospective clients should carefully review the fine print to understand the implications of any long-term contract, and what effect any new or revised licensing and service contracts will have on their future business costs.

SOURCE:
http://www.technologyevaluation.com/research/articles/how-one-vendor-addresses-support-and-maintenance-issues-18962/

Supply Chain Management Systems for Service and Replacement Parts: Players, Benefits, and User Recommendations

2010-08-18T02:50:00.002-07:00

Who Are The Players?

The differences between new parts production supply chain and service and replacement parts supply chain are significant. Companies using conventional supply chain management (SCM) methods to track their service and replacement parts supply are failing to grasp the special needs of the aftermarket. Further , one can even differentiate between the inventory optimization approaches of new production parts. Pure distribution parts include finished consumer goods (not including fashion/apparel items due to their seasonality idiosyncrasies, see Intentia: Stepping Out With Fashion and Style; Part One: Characteristics and Trends of the Fashion Industry), with a large number of items, large number of locations (whereby store levels can get out of hand), and with a desire for very high customer service levels (98 percent or more). The vendors that cater to these customers would be the likes of ToolsGroup. Mixed manufacturing and distribution for new parts require the exact positioning of parts. Exact positioning is highly important for manufacturing and configuring (postponement) purposes, because bill of materials (BOM) logic is heavily leveraged for inventory planning and optimization. Leading vendors in this market include Optiant, LogicTools, SmartOps, or i2 Technologies.

Part Four of the Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts for SCM series.

These solutions typically leverage stochastic optimization using nonlinear modeling techniques to analyze input data for randomness. This knowledge is applied to determine an optimal inventory policy at a particular node in a multi-tier supply network. Namely, as supply chain variability has increased, the data has become more random. Consequently, user companies need to not only look at the nominal values per se, but also at the probability of the value. For example, they need to know what the probability is of the forecast value, the purchase/transportation lead time, the manufacturing run time, the supplier quality, etc.

Contrary to these new parts production segments, aftermarket service and replacement parts are typically "slow movers," but may be critical for the operation of expensive equipment, often containing associated service level agreement (SLA) penalties for inadequate service. Thus, for the reasons of repair and indenture level and SLA considerations, one has to optimize inventories for required service levels and end-equipment availability. Varied service and customer entitlements complicate things, since aftermarket service must support warranty commitments; contract extensions, which might include same-day or next-day service; and direct or through distributor part sales. These entitlements may have different service objectives, which may include fill rates, response times, or system uptime maintenance.

How is risk factored into decision-making for service parts? In this case, forecasting might use demand history, but perhaps more importantly, mean time between failure (MTBF) data and an analysis of causal factors can provide item- and location-specific estimates of usage. This data can also be used to calculate the probability of demand occurring during the planning period in question. For example, a forecast might state that there is a 12 percent chance that the user will need a specific part in the next thirty days at a specific location. However, this forecast is risk-based, rather than consumption-based, as it is in new parts production supply chain planning (SCP).

Moreover, the design of the distribution network including which parts and how many of each are positioned at which depot(s) is another risk based evaluation. Typically, this dictates a multi-tier or multi-echelon depot strategy, where tactical planning involves risk-based decision-making that considers the probability of demand and therefore, the probability of a stockout. To refresh our memory, stockout costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs (not to mention lost face before the customer and hurting SLA penalties). Thus, the strategy include issues like, if we have a 20 percent chance of needing a single unit of a specific part in the next thirty days, what are the odds that we will need two? Moreover, given the part delivery lead time, what are the odds that the demand for two will create a stockout?

Given the random, sporadic nature of service events, forecasting approaches cannot eliminate the uncertainty of demand. Hence, inventory decisions must be evaluated on the basis of risk, whereby the considerations should include MTBF; the number of a particular asset type to be maintained; the product life cycle stage; the locations of assets and available spare parts; SLA commitments; the cost of downtime and of the service or replacement part, etc. To deal with these variables effectively companies must address the complexity and the need to manage risk directly. Some vendors, as will be described later, have developed approaches incorporating these factors into the proprietary models and algorithms.

Service and replacement parts inventory optimization is a big issue for a wide gamut of manufacturers. Aeronautical and defense (A&D) companies that design products for high reliability figure most prominently, but they still have to maintain stocks of complex and expensive spare and replacement parts, since the impact of any type of failure is large and requires the widespread and global stocks of parts for rapid replacement. The situation becomes even more complicated with rotable parts, such as the interchangeable elements of an aircraft that are removed, rebuilt, or reinstalled, which, almost as a rule, are always on a different aircraft. In an industry where every nut and bolt is important for safe operation, immense amounts of attention and effort are used to track interchangeable components and subassemblies for costing, replacement scheduling, and mean time-for-failure (MTFF) prediction.

A&D companies design low-volume, high-cost products for high reliability, but still maintain stocks of complex and expensive spares, since the impact of any failure in this industry, is large and requires adequate stocks of parts at several locations for rapid replacement in case of repair. On one hand, minimizing the number of new parts introduced into the market (and subsequently into inventory) should be a major aim, particularly because parts face obsolescence as new finished product are introduced. Yet, on the other hand, rotable parts and reusing ("harvesting") repaired components only adds to the complexity and likely impaired the efficiency of this process. Further, lot and serial tracking capabilities, the so-called tail effectivity, permits users to tie every part (within part lists and diagrams) on a plane back to that one entity. For more information, see MRO and Spare Parts Management Considerations.

Similar low-volume, high-cost, high-impact concerns are applicable to a range of other manufacturers, such as automotive and high-tech/electronics makers of complex medical equipment, large industrial systems, and mining equipment. All have immense, installed bases and complex, multi-echelon supply chains with high occurrences of slow-moving parts. Manufacturers of durable goods, like household appliances, have an additional issue with the need for highly mobile service van stocks. In addition to original equipment manufacturers (OEM), asset-intensive manufacturers, and service organizations, like refineries, chemical plants, primary metals producers, telecommunications, utilities, and municipalities, have to maintain large stores of spare parts to minimize the impact of failures on their revenue generating activities.

This is Part Four of a four-part note. Part One discussed the business challenge.

Part Two analyzed changes in the scope of service parts SCM.

Part Three continued the detailed service parts planning.

Major Specialist Vendors

Other than some small specialized spare parts inventory control systems that can be used in conjunction with planning systems for complete spare-parts inventory management like Foresight Software (a sister company of ProfitKey ERP), Innovative Computer Concepts, or Metrix, major specialist vendors offering solutions for spare and replacement parts planning and management include
Baxter Planning Systems www.bybaxter.com
MCA Solutions www.mcasolutions.com
Servigistics www.servigistics.com
Xelus www.xelus.com
Manugistics NASDAQ: MANU
i2 Technologies www.i2.com

Considering the complexity of spare parts considerations, these vendors initially focused on specific vertical markets. For instance, Manugistics and Xelus (now part of Click Commerce [NASDAQ: CKCM]) are regarded as the market leaders in inventory optimization solutions for the demanding needs of the A&D industry. Manugistics has a lengthy experience in the commercial airline sector where carriers like Delta and Continental Airlines have been using its revenue management and optimization applications. The vendor has further strengthened its focus with the acquisition of former Western Data Systems (WDS) in 2002, a depot repair ERP solution provider (see Manugistics Indulges in the Open M&A Season).

Still, both vendors have applied their solutions to other industries that have to deal with expensive, low-volume service parts requirements, like telecommunications, industrial equipment, and high-tech/commercial electronics. Although i2 has Southwest Airlines as its marquee A&D customer, i2 has focused more on industries with somewhat higher-volume and complex supply chains, such as segments of the telecommunications and commercial electronics industry, as well as automotive parts. This similarly holds for other traditional (new parts) SCP providers, which are also beginning to realized the service parts SCM opportunity. Among such companies are Infor Global Solutions (www.infor.com, via its recent acquisition of the demand planning vendor Mercia Software) and Logility (NASDAQ: LGTY), whose client roster includes Komatsu Europe International, a provider of construction and mining equipment, and Delco Remy International, a manufacturer and re-manufacturer of automotive electrical and drive-train/power-train products.

To that end, recent service parts enhancements to the Logility Voyager Solutions SCM suite include more robust forecasting techniques for normal, seasonal, short-life cycle, intermittent demand, end-of-life (EOL) purchases (all time buys), and reverse logistics planning. Streamlining the reverse logistics process is critical for companies that manage high value, service exchange units from return to refurbishment to re-sale. Logility also provides a method to forecast returns and conduct make/buy analysis, which helps companies synchronize their inventory investments with service-level goals, and accelerate the receipt of returned goods into inventory.

Pure-play providers beside Xelux, such as Servigistics, Baxter Planning, and MCA Solutions have focused exclusively on the requirements of service parts inventory management and optimization, and have gained recognition in some market segments for their deep spare parts management expertise and scalable technical solutions. Servigistics has carved niches in medical devices and commercial electronics and MCA in telecommunications and industrial equipment; while Baxter often competes with MCA in telecommunications, and with Servigistics in high-tech/electronics. The enterprise resource planning (ERP) (and possibly SCP too) leader SAP has long been dabbling with delivering a spare parts and MRO solutions, via a longstanding alliance with Caterpillar-Ford Motor, but a solid, commercially available solution is yet to come. International Business Systems (IBS) has capabilities in determining part criticality measures and optimum service levels, as a result of its acquisition of Stratman Software. Yet, today's ERP systems generally do not contain adequate, let alone advanced spare parts planning functionality.

The spare parts planning market thus seems a prosperous area, as seen by Click Commerce's interest through acquiring Xelus. Click Commerce started out as one of several up-and-coming SCM vendors focused on coordinating and optimizing supply chain processes across multiple channels of suppliers, customers, and partners. It features leading-edge technology that is based on open Internet standards and a component-based architecture. Also, over the past few years, the vendor has rapidly corralled its partner relationship management (PRM), and moved beyond product portfolio by acquiring several niche providers, such as

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-systems-for-service-and-replacement-parts-players-benefits-and-user-recommendations-18090/

The Trap of Accountancy Systems; When to Move on to ERP

2010-08-18T02:50:00.001-07:00

Introduction

For some entrepreneurial companies in the tornado of fast growth, staying with an accountancy system while the business expands is a quick fix that can cause long-term damage. Those companies may find that a system furnished by a vendor of accountancy systems retards growth—particularly in the case of manufacturing companies. Rather, manufacturing companies should implement an enterprise resource planning (ERP) system as soon as their budget and resources will allow them to.

This document examines why companies look to accountancy systems for business control, why that choice may be an error, and how ERP will improve the business's chance of survival.

The hole we fall into: Accountancy systems as the quick fix

There are hundreds of manufacturing companies that use accountancy systems to run their entire enterprises, some of the reasons they do so are explored below:

We already have one
Regardless of how small, every company will have an accountancy system of some sort, and this is key. Let's be honest; when a company is in high growth, everyone is busy, and changing systems seems unattractive. Rather than have everyone learn another solution and move all the existing data, some companies find that the path of least resistance is to add some extra users to the existing system and "make do."

Money is the big issue
For any business manager, cash is king. For entrepreneurs this is doubly true. After chasing funding and ploughing careers and mortgages in to a company, the focus of the principals of a company on money becomes almost obsessive. Therefore it is easy to think that your accountancy provider is helping you manage what's important, when, as will be illustrated, they are incomplete solutions.

Comfort
Accountancy systems tend to be developed by companies with strong brand names; their product is often commoditised and therefore television and radio adverts will be popular. Also, your accountants will naturally have a system and will have an opinion on a system. So, the accountancy system is a comfortable choice in the boardroom; it's on the radio all the time, and the accountants think it's OK, so it's a safe enough choice, right?

Differences Between ERP and Accountancy

What are the differences between a manufacturing ERP and an accountancy solution?
OK, now we have some ideas of how we got here, what now? Does it really matter? Actually, it does; the differences between ERP and accountancy solutions are huge. Accountancy solutions help with financial management and statutory reporting, but do little to streamline or control operational activities. Some illustrations are given below:

Operations Management
If your system vendor cannot talk to you meaningfully about the relative merits of MRP, MRPII, OPT, Kanban, and MES get rid of him immediately.

Modern manufacturers are now selecting—sometimes mixing—push- and pull-based manufacturing control philosophies, to ensure that customer service is maintained without drowning in unnecessary stock, inventory, and finished goods. Let's remind ourselves that cash flow, not profit, is often the cause of the demise of an enterprise. What does an accountancy system do to maximize throughput and order velocity on your shop floor?

Support and Service
Increasingly manufacturers are turning to support and service contracts to bolster revenues and to obtain an edge over their competitors. Naturally, to run such services effectively, functionality will be required of the ERP systems to control support contracts, customer calls, warranties, and on-site work. Again, one has to ask what an accountancy vendor will offer.

Traceability and Regulated Industries
All manufacturing is regulated to some extent, even if it is only basic lot and batch traceability of products for warranty and limitation of exposure should a product fail and need to be recalled. Some industries involving human life (food, drink, drugs, aerospace) require full traceability of all transactions—especially those concerning the definition of the product or the process. Here again, manufacturing ERP vendors are aware of these issues, whereas accountancy vendors may not be.

Expertise
This is a serious and often overlooked factor. When you engage a manufacturing ERP vendor, you can expect that the vendor brings significant experience to you. If you deal with a generalist vendor (accountancy vendors would be excellent examples of this) your vendor has to be careful about the validity of the experience that they claim to have. They may well have 5,000 clients, but how many of them manufacture?

When to Turn to ERP

The signs that its time to look at manufacturing-focused ERP.

* Users begin to complain about the performance of your systems.

* You find that you have to create in-house databases and file systems around the ERP.

* You need better control of operations.

* Your stock is too high.

* You cannot match the value proposition and service offered by your competitors.

* There are problems with engineering data.

* You struggle to meet ISO, FDA, or FAA regulations.

* You find it difficult to control the shop floor and output is poor.

* Your buying costs are too high.

* Your customers are complaining about lack of service.

* Your current IT supplier does not understand your business.

Recommendations and Conclusions

A specialist manufacturing ERP is now, seat for seat, the same cost as an accountancy solution. Simple ledgers and order processing systems should be swapped out for more comprehensive systems before the limitations on the current solutions retard growth and cause problems. In the current market many vendors are shipping most of the functionality a manufacturer will ever need in one bundle, and you need only add users when required. This can work out far cheaper in the long term than adding to a suboptimal system to paperwork, in-house databases, and lots of hastily strung-together "partner products" to drive your business.

SOURCE:
http://www.technologyevaluation.com/research/articles/the-trap-of-accountancy-systems-when-to-move-on-to-erp-17522/

Latest Developments for a Vendor-neutral Third Party Support and Maintenance Provider

2010-08-18T02:49:00.002-07:00

Rimini Street, a successful third party provider of support and maintenance (S&M), has managed to establish a growing client base for its service lines in a relatively short time. For more information on Rimini Street, please see part one of this series Is There a Street Corner for a Vendor-neutral Third Party Support and Maintenance Provider?

In December 2006, Rimini Street announced delivery of its year-end processing package and required tax and regulatory updates for 2007—ahead of Oracle's and TomorrowNow's planned tax and regulatory release dates. Rimini Street's tax and regulatory team for PeopleSoft products works with local, state, and federal government representatives, as well as all major tax and regulatory services. This is to ensure that the latest tax and regulatory updates are immediately identified, scoped, coded, extensively tested, packaged, and reverified for accuracy with government agencies to ensure the highest quality deliverables possible and the fastest "legislature-to-live" delivery cycles. With the combined engineering experience of each of its team members in developing and delivering more than 500 tax and regulatory update packages for PeopleSoft products, Rimini Street fields one of the most experienced PeopleSoft tax and regulatory teams in the industry, the core of which comes from key players at TomorrowNow and PeopleSoft.

Some user enterprises might want to outsource S&M to a company that actually focuses on the support of a specific product. Since these companies tend to have more customers with the specific application product and access to a greater pool of talent that is experienced with the product, the risk is usually lower, and the level of customer satisfaction is higher.

To provide a combination of third party S&M with outsourcing, USi (www.usi.com), an AT&T company and a leading application service provider (ASP), and Rimini Street announced an alliance in December 2006 to provide USi clients with a single-source option for hosted PeopleSoft applications as well as S&M. This new alliance agreement allows Rimini Street support for USi clients to be added by request to USi client service agreements. The offering is thereby designed to seamlessly integrate USi's client support model with Rimini Street's back end software maintenance.

USi has a strong history of implementation and support of hosted Oracle products. The company delivers application outsourcing, remote management, professional services, software as a service (SaaS) enablement, and e-business development and hosting services to more than 150 world-class organizations in over 30 countries. USi's clients have access to a broad portfolio of service offerings, including Ariba, IBMWebSphere, MarketLive, Microsoft, Oracle, PeopleSoft, and Siebel, as well as e-commerce solutions developed and delivered by USi.

With 400 hosted and managed instances of enterprise applications in the Oracle family of applications, USi's vast experience has allowed the company to develop a strong methodology for implementation and management of complex enterprise resource planning (ERP) systems. In addition to USi's comprehensive support model, the company provides its clients with custom monitoring, which guarantees availability and performance. Rimini Street Support for USi Clients is available immediately to clients that are working with USi for hosted and remote-managed PeopleSoft applications.

Actually, what Rimini Street is doing is really not that earth-shattering; rather, it is plain common sense. The firm is not trying to be a software vendor, but a focused system implementation (SI) and consulting firm that happens to sell its services under service contracts instead of mere break-fix arrangements. If the circumstances were different (that is, if the company was not perceived by Oracle as bottom-feeding and client-poaching), Rimini Street could in fact be an Oracle partner. As a matter of fact, Oracle and SAP compete with their implementation partners for maintenance contract dollars time and again, but typically not by offering 50 percent discounts for broader piecemeal choices of S&M items that customers can select.

The possibility of Rimini Street becoming an Oracle partner in the future is further supported by the fact that applications would not be owned by another software provider.

Therefore, Rimini Street's objective is not to eventually move clients from Oracle to new software platforms, but rather to help clients maximize the value of their existing PeopleSoft, Siebel, and JD Edwards software.

Appealing too is the company's rather laid-back demeanor in approaching and attracting prospects. Rimini Street is quite clear about its sweet-spot clients, and is even turning many potential clients down so as not to disappoint these prospective customers' expectations down the track. For one, Rimini Street is not interested in the portion of customers (sometimes called early adopters) that want to stay on the leading, or even bleeding, edge of applications and technologies. This would mean that both the provider and the clients would need to invest in testing, fixing, and growing the next generation of software (that is, around several diverse technologies and platforms, including service-oriented architecture [SOA], middleware, and open source). If an organization strives to deploy every latest and greatest software release and update, it is likely that an alternative S&M program is not a good fit for it.

