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Don’t shoot the IT guy: ERP selection and project management implementation in high-tech manufacturing

ERP industry analyst discussion reveals benefits of cloud v. on-demand ERP platform as a service (PaaS); ERP vendor selection, and avoiding pitfalls with project management and implementation.

By Mark Zetter

  Click to listen: ERP Interview with Frank Scavo

VentureOutsource.com interview with ERP analyst Frank Scavo.

Zetter: Hello, I’m Mark Zetter president with VentureOutsource.com. Our topic today is enterprise resource planning systems, better known as ERP. And I’m speaking with Frank Scavo president of Strativa, a management consulting firm. Frank is also the president of Computer Economics, an IT research firm. Frank is a recognized analyst in the ERP software sector.

Before we begin our conversation, if someone in our audience has suggestions for future conversation topics or feels there’s a particular person they feel would be well suited for an upcoming conversation, email us your comments or suggestions to insight@ventureoutsource.com.

The short take on ERP is it is software that helps companies manage information. But effective enterprise resource planning is way more complicated than this.

Effective ERP systems can auto manage the integration and reporting of information across company internal functional groups, like finance and accounting; manufacturing, HR, sales, management of customer relations, project and supply chain management, to name a few.

Plus, ERP software systems also integrate internal, external information.

Essentially, ERP manages and executes information flow between all internal company functions, while also managing connections to stakeholders outside the immediate enterprise.

Enterprise system software is a multi-billion-dollar industry and some say IT investments have become the largest category of capital expenditure in the United States-based businesses over the past decade.

In addition to managing internal and external information across an organization’s enterprise, more specific to the interests of our audience, many technology OEMs and contract electronics manufacturing services, or EMS, providers can have multiple product design and manufacturing locations and multiple geographies in countries with each transacting multiple currencies, which can wreak havoc on company finance and accounting functions.

Add to this, companies seeking an ERP solution often desire, or require, different user system functionality for their specific enterprise systems. Demand for, and user customization, can vary.

Additionally, recognizing benefits when choosing either cloud-based or on-premise ERP systems is not always straightforward.

Listeners can quickly see how navigating an ERP decision tree can be challenging to say the least.

ERP systems used to be only for large enterprises. Today, tech manufacturing, and companies of all sizes and in other industries, are benefiting from implementing ERP systems.

Frank is here to talk ERP, or at least as much as we can in 30 minutes.

I’d like to add, listeners will be able to post their questions to the discussion transcripts once we publish it. You can also ask Frank questions / contact him directly in GlobalNet community.

We’ll start with a question that came in, in the form of a website reader’s search through the Website. The site user was asking about whether ERP systems are able to manage actual individual SMT equipment in an automated PCBA line and I’m not sure of the answer to that but Frank can you speak to that just for a moment?

Scavo: Sure, well, Mark, thanks very much. The question is, the way I heard it there, regards manufacturing execution systems.

So traditionally, ERP systems were really more for managing back office transactions, as far as managing the production line and managing manufacturing equipment, that generally is the function of what we call manufacturing execution systems.

Typically, ERP, in terms of how it’s defined, does not take on that responsibility but would have, potentially, interfaces with production equipment and other forms of numerical control or production operation.

 

“…moving more and more toward mobile, the cloud deployment, the social and the business analytics is where much of the activity and attention is now being placed.”

 

Zetter: With regards to some of the features – specific ERP offerings, what would you say are three or four of the ‘must haves’ or most attractive [features], specific to electronics manufacturers, that are looking at ERP systems?

Scavo: ERP systems really started in the manufacturing industry and over two or three decades or more they have evolved into some pretty industry-specific functionality.

So I think it’s important, as your pointing out there, we need to look at what is appropriate for electronics manufacturers or contract manufacturers and so on.

I think the things I would look at in terms of when I’ve worked with these kinds of companies is strong integration with the engineering functions.

Many times electronics manufacturers have a high degree of engineering change and that needs to be managed in conjunction with say the PDM system; the product data management or product lifecycle management (PLM) system. That’s one thing I would look at on the front end.

Taking designs from engineering in terms of bill of material – engineering bills of material, synchronizing with manufacturing, the bills of material…if the electronics manufacturer has a product that is maintained in the field then it’s important to also have good integration with back-end systems that provide repair center, or field service systems…

Zetter: Reverse logistics.

Scavo: Reverse logistics, taking material back from customers. Many European systems do a good job of shipping product, but then they get weak on taking product back from customers or distributors. And we know in electronics that can be a normal course of business.

It’s not just in the case of product recalls, and so on…they may be putting material out on consignment, there may be redistribution involved in moving stock from one distribution location to another…so I think the strong tie in with logistics is important.

Back on the engineering change issue, it’s important also in some types of manufacturing of electronics, to be able to maintain more than one revision level in production.

You may be shipping product under one revision but introducing the same product under the next revision.

I think that’s important and then there are traceability issues.

You have warranty – some products that are supplies – supplier items that are provided to you under warranty that you need to track on a serial number basis and be able to make warranty claims as appropriate.

There are a lot of specific requirements when you get into any specific manufacturing vertical and I think electronics is no exception to that. You’ve got to really look for the types of features and functions that will make a difference to you.

Zetter: How about understanding your own operation before going out and speaking of providers and mapping existing processes, and then on top of that, choosing someone internal to help manage the implementation: project manager or project coordinator…

How would someone start to map out, what types of formats are involved, in mapping out existing requirements or to help determine existing requirements and then what are the top three skill sets you would be looking for in a project manager to manage?

Scavo: Let’s take those one at a time. You bring up two or three different areas there. Let me talk about the business process first because I think one of the things that companies underestimate is – especially in a little bit larger companies – in smaller companies it’s possible for one person to have a good grasp on the entire operation.

But in a larger companies that’s not true. There’s nobody that really has the complete picture so it is important as you point out to map the business processes to some level before you select an ERP system.

You need to understand your own business well enough to be able to define the requirements that you’re going to look for in ERP…

Zetter: But ‘how’ do you do this? How do you map it out? What is the physical…?

Scavo: Well, that’s the $64,000 question because I’ve seen two extremes.

I’ve seen one extreme where companies will go in and take a very cursory list of what they think are the requirements when shopping for software. They don’t really have an in-depth understanding.

On the other hand, I’ve seen companies go in and do a very exhaustive ‘as is’ analysis that takes months.

Without criticizing some of the service providers in this area, some of them like these kinds of projects because the consultants can bring in a lot of junior people and set them loose to do process mapping.


  Click to listen: ERP Interview with Frank Scavo


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