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The "E" in ERP is Going Electronic

Now that we've survived Y2K, what can we expect from ERP systems in Y2K+1? Remember this: E-business is a powerful force in ERP.

 

Now that we've survived Y2K, what can we expect from ERP systems in Y2K+1? Remember this: E-business is a powerful force in ERP.

Just by existing, on-line industry exchange Covisint has become one of the defining factors in automotive this past year. It has helped spotlight e-business, trading exchanges, eXtensible Markup Language (XML), and a host of other technologies and information technology strategies for the automotive industry.

By the same token, Volkswagen's announcement that it was spinning off its own trading exchange has made it clear that Covisint is not going to be the only game in town—the game being trading exchanges, the town being automotive. That's okay. "Enough business problems and localization requirements exist that one exchange probably couldn't address all the needs of the industry anyway," says Richard Scott, manager, Automotive Vertical, for Denver-based J.D. Edwards & Co. (JDE).

True, but one industry's trading exchange may be another industry's silo. As trading exchanges proliferate and the amount of automotive business transactions and general information sharing increases—all in the name of collaboration—enterprise resource planning (ERP) will have to, well, collaborate. ERP will have to extend beyond the four walls of the user enterprise and be electronically accessible to all trading partners within the supply chain.

Databots @ work

JDE, coincidentally, made a big splash recently regarding this very issue. JDE's OneWorld Xe is an "extended enterprise" product with some 300 Internet-ready applica-tions aimed squarely at collaboration. It has a Web-based portal to OneWorld, which can be configured to meet the access and collaboration needs of multiple users, whether trading exchanges, suppliers, or customers.

The ERP system supports XML-based interoperability, enterprise application integration, and workflow. These and other technologies yield "databots," Java-based applets with the smarts to perform XML-based workflow management. Databots let the system essentially send self-aware documents to trading partners instead of merely exchange data.

(This looks like the reinvention of EDI, electronic data interchange. Rest assured, while XML-based communications offers several inherent advantages over EDI, EDI will be around for many, many years to come.)

At the core of OneWorld Xe is JDE's eXtended Process Integration (XPI). XPI is a set of integration tools that let business processes cross internal and external information systems. That is, it can deliver information across the supply chain. More important, OneWorld users can manage business processes across the supply chain and across trading exchanges, including document handling and versioning; staying current with forecasting, collaborative planning and design, purchasing, and fulfillment; monitoring changes in manufacturing and distribution requirements; and managing inventory, even in vendor managed inventory environments.

 

Second Guessing The State of ERP

ERP vendors are reporting moderate license sales in the year 2000—at least the vendors who are left. Yes, there have been a number of ERP casualties in the past year or so. Of note, Invensys Software and Systems Division (ISS, Herndon, VA) is a result of a fire sale wherein Invensys bought Baan NV. System Software Associates (SSA, Chicago, IL) went bankrupt and was purchased by Gores Technology Group (Los Angeles, CA). Tokyo-based Fujitsu bought Glovia International/ LLC (El Segundo, CA), the joint venture between Fujitsu and McDonnell Douglas in 1997. Visibility Inc. (Wilmington, MA), which provided ERP for engineer-to-order environments, was bought by an investment group; Visibility's Aerospace/MRO division will operate as a separate company.

Some of this blood bath is a result of Y2K and diminished sales near the end of 1999 and early 2000. Another factor might be that enterprises are waking up to the reality that ERP is fundamentally an accounting system; it doesn't really resolve manufacturing problems, quality issues, or productivity constraints. Tom Grace, Senior Manufacturing Analyst at Boston-basedAMR Research, was quoted last year as saying, "Companies get no shop-floor productivity out of ERP. It's no surprise plants resist implementing ERP." And surely there are enough off-the-record comments to support that viewpoint.

The focus lately has been on e-commerce and e-business, and decidedly not on ERP. However, BRAIN's Van Noord, for one, figures ERP will come back into focus as the pendulum swings back and forth from e-commerce and the management of e-commerce through ERP.

In the meantime, ERP vendors are "expanding their footprint way beyond the back office, going all the way to the front office—and well outside the enterprise," says Dave Boulanger, AMR's Service Director, Enterprise Applications Arena. This footprint now includes CRM, maintenance management, human resources, supply chain planning, e-procurement, and trading exchanges. Some proof of that:PeopleSoft bought Vantive, a CRM vendor; SAP has a strong relationship with Clarify and announced a strategic ownership in CommerceOne, which gives it e-procurement; and Oracle is designing its own CRM.

Plus, under the category of "Having It All," OneWorld Xe automatically generates Windows, HTML, and Java user interfaces from one set of business specifications. The latter two interfaces are browser-based and don't require any code on the client computer, except technically the browser itself. These two interfaces might be best for task-specific workstation work (such as order status checks), streamlined branch office work, or for easy access over the Web to a partner's information; the Windows interface offers all the typical functionality and multi-tasking processing found in your desktop computer.

JDE and other ERP vendors are trying to make every line of their ERP code Web addressable. This approach is quite different than merely integrating a company's Web site to its databases, which basically circumvents the checks and balances, as well as much of the business process logic, that already exists in ERP.