Also, Rimini Street advises user enterprises to remain on their vendors' contracts for at least a year after implementation, after which time they will likely be more suitable candidates for Rimini's support program (since much of the growing pains will be sorted out by then). Also, support for some of the products that have garnered hardly any install bases (such as the PeopleSoft Campus module) are not offered by this third party provider. Rimini Street's S&M is for tried-and-true products.

Last but not least, the firm warns prospective clients that their ongoing PeopleSoft, Siebel, or JD Edwards annual maintenance agreements may have cancellation time requirements, or may be automatically renewed if a certain cancellation notice period expires. Rimini Street recommends that potential clients allow sufficient time to pass before the next annual renewal date to ask for a proposal and quote from the provider, as well as allow enough time to explore the significant benefits of switching to Rimini Street's S&M services. It is only logical that an enterprise reviews its contract for specific cancellation terms.

To be sure, no one sees vendor-neutral, third party S&M providers such as Rimini Street and TomorrowNow as the next market shakers. The market opportunity for these providers is but a fraction of the install bases of large vendors. However, there are enough prospective clients out there for these third-party service providers to create a niche customer base. What's more, the offerings from these third party S&M providers may compel larger vendors to make even more appealing S&M discounts or offers to their newly aware customers.

Conclusion and Recommendations

Companies that are "in the know" have begun to investigate the options available to them for software S&M. Alternative software S&M arrangements from such providers as Rimini Street are not necessarily the best fit for everyone. The most typical converts tend to be the technologically conservative and savvy companies that are not in need of most upgrades. Hence, longer product release life spans and higher return on investment (ROI) from existing enterprise software investments are two of the most appealing benefits of third party S&M agreements for such organizations.

The proven benefits these clients are enjoying have validated the industry and eliminated the perceived risks that have long been perpetuated by software vendors. Third party S&M options have a place in the market, as they do reduce the cost (and the pain) of paying for support (especially for new and unneeded product releases).

In terms of the current lawsuit by Oracle against TomorrowNow and SAP (which, as a result, might deter prospective customers from opting for third-party service providers), Rimini Street believes the court case isn't really about the legality of third party support, but rather specific allegations regarding TomorrowNow's business practices. Specifically, Rimini Street refers to the alleged practice of downloading updates and fixes (sometimes for unlicensed products) after a client's maintenance contract has ended.

Rimini Street's support processes are thus built to ensure it downloads only what a client has access to. In fact, Rimini Street has some clients that started with the provider after their support contracts with Oracle ended, so Rimini is unable to download and provide them with the updates and fixes from Oracle that the customers once had access to. Rimini thus provides support to these clients just like any other client—creating fixes as needed.

The bottom line is this: Customers want and need S&M agreements, but vendors are either not meeting their needs, or they are doing so at unjustifiable prices. As long as third party maintenance firms like Rimini Street pay attention to the needs of customers, these providers will do well.

SOURCE:
http://www.technologyevaluation.com/research/articles/latest-developments-for-a-vendor-neutral-third-party-support-and-maintenance-provider-18959/

Latest Developments for a Vendor-neutral Third Party Support and Maintenance Provider

2010-08-18T02:49:00.001-07:00

The Convergence of ERP and Field Services—One Vendor’s Leadership

2010-08-18T02:48:00.000-07:00

There is continued evidence that people-centric services organizations in both the public and private sectors are under increasing pressure to streamline their operations and gain cost efficiencies. For some industries, such as utilities, energy, and real estate management, the divergent needs of managing large physical assets and recurring smaller service needs is a challenge. For more information, please see part one of this series, An ERP for Services Vendor Poised to Overtake the Market

Until recently, these organizations have had few choices of systems that integrate field services and asset maintenance. But Agresso’s Field Force solution offers these organizations a combination of features that address the following realities of services industry businesses:

* Large projects and small field services orders often must coexist within the same business model or operation.

* Financial controls and visibility must drive from both a bottom-up (individual project) and top-down (multiple reporting) perspective. Further, they must intersect appropriately for both performance management and for problem resolution.

* Complex pricing models carry inherent profitability, invoicing, and financial reporting challenges.

* Service contracts must be carefully managed, monitored, and enforced to balance the tightrope between customer satisfaction and business profitability, ensuring that the best and most financially rewarding customers remain long-term revenue generators.

Following are the capabilities delivered through Agresso Field Force:

1. Integrated business processes.

By tightly integrating customer, business, and operational data, and then providing role-based visibility to both operational executives and mobile workers, Agresso Field Force optimizes field services and asset maintenance decision making and controls at every level. The solution’s capabilities span projects, procurement, financials, and human resources (HR), as well as workflow, reporting, and analytics.

Typically, customers will select Agresso Field Force as a complement to Agresso Procurement and Agresso Projects. By sharing a common data repository, customers can create their own inquiries and reports, manage changing business requirements on the fly, and intelligently analyze, predict, and plan around asset maintenance requirements. Agresso Field Force can also manage workforce evaluation and scheduling, project assignments, project tracking and completion, parts inventory or equipment management, and individualized reporting and billing.

2. High-volume field services management.

There is an inherent cost relationship between administrative tasks when they are tied to thousands of daily orders. Additionally, delayed, forgotten, or lost orders extract an equally painful price on an organization’s bottom line—in terms of both immediate receivables and the potential for end customer dissatisfaction or loss. Thus, Agresso Field Force was designed with the capacity to handle up to 2,000 orders per day.

Agresso’s “Service Order Central” design provides a comprehensive capability for managing all aspects of work orders in a high-volume environment:

* Users can register and maintain order data, which results in an auditable, consistent, flexible, and legally defensible historical record for organizations challenged with hundreds or thousands of recurring orders.

* The screen setup is user-friendly and intuitive, allowing employees both in house and in the mobile workforce to access key data, input orders, prepare invoices, and record activities.

* Status workflows are customizable and event driven, assuring that “next-step” actions are designated, tracked, and recorded to ensure they occur (or defended as to why they have not occurred).

* A special reporting tool stacks all order elements, providing the time, financial, and inventory management requirements needed by services organizations.

* The system can be accessed in several ways: in the office, via the Internet, or by using mobile devices. This ensures that mobile workforces are never out of touch.

* Role-based views provide security and data tailored to each mobile worker; job-specific information is conveyed simply and quickly.

* Both regularly scheduled and unpredicted, emergency repairs are easily managed. Mobile field communications can redirect work crews, juggle scheduling, and change the pricing attached to scheduled and unscheduled work.

3. Unlimited pricing and service model variations.

Agresso Field Force contains modeling capabilities to help organizations analyze, determine, and establish service agreements. With the ability to manage the parameters of time, maintenance schedules, workforce pay rates, parts and products needs, and customer demands or special needs, organizations are able to create and select from various complex pricing and service models that are in the best interest of the service provider, the inventory partners, and customers.

Additionally, Agresso Field Force is able to adjust to customer data changes, pricing increases, volume discounts, or workforce parameters, on the fly and without external IT intervention. Management has clear visibility to model known and unknown what-if situations that might have major bottom-line impact.

By being able to set, manage, bill, and adjust pricing and service levels for high-volume individual contracts, Agresso Field Force provides a best-of-breed solution set with virtually no limit to the complexity—or creativity—service organizations wish to build into their pricing and service contracts. The solution can manage these multiple disparate contracts from both a workforce deployment and a financial-reporting perspective.

4. Embedded analytics and reporting functionality.

Agresso Field Force’s embedded analytics and reporting capabilities flow throughout each of its field services and asset maintenance business processes. Organizations can build reporting structures and hierarchies that reflect the management and deployment of their field workforces. The Agresso enterprise resource planning (ERP) reporting umbrella provides full drill-down, drill-around, and analytic capabilities, from high-level information, down to transactional data, as well as relevant documents (purchase orders, invoices, contracts, etc.).

Service or customer inquiries and individualized or aggregated reports can be published to web sites, portals, and intranets for easy access by both traveling management and mobile workers. Ad hoc inquiries are made through an intuitive, graphical user interface (GUI), which provides sophisticated analytics capabilities that can leverage opportunities or quickly change courses that cause financial or operational stress to the organization.

5. Agile mobile workforce support.

Field services organizations need the most agile field services technologies available to facilitate communications and reporting and to build cost efficiencies into the wide range of business processes performed off site. Just a few years ago, field operations revolved around limited thin client web capabilities that delivered rudimentary self-service business processes. Today, powerful mobile laptops, multifunction smart phones, and personal digital assistants (PDAs), as well as full-spectrum broadband communication infrastructures, all keep mobile workforces connected. The result is access to and exchange of reliable, up-to-date information, which speeds up the completion of jobs and accurate invoicing.

With Agresso’s Field Force, such mobile devices are tightly integrated to role-based enterprise information in order to
o reduce or eliminate costly and time-consuming trips back to the office

o reduce or eliminate paperwork or reporting redundancies

o access invoices, contracts, or service procedures to streamline service calls and visits

o fill out and complete asset maintenance schedules for legal and preventative maintenance purposes

o order parts and supplies quickly and cost-effectively to close out jobs faster and improve customer satisfaction

o enter billable time against specific contracts to expedite accounts receivable activities

6. Asset management and maintenance.

In asset-intensive industries, the reliability and cost of maintaining infrastructure are critical components to an organization’s success—top line, bottom line, and long-term business viability. Business processes for reviewing and improving upon asset and infrastructure maintenance schedules have become titles in the business book aisle, and speech fodder for technology analysts.

Poor asset maintenance made global headlines with the near environmental disaster wrought by shoddy maintenance of oil pipelines in Alaska. What’s more, the incidence of plant sewage overflows following rainstorms continues to embarrass water treatment facilities.

Field services operations are often tightly tied to the maintenance and management of critical organizational assets. These fall into three categories:
1. preventive maintenance, which is based on proven, routine schedules and guidelines tied to infrastructure;

2. predictive (pre-scheduled) maintenance, which is based on the timely analytics of recent field services emergencies, in cases where similar assets and structures exist elsewhere;

3. and unpredicted or emergency maintenance, which is tied to urgent essential infrastructures that fail and that must be serviced immediately.

Predictive maintenance has been positively impacted by the newest compare-and-contrast analytics, where “sensing” technologies have been added to the mix. The more sophisticated, reliability-centered maintenance guidelines infuse a deep understanding of equipment specifications, needs, and priorities (overlaid by financial and personnel resources) to plan maintenance activities.

Unpredicted, emergency service of assets can have a huge negative margin impact. An organization’s ability to use a combination of Agresso Field Force’s analytics, workforce, and communications capabilities can minimize the impact by redirecting scheduled work, workforce crews, and scheduled commitments to meet financial and customer needs.

One of Agresso’s differentiators from other enterprise solutions providers is its ability to tailor its solution to the unique requirements of each customer—both in the pre- and post-implementation phase. Regardless of the type of asset maintenance schedule desired—whether accommodated for outsourced service teams or internal service teams—Agresso can create a complete framework for scheduling, cost, time and billing, best practices, analytics, and reporting.

Both Market Segments Growing Rapidly

In April 2007, IDC Research published a report titled Worldwide Enterprise Asset Management 2007–2011 Forecast: No Longer a Sluggish Backwater (IDC, April 2007, Volume 1, Product, Project and Portfolio Management Solutions: Market Analysis), claiming that the world of asset management growth is no longer the “sluggish backwater” (having backward or slow-technology solutions) it once was. IDC reported the worldwide enterprise asset management (EAM) market in 2006 to have reached over $1.3 billion (USD), with $1.1 billion between the Americas and Europe, the Middle East, and Africa (EMEA). It projects year over year revenue growth to exceed 7 percent per year, to grow to an incredible $1.9 billion (USD) by 2011.

As proposed in this paper’s preamble, the definition for both field services and for asset management has grown deep and multifaceted tentacles. Here is IDC’s definition of the latter:

Enterprise asset management application software automates the many aspects of asset management and maintenance, repair, and overhaul (MRO) operations (e.g. machinery and equipment, buildings, or grounds). The software generally includes functionality for planning, organizing, and implementing maintenance activities, whether they are performed by employees of the enterprise or by the contractor. Typical features include equipment-history record management, descriptions of items maintained, scheduling, preventative and predictive maintenance on the assets, work order management, labor tracking (if integrated within the maintenance management applications), spare parts management, and maintenance reporting.

The report continues,

... service providers are increasingly under pressure to maintain their assets and facilities, as well as those of their clients, in optimal working order to satisfy their end customers. Integration with PLM (product lifecycle management), ERP, and CRM [customer relationship management] solutions will provide service organizations with access to product information, including engineering data, materials and services purchasing, manufacturing planning and service scheduling ... and services contract and warranty management.

In a separate interview, Gisela Wilson, director of IDC’s study Product Life-Cycle Management Solutions and the author of the IDC report, says, “There aren’t a lot of companies that have attempted to do both EAM and high-volume, low-ticket field services—yet the demand is there. The big ERP players have attempted acquisitions to knit both pieces together, but the benefits are lagging due to poor integration and change capabilities. Buyers haven’t been able to get their ideal mix of change-resistant integration, plus deep rich functionality in both pieces. Something always comes up short.”

Mary Wardley, IDC’s field services guru and vice president of CRM applications software, also advises that the field services and asset maintenance hybrid has either been a disconnected free-for-all, or a no-man’s land, depending upon your point of view.

“To date, the traditional vendors on each side have made some wrong assumptions about what the buyer wants,” Wardley says. “The emerging new field services/asset maintenance model is somewhere between ERP and front office. It’s easy to see why initial efforts to join the two pieces have failed: field services vendors are traditionally a downstream piece of CRM, so they are struggling to understand the nuances of back office, asset management operations—like inventory management, logistics, product information management, parts management, etc.”

Conversely, the asset maintenance vendors are not nearly as comfortable with the analytics and mobility necessities required of the field operations piece. “These are people who have serviced assets—like cell towers, utilities, shopping malls,” Wardley said. “They were on nice, comfortable maintenance schedules that were regular, predictable, with more stabilized time/billing/parts. This is a very different world from rapid-response, ‘I’ve broken it’ service needs. The two solution sets have been speaking different languages for years ... and it will take time for many of these vendors to understand each other and mesh well.”

Wardley also concurs that Agresso’s Field Force provides a compelling solution in blending the two applications. “Agresso has done a comprehensive job in delivering the analytics, financial controls, mobility, scheduling, inventory, contracts, pricing, and billing capabilities tightly into one solution,” she said.

People-centric Business Expertise

Agresso has been a global leader of fully integrated ERP solutions for companies in the professional services and public sector for more than 20 years. With 2,700 customers and over 10,000 deployments operating in 100 countries, more than one million users use Agresso’s solutions to run their businesses. The company markets its solutions under the Agresso Business World brand.

Agresso’s deep understanding of people-centric organizations has led the company to achieve a number one market leadership position in the public sector of several European countries. Its customer base is almost evenly split between the public and private sectors.

Agresso’s VITA Architecture: Addressing “Businesses Living IN Change”

Agresso management understands that in a head-to-head competition with the giant global ERP providers, it is at a size disadvantage. Given that standard ERP applications (such as financials, HR, etc.) have relatively small nuances from one vendor to another, Agresso’s sales, marketing, and support organization (largely direct) cannot seriously take market share from the well-entrenched leaders. Even with solutions like Field Force, where the product may prove to be superior over time, Agresso is anywhere from one-third to one-twentieth the size of its core competitors.

Since the company is consistently winning multimillion-dollar deals in direct competition against SAP, Oracle, and Microsoft, how then is Agresso doing it, and how can the company prevail?

The answer is one word: architecture. Or, more specifically, the capabilities of its architecture.

Agresso has focused its sales and marketing efforts on a narrow market niche that it calls Businesses Living IN Change (BLINC). Agresso solutions reside on an architecture it calls VITA, which has supported numerous generations of technologies, including Web services and service-oriented architecture (SOA) capabilities.

The VITA architecture combines its data model, process model, and delivery (analytics and reporting) methodology into a cohesive unit. A change made in any one of these areas automatically and intelligently flows and makes associated changes and adjustments throughout the system. This combination favorably impacts the bottom lines of its customers as well as the corporate strategies selected by management.

The inherent weaving of these three components to make business changes in lockstep is a defining characteristic of the Agresso architecture. The Agresso technology platform uses open standards and allows chief information officers (CIOs) to leverage their preferred choice of popular and readily available industry components. This liberates organizations from being locked into technology solutions that are fashionable one day and out of favor the next. For more information, see Enterprise Systems and Post-implementation Agility—No Longer an Oxymoron?

If required, in a heterogeneous environment, Agresso also offers an SOA capability that supports Oracle, Microsoft SQL, and MySQL databases. Additionally, Agresso’s solution is based on an N-tier, web-based, scalable platform and a .NET framework. It also supports XML-based data-sharing, and provides unified, secure access to information via Web services.

More information on Agresso and its solutions is available at www.agresso.com.

This concludes the two-part series An ERP for Services Vendor Poised to Overtake the Market.

SOURCE:
http://www.technologyevaluation.com/research/articles/the-convergence-of-erp-and-field-services-one-vendor-s-leadership-19254/

Supply Chain Management: Morphing the Functional Scope of Service Parts

2010-08-18T02:47:00.002-07:00

The Morphing Functional Scope of Service Parts SCM

There are many requirements involved in the supply chain management (SCM) of service and replacement parts that make the process different from traditional, "new parts" SCM (see Part One). As a result, some specialist SCM solutions have been developed to address these challenges. Some might resemble conventional SCM solutions, but feature different approaches. The requirements of service and replacement parts SCM solutions also vary given the wide range of members that exist across multi-node supply chains. Each of these members can be grouped into a few major solution functional categories.

Part Two of the Lucrative but Risky "Aftermarket" Business: Service and Replacement Parts SCM series.

Service and replacement parts resource management, which is the main focus of this article, consists of a variety of solutions that are comparable to supply chain planning (SCP) components in conventional SCM suites. Service and replacement parts management has inventory optimization at its core that determines the best way to stock inventory across the supply chain to maximize service levels while minimizing investment. In other words, the basic goal is to maintain the optimal placement of resources, including parts, tools, and service technicians, across service regions to meet service level agreement (SLA) commitments at the lowest possible cost.

These spare parts planning systems provide the means to define and implement a spare parts inventory strategy that meets enterprise objectives. In other words, they tend to help enterprises understand the relationship between a customer service target level and the value of the inventory required to support it. To that end, they combine forecasting with replenishment logic to determine the optimal level and mix of parts to carry at each stocking tier, given certain capital investment targets and customer service level goals. Unlike finished goods, where nearly 100 percent customer service levels are desirable, here only certain classes of spare parts need to be available all the time, at all supply chain nodes.

Spare parts planning systems might also improve user productivity, since by automating the basic forecasting and replenishment process, planners and inventory managers can focus on exceptions and more-strategic planning activities, such as how to handle expensive, slow-moving items or how to use substitute parts to reduce costs or obsolescence.

