Conquering Complexity in Real Time Using Two-Tier ERP Strategies

Best Practices of Complex Manufacturers

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Cincom In-depth Analysis and Review

S I M P L I F I C AT I O N T H R O U G H I N N O VAT I O N

1 Conquering Complexity in Real Time Using Two -Tier ERP Strategies

Conquering Complexity in Real Time Using Two-Tier ERP Strategies

Best Practices of Complex Manufacturers

Table of Contents
Bottom Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Using Two-Tier ERP Strategies to Make Manufacturing Strategic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Conquer Complexity that Can Kill a Company if Left Unchecked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Aggressively Intelligent in Using Two-Tier ERP for Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Increasing Financial Performance by Capitalizing on the Intelligence and Knowledge of Teams Instead of Relying on Cost Reduction Alone . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A Passion for Measuring Results and Continually Improving Is Engrained in Their Cultures . . . . . . . . . . . . . . . . . . . . . . 5 Has Defined Critical Success Factors for Two-Tier ERP Strategies and Lives by Them . . . . . . . . . . . . . . . . . . . . . . 6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

WHITE PAPER
Cincom In-depth Analysis and Review

By Louis Columbus

Conquering Complexity in Real Time Using Two -Tier ERP Strategies 2

Bottom Line
Becoming more demand-driven, staying focused on emerging markets and attaining higher levels of performance all start by using two-tier ERP strategies as foundations of strategic growth.

the status quo and confront complexity for what it is a major roadblock in your company to achieving its objectives and goals. And, using two-tier ERP systems to scale globally can save your company potentially thousands of hours and millions of dollars in lost opportunities.

Opportunities. Theyre everywhere. Spotting and acting on them takes enterprise systems that can cut through complexity and allow a business to quickly achieve its goals.
From opening a new manufacturing, distribution or sales center in an emerging, high-growth region of the world to outpacing competitors by sheer efficiency and focus, the race is on. Never before has time been so precious a resource, so costly to replace and so absolutely essential for capitalizing on opportunities. The old model of inflexible, uncustomizable, slow-to-react ERP systems is quickly going away. ERP systems the heart of many complex manufacturers must be agile; focused on customers; and capable of being quickly integrated to, reconfigured and most importantly aligned to strategy not just there to deliver data-processing dial tones in the form of routine reports that reflect the past. This white paper is for companies that are out to conquer complexity and become more competitive now. By concentrating on steps you can take today to transform your complex business and make it more competitive, responsive and opportunistic your company will more effectively use the ERP systems it has. Its time to challenge

Here are the best practices that complex manufacturers are using to get the most value from their two-tier ERP strategies:
1. Using two-tier ERP strategies to make manufacturing strategic HP, IBM, Schindler, Toshiba and many others are doing this with exceptionally strong results. In speaking with several CIOs about this strategy, a few have mentioned the Harvard Business Review article, Making the Most of Foreign Factories, by Dr. Kasra Fedrows. Dr. Fedrows has done decades of research on what makes distributed manufacturing centers globally successful. His definition of the role of foreign factories is graphically shown in the following figure. Source: (Fedrows, 1997). He has found several critical success factors that are included in the framework, which is also included in this white paper. From nearly two decades of research, Dr. Fedrows has found six dominant strategic roles of global factories. From the outpost to the lead roles of global factories, the most critical dimension is access to skills and knowledge. Dual-tier ERP systems are what create lead factories those that are delivering innovations in process and product strategy. And whats making lead factories possible is the real-time data delivered by dual-tier ERP strategies.

The Roles of Global Factories: a Strategic Matrix

Reprinted with permission from "Making the Most of Foreign Factories" by Kasra Ferdows, Harvard Business Review March/April 1997. 1997 by the Harvard Business Publishing Corporation; all rights reserved.

3 Conquering Complexity in Real Time Using Two -Tier ERP Strategies

2. Conquer complexity that can kill a company if left uncheck Complex manufacturers that are attaining best practices with their two-tier ERP strategies are focused on how to simplify every phase of their value chain. From the upgrading of legacy systems to the real-time integration of information workflows across departments, divisions and global subsidiaries, these complex manufacturers are attaining a very high level of competitive efficiency. Examples of companies in this area include Cisco with its real-time updates on build-to-order production workflows, Dell and its highly integrated supply chain, Goodrich, Greenheck Fan, Harris Corporation, Michelin and others. From the excellent study, In Pursuit of Operational Excellence: Accelerating Business Change through Next-Generation ERP, by IDC Manufacturing Insights, the traditional ERP limitations of complex manufacturers are shown below. Respondents ranked the first, second and third weaknesses or limitations of their ERP systems. Rank 1, Rank 2 and Rank 3 in the figure below indicate these rankings.

The top three impediments to getting more value from existing ERP systems include the following: 1. Existing ERP systems are too complex to integrate seamlessly with other existing applications (23.3%). 2. Financial ERP and operational capabilities are weak or nonexistent (20.1%). 3. Its too complicated and expensive to upgrade (18.4) Its important to look behind these statistics to see whats driving them. In many instances, its the needs of different departments, divisions and country subsidiaries that are outpacing the centralized ERP systems, and that is a main factor thats driving the growth of dual-tier ERP systems.

3. Be aggressively intelligent in using two-tier ERP for competitive advantage Two-tier ERP systems will continue to gain in importance as a means to address new market requirements, replace aging legacy systems that are losing their effectiveness and support new business models. Here are how complex manufacturers are making two-tier strategies pay by streamlining operations while gaining customer insights at the same time. By relying on a two-tier ERP strategy, Schindler was able to displace the long-standing rival in India by cultivating a local supply chain. The competitor, who was U.S.-based, was completing sub-assembly work in the Midwest and shipping components to India for final assembly at customer sites. By using a two-tier ERP strategy and sharing a common system of record through Master Data Management (MDM) with its European headquarters, this elevator company was successful in displacing 34% of the low-end elevators throughout southern India. HPs reliance on a two-tier ERP strategy in its printer production operations led to innovations in process management and new product development. What was remarkable about visiting the HP manufacturing plant in Malaysia was how quickly the entire facility could translate little advances in production processes into cost and time savings. The HP Malaysia plant is well-known for this ability to innovate and educate other manufacturing centers of these advances. Its ability to innovate would not have been possible without HP having chosen a two-tier ERP strategy for its Malaysian operations. Dr. Fedrows has also visited this plant and written about it in the article, Making the Most of Foreign Factories.