Here Today…

Posted on 19 Nov 2008 by The Manufacturer

Over the past decade, the ERP market has experienced considerable change. Technology has developed and manufacturers’ knowledge and experience of buying, implementing and using computer systems has grown. At the same time, there has been a consolidation of solution vendors and products. While this has helped sort the wheat from the chaff - only the strongest products and suppliers have survived - there are still pitfalls for the unwary buyer. John Stephens reports

These days the use of business systems in manufacturing is a way of life and many manufacturers are on their second or third generation ERP system. Companies know what to expect from computer systems and their suppliers; modern solutions have standardised in terms of their functionality to a great extent; they are easier to use and prices have come down. In short, this is a mature market, and while business solutions can hardly be described as commodity products, it is much more a buyer’s market than even five years ago. It is hard to see anything other than that trend continuing.

As new customers become increasingly difficult to find, the only way ERP suppliers can expand their user base is to sell to each others’ customers. As well as putting downward pressure on prices, this has inevitably led to a bit of a shake up as Darwinian principles begin to apply. Some (usually smaller) systems and suppliers have disappeared altogether, while others have been acquired by competitors or other IT companies seeing an opportunity to expand their portfolio into the manufacturing sector.

All well and good, but if you’re thinking of changing your system, you should apply due diligence. Whichever system you choose, you will be entering at least a five to 10 year partnership with the vendor and you need to be certain about the future strategy for your system and the supplier itself.

Mergers of suppliers or products in the UK are sometimes driven by the acquisition of an overseas parent; otherwise acquisitions have tended to follow one of two paths: companies which are trying to grow by acquiring complementary products and those which are buying up competitors to increase their user base. In theory there’s nothing wrong with either scenario, but in the latter case, only if the vendor can demonstrate a clear vision and strategy for its product or products. Because of their acquisitive nature, some vendors now have two or more ERP solutions, so how do you know which one is right for you?

One of the problems here is that, to a large degree, ERP solutions offer essentially the same core functionality and the real important differences between them can only be found in the nuances of the system and in its implementation. Your supplier will have to demonstrate a detailed knowledge of both the system and your business if you are going to be convinced it’s right for you.

Craig Such, managing director of Access Supply Chain (supplier of the eponymous ERP solution), believes it’s a cause for concern if a single sales team is responsible for more than one ERP product; something he says has become more prevalent in recent times.

“ERP systems are very complex and it’s just not possible to have enough depth of knowledge on every product,” he says. “If you have more than one product in your portfolio, it makes it very difficult for the sales consultant to decide which product is the right one for the customer. We have been in competitive situations where the competitor has switched to recommend a different product mid-way through the sales cycle, as additional customer requirements are identified and they realise the system they originally put forward is no longer suitable.”

Access Supply Chain is itself part of a bigger group, Access Technology Group, which has been building its product portfolio in recent years, both through organic growth and acquisition. Its strategy is to acquire complementary products, often in niche vertical markets.

While it is a stand-alone ERP solution, Access Supply Chain also shares its core ledgers with another Access Technology Group product – Dimensions. Dimensions is a fully-featured business and accounting solution used in a wide range of industries, and it has customers as diverse as the Royal Philharmonic Orchestra and Bridgestone Motor Sports. As a dedicated manufacturing and distribution system, Access Supply Chain allows Dimensions customers to add this extra functionality, if and when it is required.

One example of this is Sheffield-based kitchen manufacturer, Crosby Kitchens – winner of The Manufacturer’s IT in Manufacturing Award last year. Crosby is a 65-employee operation with two divisions – manufacturing and sales and marketing. In England its products go to high street kitchen retailers via two main distributors; in Scotland it sells to house builders through a distribution arrangement with builders’ merchants.

This is a fiercely competitive sector with manufacturers vying for a share of a market with single-digit growth. A couple of years ago, Crosby recognised it needed to overhaul its business systems if the business was to move forward.

Managing director Mike Atkin explained: “We really had very little information for the factory. The shopfloor was being run on spreadsheets and this meant we had no clear view of the work in there. What’s more, data often had to be rekeyed two or three times throughout the course of an order – this took time and often led to errors. We needed a manufacturing system to help us secure more control and more visibility.

“We were already using the Access Dimensions accounting software for all the ledgers and we were very pleased with that,” says Atkin. “We compared Access Supply Chain against other solutions and it competed very well in all aspects of functionality and it was very competitively priced. What tipped the balance for us, however, was that integration was simple – we could continue using the finance software and just move forward seamlessly with the manufacturing system.”

The business growth speaks volumes: “We’ve increased sales by 20 per cent in the last year and before we had the new system, we would have really struggled to keep up with any amount of new business – we were constantly fire-fighting and troubleshooting to get work processed as fast as possible. A 20 per cent increase in business means 20 per cent more orders to be picked, 20 per cent more products to be delivered. We’ve got the same workforce and we’ve taken this increase in our stride. We are more effective, we have more visibility and ultimately more control.”

Deciding it’s time to buy a new ERP system is one thing, but what if you find yourself in the situation where your existing ERP solution or supplier is the subject of an acquisition? Again you need to find out what the future holds – if the new owner has other products, what is the upgrade path, is yours the system which is going to be developed and supported going forward, or will you be asked to migrate to one of the vendor’s other products? Nowadays, more and more suppliers are including software upgrades as part of the annual maintenance contract but Craig Such says it isn’t just the cost of the software you have to be aware of.

“Even moving to an updated version of your existing solution will require an element of training. If you’re moving to a completely different product, there will be so much more training and reimplementation – potentially running into tens of thousands of pounds – you may as well go to market and start again.

What’s more you may find the system you are being forced to take just isn’t suitable – it may have too much functionality or not enough,” he says.

So whether you’re buying a new ERP system, or if you find your existing solution has been acquired, make sure you start asking the right questions. Find out whether the supplier’s resources are focused on a single solution or spread across multiple, competing products. If it’s the latter, ask what future support guarantees the supplier offers – will you be forced to upgrade and what will that cost you? If you’re not satisfied with the answers then you might want to think about your options elsewhere.