Achieving this goal requires a mix of tools. These range from strategic tools identifying demand profiles, service objectives, and the best way to position resources to meet demand, to tactical tools determining what orders need to be placed to meet strategic objectives. Such goals include managing the risk inherent in allocations and transships; repair or new purchase orders; new product introductions (NPI) or discontinuations; and the replenishment and redeployment decisions.

Tactical refinements of inventory optimization entail setting minimum and maximum inventory levels, which recognizing stochastic, changing demand and lead-time. The algorithms required to provide this support are significantly different from those found in conventional, new parts production SCM, and justify the use of focused, point solutions, including dynamic programming, simulation, mixed integer optimization, etc. In the case of inventory optimization, two parts may be present:

1. Multi-echelon optimization determines optimal stocking levels of an item at a particular location, based on the item's possible investment levels. In this case, an echelon is the level of supply chain nodes, or disintermediation. For example, a supply chain with two independent factory warehouses and nine wholesale warehouses delivering product to 350 retail stores is a supply chain with three echelons between the factory and the end customer. One echelon consists of the two independent factory warehouses, the other echelon consists of the nine wholesale warehouses, and the third echelon consists of the 350 retail stores. Each echelon adds operating expenses, holds inventory, adds to the cycle time, and expects to make a profit.
2. Multi-item optimization determines the optimal allocation of inventory investment across items in a product group.

Even fundamental concepts like customer service level are different in the service and replacement parts milieu. Namely, in new parts production, the customer service level (synonymous with customer service ratio, fill rate, order-fill ratio, and percent of fill) is a measure of the delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock (MTS) company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Likewise, in a make-to-order (MTO) company, the customer service level is usually a comparison between the number of jobs or dollars shipped in a given time period and the number of jobs or dollars that were supposed to be shipped in the same period. Yet, in the service and replacement parts world, with a high level of unpredictability, how can one forecast the dollar amount of service or repair parts that were supposed to be shipped during a particular period?

Thus, given the random nature of service and breakdown events, it is clear that demand uncertainty (which can be measured by the standard deviation, mean absolute deviation [MAD], or variance of forecast errors) cannot be eliminated through traditional forecasting methods. Hence, trade-offs must be evaluated on the basis of captured future risk assessments; estimates of demand probability distribution, relevant to specific customer products; and locations at future points in time. The decisions made across the planning horizon thus constitutes an exercise in risk management

This is Part Two of a four-part note.

Part One discussed the business challenge.

Part Three will continue analyzing service parts planning.

Part Four will cover players and benefits and make user recommendations.

Comparing Traditional Planning to Risk Management

Table 1 compares the traditional planning approach found in enterprise resource planning (ERP), supply chain planning (SCP), and first generation service supply chains to elements of advanced, contemporary risk management planning approaches. It should clarify why traditional, new products SCM approaches are not able to handle the demands of the service parts supply chain.
Area

Traditional Planning Approach

Risk Management Approach

Budget

Creation of service offerings with limited understanding of cost and service tradeoffs. Budgets are created through crude estimation, guesswork and historical extrapolation.

Intelligent design and modeling of service offerings include pricing of offering, SLA and inventory tradeoffs, and network configuration scenarios to optimize investment in assets to achieve maximum return.

Strategic Forecasting

Production-based forecasting from historical demand that does not recognize probabilistic nature of demand.

A proprietary composite forecasting methodology that combines time series demand history with causal factor projections to generate item-location specific estimates of usage probability distributions.

Strategic Positioning

Each part location and inventory echelon is planned in isolation or in planning groups, without considering multi-echelon, multi-indenture, and system interactions.

Up to date multi-echelon optimization based on rapid solution algorithms and strong model or system architectures that can be applied across a wide range of industries and company contexts.

Tactical Planning

Deterministic distribution requirements planning (DRP) type logic using deterministic forecasts not suited to intermittent demand environment. Characterized by unplanned, reactive expediting.

Risk-based decision-making that incorporates the probability of stock-out in all order generation and deployment activities, integrating strategic and tactical planning.

Event Management

Fulfillment to traditional fill rate metrics, whereby fulfillment strategy is not tied to asset management strategy, and responses are reactive.

Differentiated SLA commitments enabled by strategic positioning of inventory, including availability-based planning, which maximizes product up-time for budget constrained multi-echelon, multi-indenture, multi-period environments. Consequently, responses are pro-active through asset re-deployment prior to service event based on risk projections and optimized post-event fulfillment.

Table 1: Traditional versus risk management approaches.
Source: MCA Solutions

Another functional category, service and replacement parts delivery management solutions, are analogous to supply chain execution (SCE) components in conventional supply chains. The execution side of inventory optimization takes into consideration constraints on supply, transportation, and warehouse resources, perform detailed tactical cost minimization (such as possible consolidation opportunities, etc.), enable visibility into stock movements, leverage lateral transfers, etc. For more information, see SCP and SCE Need to Collaborate for Better Fulfillment.

Bundled with these, customer relationship management-like (CRM) solutions provide a means to manage service requests considering contractual or SLA entitlements (or restrictions) and resource availability. Additionally, relevant logistics management solutions manage the rapid dispatch of parts to customers and the return, repair, or discontinuation of broken or condemned parts. Service requests can come from many places in addition to a problem report from a customer, and these service requests must be routed to the right company representative and then efficiently dispatched for field service.

In addition to reported problems, effective service management requires that service problems and preventative maintenance calls be proactively generated by these applications. As the service request is reviewed, company representatives must have the ability to review all past service requests, as well as all relevant contracts, SLAs, and warranties in order to determine customer entitlements and the best course of action. Near real-time tracking of service delivery and repair activities across depots and service centers are other crucial components of the execution side. In this regard, mobile, wireless technologies are playing an increasingly important role.

Service Life Cycle Management

This brings us to service life cycle management (SLM), which is a holistic business initiative focused on the after-sale service of products and clients. Simply put, SLM focuses on making more money from the product after the initial sale and is a way to become a strategic part of the customer's business after the sale is completed. Another benefit of SLM is the automation and optimization of the service processes in the field, since resource utilization and efficiency can be increased through effective call scheduling, allowing more service to be performed with fewer technicians. Companies see the value of completing service calls on the first visit through deploying the right technician with the right skills and service parts at the right time.

Perhaps most importantly, SLM can integrate service-oriented business processes that span from the time of the service request, to the satisfaction of need, to billing or warranty. SLM, like any other business initiative that involves new business processes is best implemented alongside other strong enterprise applications. Two primary capabilities that are required in this process are call center and field service applications. These two categories of software provide support for capturing or generating the initial service request and manage them through to completion all the way to the back-office. In order to manage the total life cycle of the service requirement in a continuous business process, integrated call center and field services capabilities are essential.

Call center applications must manage the demand for service through to completion, in order to satisfy the needs of the customer and the manufacturer or distributor. The initial service request may come from a number of different sources, all of which must be captured and processed through the call center. In addition to telephone, self-service, or e-mail requests, an increasing number of products are being embedded with self-monitoring capabilities that can evaluate the health of the product and self-report on service needs.

Once the service request has been reviewed and targeted for service, field service applications must then be able to ensure that optimal resources are deployed to provide the service. Once dispatched, technicians or service representatives should have ready access to information about the product they are servicing; the customer; and the product's maintenance history and configuration in order to complete the service on the first call. In addition to being knowledgeable, the technician should be armed with the appropriate parts and tools for the job—parts that may have been planned months in advance, when applicable (e.g., in case of periodic maintenance).

Service representatives should then be able to close the loop on the service call and provide the home office with appropriate information on the time and materials used to complete the call, which is then used to generate appropriate billing and update warranties and SLAs. For more information, see Service Lifecycle Management—Tapping into the Value of the Product Aftermarket.

Moreover, given the existence of a number of various third party providers in the service and replacement parts supply chains, there is a need for service and replacement parts network management applications to coordinate all the parties involved in supporting the needs of OEMs and asset owners. This requires a collaborative infrastructure that integrates business processes and automates transactions across SCM trading partners. The integration and role-based portal presentation of network information, like product designs, service contracts, and asset and service histories are another key responsibility of this functional suite of solutions.

Last but not least, enterprise asset management (EAM) or computerized maintenance management systems (CMMS) solutions are also related, despite their focus on asset owners instead of the service and replacement part providers per se (for more information, see EAM Versus CMMS: What's Right for Your Company?).

Nevertheless, integrating information about assets (e.g., drawings, service history, etc.), and asset owners and their activities into the service and replacement parts supply chain is critical, as companies shift to newer outsourced EAM business models. Proactive maintenance strategies, such as reliability driven maintenance (RDM), enabled by external access to plant instrumentation monitoring and alerts is a prime example of how tight integration between EAM and spare and replacement parts SCM can facilitate better handling (for more information, see Reliability Driven Maintenance—Closing the CMMS "Value Gap"?).

This concludes Part Two of a four-part note.

Part One discussed the business challenge.

Part Three will continue analyzing service parts planning.

Part Four will cover players and benefits and make user recommendations.

SOURCE:
http://www.technologyevaluation.com/research/articles/supply-chain-management-morphing-the-functional-scope-of-service-parts-18086/

Service Supply Chain Strategies to Increase Corporate Profitability

2010-08-18T02:47:00.001-07:00

Abstract

The last decade has witnessed a substantial shift in emphasis on the part of many OEM manufacturers, from a focus on the products they produce to a concentration on their customers and the value that their customers derive from ownership and use of these products after the initial product sale. The importance of service is made clear in a recent AMR survey1 of manufacturing companies which revealed that service represents 24 percent of their revenue and 45 percent of their profit contribution. With only 20 percent of IT spend allocated to service, there is indication of value in increasing corporate attention to the service area.

With an increasing awareness of the strategic value of service, companies are beginning to focus on their service supply chains, which can be defined as the network of resources that includes the appropriate service parts, customer engineers, and infrastructure for material movement and storage, repair, transportation, information systems, and communication.

This shift toward a service-centric strategy represents an important aspect of firms' efforts toward enhancing overall revenue and profitability, customer acquisition and retention, and competitive differentiation.

In this paper, we describe the unique challenges of the service supply chain, and a framework for understanding the service management decision hierarchy. Most importantly, we highlight the dramatic value proposition available to companies that deploy advanced service strategies and decision-support tools to address these challenges. Brief case studies from leading service organizations Cisco and KLA-Tencor describe examples of successful deployments of service supply chain strategies that leverage this approach.

[1] J. Bijesse, M. McCluskey and L. Sodano, "Service Lifecycle Management (Part 1): The Approaches and Technologies to Build Sustainable Competitive Advantage for Service," AMR Research Report, August, 2002.

Introduction: Service Supply Chain Challenges

The mechanisms required to design, produce, and deliver service products in a cost-effective and competitive manner are quite different than those used to manufacture goods and to procure direct materials. Significant assets must be dedicated toward service delivery. The task of effectively deploying these assets across a wide network of locations and fulfilling demand which is driven by infrequent service events is a daunting one. Figure 1 shows a representation of a typical multi-echelon service supply chain network, and the resulting material flows required to supply material and to fulfill demand.

As a specific example of a service supply chain, consider Cisco Systems Global Product Services, which manages a complex supply chain consisting of the following elements:

* Over 10 million service contracts defined in terms of specific customer performance targets (i.e., high priority with 2—4 hour response time guarantee, 8—12 hour response time and next business day response time), with thousands of service contract transactions per day.
* 3—5 echelons consisting of nearly 750 stocking locations (including a central depot, regional warehouses, local warehouses, and forward locations positioned at or near major customer sites) required to position inventory close to the customer to support rapid response.
* Hundreds of supported products that are mission critical to customers (e.g., net servers, communication systems), with more than 100,000 part numbers supported throughout the service supply chain. Most of these parts have very infrequent demand, with global demand rates of fewer than ten hits a year not uncommon.

Figure 1. Multi-Echelon Service Supply Chain Material Flows

While not all manufacturers face this level of complexity, it is not surprising that performance metrics are vastly different from the production supply chain, as indicated by a recent Wharton benchmark study that showed that inventory turns of one to two are common for providers of same-day service agreements2, even for manufacturers whose production supply chains show turns of fifty to one hundred.

[2] Morris Cohen and Vipul Agrawal, "After-Sales Service Supply Chains: A Benchmark Update of the North American Computer Industry," Fishman-Davidson Center for Service and Operations Management, The Wharton School of the University of Pennsylvania (August 1999).

Risk-Management Framework for Decision Making

Given the complexity of the service management problem, it is appropriate to decompose it into a collection of interrelated decision problems. Figure 2 illustrates the levels of managerial decision making that we have observed in many service supply chain environments. Each of the following components corresponds to a different period of the planning horizon, over which managerial trade-offs and objectives must be considered as the relevant decisions are made.

Budget Planning is in the longest decision timeframe, with a planning horizon typically measured in months or years, where decisions that determine specification of the overall service strategy are made. Such decisions can include design of the products being supported, the design of the "service products" that are offered to customers in the after-sales market, and the design of the infrastructure used to deliver these service products.

Strategy Planning decisions are made in shorter timeframes, typically weeks and months. At this level, management is concerned with the forecasting and strategic positioning of its material and human resources in anticipation of the need to meet customer service demands in a manner consistent with the response, and cost entitlements as set out in the warranty and service agreements. These strategic resource deployment decisions give rise to a challenging optimization problem that must be solved periodically if the service strategy is to be implemented in a cost-effective manner.

Tactics Planning decisions are made at a nearer-in planning horizon (weeks, days, or hours), and include the redeployment decisions that are associated with repositioning resources within relevant lead times to meet the service objectives and resource levels defined in the strategic plan. This includes generation of orders for service parts allocation (from a central to field location in the network), replenishment (from the network to external sources of supply for repair and new buy), and transshipment (across parallel nodes in the network).

Figure 2. Interactive Decision Hierarchy

It is important to note that all of the resource decisions described in Budget Planning, Strategy Planning, and Tactics Planning must be made prior to the occurrence of a particular service event whose fulfillment will require use of those resources. Hence these decisions are based on estimates of future resource requirements along with visibility of all of the events that affect supply and demand of such resources that have occurred throughout the service supply chain prior to the occurrence of the service event in question.

Given the random nature of service events, it is clear that demand uncertainty cannot be eliminated through forecasting, and hence, trade-offs must be evaluated on the basis of future risk assessments captured by estimates of the demand probability distribution relevant to specific customer products and locations at particular future points in time. The decisions made at all pre-event planning levels, (Budget, Strategy and Tactics), thus constitute an exercise in risk management.

Event Management is the "last mile" of decision making in the planning horizon hierarchy which concerns fulfillment after service event-based demands for resources have been made (e.g. part failure). This is where the service product is actually "produced" to meet the goals of customers. Intelligent decision making here can improve the performance of the system by allowing managers to make the best use of current and projected resource deployments throughout the service supply chain. This framework has a global perspective which has implications for the organization, tools, and processes to effectively deliver a service strategy

Risk Management Solutions to Drive the Efficient Frontier

Balancing the trade-offs among revenue, cost, and service is challenging because of escalating service expectations, complexity of the service supply chain, and, as mentioned before, the high degree of uncertainty associated with service events. The results of the planning decisions are best expressed using the concept of an efficient frontier curve as shown in figure 3. This demonstrates that, in general, the greater the promised level of service performance, the larger the required investment in such assets, which increases the total costs incurred by the service provider. Note that the curve rises steeply; the costs increase disproportionately as the promised service performance level increases.

Figure 3. The Service Supply Chain Efficient Frontier

Over the past decade, firms have made great progress in implementing transaction disciplines and traditional service supply chain systems, moving them from point A to point B towards a more efficient frontier. As companies have increased service levels by moving from point B to point C along the efficient frontier, they have found further progress difficult, limited by traditional modes of planning. These traditional modes of planning found in first-generation service supply chain systems are inspired by manufacturing and finished-product distribution thinking (e.g., ERP and DRP), which attempt to match service supply to demand by assigning enabling resources to specific service products in a static and separable fashion.

After years of research and development of solutions for the service supply chain with organizations such as IBM, General Motors, and the U.S. Navy, and after observing that no existing commercial software solutions addressed the risk management nature inherent in the service supply chain, MCA Solutions developed the Service Planning and Optimization (SPO) suite of products for strategic and tactical planning of the service supply chain. In successful implementations with customers across a variety of industries, it has been repeatedly proven that implementation of SPO's dynamic planning capability in traditional planning environments shift the efficient frontier as demonstrated in the movement from point C to point D in figure 3, resulting in 10 percent to 30 percent reductions in inventory at the same service levels.

These dramatic performance improvements are enabled by the capability demonstrated in figure 4, which is a comparison of traditional planning approaches for the service supply chain to MCA's Risk Management Approach.

SOURCE:
http://www.technologyevaluation.com/research/articles/service-supply-chain-strategies-to-increase-corporate-profitability-17349/

Mid-Market ERP Vendors Doing CRM & SCM In A DIY Fashion Part 1: Recent Announcements

2010-08-18T02:46:00.002-07:00

Event Summary

Microsoft's acquisition of Great Plains, MAPICS' acquisition of Pivotpoint, and the merger of former Navision Software and Damgaard in 2000, combined with the anxiety of the then only looming economic slowdown, triggered the spate of mergers & acquisitions throughout 2001 (see The Mid-Market Is Consolidating, Lo And Behold). As the ground seems to be settling down from quakes and tremors of these mergers, some renown, still independent mid-market ERP vendors seem to be on the course to natively deliver some 'must have' functionality beyond core ERP. These Tier2/Tier 3 vendors are prepared to endure the onslaught of the likes of SAP, Oracle, and PeopleSoft, as well as of proverbial mid-market leaders such as J.D. Edwards, Baan, Intentia, QAD, IFS and Epicor, and newly formed mid-market juggernauts like Microsoft Great Plains, Best Software (formerly Sage Software), and Navision, to name some.

These vendors include:

* Frontstep with Frontstep Capacity Promiser
* Frontstep CRM
* Syspro Group with IMPACT CRM and IMPACT eCRM

This is Part 1 of a two-part analysis of recent news from Tier 2 and Tier 3 ERP vendors.

Part 2 will discuss the market Impact and makes User Recommendations.

Frontstep Capacity Promiser

On March 19, Frontstep, Inc. (NASDAQ: FSTP, www.frontstep.com), a prominent global mid-market provider of business applications and services for manufacturers and distributors, announced the release of Frontstep Capacity Promiser, which is devised to allow companies to automate the promising of delivery dates that accurately reflect their current inventory and capacity.

In today's highly competitive environment, providing accurate and up-to-date information on item availability should be critical to a manufacturer's ability to meet customer expectations. Therefore, they must have accurate and timely information to make delivery date promises that can be kept. Frontstep Capacity Promiser, a single site capacity availability engine, provides a way for make-to-order (MTO) manufacturers to promise their customers, at order entry time, a delivery date that can be met. By filling the gap between simple available-to-promise (ATP) applications and robust advanced planning and scheduling (APS) applications, Frontstep Capacity Promiser provides capable-to-promise (CTP) dates based on inventory and capacity without necessarily having the data for manufacturing bills of material (BOM) and routings.

