This week, Sanjiv Karani and I are attending Gartner’s Supply Chain Executive Conference in Palm Springs, California. This is the best conference of its kind in the industry, bringing together enterprise software, manufacturing, services and supply chain experts both within Gartner and across the industry. It’s encouraging to see so many areas of this industry measure the value and success that’s being delivered to customers. If you ever have a chance to attend this conference, invest the days; it’s well worth it.
Sanjiv and I are seeing that the seven most critical success strategies for Cincom customers that are pursuing two-tier ERP strategies are emerging as best practices throughout the industry. The following seven strategies of market leaders, learned from our visits with Cincom customers and reinforced by lessons learned at this conference, further underscore just how effective two-tier ERP strategies are for manufacturing companies today:
1. Relying on two-tier ERP strategies to make manufacturing strategic by aligning the market and supply chain needs. IBM, Schindler, Toshiba and many others are doing this with exceptionally strong results. This conference is rich with examples of how two-tier ERP strategies are making companies more agile and capable of responding quickly to both the pace of change and economic turbulence occurring today. In speaking with several CIOs about this strategy, a few have mentioned the Harvard Business Review article, “Making the Most of Foreign Factories” by Dr. Kasra Fedrows. Dr. Fedrows has done decades of research on what makes distributed manufacturing centers globally successful. The following figure illustrates how factories can in fact play a variety of roles in the execution of a strategic plan. “The Roles of Foreign Factories: A Strategic Matrix,” which is shown below, captures the essence of what Dr. Fedrows has found in this research of the most effective manufacturing strategies.
Reprinted with permission from “Making the Most of Foreign Factories” by Kasra Fedrows, Harvard Business Review, March/April 1997. ©1997 by the Harvard Business Publishing Corporation; all rights reserved. You can find the article on the HBR site: http://hbr.org/1997/03/making-the-most-of-foreign-factories/ar/1).
2. Conquering bad complexity that can kill a company if let unchecked is a passion in high-performing companies. The ability to discern the source of bad complexity and eradicate it from a business model is a critical survival skill of even the most resilient companies today. We’re seeing that complex manufacturers that are attaining best practices with their two-tier ERP strategies are focused on how to simplify every phase of their value chain―taking every opportunity to replace bad complexity (high costs, confusion of goals and customer definition) with good complexity (more aligning and focus on core customer requirements; measuring performance collaboratively, not in silos). Examples of companies in this area include Cisco with its real-time updates on build-to-order production workflows, Goodrich, Greenheck Fan, Harris Corporation, Michelin and others.
3. Developing and continually fine-tuning analytics and Business Intelligence (BI) data on their entire business model so they can be moved faster, with greater clarity and precision than competitors. This is one of the most fascinating lessons learned at this conference. There are manufacturing companies today using analytics and BI to gain exceptional acuity, clarity and insight into their operations, looking to fine-tune them in the process.
4. Developing an innate ability to translate knowledge into competitive advantage very rapidly, often within weeks, and completely changing the competitive dynamics of their industry in the process. The ability to capture both tacit and implicit knowledge is critical for any manufacturer to continually stay demand-driven. Leif Erickson and Simon Jacobson’s session, “Factory of the Future: Next-Generation Manufacturing Strategy” made this point very clear, and had many outstanding points. Leif showed how 60% of the knowledge a manufacturing company needs is tribal knowledge. Only by using enterprise systems to unleash this expertise and align them to strategic priorities can a business grow.
5. A passion for measuring results from the customers’ perspective first and continually improving is so engrained in their cultures it changes how they evaluate risk and opportunities. Both at this conference and throughout conversations with customers, it becomes clear that the greater the reliance and valuing of customer value in a supply chain, the more successful and lean it becomes. This was clear in many of the sessions today, and is a very strong theme throughout the conference as well. Measuring results from the customers’ standpoint is crucial for unifying and leading a manufacturing company to excellence.
6. Has defined Critical Success Factors for two-tier ERP strategies and lives by them. Supply chain segmentation is a major area of interest at this conference. That aspect of supply chain management is integral to how a strategic IT plan is designed and implemented as well. The following table highlights eight of the most critical success factors complex manufacturers that are attaining best practices are relying on for planning and executing two-tier ERP strategies.
7. An urgency to lead their industries in manufacturing performance, from supply chain efficiency to perfect order performance. One CIO of a semiconductor manufacturer told me that while visiting one of their chip foundries inAsia, they led the industry in quote-to-cash cycles at 22 days, and they could fulfill a quote for components in less than three hours. He had that IT department immersed in seeing the goal of being the best in their industry―and dashboards were on the message boards, on their Intranet sites―everywhere to reinforce the message. He said that only a two-tier ERP system flexible enough for their area in the industry would have made that possible.
Bottom line: Becoming more demand-driven, staying focused on emerging markets and attaining higher levels of performance all start by using two-tier ERP strategies as foundations of strategic growth.
For more information on a two-tier ERP strategy, read “Conquering Complexity in Real-Time Using Two-Tier ERP Strategies―Best Practices of Complex Manufacturers,” which includes in-depth analysis and review of two-tier ERP strategies and how to achieve success with these strategies. View or download the white paper here: http://ow.ly/aVA0M (no registration form is required).
Fedrows, K. (1997), “Making the Most of Foreign Factories,” Harvard Business Review, 75(2), 73-88
Nah. F. & Delgado. S (2006), “Critical Success Factors for Enterprise Resource Planning Implementation and Upgrade,” The Journal of Computer Information Systems, 46(5), 99-113
Ugrin, J. (2009), “The Effect of System Characteristics, Stage of Adoption and Experience on Institutional Explanations for ERP Systems Choice,” Accounting Horizons, 23(4), 365-389
Velcu, O. (2010), “Strategic Alignment of ERP Implementation Stages: An Empirical Investigation,” Information & Management, 47(3), 158