An alternative is to rewrite the entire ERP system for the Internet. This is what PeopleSoft Inc. (Pleasanton, CA) did—and SAP AG and Oracle Corp. haven't, yet. The elements of this Internet-based ERP system, PeopleSoft Version 8, include no code on the client computer; applications accessible from any Web-enabled device; every screen is a Web screen; conventional Windows features such as drop-down menus are now hyperlinks; and an architecture based on open XML and component standards.

Yet another approach is for the ERP vendors to develop interfaces so users on the Web can receive and enter information directly from and to the ERP system. SupplyWEB Enterprise, from BRAIN North America, Inc. (Grand Rapids, MI), exposes ERP to the Internet by letting automakers publish information over the Internet to their suppliers, including information about procurement, shipping, supplier performance, defective materials, purchase orders, and payments. With this information, suppliers can better handle more traditional automotive blanket orders, such as 830s and 862s, as well as view and enter root cause and corrective action responses to quality issues (MS- and QS9000), view their overall ratings, enter invoice details, and so on. Suppliers can send advance shipment notices (ASN) over the Internet, thereby updating the procurement system as required.

SupplyWEB is a multi-plant, multi-ERP, multi-platform communications system. Automakers can use it to send releases, or they can still use the traditional Edifact and X12 formats. Why the multiplicity of communications mechanisms? Co-existence. In the real world, suppliers have different levels of sophistication; mom-and-pop shops still operate using Excel spreadsheets for internal planning, if they use anything. They'll probably use just the browser interface in SupplyWEB; other suppliers will use EDI, which also lets them modify their ASNs.

In either case, the goals are the same. First, create an automated system for as much machine-to-machine communication as possible between supply chain partners. Second, eliminate phone and e-mail tag, and the associated costs of telephoning or faxing information to suppliers.

Just in: Sequencing

Enough of this e-biz stuff. Let's turn to something solidly automotive: OEMs pushing suppliers to deliver inventory in sequence. Doing this requires some amount of delivery information from the automaker's build schedule to whatever information system being used for sequencing production on the shop floor. Granted, sequencing information is already contained in EDI transactions; however, that information has to go from the recipient of the EDI transaction, namely ERP, to the shop floor.

BRAIN has taken sequencing head on. BRAIN's Just-in-Sequence (JIS) is a separate software application that hooks into ERP—any ERP, not necessarily BRAIN's ERP—and supports three sequencing categories: assemble-, manufacture-, and pick-and-pack-to-sequence. JIS lets the sequenced supplier receive a customer broadcast or 866/DELJIT message, which then leads to a sequenced manufacturing production schedule. Dave Van Noord, BRAIN's vice president of Technology and Product Management, expects JIS will enable more automotive configurability than traditional automotive ERP because automakers will be able to more finely tune their requirements to suppliers. Currently, most of these requirements are generated very undynamically by repeating orders at the part-number level based on a bill of material explosion.

Along the same vein of transmitting a clear schedule to suppliers, JDE's newly released Advanced Planning (formerly Active Supply Chain) module helps in collaborative (read: Internet-based) real-time order promising and demand planning. This advanced planning and scheduling module, working with OneWorld Sales Order Entry, can consider multiple fulfillment options for each line item. Casual remote users can log into Advanced Planning to view and modify production schedules, and thereby determine actual product demand. Spreadsheets can be saved locally and later synchronized with the centralized forecast. And of course, the module is XML capable.

It's all in relationships

One of the current darling applications for ERP vendors is customer relationship management (CRM). They are either partnering, acquiring, or developing CRM applications to fold into their ERP systems. Now despite all the press about CRM (including my articles), CRM is probably not an application for the tiered relationships in the automotive industry. Except at the OEM level, participants in the automotive supply chain do not deal with hundreds, let alone thousands, of different customers. So the need to aggregate demand and generate forecast trends does not exist. This is not true for companies heavily into aftermarket sales, such as parts distributors, or companies that are a combination of tiered supplier and aftermarket supplier. For these companies, CRM might prove useful.

Another reason why CRM might not, uh, fly is because of how the automotive industry works. While the general notion of CRM extends to managing trading relationships, pricing, and things like that, the automotive industry operates more according to what the automakers dictate.

Having said that, BRAIN has an application called ACmanager (AC is for "Automotive Customer"). Even though "the market analyst beat [him] up for saying this," Van Noord calls ACmanager a CRM system because it handles all the release and shipping requirements mandated by the automotive customer (automaker or supplier). It automatically processes volume releases and converts customers' orders into a single, user-friendly display. Every time you ship, ACmanager handles the release accounting, updates inventory, generates barcode labels, completes the shipping paperwork, and generates the ASNs. ACmanager is platform independent, and it is not tied to any single ERP application.

What does this all mean?

ERP lives on. However, automakers and automotive suppliers need to look beyond ERP, and beyond their "Internet strategy" or "e-business strategy." "Enterprises, especially Tier Ones, need to think in terms of what their trading exchange and supply chain strategies are going to be in the future," says JDE's Scott.

As e-business directives within automotive move forward, that part of the world will get more complex. Business-to-business transactions will get more complex and faster. Adaptations will go faster, too. "The key as a supplier to the OEMs or to Tier 2 or Tier 3 suppliers is to adopt a technology that provides you with the flexibility to adapt to pretty much anything," concludes Scott.