Frontstep Capacity Promiser provides realistic CTP dates that consider manufacturing constraints such as materials, parts production, family production, shift schedules and business priorities. Frontstep Capacity Promiser furthermore provides:

* Real-time availability information based on unallocated inventory, planned supplies and capacity
* Comprehensive constraint representation for accurate availability information
* Integration with different order entry systems
* 24x7 visibility for accurate promise dates for orders entered not only during the day, but also at night or over weekends
* Minimal data entry needs, supported with a simple spreadsheet upload using Microsoft Excel
* Additionally, depending on the customer's requirements, Frontstep Capacity Promiser will report either the date that the requested quantity of an item is available, or the quantity of an item that is available by a requested date.

Frontstep CRM

A day earlier, on March 18, Frontstep announced the release of Frontstep CRM, its new business process-driven customer relationship management (CRM) solution. By providing companies with an integrated view of prospect, customer, product and service information, Frontstep CRM hopes to help companies maximize the value of existing relationships.

Frontstep CRM, built specifically for manufacturers and distributors of discrete products, is a Web-based application that provides a consistent view of customer and order information across the enterprise to improve and extend sales, marketing, and support business processes. Frontstep CRM reportedly goes beyond traditional sales force automation (SFA) and contact management tools and allows organizations to realize the true benefits of CRM with integrated product catalog, configuration, quotation, inventory availability, ordering and support capabilities. Frontstep CRM offers the following traits:

* Cross-departmental access to data - Multiple departments, including sales, customer service, support, and marketing can act as one team by managing complete business processes using common customer and order data.
* Order management - Sales or customer service representatives can search product catalogs, create new orders, leverage previous orders, configure products, and prepare or change quotes, complete with complex pricing and item availability.
* Integrated - Frontstep CRM seamlessly integrates with SyteLine, Frontstep's flagship extended ERP solution, and is also architected to integrate with other ERP and supply chain management (SCM) systems. Frontstep CRM consolidates the information from multiple back-end systems including: customer and product data, product availability, pricing data, estimate and order transactions, and return material authorization (RMA) status information.
* Flexible user interface - User interfaces can be tailored for specific job functions and departments to meet the unique requirements of different organizations. These personalized attributes migrate forward when Frontstep CRM is upgraded.
* Complementary tools - Productivity tools, like Microsoft Outlook and Microsoft Excel, used in sales, marketing and service areas can be leveraged to support current business processes and enhance team effectiveness.

Syspro Group - IMPACT CRM 3.5

Also on March 18, the Syspro Group, a privately held provider of enterprise software for small to medium enterprises (SMEs), with its US headquarters in Costa Mesa, CA (www.sysprousa.com), announced a major new release of IMPACT CRM 3.5, which features numerous system enhancements as well as IMPACT eCRM, an option that enables remote on-line access.

IMPACT CRM is an enterprise software system that enables a business to manage internal resources, customer, supplier and prospect relationships, marketing campaigns, sales opportunities as well as service contracts and incidents within a single, CRM/SRM program. IMPACT CRM is part of Syspro's IMPACT Encore, its flagship ERP solution. In addition to the IMPACT eCRM option, significant new features in IMPACT CRM 3.5 include:

* Business Process Automation -- IMPACT CRM 3.5 features a built-in Process Definition Language (PDL), a new table-based tool for modeling complex business processes. Syspro touts PDL expands the use of IMPACT CRM beyond traditional CRM to true "computer aided management." Using PDL, businesses can, e.g., automate the following functions: Automatically trigger processes; Automatically generate alerts to employees and customers; Automate marketing campaigns; Schedule proactive service calls; Automatically respond to Web-based leads; Run telemarketing scripts; and Automatically follow up on important activities.
* Related Accounts, Activities, Tasks -- A new facility allows the tracking of vertical account relationships (e.g., parent company that owns a subsidiary) and horizontal relationships (e.g., accounts which are referred to/from other accounts.) Activities and tasks can be linked to individual accounts and to "related accounts" on whose behalf the action was, or is to be performed. In addition, users can roll up details of "child" accounts from the record of the "parent" account.
* Interactive Scripting Capabilities -- IMPACT CRM 3.5 permits the easy creation of on-screen, interactive "scripts" for users involved in telemarketing campaigns. These scripts serve as guides and can contain instructional text and user-defined input fields, which can be captured during outgoing or incoming calls. The scripts are available at the push of a button directly from the activity screen.
* Added Microsoft Outlook Integration Features -- IMPACT CRM 3.5 extends Outlook email integration capabilities, while adding task and appointment synchronization. For users of Microsoft Outlook, IMPACT CRM 3.5 will optionally use the MS Outlook email editor for composing emails, making available the full editing, spell check, formatting and other facilities that Outlook provides. The contents of sent email messages are automatically copied as activities in IMPACT CRM. In addition, incoming MS Outlook email messages along with any document attachments can be automatically copied into matching account records. Furthermore, when tasks and appointments are created in IMPACT CRM, an option "Write to Microsoft Outlook," is offered. When this option is engaged, IMPACT CRM will automatically create a copy of the same task or appointment in Microsoft Outlook.
* Extended Customer Service System -- IMPACT CRM 3.5 offers an improved customer service management system that enables organizations to track and proactively support customers through an unlimited number of user-defined service contracts. Among the newly configured features are: Service Queue Management; Enhanced routing system; Simplified escalation system; Automatic triggering of service processes; Inclusion of a roles table; Tracking of user-defined milestones; Embedded RMA tracking; Improved item tracking; Item and serial number searching; Support for multiple service contracts per customer; and User-defined billing parameters.
* Improved Security and System Administration Tools -- IMPACT CRM 3.5 features a new, rights-based security system that enables system administrators to restrict access to any high-level function, specific feature, as well as access to any IMPACT Encore records, down to the field-level. For system administration, a new "merge" tool allows users to merge multiple account records into a single record. Duplicate records are automatically deleted, and all history and transactions associated with the deleted records are moved automatically to the main record. Another new utility enables the transfer of any data to or from any IMPACT CRM database - not just account records. This tool facilitates the transfer of data from other contact managers or customer databases into IMPACT CRM without losing any history or detail. It also eases the copying of specific accounts between IMPACT CRM databases. In addition, IMPACT CRM now includes the newer North American Industry Classification System (NAICS) for classifying business types. Users have the option of loading the entire six-digit set of NAICS codes into the ADAPT business types table.
* Remote User Support -- IMPACT CRM 3.5 introduces a new replication tool to support remotely located employees, including field salespeople and service technicians. For users who do not have Internet access and need to run IMPACT CRM "unplugged" from any network, IMPACT eCRM includes bi-directional database synchronization with the main office. Bi-directional, entity-level synchronization is achieved using Microsoft SQL 2000's database replication feature. The synchronization process can occur via any type of network connection, including LAN, WAN or VPN (over the Internet).

IMPACT eCRM

IMPACT CRM 3.5 also introduces IMPACT eCRM, which enables online collaboration via a browser-based interface into the main CRM database. The Web-based solution is divided into three key "portals," each intended for a specific type of user. Syspro is releasing the portals in two phases. A Mobile Employee Portal and Web Marketing Portal are included in the initial IMPACT eCRM offering, while a Customer Service Portal will be offered in a subsequent release.

The Mobile Employee Portal empowers employees in the field to interface with the IMPACT CRM system in real-time via web-enabled PalmOS, Windows CE equipped mobile devices or standard Web browsers. This technology allows users to instantly access and modify calendars, appointments, tasks, sale opportunities, marketing campaigns and ultimately service tickets.

The Web Marketing Portal automates the web-based lead capture process and provides facilities for linking to existing web forms or creating new ones without the need to write a single line of HTML or Java Script code. When a prospect enters details on a web site, the information is automatically "pulled" into IMPACT eCRM, eliminating duplicate data entry and the need to manually export/import data from a Web server into the CRM database. In addition, the Marketing Portal utilizes IMPACT CRM's built-in PDL to automatically reply to prospective or customers or consumers who submit data via the Web.

A Customer Service Portal, which completes the IMPACT eCRM offering by enabling customer self-service from the Web, is scheduled for release in Q2, 2002 and will be offered free of charge to existing IMPACT CRM customers.

This concludes Part 1 of a two-part analysis of recent news from Tier 2 and Tier 3 ERP vendors.

SOURCE:
http://www.technologyevaluation.com/research/articles/mid-market-erp-vendors-doing-crm-scm-in-a-diy-fashion-part-1-recent-announcements-16638/

SouthWare Excellence Series: Making Excellence Easier Part Four: Application Analysis & Development Environment

2010-08-18T02:46:00.001-07:00

Detailed Application Analysis (continued)

The process of selecting mid-market accounting software usually starts with products that have achieved some name recognition and that's fine as long as the search does not end there. SouthWare Innovations (http://www.southware.com) has created in its Excellence Series a worthy competitor, serving a number of industries and offering users a surprising array of functionality, either directly as SouthWare applications or through one of their independent sales vendors (ISV).

Service Management Series

This is a complete service management system that is comprised of four specific applications to help companies manage service contracts, track service histories and required preventive maintenance for each piece of equipment under service contract, daily planning and dispatch, and service invoicing.

* Contract Management: Tracks each service contract, including earned and unearned income, contract pricing, route scheduling, meter usage, renewal tracking, contract proposal, and addendum generation.

* Service Orders: Handles both recurring and on-demand service calls, technician scheduling, complete time and cost tracking, and all dispatch functions. This application also interfaces with SouthWare's Return Authorization application to track returns for credit, repair, exchange, and warranty work for both items sold as well as customer-owned equipment.

* Equipment Servicing: Maintains equipment service information including service histories, metered usage, location, status, preventive maintenance schedules, parts lists for each piece of equipment under service, skills required for servicing, and extensive warranty information, including on-line customer access for warranty inquiries, service requests, equipment service history, and notification of equipment relocation.

* Service Invoicing: Invoicing application for service management series. Includes recurring and contract billing as well as actual service calls.

This is Part Four of a five-part note.

Part One detailed the company background and the product overview.

Part Two looked at what makes SouthWare different.

Part Three began the discussion of the applications and development environment.

Part Five will provide a competitive analysis and make user recommendations.

SouthWare NetLink

NetLink is a comprehensive tool for developing browser-based access to corporate data and processes for customers (including shopping carts), vendors, and employees. Live or off-line access is supported. The following are standard SouthWare functions.

* Order shopping cart is saved until order is submitted.

* Provides default pricing as well as customer-specific pricing.

* Catalog lookup. This is where SouthWare's use of catalog technology makes it very easy to set up a storefront.

* Automatically create customer for new sale.

* Easy add, change, or delete line items.

* Numerous options to show item pictures, notes, and discount from list price.

* Optionally supports SSL encryption for secure transmission of data.

Since NetLink is a framework for building an on-line business community, virtually anything that is possible within standard SouthWare can be accomplished with a browser. Sample supported requests include

* Sales orders submitted from customers and employees.

* Customer request for account balance and related details.

* Employee request for customer-related information.

* Customer requests for service (resulting in the creation of a service order).

* Requests for marketing materials.

* Changes of address or phone number.

* Request for invoice or purchase order details.

* Review of product history.

* Vendor review of open purchase orders.

* Review of shipped status of open sales orders.

* Review of product catalog and pricing.

* Dispatch status of open service calls.

* Internal review of current financial statements.

* Access to employee personnel information.

ImportMate II

This is an import application with powerful filtering and validation. This powerful utility can be used to

* Convert accounting data when switching to SouthWare from another business system.

* Regularly update inventory pricing from vendor-supplied electronic catalogs.

* Create payroll exception hour entries from data captured in an electronic time clock.

* Add new stock items from a vendor price guide.

* Create physical inventory transactions from an electronic handheld count device.

* Import—create or change—trading partner documents, such as orders and invoices.

* Import a file of the checks that cleared your bank to automatically mark them cleared in cash flow.

* Create A/R transactions from invoice data generated by a special customized billing system.

* Create A/P transactions from invoices stored in a database package.

* Change the product category code for a group of stock items.

* Create G/L journal transactions from data in a customized non-SouthWare package.

* Assign an A/R account number based on customer type.

COBOL Development Environment

There are many programming languages available today and many advocates for each language. Since the language is simply a tool to create a program that performs a task, the best language to use varies depending on the task you need done. Data communications, Internet web pages, database analysis, and business applications are all software, but they are very different in nature. The SouthWare Excellence Series was developed in 1984 using COBOL, an industry standard at the time. While some people say that COBOL has outlived its usefulness, SouthWare and many others counter by saying that COBOL offers a robust set of features such as:

* Proven Reliability: 80 percent of all business applications exist in COBOL. COBOL technology has been in use since businesses first started to use computers, and Acucobol is running mission-critical applications in thousands of businesses today. There is not a more proven business language in existence.

* Flexible and Secure File Handling: COBOL was invented to write business applications, and its language contains a rich set of powerful I/O commands. The integrity and security of data has always been a focus of COBOL applications. Acucobol also offers significant flexibility in the structure of data files. Their Vision file structure format optimizes performance. However, if users so choose, they can use other structures such as Oracle, Informix, Sybase, ODBC, C-ISAM, Btrieve, or MINISAM. Users can even mix multiple structures on the same system, and with the same version of object code.

* Fast Performance: COBOL was designed for fast and reliable data handling. Data manipulation and throughput continue to be strengths of the COBOL language.

* Portability: Acucobol object code is fully portable across over 600 platforms without recompiling. Acucobol users can run the same object program on any platform Acucobol supports, and Acucobol supports more environments than any other language.

* Ability to Add New Features without Rewriting: Acucobol has implemented new features in its language by adding new optional syntax. This allows developers to utilize new features as they wish without being forced to rewrite code that is working. This is a critical element of SouthWare's S.M.A.R.T. methodology.

* Ease of Program Maintenance: COBOL is an easy language to develop in, and maintenance is simplified because its English-like syntax results in "self-documenting" source code. Any language can result in well-documented programs if the programmer takes the time to do it, but COBOL enforces this better than other languages.

* Scalability: COBOL programs can easily be scaled up or down and are currently performing vital work on mainframes, workstations, minicomputers, and micros.

* GUI Support: Acucorp has developed logical extensions to the ANSI COBOL syntax that allow developers to have access to the expected set of graphical interface tools while remaining in COBOL. This separates Acucorp from other COBOL vendors and results in a graphical language with the capabilities of other graphical languages. SouthWare uses these options in the various styles provided in the Excellence Series so users can utilize GUI as they like.

* Standards: There have been ANSI standards for COBOL since 1968. Every six to ten years these standards are extended to meet the requirements of the current operating environment. This type of standardization is not found in some newer languages and results in competing versions that are not necessarily compatible. The presence of COBOL standards helps ensure that business software written in COBOL conforms to internationally accepted minimums to help protect your investment in your system.

* Integration with Other Languages: When a business application needs to perform a task that is not best suited to COBOL, Acucobol lets users call out to programs written in other languages. This allows users to utilize the best language for a particular task.

* Business Process Orientation: COBOL is a procedural language that can readily duplicate the ordered procedures used by businesses.

* Applets or Web Based Computing: As the use of the Web by businesses increases in the future, users may need to download applications that would then run in their browser. Acucorp has provided a Web Browser Plug-In that provides this capability for programs written in Acucobol.

* Accuracy: COBOL defines the accuracy required during a calculation by using data types like COMPUTATIONAL-3. This guarantees that the same code and data will produce the same results on different systems. In other languages, such as Java, precision during calculation is not defined. This means that a program using floating point arithmetic can produce different answers on different systems.

SOURCE:
http://www.technologyevaluation.com/research/articles/southware-excellence-series-making-excellence-easier-part-four-application-analysis-development-environment-17713/

Analyzing MAPICS’ Further Steps After Frontstep

2010-08-18T02:45:00.001-07:00

Event Summary

For the last several months, MAPICS, Inc. (NASDAQ: MAPX), possibly the largest global provider of extended enterprise applications for solving the challenges of discrete manufacturers following the acquisition of its former competitor Frontstep (see MAPICS To Leap Forward In A Frontstep Way), has shown both the signs of significant changes but also a persistence of a number of its historically recognizable invariant tenets of operation. The former steadfast IBM iSeries (formerly IBM AS/400)-based ERP supplier to mid-market manufacturing companies, MAPICS, has since indeed become quite a larger vendor and with a wider choice of products, having recently acquired a Microsoft .NET-based competitor. However, as the customers from both camps have been uncertain of their provider's strategy, given that bigger size brings about the need to rationalize multiple products in the same marketplace, after a few months period of buried heads and brainstorming sessions, MAPICS has lately been engaged in explaining its rationale, as to set many customers' minds at ease.

At the same time, the vendor has continued with a painstaking process of producing a strategy going forward that would pragmatically blend the company's traditional values and success factors with new approaches to stay in tune with market trends. The process had started well before the Frontstep's acquisition, during which time in early 2002 the company was energized with a new functional structure and an expanded executive management team. During the same period of time, MAPICS had evolved its marketing and revamped its solutions to focus on business issues and specific discrete manufacturing verticals and to thereby appeal to existing and prospective customers. Pre-Frontstep MAPICS, indeed, had not been sitting still, as the company had made every effort to avert the relegation to legacy Atlantis' as often speculated by some, and it has therefore lately rebuilt its technologies, reviewed its implementation partners, and thus shored up a notable customer base, and retained profitability and security while doing so (see MAPICS Moving On Pragmatically).

Therefore, MAPICS has never departed from its conservative approach of delivering practical innovations and bulletproof applications for its customers, and from its proverbial fiscal discipline. To that end, on July 31, MAPICS reported GAAP (Generally Accepted Accounting Practice) net income for its third fiscal quarter ended June 30, 2003, of $3.0 million, including an income tax benefit and restructuring costs, compared with GAAP net income of $7.5 million, for the same period in fiscal 2002. More importantly, this was the first quarter that included Frontstep revenues and costs, in which case the return to profitability and reduced and stabilized expenses bear even higher magnitude. Moreover, total revenue for Q3 2003 increased by 51% to $47.1 million versus $31.3 million a year ago, while license revenue was $13.6 million, up 44% from $9.4 million in Q3 2002 (see Figure 1). This was in a sharp contrast to previous MAPICS' quarterly reports featuring flat or often depressed revenues (see Figure 2).

Figure 1

Figure 2

* Primarily represents a goodwill write down of the PivotPoint acquisition

While the majority of revenue continues to come from the loyal existing customers, the vendor has processed nearly 400 license transaction during the quarter, which is threefold the average volume for MAPICS without Frontstep over its last four quarters. Nearly 60 new MAPICS SyteLine (formerly Frontstep SyteLine) customers have reportedly contributed $2.8 million in license revenues. The company still has a comfortable cash amount of nearly $22.6 million, and maintains its acquisitive stance.

