February 2007 | Commentary | IT Matters

To Hang On, Let Go of Antiquated Processes

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In today's brutally competitive environment, manufacturers are discovering that the only way they can hang on is to let go.

They are realizing they must abandon antiquated business processes and take full advantage of the affordable and sophisticated technologies available to them that automate and enhance processes throughout the plant.

Letting go is no easy task. Manufacturers have invested considerable money, time, and confidence in their approaches to ordering, production, accounting, and customer practices, which, until now, have been "good enough."

At the same time, many manufacturers have not kept their information technology up to date. Often a company's management feels it cannot afford to adopt an entirely new ERP system, but the organization may fail to realize that its current system can be upgraded efficiently, and at reasonable cost, to provide new levels of capability and savings.

What kinds of outdated processes are we holding on to? Creaky, disjointed processes that require far too much manual activity.

Purchasing, for example, still involves too many people faxing purchase orders to their suppliers. The time it takes to produce the paper purchase order, fax it, pick it up, re-key the information, correct keying errors, and communicate back to the manufacturer is time wasted in today's digital economy.

A Batch of Inefficiency

Batch processing is another inefficient operation that many companies continue to run. Every night the manufacturer goes offline to process the impact of new and changed orders, recalculate resource requirements, and produce status and exception reports.

Time-consuming material requirements planning runs may be done only weekly. This sporadic updating limits a manufacturer's ability to operate at the speed of business reality. Without real-time information, it is impossible for a manufacturer to effectively operate and respond to customer demands.

It's time to let go of the manual, the generic, and the disconnected, and grab hold of new ways to automate operations, ensure quality, and vastly improve planning, while paying for itself in the process.

In place of a paper-based purchasing process, companies can benefit from systems that offer electronic supply/demand communications and collaboration.

With these systems, manufacturers develop supply and demand plans automatically calculated from customer demands, more accurate sales forecasts, and other factors. The system analyzes incoming orders and automatically sends to their suppliers updates that describe the number of components needed at a specific time on a particular date.

The whole process operates without any need for manual intervention unless an exception to the plan occurs. Then an electronic alert is sent from the supplier to the manufacturer, and only then do people enter the process.

With integrated ERP technology, real-time visibility replaces batch processing. Orders, materials, production schedules, and delivery dates are calculated continuously so managers can see up-to-the-second information any time from anywhere.

Collaboration between supplier and manufacturer takes on radically new dimensions with technology that allows suppliers to see the manufacturer's upcoming needs and the manufacturer to see into the supplier's inventory.

With this electronic visibility, the supplier can view the demand directly in real time and respond more quickly and efficiently. The end results are shorter lead times, less inventory, improved flexibility for the manufacturer, and improved responsiveness from suppliers.

The first step in letting go is finding a trustworthy safety net. Manufacturers transitioning to the latest technology should seek out a comprehensive, integrated ERP system that encompasses the entire scope of the company's business—from quote to cash.

Those who already use reasonably current ERP technology should examine modules and upgrades that recently have become available and that can make a tremendous improvement in business processes at an affordable price.

The ERP system must be attuned to the specific industry in which the manufacturer competes, and must meet that industry's particular requirements. Likewise, the system must be flexible so it can be personalized to the processes that drive the manufacturers' competitive advantage.

Finally, an ERP solution should be able to evolve as the manufacturer's business and product portfolio evolves. Small and mid-size companies tend to grow more rapidly, change direction, add product lines and capacity, and expand operations—change is their only constant.

Their ERP system must make change easy—not get in the way—by supporting the fluctuating requirements of the evolving business. Companies should not have to toss out their technology every time they reach a new growth plateau. Rather, they should select technology that will lead them to growth and expand with them.

In letting go, manufacturers can grasp unparalleled efficiencies, improve profitability, and achieve higher customer satisfaction through the potential inherent in today's technology.

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