Ever since the analyst firm Gartner coined the term "enterprise resource planning" or ERP, the prevailing wisdom in manufacturing software was that combining all of the core functions of a manufacturing concern on a single enterprise-wide software suite enabled more effective management of a mid-sized to large enterprise.
In recent years though, there has been a growth in the number of stand-alone software solutions -- "best of breed" applications as they are called -- that threaten to roll back the progress experienced by manufacturers lo these many years. These software products deal with only a segment of the enterprise, inhibiting the free flow of communication and reducing efficiencies. The more these software products proliferate, the more expensive and confusing enterprise technology becomes, and he more difficult it is to coalesce data for reporting and manage enterprise-wide security.
Indeed, ERP suites allow a greater degree of interaction between functions that would otherwise be relegated to separate data silos, combining data on manufacturing, finance, supply chain management, maintenance and other functions in a single universe. This allows executives more effective visibility and control of the many manufacturing and business processes that are cross-functional.
Examples of the superiority of integrated ERP suites abound. Imagine the situation faced by a manufacturer that needs to design a product that uses fewer regulated heavy metals, ships more easily to reduce carbon footprint and meets requirements for recyclability at decommission. This would require tight integration between engineering, supply chain management and service management, at a minimum. Or what about the capital equipment manufacturer working on amendments to design of a wind turbine even as long lead time items need to be ordered and fabrication needs to begin. This would require tight integration between engineering, project management, supply chain management and manufacturing. Failing this integration, it would be near impossible for manufacturing to work on the same revision of the design, or for purchasing to know which bill of materials was current so they could plan accordingly.
Fortunately, a packaged ERP product based on a granular, service oriented architecture delivers this integration quickly and cost effectively because each component of the ERP suite was designed to work together in a plug-and-play configuration. Each manufacturer may have slightly different business processes, but a modern ERP suite ought to be configurable enough to meet a variety of business models and process flows.
Decline of "Enterprise" in ERP
Due in part to a recent flurry of merger and acquisition activity among manufacturers, many companies find they are no longer realizing the full benefits of ERP. They are left with numerous acquired divisions that each run separate ERP solutions or collections of standalone "best of breed" solutions, and lose the true "enterprise" perspective in their ERP system. This means that while they may be one company on paper, they cannot behave like one company because they do not have visibility or the ability to collaborate across their entire combined operations. To solve this problem, many try to integrate numerous best of breed and divisional software products, which can be expensive and often keeps them from realizing the full potential of an enterprise solution.
There is in fact a place for integrating best of breed solutions with ERP, but the best way to accomplish this is through a mechanism known as extended ERP. Extended ERP provides enhanced solutions, such as integrating warehouse management with traditional ERP, using modern integration principles such as Service Oriented Architectures and Web Services. When done properly, this approach can provide a tight integration without creating duplicate data and "application gridlock" that prevents future upgrades.
Drawbacks of Best of Breed Solutions
Whether they are run in place of a proper, integrated, ERP system or run alongside ERP in a one-off integration, standalone and best of breed solutions present distinct drawbacks.
- Integrating best of breed solutions requires the work of systems integrators, adding cost and substantially extending implementation time. These efforts are typically unnecessary with a Suite application.
- Reporting and access to information can be more expensive using a best of breed solutions because corporate information is spread across multiple applications and platforms. This typically leads to expensive data warehousing projects to pull together a common view of data. This is also problematic because the source data exists outside the data warehouse, leading to timing and data integrity issues. These projects and expenses are typically not required by Suite solutions.
- A best of breed solution can increase costs for supporting technology acquisition and maintenance costs. Each solution often has separate technology and version requirements for things like databases, software environments and middleware. This is usually not true with a Suite application that shares a common technology. Further, Suites are often sold with a special runtime version of a supporting technology, further reducing cost and complexity.
- Different best of breed solutions tend to have distinct or unique security models, and that means it is harder to maintain security and privacy across an integrated collection of products. Technologies are available to simplify authentication, but authorization (what a user can actually do) is typically controlled at the application level. An application Suite will offer consistent and straightforward authorizations and user permissions across all functions.
- Usability and the ability to collaborate are often diminished with a collection of best of breed solutions because users that must work cross-functionally must learn different user interfaces and systems. This is in contrast with a Suite product that offers a consistent, well-thought-out user experience.
- Common data like customers and product information is typically shared by multiple applications in a scenario involving multiple best of breed solutions, requiring data to be replicated or otherwise synchronized across applications. This can lead to duplicate data, complex synchronization scenarios, and data integrity issues not experienced with Suite solutions.
Conclusion
As manufacturing becomes more challenging and complex, there is an increased, rather than a diminished, need for simplicity. Enterprise software Suites deliver this simplicity by bringing data and processes together cross-functionally. A good ERP Suite ought to be like an open concept office, where everyone can interact and collaborate freely, maximizing organizational agility. Best of breed solutions, whether or not they are owned by the same software vendor, throw up walls where there should be windows and doors.
Rick Veague is Chief Technology Officer with IFS North America http://www.ifsworld.com/us/, and is based in the Itasca, Ill. headquarters. In this role, Veague provides direction for IFS' use of Service-Oriented Architecture (SOA) and works with IFS' leading customers to leverage SOA to provide state-of-the-art ERP.
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