The Frontstep acquisition has obviously provided MAPICS with a boost in terms of product choice, having solutions on both leading platforms -- Microsoft and IBM. With MAPICS SyteLine 7, the vendor now boasts a notable application built on a .NET architecture. However, the loyal AS/400 install base should rest assured of MAPICS' continued support for the platform. The big news on the MAPICS ERP for iSeries product side is that the version 7.3, which is slated for December, will feature Double Byte support, and expanded Java 2 Enterprise Edition (J2EE)-based client technology.

Other developments detailed in this note are:

* MAPICS Field Service & Support
* A global partnership with Systems Union
* Primus Knowledge Solution Results (to be covered in Part Two)
* Certified Partner Program (to be covered in Part Two)
* Pacejet Logistics, Inc is Certified Partner (to be covered in Part Two)
* A revised sales strategy (to be covered in Part Two)

This is Part One of a five-part note.

Part Two continues to detail recent events.

Parts Three and Four will discuss the Market Impact.

Part Five will discuss challenges and user recommendations.

MAPICS Field Service & Support

Further proving its commitment to delivery of enhancements, in August, MAPICS announced the general availability of its new, integrated MAPICS Field Service & Support solution, aimed at helping manufacturers better manage after-market services personnel, materials, and information, as well as offer customers post-sale support that increases customer loyalty and retention. The new field service solution relies on critical business information resident in MAPICS ERP for iSeries to ensure that users have access to the single master source for order, product and customer information. Integrated to the MAPICS ERP for iSeries solution, Field Service & Support users should benefit from the current business processes associated with materials, resources, contracts, and financial information. The MAPICS Field Service & Support solution consolidates the management of service contracts, warranty claims, task assignment, technician scheduling, Return Material Authorizations (RMA), and service variance analysis.

Hence, this new offering extends the capabilities of the core MAPICS application suite, to encompass manufactured products throughout their life. MAPICS' new Field Service & Support solution creates a comprehensive after-sales service infrastructure to handle a number of service and customer management tasks with inherent benefits, including:

* Automating the administration of service contracts and warranty claims.

* Tracking time and materials contracts for equipment repair not under warranty or service contracts, providing more accurate data for invoicing.

* Integrating service-related material management, financial management, and billing processes, translating into faster service to the customer and maximized uptime on their equipment as well as better-cost control and analysis capabilities for the service provider.

* Providing integrated incident tracking, tech support, and RMA management, improving service efficiency for the customer and at the same time providing data to manufacturing engineering to drive product and process quality improvements.

* Initiating easy remote access capabilities to manage work order information flow to and from remote work locations, speeding repairs.

* Consolidating management of the services resources; people, tooling and parts, to speed the completion of work in the field.

Partnership with Systems Union

As for bolstering the other part of its bifurcated offering going forward, in June, MAPICS announced a global partnership with Systems Union, provider of SunSystems, one of the leading international financial and business management solutions. The partnership will enable MAPICS to leverage SunSystems' infrastructure to integrate exclusively with the MAPICS SyteLine ERP solution, which should facilitate increasing global access to valuable financial information. SunSystems is the core product range of the Systems Union Group plc, which is quoted on the Alternative Investment Market (AIM) of the London Stock Exchange. The company is one of the largest business software houses in the world, with 21 offices worldwide and some 200 Channel Partners in 76 countries. Products within the SunSystems range are available in 30 languages with over 18,000 customer sites, and 250,000 customer seats in some 194 countries. The software solutions are used extensively by multinationals, whose offices worldwide require an international product with global support infrastructure.

MAPICS and Systems Union plan to integrate their technologies to deliver enhanced global financial management solutions for manufacturers in industries such as industrial equipment, electronics, fabricated metals, automotive, and furniture & fixtures. The integrated enterprise offering this partnership provides should allow MAPICS to better address the ever-increasing financial issues that large multi-national manufacturers face, while continuing to solve their complex manufacturing requirements.

Financial data flow throughout an organization is the livelihood of a company's success and has a direct effect on the bottom line. Large, multi-site and multi-national enterprises that capture financial data using SunSystems have reportedly been better able to make more informed decisions based on immediate access to information. Thus, integrating with SunSytems should allow MAPICS to add commonality and higher value to financial management processes such as accounting, corporate collections, invoicing, reporting and budget management across a manufacturers global operation, through the use of a single tightly integrated solution.

SOURCE:
http://www.technologyevaluation.com/research/articles/analyzing-mapics-further-steps-after-frontstep-17081/

Technology Hardware Maintenance-Acquiring and Managing Cost Effective Service

2010-08-18T02:42:00.000-07:00

Introduction

Who likes getting their car serviced? No one does, but the need for dependable transportation requires us to maintain our cars. A similar situation applies to maintaining a portfolio of technology hardware. The business depends on its reliability, so we must maintain it. This article focuses on how an organization acquires and manages that maintenance service cost-effectively.

Identify the Enterprise Portfolio

The first step in developing your maintenance options is to gather data on your existing hardware portfolio and how it is maintained. This should be done across the entire enterprise and include all the technology hardware.

A useful approach is to consider a simple framework for organizing your portfolio data. That framework can vary based on an organization's operations, but a generic framework is outlined below:

* Data Center Environment

* Distributed Environment

* Print Shop

* Telecommunications

Organizations often view their hardware maintenance picture in stovepipe fashion. Different managers may own the operations of the different environments, so maintenance views are often of just a specific environment. This presents two problems:

* No one in the organization gets a comprehensive picture of total maintenance costs.

* Opportunities to leverage or consolidate service providers are not considered.

An organization can avoid these problems by creating a high-level enterprise view of their hardware portfolio maintenance. That view consists of a simple table that presents several pieces of high level data that provide an effective summary of the maintenance picture.

Table 1.
Portfolio Data

Data Center

Distributed

Print Shop

Desktop

Telecom
Inventory
Maintenance Provider(s)
Tenure of Provider(s)
Annual Contract Value
Annual T & M Cost (if any)
Contract Term
Contract Exp. Date
Contract Terms & Conditions
Service Levels

Most of the table's data items are self explanatory, but a few warrant description.

The inventory data in this view would consist of some high level numbers such as the number of devices (e.g., # of PCs, # of RS6000s) or capacity (e.g., 2 terabytes of DASD). However, it is essential that detailed inventories exist behind those high level numbers. The operational manager of each environment should have a dynamic inventory that reflects the ongoing impact of procurements and retirements. A complete and accurate inventory will position the organization to get the best pricing from maintenance providers.

The contract terms and conditions data element appears on the table because the organization should document whether it has consistent terms and conditions across all of its maintenance service contracts. Best practices advise organizations to develop a standard maintenance service contract and use it as the basis for all maintenance service transactions. At a minimum, this data element should document whether the maintenance contracts reflect the use of the organization's standard contract or the use of a vendor contract.

Analyze the Enterprise Portfolio

The next step is to analyze your current maintenance portfolio. That analysis should occur at an enterprise level. That perspective should consider the following questions:

* How many maintenance providers do we currently have?

If an organization hasn't been reviewing its maintenance picture from an enterprise perspective, it tends to accumulate a variety of maintenance providers that rivals their variety of equipment. Several large maintenance providers will service a wide variety of equipment, and will offer more competitive pricing if presented with a larger portion of the total maintenance business.

You should also consider consolidating portions of your maintenance business under a single provider regardless of who actually delivers the maintenance service. In this scenario the single source provider manages the service delivery, but may source some service to third parties. The advantages to the organization are a single point of contact, consistent service delivery, and more competitive pricing due to the larger volume.

* Does the same maintenance provider service different portions of our portfolio?

The service provider market is very competitive. Consider putting your significant service contracts out to bid on a regular basis. In most cases, annual contract bidding on significant contracts is too disruptive to the operations of both the service provider and the client. However, bidding out contracts every two to three years ensures competition and keeps the organization abreast of changes in the marketplace.

Develop Service Strategies

Based on the analysis of its current maintenance picture, the organization should determine what strategies to pursue. The enterprise analysis could result in strategies that generate cost reductions that are realized within a short time frame. These strategies could include the following:

* Consolidation of separate maintenance service contracts into a single, larger contract.

* Revision of existing service levels.

* Removing non-critical equipment from contract maintenance.

Implement Service Strategies

As the organization develops service strategies it should also begin to outline an implementation plan. In most instances, the most significant implementation activity accompanies the consolidation strategy. The major part of this activity encompasses the process of identifying, evaluating and selecting a service provider.

That process consists of four major steps:

* Developing the Request for Proposal (RFP).

* Developing the Evaluation/Selection Decision Matrix.

* Executing the RFP process.

* Negotiating the transaction.

Developing the Request for Proposal (RFP)
Successful development of a hardware maintenance RFP depends on two major tasks: gathering a complete and accurate hardware inventory and clearly defining your required service levels. As stated earlier, the inventory positions service providers to provide their best pricing. Complete and accurate inventory data should minimize the contingency buffer the service providers build into their pricing.

Clearly defining your required service levels is an obvious step, but often poorly executed. The requirements should be presented in a clear, succinct fashion and the service providers should respond in a similar fashion. The best way to ensure this is to present your requirements in a tabular form and provide a small number of standard response choices. A three option choice (e.g., Fully Meet, Partially Meet, Can't Meet) usually will suffice. You should also include space for the respondent to provide a detailed response, but this format will usually limit those to the requirements with a 'Partially Meet' response. The objective is to avoid asking for and getting long narrative responses that may waste time and be unclear. The added benefit of this approach is that once you move to the contract negotiation stage, you can simply make this table a contract appendix item.

If your organization has a standard maintenance service contract, it is useful to include it in the RFP and require the respondents to provide a marked up contract with suggested changes. This will complete a step that you will otherwise have to execute in the negotiation phase.

SOURCE:
http://www.technologyevaluation.com/research/articles/technology-hardware-maintenance-acquiring-and-managing-cost-effective-service-16177/

Deltek Remains the Master of Its Selected Few Domains Part Four: Deltek's Differentiators

2010-08-05T11:30:00.002-07:00

Deltek Systems, Inc. (www.deltek.com ), the leading provider of enterprise software and solutions for project-based businesses and professional services firms, remains committed to a potentially unique, high level of investment in product development as compared to other software companies. According to Kenneth E. deLaski, Deltek President and CEO, the average public software company only invests approximately 14.5 percent of its revenue in product development and, at 24 percent, Deltek customers should take this as a strong sign that the vendor is deeply committed to continued investment and improvement of each of its product suites for project businesses and professional services firms. Deltek also announced that, once again, it achieved strong profitability and cash flow for fiscal 2002, which reportedly marked the 18th consecutive year of profitability for the company. In addition, the company added more than 300 new customers during the year in a variety of industries including aerospace, construction, engineering, IT services, consulting, architecture, and project-based manufacturing.
Deltek aggressively pursued two major product development initiatives in 2001:
1. Web-based development of the Costpoint application suite for advanced project-oriented businesses
2. Development of a new, web-based PSA product suite for professional services firms
In addition, Deltek also developed and introduced several new application modules during 2001 and has since continued to strongly maintain and enhance its broad array of 125 existing products.
As a result, the company's product line has expanded from applications for managing the core back-office processes to the front-office and e-business of professional services and other project-based companies, many of which provide products and services under American Federal Government contracts. Deltek has also grown to nearly 700 employees in eight offices worldwide and nearly $100 million (USD) in revenues and has also contracted over 8,000 customers since its inception. Moreover, with its two decades of experience, expertise and an exceptional track record in designing, developing and providing project and financial accounting systems to professional services firms and other project-based organizations, Deltek touts a reputation for delivering functionality-rich applications and highly-responsive customer service and technical support, as seen with its 98 percent customer retention record.
Deltek Differentiators
As already mentioned, since its inception, Deltek has focused on addressing the unique business needs of project-oriented organizations, resulting in a competitive advantage relative to both larger ERP vendors that offer general-purpose enterprise software that requires heavy customization, and small off-the-shelf project-management solutions that are soon outgrown by the user company. Deltek solutions have always been very focused on fulfilling the needs of its chosen target customer—the project manager, who is responsible for sharing and tracking the revenue, expense, and profitability of a project. Conversely, most enterprise-wide business systems sold by other software vendors are general purpose in design and, without significant customization, do not address many of the unique requirements of businesses engaged primarily in providing products and services under project-specific contracts and engagements.
For a detailed comparison of project-oriented ERP vs. generic GL-oriented systems see "Project-Oriented ERP vs. Generic GL-Oriented ERP/Accounting Systems".
Project-oriented organizations have many project-specific business and accounting requirements including the need to track costs and profitability on a project-by-project basis; provide timely project information to managers and customers; and, submit accurate and detailed bills or invoices. Often this must all be done in compliance with complex industry-specific and regulatory requirements. As a result, Deltek rightfully says that all its applications have been made with projects rather than general ledger as their core.
Not many enterprise products will support the following project-based processes: job costing; managing the sub-contactor; financial reporting; managing the workforce; process time and expense; winning new business; purchasing goods and services; managing the project; and, build to order. If these high-level processes sound rudimentary, then breaking down their processes will reveal their true intricacies. The need for detail is seen in such processes as employee time, billing rates, budgeting, collections, or project proposals, all which are only supported by a few vendors besides Deltek. For example, the steps involved in the support for the build to order process reveals Deltek's solid core ERP materials management functionality: customer demand; bills of materials (BOM)/routings; engineering change notice (ECN); materials requirement planning (MRP); capacity planning; purchase requisition/order; receiving and quality assurance; fill inventory; issue manufacturing orders; final sub-assembly and finished goods; customer delivery and billing; revenue recognition, and PSR.
Furthermore, many project-oriented organizations provide products and services under government contracts, and project accounting often requires the use of sophisticated methodologies for allocating and computing project costs and revenues. There are many different types of contracts the American government uses and within each of those there are more than dozens of variations, whereby each variation will drive its own type of billings, revenue recognition and requirements for reporting back to the government customer. Because of an expected increase in defense and national security spending, Federal government contract spending and activity are also expected to increase in the next several years (see Fed Gives ERP A Shot In The Arm).
For the past two decades, Deltek has been a recognized leader in providing systems for firms that do business with the federal government. Its solutions allow customers to maintain their accounting records according to guidelines set by American government oversight bodies such as the Defense Contract Audit Agency (DCAA); Federal Accounting Regulations (FAR); and, Cost Account Standards (CAS). The government requires its contractors to collect and allocate costs in certain ways; for example, according to DCAA rules, labor costs must be recorded daily. Also, a contractor is required to keep track of several contracts simultaneously, to meet the rules for different types of contracts and to account for a number of indirect costs. Thus, of 8,000 Deltek customers, about 2,000 are federal contractors that account for more than 50 percent of the vendor's revenue. Nearly 4,000 additional customers are contractors working on state and local deals, while the remaining customers are from the commercial sector that Deltek has started to target quite later.
According to the Small Business Administration Pro-NET sourcing service database, there are tens of thousands of small and minority-owned companies doing business with the federal government. With the new emphasis on improving homeland security and expanding anti-terrorism operations around the world, many of these firms will likely experience a significantly greater demand for their services and rapid growth over the next several years.
Deltek in the PSA Market
Deltek's focus on projects also means it has the ability to provide a comprehensive offering for professional service automation (PSA), in a market which is still evolving and has fragmented offerings from a number of point solutions providers that are typically financially unsound. As a matter of fact, a vast majority of pure PSA vendors are start-up weaklings offering only some areas from the entire PSA (e.g., the bid-to-bill life cycle). These areas include opportunity and lead tracking/management; proposal automation; resource planning and forecasting; recruiting and partnering; CRM; project planning; budgeting and management; employee time and expense entry and processing; project and financial accounting; billing and receivables; HR management; document and knowledge management; BI/analytics; workflow management; collaboration management; partner relationship management (PRM); portfolio management; practice management; service sourcing; and, so on.
Thus, the likes of Deltek should benefit from the expanded use of project-oriented and professional service business application software systems due to economic trends. Service organizations traditionally have utilized project accounting more than manufacturing firms because they need to customize their services for each client and properly allocate the associated revenues and costs. Therefore, as the shift from a manufacturing-based economy to a service-based economy continues, the market for project-oriented organizations is expanding. Furthermore, the trend towards outsourcing an increasing range of activities broadens the market for project-oriented organizations as both customers and vendors need to track the costs associated with their projects.
Like other businesses, project-oriented and professional services organizations are also demanding solutions that allow them to combine their business software applications into a single integrated, enterprise-wide system. Deltek has long been providing the above-mentioned individual pieces of the PSA puzzle, which have recently been integrated into a much more cohesive whole.
For a detailed discuss of the PSA Market, see "PSA — Still An Evolving Market".
To that end, Deltek has developed a family of complementary products with a broad-based functionality that is usable in a variety of technology environments. These products are offered to larger, more sophisticated project-oriented organizations in the aforemented industries. Time is of essence for any business that bills for its services rather than sells a physical product, but it can be particularly tricky for design firms that may need to bill at different rates depending on things such as project phase, task, client type, or escalation clause. At the same time, the industry is quite fragmented with its legions of specialist contractors, and long tradition of technophobia. The vendor that can satisfy the requirements of the fastidious A/E/C sector stands the chance of selling its technology to other project-oriented businesses. The strong capabilities of the collection of project-based applications (such as the "project view" of opportunities within its CRM module, or over 15 overtime cost allocation options within its financial and project management module) have resulted in 70 percent of the 500 largest, most influential firms in the American architecture, engineering, construction (A/E/C) and design services industries to leverage Deltek's business software, solutions and consulting for automating essential front- and back-office business functions. Additionally, more than 40 percent of these firms use Deltek Front Office applications, and more than 55 percent using Deltek Back Office applications.
These companies, as well as accounting practices, law offices and other professional service firms can also benefit from an emerging CRM derivative known as client relationship management, which Deltek espouses within its marketing and proposal automation product. This derivative should help these firms track client relationships in a more sophisticated manner than referral or word-of-mouth, which were appropriate during their start-up phase
SOURCE:http://www.technologyevaluation.com/research/articles/deltek-remains-the-master-of-its-selected-few-domains-part-four-deltek-s-differentiators-17153/

