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A business case
In the post-September 11th world, demand for Hunter’s military and security products increased dramatically. But its legacy computing systems couldn’t support rapid growth. “Our legacy ERP system hadn’t been updated since 1989,” says Denny Weyhe, controller at Hunter. “It was green screen, had limited reporting capabilities, and had no drill-down functionality of any kind. There was no room to grow with that system.”
Before Hunter began its search for a new ERP solution, it identified five capabilities it had to deliver, Weyhe says, including:
- Integration, so Hunter wouldn’t need to cobble systems together;
- Accounting best practices; of a new attitude from the company’s management when it came to information technology.
“In the past, IT was considered a necessary evil. We invested only when we had to. Consequently, the systems we had in place didn’t address our requirements,” Schumacher says. “For instance, we had to pull information from three or four systems to compile month-end reports. Without real-time access to information, those reports were always late and not as useful as they could have been.”
In contrast, Schumacher says, the company today looks at IT vendors as strategic partners. Given constant, accelerating change, IT investment is increasingly center stage, and it’s important to partner with IT providers whose strategic vision matches that of Schumacher, he adds. Schumacher says enterprise resource planning (ERP) provider SAP has taken pains to incorporate best practices in its solutions for those companies. This leads directly to an ERP implementation that relies on configuration, rather than customization, to meet its users’ needs.
Configuration, not customization
“We took a hard-line approach that we would mold our processes to best practices whenever we could. We wanted to leverage SAP’s industry experience and didn’t want an IT infrastructure that wasn’t manageable,” says Schumacher.
“In other words, too much customization would have slowed the implementation, but also would have made it difficult for us to take advantage of new functionality when it became available.”
Jay Krueger, solution manager, SAP Industry Business Unit, says SAP best practices include 30 years of industry experience that manufacturers can benefit from. These practices are derived not just from industry managers within SAP, as well as its Flexibility, to configure interfaces and custom reports as needed;
- Internal controls, including sign-off levels for purchase requirements and purchase orders; and
- Rigorous audit capabilities needed by a defense contractor. “On the production side, we wanted better visibility to inventory,” Weyhe says, “and to analyze individual production orders so as to make business process improvements.”
Industrial manufacturing
To be successful, an ERP system used in the industrial manufacturing space must combine broad business functionality with deep, embedded domain expertise in best manufacturing practices.
Industrial manufacturing itself is a broad category of product markets that include:
- Construction and mining machinery;
- Electrical equipment, appliances, and components;
- Engine, turbine, pump, and compressor machinery;
- Heating, ventilation, air conditioning, and plumbing equipment;
- Industrial tools and metal working machinery; and
- Lifting, material handling, and railroad equipment.
As diverse as these industries may seem, they share common characteristics, says Mark Lehew, VP, discrete manufacturing industries, SAP.
For instance, all face complexities of quote and order management for equipment that runs the gamut from highly configured to custom designed. Moreover, equipment, services, and parts may be mixed in a single order, Lehew says, as manufacturers use customer service as a competitive differentiator.
The economics of the industry are changing, too. Rapid consolidation caused by a quickening pace of mergers & acquisitions means even midsize companies operate today in global networks.
“Manufacturers want to extend lean initiatives across multiple facilities,” says Lehew. “These companies are growing quickly and globally. They have pressing needs for a single system that allows visibility across divisions and locations. At the same time, the system must handle multiple languages and currencies, and meet local compliance requirements that differ from country to country.”
It’s pre-configured
Lehew says it doesn’t take long for manufacturers to get comfortable with the applications, capabilities, and functionality SAP provides. More often, of greater concern to them is whether they have the IT resources for a good implementation.
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