WHILE growth in the ERP market has been slowing since Y2K, new regulations are keeping ERP vendors occupied delivering upgrades, especially for issues affecting manufacturers’ supply chain activities.
With many companies now forced to track and trace their products through the supply chain, including raw materials, Kari Miller, US-based director solutions management ERP with SSA Global , says that traceability is becoming critical.
“Today, companies not only have to track where their products went to and to whom, they also have to track who carried them, when they carried them, how many times the product moved, and who touched the product. And it’s the same for their raw materials.
“Then there is the Sarbanes-Oxley Act. If you have any kind of transaction that is going to have significant financial impact on your organisation you have to processes that detect it, report it and correct it,” Miller told Manufacturers’ Monthly.
For Australian companies, the US Sarbanes-Oxley Act has far greater implications than once thought. While local companies listed in the US need to comply with this law, companies in joint venture agreements with American public companies or undertaking off-balance sheet financing with American partners may also be affected.
Phil Manning, a business consultant with SSA Global/Pacific, says complying with Sarbanes-Oxley involves not just simply legal and accounting work, but major adjustments to company reporting structures and management information systems.
“As an indication of cost, AMR Research estimated US companies spent US$2.5bn on Sarbanes-Oxley compliance in 2003.
“But there is an upside. Companies that make the effort to reach the new levels of transparency and predictability are likely to become stronger competitors, with greater international opportunity,” Manning said.
More than compliance
According to Miller, “Compliance, whether its fiscal or supply chain related, are the kind of things driving the ERP space right now. Then there is Wal-Mart!”
She describes the move to RFID technology as more than just hype. “In time, manufacturers will be putting RFID tags on everything, and they will be doing it in-line. No more slap and ship.
“Within a couple of years, manufacturers are going to figure out that slap and ship is a non-value added activity. By then, Wal-Mart and its top 200 suppliers will have the technology smoothed out, with Target and K-Mart and some of the other big retailers right behind,” Miller said.
“The only way for manufacturers to start offsetting those RFID costs is to make use of the efficiencies they can get out of RFID throughout the manufacturing process.
“With retailers continuing to push costs back through the supply chain, RFID has to become an integrated part of the overall manufacturing process. That’s when you get enough volumes to make RFID tags inexpensive enough that they are usable.”
Miller says it RFID adoption will start in the warehouse and advises manufacturers to get ready.
“Anytime you look out on the shop floor, try to figure out where cost is. Typically it’s not labour at this point, it’s moving material around, the actual processing, and the machine time on it.
“If you have RFID tags helping you direct all of that, where you can keep things in order and track costs, that will be beneficial, but the tags have to be cheaper before that can happen. But it is coming.”
Miller, in Australia recently as part of a world tour, also spoke of SSA’s latest release ERPLX describing it as a major step forward.
“This new ERP solution is built and optimised for the IBM eServer iSeries and leverages IBM WebSphere for integration and the adoption of service-oriented architectures.
“With Version 8 (released a few years back), we started to put in vertical specific functionality. Things specifically for life sciences, CPG, chemicals, food and beverage, and automotive suppliers. Now we have LX, our next version for BPCS, PRMS and KBM.
“This brings together our convergence strategy, bringing together the best features of all packages into one. Obviously BPCS had the largest footprint of all those, but not all.
“The browser pages, which use Java and XML technology, are far more intuitive and easier for users to navigate. It offers some real employee productivity gains in that area.
“We have also embedded our Workflow in LX, with 350 Workflow exit points. Any time users transact data in LX, whether it’s master file maintenance data, order data, inventory transaction data, when users do that it automatically can trigger a workflow. Users don’t have to remember to manually start workflows, or go through different menuing systems to get the workflow to work.
“With LX, and BPCS in the past, we have become more and more open so integrating with other systems is straight forward, we use Websphere and Integrator as our broker for our data for bringing data in and out of LX. So when you do have a mixed account users can deal with it effectively and become part of the solution rather than part of the problem,” Miller said.
While recognising that many manufacturers find upgrades costly, Miller said often it’s just a perception. “People with older versions have often done a lot of modifications. So the assumption is they have to take those modifications with them, when really an analysis needs to be done to see if those modifications really need to be brought forward or not.
“We recently had a customer that went to Version 8.2, and eliminated 85% of their enhancements, we also have one who eliminated 90% of their enhancements. And it wasn’t costly.
“Now they don’t have all those modifications to put back in. They cut the cost of the upgrade in half, even though it was from several versions back. They are really reaping benefits from it, because now they are able to do all the kind of control things that they needed to do in the past which a lot of the modifications were trying to do.
“We want manufacturers to move forward, because there are business benefits for them in doing so. We don’t want customers to move forward just because,” Miller said.