The Exacting Needs of Metal Service Centers

2010-08-05T11:30:00.001-07:00

There is one market where the vast majority of general enterprise resource planning (ERP) products show a number of "fatal flaws". Metal services centers, which perform operations like cutting, slitting, painting, galvanizing, anodizing, etc., and their related converting operations, which may involve paper, textiles, plastics, etc., suffer from an absence of "must have" capabilities. Such omissions impede an enterprise's operation—often resulting in complete failure. See Find the Software's Fatal Flaws to Avoid Failure for more information.
This article will highlight the requirements and fatal flaws that these prospective enterprise applications users face.
With limited knowledge of cutting and surface treatment operations, those who are not familiar with the metal centers' modus operandi, might quickly conclude that the industry's requirements are rather basic. However, the unique nature of metal products means that inventory information is critical, and only those experienced with the operations of metal service centers understand that their unique business requirements demand distinct software that can concurrently handle and track several inventory item attributes or specifications, such as heat, dimension (width, length, gauge), form, diameter, shape, grade, grain direction/texture, density, and more. The system must also be able to record and evaluate detailed information on chemical, metallurgical, and physical properties. Tracking inventory up and down the supply chain, including lot, heat, tag, and certification is also vital.
Another absolute must is that metal processors and service centers need to be able to trace the ancestry and genealogy of an inventory tag from its purchase order (PO) receipt to the customer's delivery ticket. For such an enterprise, it is invaluable to be able to enter a master tag number or heat number for a coil or a bundle of sheets, pipes, or tubes, and see every single piece produced from it, along with the processes that were performed, at what cost, and the details about who purchased the piece, when, and for how much. Information on how much profit (or loss) was generated from that order, part, or tag is also vital.
Products made at these sites include a wide variety of metal sheets, pipes, tubes, and wires that vary in terms of grade, size, and chemical composition. Moreover, up to 90 percent of customer ordering patterns can vary considerably. Thus, software used by a metal process center must allow the user enterprise to efficiently manage and control inventory, effectively plan production, perform the necessary quality control, and trace the process all the way down to the steel heat level used to meet particular national standard grades for items such as mild/carbon steel, stainless steel, aluminum alloys, etc.
These companies also require software that can quickly configure quotes and orders based upon exacting customer specifications. Paramount to proper inventory management is that the system must also be able to recognize that an enterprise's inventory is multidimensional and multifaceted. When a user company offers products in different dimensions such as length, width, thickness, diameter, etc., the software's formula engine should be able to ensure the validity of the configured items, and deliver convenient cost-plus pricing capabilities that allow users to associate profit margins with materials and labor, or the overhead costs for configured items.
Further, each customer usually wants to be invoiced in their preferred unit of measure (UOM) such as pieces, pounds, hundred weight, lot, kilo, etc. Consequently, the software should be able to convert these based on the material's characteristics including specific weight or density.
Additionally, customers will often have specific labeling and packaging requirements and materials handling needs. Often, they will require detailed certification or material, or mill test reports (MTR), and if the selected software solution cannot handle these type of inventory and document management requirements seamlessly, the hidden administrative costs will quickly erode the enterprise's profit margin.
Another feature that metal service centers require is the ability to identify the ideal raw materials needed to fulfill any given customer order. To that end, a so-called parsed item lookup feature must permit effective item searches down to the cut piece level, efficiently display attributes to users, and define characteristics such as gauge, width, length, heat number, schedule, thickness, internal diameter (ID) and outer diameter (OD). It should also have advanced sorting and filtering capabilities, and be able to identify an exact piece of inventory within seconds.
When the stock on hand cannot satisfy the requirements of an order, users must then be able to quickly view what material is on order and see when it will arrive, and what its specifications and attributes are. In case the enterprise does not stock the item the customer is requesting, or it has never purchased the item before, the resulting buyout must be handled quickly without disrupting the normal order flow. These buyouts might have to be drop-shipped directly from the supplier to the end customer or to a sub-contractor if outside the value-added services being performed.
How Metal Exacting Needs Relate to General Enterprise Resource Planning Solutions
Some may argue that general enterprise resource planning (ERP) solutions offer a method of determining inventory availability; however, only a selected few allow user-definable attributes to be associated and validated for each item and each piece of stock within that item's inventory, and can do so without encumbering the master item classification.
The product line of some customers might consist of a few thousand products that fall in two categories: 1) standard, and 2) non-standard, sub-assemblies (products). For example, the standard material may be an aluminum coil ranging from 42 to 60 inches in width, weighing between 2,000 and 10,000 pounds. When shipped to a customer as a finished good, the coil has to be slit, cleaned, etched, anodized, dyed, and sealed. While standard products are manufactured and placed into the inventory to meet forecasted sales demands and long term customer contracts, non-standard sub-assemblies are more numerous and are fabricated only when the customer's order is received. Such orders are not typically placed in inventory, and are instead shipped directly to the customer when the fabrication process is complete.
Each product, whether standard or not, has to be sized, packaged, and coated to customer specifications at the ship-to or line-item level. These specifications can change from one order to the next, and are communicated to the production floor, so the appropriate action and documentation can take place. Many times, the completion of specific activities must be certified to the customer. The supplier (metal center) has to accommodate customer specifications without requiring a new bill of material (BOM) or routing for each new customer configuration. Consequently, having historical cost and pricing data available for instant retrieval during the quoting and order entry process is critical to servicing customers over the telephone. Often, a faster data capturing green-screen user interface (UI) is preferable to a "snazzy", time consuming, and memory intensive rich graphical user interfaces (GUI).
As a matter of fact, BOMs are often not required for customized customer orders because the starting item and the finished item are the same item in the customer's mind. As a result, the software system used by a metal service center must be able to follow this logic. It must be flexible and accommodate how a user assigns numbers to items, such as a mild steel grade, a mild steel grade standard size sheet, or a mild steel grade standard size sheet that is an inch thick. Furthermore, end item variants must be handled under the same item number, but with a multiplicity of variations listed as attributes.
Customarily, a generic ERP system cannot make such accommodations. It requires each order (or even worse, each order line item) to be treated as a new product or item number, creating redundant work, and item nomenclature glut and delays, to the dismay of customers and an enterprise's employees. As a result, the enterprise's sales force or shipping personnel has to plow through a number of illogical item numbers, where several redundant item numbers referring to the same physical product are likely to appear.
Therefore, astute metal center software must also be able to optimize cutting operations and minimizes waste. A so-called material selection optimizer feature should come in handy to pre-filter inventory whose dimensions, and chemical or physical properties do not match the order specifications. The current order can then be nested with other open orders, even if they are for different customers. The product can then be produced from the same inventory result set. Doing this allows an optimal cutting layout to be determined and minimizes remnants. Additionally, the system should be able to optimize the usefulness of the remnant inventory by determining if the scrap and waste can be further used. This must also be done in terms of multiple UOMs, heat/lot/serial tracking, and MTRs. The sales staff must be able to see when and what size of remnant will be created, and this needs to be done under the same item number (but with different size attributes).
Traditional manufacturing resource planning (MRP) systems only look at the quantity on hand, the demand quantity, and order quantity, and are able to advise users whether there is enough tonnage to meet customer demand. But, these systems cannot discern whether the available total tonnage on stock meets the customer's dimensional specifications.
A specialized MRP module for metal centers must be able to recognize when current demand cannot be satisfied by the in-stock inventory due to dimensional issues and it must include unsatisfied demand in its reorder messages. Peculiar inventory information, and how it is used to optimize operations, is often "a showstopper" for most general ERP solution providers. For example, when a company from the metals industry approaches a mainstream, ERP provider and asks for solutions to manage down costing of drops and remnants, it is often met with a blank stare, which coverts into a less than 50 percent out-of-the-box functional fit, and a horrendous scope resulting from system customizations.
Other Requirements
Also, shop floor data collection requires a simple, single point of entry for data capture, and astute ERP products should be able to support the following metals industry capabilities:
1. Provide the exact location, heat, size, and quantity of material to pull from inventory.
2. Display the finished product, scrap, and remnants they are expected to produce.
3. Allow an employee to record actual products produced and to record the time expended to produce them.
Although these three capabilities might be generally supported many generic ERP products, to help communicate accurate delivery dates (and keep customers happy) the system must deliver up-to-minute information about available inventory, in-transit inventory, replenishment orders, manufacturing schedules, and lead times, all while taking the item's attributes into consideration. Distribution solutions for shipping and receiving, should allow users to define carriers, shipment methods, freight rates, and customer routings. Moreover, these solutions should also easily interface with common third-party shipping and manifest software (e.g., Kewill's Clippership). Additionally, radio frequency (RF) and bar code functionality should provide the following transactions to help ease data collection: inventory move within a facility, print location labels, shipping, inventory move, physical inventory, and cycle counting.
One vendor that does address the needs of metal serving centers is Verticent, which has also developed alliances and partnerships with complementary solution providers. Verticent also recognizes some metal centers' need for yard management systems (YMS) and truck route scheduling and optimization capabilities, and it is currently brainstorming whether to develop these internally or to opt for an alliance.
To recap, general ERP providers, who likely have a solid product and are viable companies, typically do not have the functionality to meet the dimensional inventory, and chemical and physical property requirements that are vital to the metal center services industry. On the other hand, several metals industry specific solutions providers, such as Enmark Systems, Invera, Compusource Corporation, STEELMAN Software, Axis Computer Systems and to a degree SYSPRO, and SoftBrands' evolution or Exact Software's JobBOSS products may certainly address some of the complexities of the industry.
SOURCE:http://www.technologyevaluation.com/research/articles/the-exacting-needs-of-metal-service-centers-18289/

Unifying Global Trade Management: Challenges and User Recommendations

2010-08-05T11:29:00.001-07:00

Complex Requirements Drive Future Development
Enterprises with global operations can no longer manage their transportation needs with generic sourcing and e-procurement applications. They need more astute systems to address their evermore complex requirements. The functionality of their supply chain management (SCM) systems will also need continual enhancements to manage supply chain business relationships, transactions, and communication.
Undeniably, while supply chain outsourcing is exploding because of offshore manufacturing, subcontracted manufacturing, third-party logistics, sadly, too many companies pursue adverse "follow suit" strategies because of poor and incomplete information. Today, logistics costs across industries average double-digit percentages of revenues. Multiple factors, such as rising fuel costs, driver shortages, trade policies, border, and security measures will continue to drive logistics costs higher. Still, few companies adequately factor in the cost of global logistics in their outsourcing decisions. Decisions are based almost exclusively on per-unit nominal manufacturing costs and irresponsibly, do not consider deeper logistics cost data.
Therefore, in addition to global trade management (GTM) solutions, companies should consider solutions that support strategic and tactical decision-making, such as logistics activity-based costing, which is offered by companies like Acorn Systems; strategic supply network design from i2, SSA Global, Insight, LogicTools, Manugistics, Oracle etc.; and optimized strategic sourcing, as offered by MindFlow or TradeStone.
The situation might become even more jumbled with the recent US Federal Maritime Commission's major ruling, that allows Non Vessel-Owning Common Carriers (NVOCC) to negotiate private contracts with their customers. The ruling, which effectively deregulates the US maritime industry, attempts to level the playing field between shipping lines and the freight-forwarding community, and thus ends the six-year advantage that vessel-owning shipping lines had over the non vessel-owning ones. In other words, shippers with less freight than large corporations, which, for several years have privately contracted with ocean line companies, will now the same opportunity.
Whereas the passing of the US Ocean Shipping Reform Act (OSRA) in 1996 freed ocean lines to create private contracts with independent customers, now NVOCCs will have basically the same power. However, this freedom comes at the cost of many planning and execution alternatives for shippers. Moreover, emphasizes the need for more complex contract information recordkeeping for NVOCCs and executing against such contracts.
One might note that a similar move was made by the US government in the early 1980s with the deregulation of the trucking industry. This resulted in a new enterprise applications category—transportation management systems (TMS)—that has helped optimize decisions for trucking services. The NVOCC ruling should help smaller shippers, as well as introduce more options. Consequently, one should therefore expect similar software solutions for the planning and management of ocean freight alternatives to emerge. Such a solution will likely resemble a TMS solution and will include ocean and sea-based transportation. As a result, companies that continue to rely on people-intensive, paper-based processes may end up walking away from potential savings if they do not switch.
Such technology should definitely help shippers navigate the maze of alternatives between providers, rates, and service, and broader logistics resource management (LRM) systems required for NVOCCs to manage the new multitude of private contracts. There will also be a need for multimodal transport procurement optimization, rate and service databases, sailing schedules, and shipment management and settlement functions, as shippers analyze and predict freight demand and negotiate contracts with their carriers that keep rate increases to a minimum. It will also have to secure capacity in the right lanes as best as possible, especially for critical seasons. These systems should allow shippers to create and issue standardized bids, optimize across multiple carriers' responses, convert the results into digitized on-line contracts, and create detailed plans that weigh price, service, and capacity commitment levels across the network of a shipper's select carriers. Currently, vendors that come close to fulfilling these tasks include the likes of GT Nexus and Management Dynamics.
However, just as with any SCM application, the benefits of an optimized plan cannot be realized unless an execution system is put in place to monitor and ensure daily compliance with negotiated contracts and commitments (see SCP and SCE Need to Collaborate for Better Fulfillment). Consequently, these multimodal TMS systems will have to monitor both sides of the contract, as either the shipper or the carrier may not live up to their commitments. That is to say, shippers must follow the plan, make sure their forwarders are following it, and continuously track the actual versus planned situation to ensure commitments are being met and the desired ocean freight savings are being realized. There appears to be more options for vendors than there are in the planning phase, with solutions offerings from vendors the likes G-Log, i2, TradeBeam, and Descartes.
Shippers Balk at One System Fits All
Currently, it is clear that TradeBeam is far from being close to espousing an LRM system, given its forays to deliver some intrinsic GTM capabilities, such as foreign exchange, transfer pricing, contract management, compliance audit, or inter-company orders. On the other hand, some point solutions might still have exceptional functional traits, that appeal to customers inclined to purchasing software in a piecemeal manner due to financial constraints.
Some believe that there are too many silos of technology for any vendor to handle every aspect of global logistics, and many companies may decide on separate packages for trade compliance, TMS, forecasting, or other tasks. Given that a lot of logistics and manufacturing is outsourced, companies also need technology to work with the counterpart systems used by their carriers and 3PL providers. Trying to roll all of these diverse capabilities into a single application, based on a single set of universal data standards, is certainly daunting, if not a wrong approach. No doubt, trying to integrate disparate systems has always been a challenge, but the emergence of Web services-based architectures, however, may ease some of these integration issues, at least in a loose-coupled and hosted mode. For instance, a freight forwarder and customs broker may first buy modules to help them conduct denied-party screenings and put together landed-cost quotations, based on customers' requests for assistance with those specific activities. The software typically steps in when automation can meet customers' requirements faster and more efficiently than existing capabilities.
ERP Backbone Cannot Be Ignored
However, importing and exporting are intimately connected with the enterprise's internal finance, increasingly making ease of integration with ERP systems a top priority for many companies. For any company that has already rolled-out an ERP-based, order-processing system worldwide, the ability to link export compliance around the world to directly order processing and eliminate re-keying data, could be a big selling point. Also, many shippers are using import/export software to create worldwide uniform information infrastructures and to impose uniform practices on all subsidiaries.
The software should preferably gather information and feed it back into the parent company, giving it visibility into what remote divisions are doing and how they are doing it. The software providers, though, must strike the right balance between global consistency and special local needs (see Standardizing on One ERP System in a Multi-division Enterprise). Working with customs and trade law experts around the world, many GTM software and service providers have thus been building in adaptations for local requirements while still maintaining procedural consistency.
For example, Arzoon, which was recently acquired by the ERP dignitary SSA Global, was one of a few dot-com TMS start-ups to become what was possibly the first software vendor to provide an integrated TMS/GTM solution. Arzoon, with offices in North America and Europe, achieved this feat by acquiring From2, Inc. a provider of trade compliance content and automation software, in March 2001. The move gave Arzoon's existing procurement, and inventory, and transportation management suite Web-based ITL/GTM capability for regulatory compliance, cross-border landed costing, and global trade document generation. It also excelled in options for rail, an area where TMS and LRM vendors were limited. Before the SSA Global acquisition, the company had developed Internet transportation technology (logistics exchange) to help companies procure, monitor, and manage services that involve one or more modes of transportation—rail, highway, air, or water.
In addition to such functionality, global logistics systems should be well-equipped to classify shipments, identify denied parties, collect and disseminate data electronically, and provide the visibility needed to ensure shipment security. The Arzoon LIFE software suite takes item-level data from a purchase order and then records each movement of the shipment to document who exactly has touched it. The system, which incorporates a database of trade regulations, tariffs, and duties from more than twenty-five countries, heads-off potential problems at border-crossing by letting user companies correct inaccuracies in shipping documents before goods reach the border. The system also lets companies track shipments by multiple reference numbers in a single lead of cargo, providing much greater visibility into shipment status. This visibility into individual shipments (via pre-inspection of purchase orders) also makes it possible for the companies prioritize and move urgent freight orders ahead of less urgent shipments.
Yet, with the exception of SSA Global, the vast majority of ERP and SCM vendors still lack native GTM functionality. However, considering the ongoing increase of global sourcing, they will likely fill this gap through acquisitions of providers or through strategic alliances with content providers. An exception to this trend was pre-acquisition PeopleSoft (currently owned by Oracle). PeopleSoft had long offered a built-in trade compliance capability (since the mid 1990s). For example, any time an order moved through the system, or changes its status, it would be checked for compliance. Thus a legitimate order could not be excepted only to later find that the company inadvertently breeched the law because of changes to the customer name, address, carrier, or country of destination.
Conclusions and User Recommendations
The moves of major GTM players demonstrate the need for a software category that handles incomprehensible regulations, complex supply chains, inevitable disruptions (due to the weather or geopolitical events etc) and so on. As enterprises move production and continue to source from remote places worldwide to supposedly lower item costs, complexity will inevitably be introduced into the supply chain, resulting in bloated multi-echelon inventories or lower customers service levels.
Companies that need to manage intricate details of their goods movements across borders, such as trade financing, regulatory compliance, HTS coding, multimodal carrier handling etc., may want to look for a full-fledged GTM system. The ITL or GTM system should be able to track all the activities and incremental costs as the shipment is processed from point of origin to final point of receipt.
However, while this technology (like most other IT tools, for that matter) can provide critical assistance, it will not replace the import and export savvies of experts knowledgeable about international trade. It will also not eliminate the need for freight forwarders and customs brokers. Now that US laws shifts the responsibility and of customs compliance to the importer, human experience and expertise might even become more important than ever to manage financial decisions or negotiate cultural issues. It is not just a matter of diligently inputting data. Everyone has to be preemptive in managing international trade.
Once the GTM/ITL software is fully implemented, dedicated staff will have to meticulously update and manage the content and programs, and more importantly, trade experts will be needed to interpret reports and respond appropriately. GTM software typically provides an indication whether there will be an issue, whereas users will have to follow up on those alerts by researching other sources, either electronically or manually. The software alone will never completely prevent logistics delays and disruptions either. Optimized processes, procedures and training are needed, but even then many problems caused by the factors that are beyond anyone's control may arise.
SOURCE:http://www.technologyevaluation.com/research/articles/unifying-global-trade-management-challenges-and-user-recommendations-18012/

A Traditional "Local Touch" Leader Espouses a More Global Vision

2010-08-05T11:28:00.002-07:00

The response to our article series where we solicited vendors' input on a number of market trends has received much attention and reaction from readers and vendors alike. Infor and IFS were the first two to respond (see Two Stalwart Vendors Discuss Market Trends), followed by Progress Software (see Open Platform Provider Answers Questions about the State of the Market).
Now another prominent market player has joined the discussion: Sage, a world leader in accounting and midmarket ERP. The Sage Group, PLC (www.sage.com) is a $2.55 billion (USD) organization and arguably the third largest business software vendor worldwide. It is the leading supplier of business management software and services with over 5.8 million customers worldwide. Globally, Sage has over 14,500 employees and a global network of over 25,000 reseller partners and 40,000 accountants that recommend its products. The vendor handles over 36,000 customer support service calls daily and over 1.7 million support service contracts. Sage also represents a strong cash generating business, which has consistently delivered strong operating margins earnings before interest, taxes, depreciation and amortization (EBITDA) of 23 percent and organic growth of 6 percent (excluding Sage Healthcare Division) for the financial year ending September 30, 2008. For details go to http://www.investors.sage.com/reports_presentations/results_presentations/.
With North American operations located near Pittsburgh, Pennsylvania (US), Sage offers Sage ERP X3 (formerly Adonix X3, www.sageERPx3.us), an international enterprise resource planning (ERP) solution for midsized companies. The product targets midsized, competitive, and progressive companies that face the same business challenges as (and similar complexities to) Fortune 1000 ones, but that need more flexible and cost-effective, modern solutions to support their operations and growth. To that end, the Sage ERP X3 software suite integrates manufacturing, distribution, warehousing, customer relationship management (CRM), and finance functionality, while remaining competitive in terms of cost-effectiveness, implementation speed, and ease of use.
Espousing an International Offering
Sage ERP X3 is sold and implemented both directly by Sage and through a network of 150 value-added resellers (VARs). The product is also distributed by Sage branches and its international network of resellers throughout Europe, China, South East Asia, the Middle East, and Africa. With over 2,000 worldwide customers—ranging from 10 to more than 1,000 ERP users and representing over 5,000 sites—Sage ERP X3 has established itself as one of the fastest-growing enterprise systems for midsized companies.
The latest product's version was recently released by the Sage Group under the new brand name, Sage ERP X3, to better reflect its potentially unique position within the vast Sage portfolio of ERP products. Namely, while Sage has traditionally offered well-attuned local and regional products, Sage ERP X3 might be Sage's first notable foray in offering a globally available enterprise-level product. A multi-audit and regulatory compliant system, Sage ERP X3 meets multisite, multicompany, and multicountry business requirements. It is available in eight languages and legislations, including the United States (US), France, Spain, Portugal, Italy, Germany, United Kingdom (UK), and China.
In 2008, Sage issued a controlled-release Sage ERP X3, version, unveiling it in 35 countries across Europe, the Americas, Asia, Africa, and the Middle East. The system is represented in the US through Sage North America, a dedicated North American ERP mid-market player. Prior to version 5, Sage ERP X3 was distributed under different brand names depending on the country (Adonix X3 in the US, Canada, and Argentina; Diapason X in Italy; and Sage X3 Enterprise in other countries).
Sage has reportedly invested 20 percent of X3's product line annual revenues into research and development (R&D), ensuring customers benefit from an ongoing release schedule and assuring them a return on investment (ROI) over the life of their Sage ERP X3 implementations.
Zooming Into Sage ERP X3?
Sage ERP X3 is an extended-ERP software suite designed to meet mid-to-large companies' deep manufacturing and distribution functional requirements in a relatively simple and cost-effective manner. The system offers integrated functionality in the areas of finance, sales, CRM, inventory management, purchasing, and manufacturing. The typical customer for Sage ERP X3 is a company of 50 to 2,000 employees with $20 million to $500 million (USD) in revenue.
The versatile system comes in three configured offerings aimed at meeting the needs of 1) process manufacturers, 2) discrete manufacturers, and 3) wholesale distributors with a limited need for customization (due to a tight functional fit). In the US, Sage ERP X3's core industry targets include chemicals (see So What's the Big Deal with Chemicals?), food and beverage (see Food and Beverage "Delights"), life sciences, hard goods manufacturing, wholesale trade, and multichannel retail and direct marketing (see The Challenge of Fulfillment).
Sage ERP X3 complements the existing Sage ERP portfolio in North America by providing the upper mid-market with mid-range to high-end ERP software capable of meeting more elaborate business processes. Scaling up to more than 1,000 concurrent users, it also provides current Sage customers in the lower end of the market with a viable path for growth for the future, and provides an opening to global expansion. In other words, Sage is positioning Sage ERP X3 into the Sage ERP family, which excludes stand-alone CRM packages, such as SalesLogix (which is another globally available product by Sage).
Within that family, Sage ERP X3 tops the product line by targeting a worldwide upper mid-market, as the "high-end" Sage ERP solution (accommodating up to 1,500 users). Other ERP products in North America are Sage MAS 500 ERP, Sage MAS 200 ERP, Sage MAS 90 ERP, Sage PFW ERP, and Sage Accpac ERP, covering companies of 1 to 1,000 employees. Select Sage products can be found within the TEC Vendor Showcase. The full Sage ERP family—including Sage ERP X3—is listed on the Sage North American Web Site; www.sagenorthamerica.com.
In North America, Sage MAS 500 and Sage ERP X3 may overlap in some cases, although Sage ERP X3 should be viewed as an upper-market product. Whether a business should evaluate one or the other product depends several organization-specific elements:
*
prospective growth (X3 has high scalability); *
activity worldwide (only X3 includes multi-audit functionality and may fit global business needs); *
industry (X3 focuses on distribution and manufacturing in chemicals, life sciences, food and beverage, and hard goods); and *
level of complexity and the agility of its business processes (X3 may be more easily customizable).
There are also similar, potential overlaps with Accpac ERP, which has a good presence in several English-speaking markets (see Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions?) Organizations considering Accpac ERP should also perform a similar exercise to help pinpoint their needs.
Asserting Technology Prowess
To put the things into perspective, prior to being acquired by Sage in 2005, the privately held French vendor Adonix, had a number of its own acquisitions (see Adonix Expands X3 and Its "French Connection"). These products (e.g., Prodstar, CGI, etc.) were first integrated with the Adonix V3 product, the predecessor of Adonix X3, and have been rewritten in a Java-like and Unicode-compliant engine. As a result, a modern Adonix X3 product was first launched in France in 1999, and later in the US in 2000.
First introduced in 2000 as Adonix X3, and now in its fifth major incarnation as Sage ERP X3, Sage ERP X3 was built on the Sage Application Framework for the Enterprise X3 platform (SAFE X3), a framework shared by a full set of Sage applications for mid-to-large enterprises (human resources [HR] and payroll, warehouse management system [WMS], etc.). This service oriented architecture (SOA)/Web-native platform provides users with collaboration capabilities in either client/server or Web mode, as well as an integrated business intelligence (BI) engine by Business Objects (an SAP company). It also provides a flexible second-generation workflow engine.
Early in 2008 Adonix announced the availability of the latest version of its enterprise software suite Sage ERP X3. The latest Sage ERP X3, release, v5, focuses on
*
new ergonomics, making complex operations simpler for users; *
improved communication capabilities, leveraging the SOA and open architecture of the product; and *
enriched functionality in the areas of finance, distribution, and manufacturing.
In addition to this BI engine, which provides users with "drag and drop" analytical capabilities and an enhanced view of key performance indicators (KPIs), new features include
*
in-depth integration with Microsoft Office, which enables ERP users to create and edit Office documents within the context of the ERP software operation (attaching a Word document to a customer entry, for example), storing any Office document in the ERP secured database, as part of the enterprise data *
enhanced integration with Microsoft Outlook, which allows two-way synchronization of contacts, calendars, and tasks *
improved traceability and security, and an extended workflow including a multilevel signature circuit, externalized management of recipients and absences, strong workbench management, signature automation by clicking inside an e-mail message, and batch workflow events creation; *
new core engine and administration tools speeds up installation and parameterization, which simplifies extensible markup language (XML) import/export, and supports radio frequency (RF) terminals as standard ERP client.
The product also includes a Java-based fourth-generation language (4GL) development environment for custom vertical applications by VARs. Namely, Sage ERP X3 offers the possibility of integrating custom developments without altering the standard functions' ability to evolve. Realized through the aid of a development tool set, these developments can be integrated into the standard product and activated or deactivated at will. They are reusable and permanent, even when the software package version changes. The development tool set for customer or third-party developers preserves custom developments from standard system upgrades or updates, and is part of the core Sage ERP X3 offering.
The product's multi-tier architecture benchmarks up to 1,500 users and the system runs equally well on Microsoft Windows, Unix (IBM AIX), or Linux (Red Hat) operating systems with either Oracle 10g or Microsoft SQL Server 2005 databases.
Preamble
Before providing its answers, Sage wanted to set the stage by pointing out Sage ERP X3's customer value proposition: simplicity for users, and extended functionality. Given this, the vendor believes a mid-market software vendor must cope with the IT complexities of its customers, instead of the customer bearing this responsibility. SOA and more generally distributed software architectures and application integration (not to mention cloud computing) are complex. And Sage Adonix intends to tame this complexity via its products and services by offering simplicity and choice to its customers.
To this end, the vendor designed its SAFE X3 platform strategy to protect the investments of its partners and customers by remaining independent from fads and short term trends and by leveraging established standards to maximize interoperability with other applications and legacy applications at customers' sites. Sage wants to minimize the risks associated with software architecture choices and implementation for both its customers and partners.
The vendor also believes ERP's evolution earlier in this decade created extended-ERP solutions, encompassing supplier relationship management (SRM) and CRM for instance. ERP solutions are now evolving to user-centric solutions to accommodate more users in the enterprise. Through this, user-centric ERP solutions will embed SOA (and possibly even Web-oriented architecture [WOA]), and seamlessly integrate with Web 2.0 collaborative tools. Some of these types of solutions already embed Web 2.0 functionality through really simple syndication (RSS) feeds and portals. Doing so better embraces all potential users in the enterprise, far beyond pure transaction-based processes extending to extensive collaborative ones.
User experience is predominant in customer's choice, time to deployment, and actual user ERP appropriation. Thus, Sage Adonix is making a large investment for Sage ERP X3 in order to make it quick to implement, simple to use, and cost-effective.

SOURCE:http://www.technologyevaluation.com/research/articles/a-traditional-local-touch-leader-espouses-a-more-global-vision-19523/

Netpliance’s 4X Price Hike - Will It Spell Boom or Doom?

2010-08-05T11:28:00.001-07:00

Netpliance, Inc. has announced i-opener 2001, the next generation service for Internet appliances. As part of the new service package, i-opener customers will be able to alert one another and chat live for the first time with iChime Direct Messaging using an i-opener Internet appliance.
Adding to its features such as always-on automatic updates and the simple email-waiting light, the new iChime feature will allow i-opener members anywhere to find and alert each other, then begin communicating instantly.
Other new applications and features include:
* The i-opener CommunityCenter, where members meet each other in a safe environment to discuss issues of interest.
* The i-opener FamilyRoom, where members can interact, share news and organize events with family and friends in a simple forum.
* The i-opener Stock Tracker.
* Up to four (4) e-mail accounts per membership.
"The problem with current instant messaging approaches is that there is no way to 'ring' the person you want to converse with. Netpliance's patent-pending iChime Direct Messaging allows a member to ring another member at the press of a button," said Netpliance Chairman and CEO John McHale. "Beyond the cornerstone of simplicity, the new iChime service gives members the best way to communicate instantly with other members, taking the guesswork and frustration out of instant messaging."
"The iChime Direct Messaging Service, included in i-opener 2001, provides virtually free 'long distance ' service, allowing members to alert and communicate with each other instantly," McHale said.
The new features come as part of the new i-opener Membership Program, which invites consumers to become i-opener members by purchasing an i-opener 2001 membership kit for $399 and paying a monthly subscription fee of $21.95 with no long-term service commitments or contracts. The i-opener promotional offer of $99 ended June 30, and Netpliance began accepting orders for i-opener 2001 memberships starting July 1, with the new kits and new capabilities to be available in the fall of this year
The new Membership Program will offer a community of common users, unlimited support, software maintenance and a monthly newsletter. To support its customer base, Netpliance will automatically enroll existing subscribers into the Membership Program and make i-opener 2001 available to them as a free charter member benefit.
We suspect that Netpliance may be cutting its own throat by this move. Although they have a growing subscriber base (currently estimated at 20,000+), much of this was based on an "introductory" price of $99 for the "i-Opener" (as compared to the formerly "official" price of $199). We do understand the concept of charging more to increase profitability. But, based on Netpliance's own comments earlier this year, demand is "inelastic" above $199, so we don't understand how doubling the high-end price is an effective long-term strategy. (Refer to TEC Note "Internet/Information Appliances"). For a start-up without a large subscriber base, increasing market share through a price increase is a counter-intuitive strategy. America Online, with a subscriber base roughly 1000 times the size of Netpliance's, is probably not too worried.
The recent availability of Oracle Chairman Larry Ellison's "New Internet Computer" (NIC), with more features (except no monitor), the freedom to choose your own ISP (including the NIC's own free ISP), and no required subscription charges, probably spells big trouble for Netpliance.
We expect that Netpliance will last until early next year. By that time, the Gateway/AOL appliance will be out, the first MSN Web Companions should be out, and other large manufacturers should be scoring with their appliances. We do not believe the i-opener provides sufficient functionality to compete adequately against any reasonably featured, AOL-focused appliance.
As we have stated before, the i-Opener series is consumer-focused, not business focused. At $99, its limited-functionality focus was at least cheap enough for the less wealthy - those who hadn't already purchased a PC, and probably couldn't afford one. At $399, plus an additional $21.95 per month (required), it no longer falls into the "great deal" category. Given the price pressure from Ellison's NIC, as well as product pressure from Gateway/AOL and MSN Web Companions, we expect Netpliance will rethink their pricing strategy.
Business users will find little use for this, even with the "improved functionality", and should stick with a mainstream PC (with Internet access), or a more flexible appliance if money is exceptionally tight. The added negative is the (in our opinion) cloudy corporate future, which might mean a dead-end investment.
SOURCE:http://www.technologyevaluation.com/research/articles/netpliance-s-4x-price-hike-will-it-spell-boom-or-doom-15971/

Avoid the Perils of Service Parts Planning in Supply Chain Management

2010-08-05T11:27:00.002-07:00

Inventory planning and management is generally a well-researched and documented and applied discipline. However, the vast majority of work and associated software products are directed at servicing the needs of the new parts production supply chains, moving product from the likes of Proctor & Gamble to Wal-Mart across the globe (see Linking Planning and Execution Systems for Retailers' Nirvana—Improved Visibility and Fulfillment). It cannot be understated that significant differences exist between the new parts production supply chain and the service and replacement parts supply chain. Companies attempting to manage their service and replacement parts using conventional, new product inventory methods are missing significant opportunities for improved efficiency and effectiveness in their operations, if not working at their peril.
Part Three of Lucrative but "Risky" Aftermarket: Service and Replacement Parts SCM series.
Table 1 depicts how new parts production and service supply chains operate differently and require systems that cater to their differing needs. For example, demand (inventory turnover) for new products is generally much higher than for the counterpart service parts, particularly if the serviceable product is a brand new model with an unknown behavioral history. Increasing product reliability requirements further intensify this difference. Inventory turnover (synonymous with inventory turns) is the number of times that an inventory cycles, or "turns over," during the year, and a frequently used method to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, an average inventory of $3 million divided into an annual cost of sales of $21 million means that inventory turned over seven times.
Also, conventional inventory ordering/cost management strategies, like economic order quantity (EOQ), are based on the assumption that there is a strong, continuous demand or velocity of product throughout the system. For example, EOQ (synonymous with economic lot size and minimum cost order quantity) is a type of fixed order quantity model that determines how much of an item is to be purchased or manufactured at one time, with the intent to minimize the combined costs of acquiring and carrying inventory. The basic formula takes into consideration annual demand, average cost of order preparation, annual inventory carrying cost percentage, and unit cost. Needless to say, such simplified formulas are not applicable for spare parts where there is demand for an item is little, uncertain, or not at all.
Thus demand variability or uncertainty is another issue that complicates service and replacement parts planning. Variability in new products supply chains is magnified by the bullwhip effect. The bullwhip effect is an extreme change in the upstream supply position in a supply chain resulting from a small change in demand, downstream in the supply chain. As a result, inventory can quickly move from being backordered (needed in an expedited manner) to being in excess. Such a state is caused by the serial nature of communicating orders up the chain combined with the inherent transportation delays of moving product down the chain. In new parts production supply chains, this negative effect can be mitigated or even eliminated by synchronizing the supply chain, through, for example, collaborative planning, forecasting and replenishment (CPFR), and other more adaptive supply chain management (SCM) techniques. Promotional pricing can also be used, to some extent, to manage demand fluctuations by stimulating demand of new products.
However, demand for spare parts is driven mostly by breakdowns, and much less by planned maintenance. Therefore, safety stock, which is often a minor component of new product inventory levels, remains the sole component for service parts and the only method for managing variability. In general, safety stock (synonymous with buffer stock and reserve stock) is a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply.
Production Versus Service Supply Chains
While supply chains can be complex and multi-echelon for both new products and service parts, the impact is much different. Namely, in new product supply chains, echelons and nodes increase the complexity of distribution planning and the scheduling of material transfers. In the case of service parts, echelons offer opportunities that significantly reduce safety stock by aggregating volume at higher levels.
Pooling spare parts among divisions and companies with similar assets is a strategy being increasingly considered, since pooled inventories can reduce costs while ensuring that service requirements are met for all parties. Namely, to meet same-day service requirements for products with very low demand rates, inventory must be positioned in a large number of geographic locations. For example, Cisco, maintains inventory in over 700 locations including field locations, distribution centers, and repair centers. These locations may be owned by the manufacturer, distributors, third party logistics providers, or repair providers, and must manage not only the forward movement of inventory, but also the reverse logistics flows for return of damaged items.
Incidentally, basic multi-echelon inventory optimization strategies (regardless of the part being a new or a spare one) involve either pooling demand by keeping inventory at central locations, or forwarding position/push stock into field locations to give great customer service. A very general rule of thumb is for the first approach to be used when demand volatility is high and demand volume is low. The latter is more appropriate for the opposite—low demand volatility and high demand volume. For some new parts, there may also be anassembly or light manufacturing postponement strategy, in order to store basic product configurations, rather than variations.Area/Metric Production Supply Chain Service Supply ChainInventory turns 6 to 50 a year 1 to 4 a yearInventory events predictable / forecastable random / intermittentResponse times manufacture/distribution lead time mix of same-day, next day, responseDelivery network move to simplification, rationalization increasing flexibility to deliver differentiated, rapid response serviceProfit margins decreasing increasingInventory Strategy maximum velocity to meet schedule pre-position in network in anticipation of demand
Table 1: Differences between product supply and service supply chains.Source: MCA Solutions
Replenishment processes for service and replacement parts differ significantly from those for new products too, since new product inventories are always replenished from regularly (if not continually) running production batches. The key issue is to synchronize distribution needs and production schedules. Again, breakdown repair is a major source for service and replacement part inventories, especially for expensive products (whereas some spare "widgets" can leverage new parts planning practices).
Product structure is an another factor driving the differing requirements of the service supply chain. Namely, while product life cycles are decreasing, the service function must support not only newly introduced products but include out-of-production products with low demand and very long manufacturing lead times. These means support not only for a very large number of parts and products, but also a requirement to stock them at different levels of the bill of materials (BOM). For example, this involves a complete product, a repair assembly, and component parts.
To that end, pre-introduction spare parts planning defines service offerings and warranties, develops maintenance BOM and approaches, and determines expected reliability, whereas the new product introduction (NPI) phase must determine initial provisioning based on estimated sales and failure rate, and develop budgets. Further, in-production planning would have to manage engineering changes, determine actual failure rates and causal factors, balance new buys with expected returns, manage supply and end of production, and manage warranty and contracts.
Last but least, the end-of-life (EOL) phase determines the last time buys based on expected returns, and manages the disposal of product and components. Minimizing the number of new parts introduced into the inventory is a key goal, particularly as parts face obsolescence criteria established by the organization, such as being superseded by new model introductions. Obsolete inventory will never be used or sold at full value, while disposing of the inventory may reduce a company's profit. Part substitution and harvesting or reusing components during repair add to the complexity of this process.
Thus, more capable spare parts planning systems should be able to help enterprises plan spare parts inventories based on seasonality; statistical forecasting methodologies; carrying costs; customer service levels; parts' obsolescence and criticality measures; product life cycle stage/curve; certain leading indicators (e.g., machine population, part failure rates and like causal variables); and historical demand, to name some factors.
These systems may also use sporadic or intermittent demand methods and spike demand analysis for slow-moving items, and handle return, repair, and refurbishment forecasting, often offer flexible forcing abilities (e.g., forecast at higher, aggregated levels and then prorate down to individual items). At the same time, they may also show strong performance when handling a huge number of item or location combinations and then suggest how to redistribute stock among locations. They might also be able to provide flexible cost analysis, including actual repair cost, standard cost, carrying cost and salvage value, provide flexible simulation abilities such as service-level and inventory cost simulations), or allow for automation, analysis, and exception reporting for planners—all with the idea to lower capital investment while doing the least damage to customer service levels for critical parts.
SOURCE:http://www.technologyevaluation.com/research/articles/avoid-the-perils-of-service-parts-planning-in-supply-chain-management-18088/

Where Has All the Service Gone?

2010-08-05T11:27:00.001-07:00

Recent presidential debates included predictable topics. More relevant than political rhetoric is voter perception of what this means to them. The cost of a gallon of milk, a gallon of gasoline, or a pack of cigarettes will have more impact than the war with Iraq and esoteric issues. Recognizing this, Kerry aligned himself with the American worker, bewailing lost jobs and promising legislation to penalize companies that outsource. Laudable sentiments. Dramatic, when translated by press coverage.
The reality is that controls in support of environmental issues, regulation, and legislation have created a situation where it is economically unviable to manufacture consumer goods in many geographies. Emerging economies, less concerned with the longer term impact of pollutants than the immediate gratification of full stomachs and vodka glasses, are reaping the benefits of social conscience and sustainability policies. More legislation and control is not the answer—this has always proved to be a double-edged sword. Automotive, textile, and other industries that imposed embargoes, penalties, and trade restrictions bear testimony to this.
Automation and technology challenge rules and create disruption. The industrial revolution changed the demographics of the world—forever. Workers were drawn from their agrarian base to growing cities by the promise of higher wages, shorter hours, and enhanced lifestyle. Waves of technology crashed through the 1900s leaving in their wake further changes. Men moved from smoke stack industries to white-collar positions. Armies of women joined the workforce, initially as hand maidens to the men in suits, evolving to corner offices of their own, as the personal assistant changed into digital form. In the unwired world of today, the immediacy of the Internet has transcended geographical boundaries. The physical becomes irrelevant. Activities taking place in Beijing that result in electronics for European markets are no more disruptive than the economic revolution that enabled creation of uniform products anywhere in the world.
Of greater concern is the fact that the most intangible of corporate assets—customer satisfaction—is now being outsourced. In almost frenzied fashion, major corporations—who should know better—are placing their customers, the source of their income, in the hands of the uncaring.
Take for example the consumer electronics industry. Symbiotic relationships between manufacturers and retailers are reinforced by sales and margin growth. Manufacturers support their products with incentives, discounts, and rebates. Retailers provide the point of purchase, to include zero percent financing, enabling consumers to take home the latest gizmo and gadget immediately. Another revenue generator is the extended warranty'. Sales personnel at specialty retailers urge the innocent to purchase these, in many cases at exorbitant cost. Yes, the product has a warranty, but of course this is limited, and the customer would be well served to protect this new investment.
What happened to the lifetime value of the customer?
This in itself should be a warning! Where is the manufacturer in this picture? What happened to the lifetime value of the customer? And whose product is it anyway?? After-sales service is increasingly part of the value add—product lifecycle does not end at the retail check-out. Product performance as promised challenges the future of the manufacturer/consumer relationship. Brand loyalty is hard won—product differentiation is in many cases based on perception. This is one remaining area where manufacturers can impact true future demand. But for some reason, once the product moves into the retail channel, most manufacturers lose control. When faced with a problem, the consumer is alone! The retailer abdicates responsibility. The product is still under the manufacturer's warranty (call a toll-free number). Or, more commonly, this has just expired. Yes, you purchased the extended warranty, but this has been outsourced. You need to call a toll-free number. The agony begins. A recording instructs you to select from multiple options. By the end of this first message you have forgotten what they were! More canned music followed by more choices. If you are really tenacious, you are finally connected with a living being. From the heavy accent it is apparent that Bert' or Nancy' is more likely to go home to an apartment in Mumbai than Memphis. Cost cutting is at epidemic levels and the Holy Grail of the customer experience—customer support—is now being outsourced to the lowest bidder. Contracts are negotiated based on hourly rates for call handling. Technicians and so-called support personnel are trained based on canned scripts and English language idiom, ignoring the key ingredient—customer satisfaction!
But there is light at the end of the tunnel. Forward thinking retailers like Nordstrom have empowered their personnel to do whatever it takes' to ensure true customer satisfaction. No matter where or when the product was purchased, issues are resolved with a smile. The ambiance, the piano player and the wonderful consumer experience more than compensate for a potentially higher price than at the alternative low price leaders'. Service industries have also embraced that philosophy—Ritz Carlton personnel treat each guest like a celebrity—hospitality takes on a new meaning. Supermarkets are recognizing the value of customer loyalty programs. And even the desk-top shop and ship', a potentially clinical process, has many opportunities.
Technology enablers are more common with on-line retailers—software programs recognize repeat buyers, personalizing the purchasing experience. Suggestions are made with regard to products that might appeal, based on purchase history. Accessories are recommended to accompany new selections, the whole interactive experience creating an illusion of intimacy. And even those companies that have chosen to outsource the after sales service' element can create a satisfying experience through the use of technology—number and voice recognition in combination with software programs, scheduled call routing, and other tools that smooth the bumps. But technology is only an enabler—the human element is the critical factor. Best practice at the process level should be identified and consistently applied. Problem resolution should be standardized through hands-on' experience, achieved during support analyst training through
* Role-playing * Reviewing and analyzing real-time and recorded problem resolution by competent analysts * On desk' experience, supported by mentoring program * Tools that support a consistent process, prompts, links, etc.
Who knows—maybe technology will once again change the rules and enable the creation of consistent and high quality customer service—no matter who or where the players are.
SOURCE:http://www.technologyevaluation.com/research/articles/where-has-all-the-service-gone-17594/

Will User Enterprises Ever Get onto an Easy (Support and Maintenance) Street?

2010-08-05T11:26:00.000-07:00

Will User Enterprises Ever Get onto an Easy (Support and Maintenance) Street?
A series of articles published at the end of 2005 highlighted at great length a conundrum on price per value that has long affected enterprise application vendors and their users. Specifically, while vendors would like to have well-oiled business models that promote stable and recurring revenue streams (which in turn would ensure future product and service enhancements), users favor freedom of choice (in terms of which vendors they purchase enterprise software from, and how they implement and pay for that software).
To be fair, one needs to acknowledge the revenue recognition guidelines that publicly owned, US-based companies must abide by. These revenue guidelines promote the current and perpetual software licensing and software support and maintenance arrangements. In addition, "pricing potholes" exist even within the more recent and creative initiatives (that is, "value-based pricing," "pay as you go," "on demand," "software as a service [SaaS]," etc.) that, at the end of the day, might carry unforeseen costs and become more expensive over time.
Such pricing mechanisms typically work well for smaller and simpler applications, but have thus far largely failed with the more complex enterprise-class applications. Further, the on demand pricing model is a hard transition for software vendors that are used to receiving large, up front payments and spending them right away. Dollars spread out over time results in huge transition costs. Stockholders and all but the most cash-abundant software companies cannot handle this transition cost, so the transition process has to be very slow. In the long term though, on demand initiatives should make any vendor stronger and more profitable. But in the short term, it may just "kill" some vendors if they go this route too quickly (meaning if on demand solutions are all they begin to offer their customers in a short time bracket).
In any case, the series of articles in question had certainly stirred up a slew of mixed reactions, which naturally varied depending on which camp they came from (see Is There a Panacea for Enterprise Software Pricing Yet?). Specifically, while users felt favorably toward the content preaching about their "bill of rights" and freedom of choice, this was certainly not the case with the vendors' staffers.
To allay any misunderstanding, let us state unequivocally right here and now that it was not our intention to create a gossip column or to imply that enterprise software is unjustifiably overpriced. We even agree with one reader's comment that
Building quality enterprise software is difficult, expensive, error prone, and unregulated. The day when we will build software the way we engineer cars or buildings, it will become much more reliable, but much more costly as well. Today, people accept bugs and problems in software because it is the way this industry has always worked and otherwise, it would probably be so costly that there would not be an industryand it will stay like this for a long time given the increasing appetite of people for cheap and disposable goods and services.
To be fair to vendors, we also agree with the fact that some users have a "devil-may-care" attitude toward implementing and using their software. One comment even went so far as to state that
Customers get what they wish for, if customers were more realistic about the dynamics in play in creating, delivering and maintaining a world class software solution, they would be respectful of the cost/benefit/value equation. If they took the same attitude that many take to software as they do to buildings and transport, they would be working in tents and driving around in rickshaws.
However, related to the above disdainful opinion of users is the highly defensive remark of another anonymous reader (likely coming from a leading vendor's ranks), which said
Clearly the author has never owned, operated, or had to manage the profit and loss (P&L) of a software development company
OK, even if we admit we lack that respected vendor "insider" experience, the point here is that vendors' traditional "from inside out" or "cost plus" pricing strategies are not going to work for much longer, and vendors had better get used to that idea (however upsetting it might be to them). In other words, like in many other industries, sooner or later, prices will be determined by what the market is ready to bear ("the value is in the eye of the customer"). No longer will prices be based on what vendors think is a profitable way to deliver solutions while leaving customers to ask "how high" they should "jump."
Indeed, even today many user enterprises are increasingly demanding more certainty, higher comfort levels, and justification as to why (and what) it is they are paying for. To be sure, "fine print" addendums in enterprise software purchase contracts are common; sometimes longer than the contracts themselves; and typically serve to protect the vendor from any future liabilities. Such addendums customarily cite that the contract includes only the stipulated, basic functional and service scope. For any additional module or service attention, the vendor applies another pricing math, whereby the client will likely pay far more at the end of the day than if the client had gone for the "wall-to-wall" license and service arrangements up front.
Questionable Support and Maintenance Value
Nowhere else is this notion (the client paying more over time) as apparent as in the increasingly controversial software support and maintenance (S&M) contracts. For a long time, it had been a dirty little secret of the software industry that the maintenance part of the business is the largest part of vendors' revenues, and is really where vendors meet profitability (if not "money for the caviar," meaning their profits exceed original profit margins).
The situation is somewhat analogous to shopping for a big screen or plasma TV set, a washing machine, or a car at a major retail outlet or dealership. Prospective buyers might be impressed with the nominal sales price of the goods and believe that they've landed a great deal, but before the deal is signed, most of them have been thrown a sales pitch (subtle or otherwise) to sign up for the extended warranty contract. This warranty contract is where the store (and the sales person) makes most or all of its profit. Buying enterprise software is similar in terms of one-time license fees and ongoing S&M fees thereafter. The key difference is that enterprise users do not really have the option to abstain from the maintenance contract (or at least not until very recently).
SOURCE:http://www.technologyevaluation.com/research/articles/will-user-enterprises-ever-get-onto-an-easy-support-and-maintenance-street-18935/

Service Chain Information will Transform the Total Chain

2010-08-05T11:25:00.000-07:00

Spending time with very diverse sets of businesses—from Combatant Commanders in the military to a dishwasher repair business, the obvious facts continue to haunt me—and probably a huge amount of business people—is the lack of real information about what happens to products once they leave the manufacturer. From a hot bumpy ride (RFID sensors, anyone) to a lost shipment bound for Iraq, everything that happens has some kind of relevancy to a host of business people, product designers, quality engineers, logistics firms, aftermarket managers... oh, and did you mention the customer? Everyone seems to want the data, yet so little is known.
There is a whole series of structural reasons for this.
First, many user organizations have a stovepipe procurement process where the purchaser (or the original equipment) is not the same person maintaining it. So information about performance on the plant floor or in the field may not be known in headquarters. Also, many products don't stay with their original owners, making their way to new buyers—from huge used car networks to ebay. The recent commercial where the father is quizzing the automobile to determine if it will take good care of his daughter highlights this issue.
The converse of this is also true. The OEM's service business is disconnected in process, systems philosophy, accounting, etc. In fact, today much of the last mile service businesses may be outsourced. Though best practice says we get connected for the total life cycle of the product, only the very best and very rare of entities can boast this.
Lack of integration between logistics and repair. Getting the stuff to the point of breakdown is a nontrivial exercise. Vision of FedEx packages with laptops might be great for consumer electronics, but large components of aircraft, power generators, even autos—well they don't get there in a mailer—may require a hard day's night, or weeks of travel to get to where it is needed.
Performance-Based Management Philosophy Will Transform Business
In recent years we have gone through a life cycle of improvements in the service infrastructures. And with more and more manufacturing moving offshore, the need for still more local service providers is evident. Long life products are particularly expensive not only to repair, but many businesses maintain significant backup parallel equipments just to offset the vagaries of downtime. But that stuff's expensive! And the tolerance for this is wanning, with economic pressures increasing. We just don't have an unlimited amount of capital—and it is possible to get much better performance. Imagine the average household buying a backup auto, dishwasher, TV, and all their appliances, because the uptime on these products was less than 50 percent and they had to have a backup while their furnace was in for repair.
Performance-Based Management
Moving to a performance-based business model will have huge implications for the whole value chain. Firstly, it's giving customers what they really want. As someone once said, "our customers don't want drills, they want holes!" Having said that, it means architecting your processes and technology, from the point of performance back. Rather than pushing our parts through distribution networks, it's predicting performance, building products better and sensing or predicting when they will fail—before they fail—and then averting downtime.
The implications are profound and don't make everyone feel happy about this.
More uptime means less sales of original equipment.The DoD, for example, is beginning to write contracts for these "Performance-based Logistics" weapons systems, like the Joint Strike Fighter, etc. Performance-based Logistics is a leading-edge approach to managing complex supply chains. Its principle is to manage for outcomes—procure performance rather than parts and people. It requires total business process reorientation from servicea and maintenance through procurement techniques, as well as the IT platform for integration. Technologies that allow predictive management dramatically improve the DoD's ability to predict and prevent weapon system failures. This includes the addition of sensing and monitoring technologies for both new and legacy weapon systems, and incorporates consideration of operational and environmental factors in preventative maintenance. It also includes data gathering and transmission in a distributed environment, and represents an integrated approach to driving weapon systems availability.
Many IT-focused businesses already have this approach as a core tenant. If you outsource your data center to SUN, Unisys, etc., you are not particularly interested in details, you expect uptime. SUN has done a good job of marketing this approach—access anywhere—total performance to their customers. Real-time sensing tools, performance analyses, and remote diagnostics have all been part of this model for some time.
Owning or managing more of the logistics process.So, an OEM will sell less parts—less original equipment, but increase service. Less parts can mean JIT Logistics, if you will. So planning systems like multi-echelon planning play a prominent role here as well. What is the best network and how do I position inventory best? Many OEMs are starting logistics businesses, either with partners or moving into them on their own. Good product companies who may not have overly thought about supply chain excellence, now have to be just that—excellent.
The IT business.Performance-based management is an information-intensive play. The information at the point of performance is key to so many partners, processes, etc., but the challenge will be how to get that data. On-boarding diagnostics technologies embedded within the product, and then integrating that intelligence through a network provides not only the pinpoint data, but also allows the various entities who need the information access to synchronize the whole execution process as well as feed demand, product quality, etc.
Change in Revenue Model
Many firms will also need more knowledge—not just on what to do—but how to make money at it. From selling equipment and systems to leasing and transaction fees, in businesses where they may not adequately understand the business model—what to say, what it takes to provide stellar performance—will challenge firms who will attempt this. Understanding the path and practices of firms who already deliver in the model—at least at a foundation—will provide some guideposts. But managing an industrial facility, versus a data center versus an automobile repair center versus a thirty year weapons system, all have their unique attributes, as well as winning the supply chain components to ensure the complete seamless efficient model.
There is gold in this model, though, not just in added services to charge for, but in customer retention and an exclusive feedback loop to your product developers for the next generation of 'satisfiers' in the killer product.
The Value Shift
Managing performance—sustained, responsive, and customer centric—changes the way we think about, procure, and manage supply chains. This value shift to the real desired outcomes, performance-based management (PBM), has a dramatic impact on the design and cost of supply chains, as well as how core suppliers and OEMs design, build, and service their products. It changes the business models of the enterprise. Policies, processes, and IT systems that are designed around building, buying, and moving assets with material as their core will change to performance as the core. Integrated, visible processes allow the sensing and seeing of what is needed, rather than over procuring equipment or overstocking inventory. Technology innovation is creating capabilities supporting the next shift toward this performance-based approach.
Partnerships in the value chain—sharing of knowledge, process innovations, and technology concepts, as well as the building of agreements, will be bedrock to the success of performance-based business models. The data is housed in too many locations, in too many enterprises, in all level of aggregation, formats, etc., for partnerships not to be essential to performance-driven business models.
SOURCE:http://www.technologyevaluation.com/research/articles/service-chain-information-will-transform-the-total-chain-17351/