Enterprise Applications—The Genesis and Future, Revisited Part Six: Looking to the Future

Today's enterprise applications are required as a matter of course to address more than the processes taking place within the walls of an enterprise. While Web-enablement and collaborative e-business will continue to be a major direction, easier enterprise applications integration and interconnectivity; more flexible pricing; embracement of "plug-and-play" applications that support commonly accepted standards (reflecting a reduced need to heavily customize multi-vendor solutions), embedding analytical applications; knowledge management (KM); and workflow and business process management (BPM) are some of the best prospects among the ongoing wave of enterprise applications hot-buttons. It is needless to say that almost all traditional ERP vendors (small and big alike) had to experience a "wake up call" and have long been trying to expand their product offering in tune with the ever-changing trends and requirements of the new collaborative economy. Multinational capabilities, product data management (PDM), APS, warehouse management, Web-based product configurators, and component (modularized) architecture might still be the order winners, but, we believe these functional and technological features are becoming demoted into commodities (order qualifiers).

The still untapped ERP mid-market segments have also vicariously benefited by learning from mistakes and failed ERP implementations in many commercial companies in the past. Additionally, many enterprise systems are now also componentized, which provides phased implementations in more manageable chunks (instead of a traditional "big bang" approach) in addition to vendors' developed implementation methodologies that are based on bypassing the usual traps of past failures. Many ERP systems have meanwhile also been Internet-enabled, which also allows for a quicker and simpler implementation, because client machines do not have to be configured time and again. Consequently, a prospective customer also has a choice of either installing software on its own intranet or renting it via an application service provider (ASP).

It is apparent that lately ERP has been redefined as a platform for enabling e-business globally. Originally focused on automating the internal processes of an enterprise, ERP systems have begun to include customer and supplier-centric processes as well, having thereby become universal business applications that encompass front-office; business intelligence; and e-commerce or supply chain management. Given the mere "ERP" moniker is no longer an acronym sufficient enough to cover the above scope, we would like to join in the above-mentioned buzzword frenzy with a new acronym—iERP, standing for inter(net)-enterprise resource planning, albeit we are full aware of the buzzwords' abundance in the market and its imperfection of not fitting the TLA description (see BLM—Buzzword Lifecycle Management).
As mentioned earlier, knowing the history and evolution of enterprise software is essential to understand its current application and its future developments. ERP was an important step in an ongoing evolution of computer tools that began in the 1960s. Each evolutionary step is built on the fundamentals and principles developed within the previous one.

It should be noted that the underpinning of the most sophisticated business applications systems today still remains the same mathematical model introduced in the first MRP systems. This model of "what do I need, what do I already have, and what do I need to get and when" will be the backbone of the integrated, Internet-enabled supply chain.

Technology can never totally replace an effective demand management process. Therefore we have always regarded some analysts' hasty predictions of ERP's demise at the end of the 1990s as frivolous. The fundamental shortcomings of ERP revealed by the advance of technology and increasing customer demands have been addressed by extended-ERP point solutions (bolt-ons), and ERP vendors are expected to continue their quest for delivering more complete solutions. As mentioned earlier, there has been a renewed recognition that ERP is imperative to managing and controlling internal materials movements and processes, and it forms the foundation for collaboration, e-business, CRM, SCM, and so forth. Therefore, while the traditional introspective mind-set of ERP becomes history, its functionality remains critical. The "new economy" of the late 1990s will not have caused the obsolescence of general ledger (GL) and accounts payable and receivable (AP/AR) for example. Quite the contrary, it will have only emphasized their importance.

Still, one should ensure the transaction coherency that this extended scope of enterprise applications might likely hinder. In other words, unless all the functional modules have access to and use the same data in near real-time, unless all processes are fully integrated (so that, for example, a mobile sales representative can see the live inventory data for order promising), and unless users can seamlessly move from one module to another, we are not talking about coherency but rather about the hodgepodge of disconnected (or very loosely connected, in the best scenario) islands of information. While there is a promise of new technologies like portals, Web Services, layers of abstraction between application components, and so on, all to contribute to seamlessly connecting people, data and processes, that is still largely the most probable case within the context of a homogenous offering from a single vendor, and only whose all applications concurrently "look" at the same data.

Enterprise Applications—The Genesis and Future, Revisited Part Five: More on ERP Evolution

Another important area of enterprise resource planning (ERP) vendors' functional expansion has been in the front-office and customer relationship management (CRM) arena, since customers are demanding applications and tools that allow them to link back-office ERP systems with front-office CRM systems. CRM has gone from a vast field of point solutions to suites of customer care applications covering SFA, field service, telesales, call center, marketing automation, etc. Today's enterprise applications are required as a matter of course to address more than the processes taking place within the walls of an enterprise. Almost all traditional ERP vendors (small and big alike) experienced a "wake up call" and have long been trying to expand their product offering in tune with the ever-changing trends and requirements of the new collaborative economy.

To that end, over the last few years, all significant enterprise applications players have been actively partnering or finding other ways to provide solutions that allow businesses to collaborate more effectively. Consequently, the boundaries between ERP, CRM, e-commerce, and SCM have blurred so much that any attempt to functionally separate them becomes ever more pointless. If the ultimate objective is to win and retain customers, one must consider the entire chain, which includes traditional ERP and SCM functions as well as the once-considered more remarkable and supposedly more relevant CRM and e-commerce activity.

The cycle begins with the attraction of the customer through sales and marketing. This hopefully results in an order management and fulfillment process and ends with customer service, which can involve anything from field installations through to enquiry and complaint management. All of these steps have to be executed well without exception. Otherwise, the prospective customer will end up on a competitor's list of customers. Therefore, the relative importance of CRM versus ERP, ERP versus SCM or of any other match-up is irrelevant. All of these functional areas are critical, except for some esoteric or autistic businesses that can get by with implementing islands of information.

The "64,000-dollar" question is how all business processes work together. In the electronic world, the degree of flexibility and efficiency of collaborative processes relating to the customer life cycle, product life cycle, and so on, to name but a few, will be a big determinant of losers and winners. As proof of the above might be the fact that the traditional large ERP providers like SAP, PeopleSoft, and Oracle can claim bigger CRM-related revenues than every pure-CRM vendor except for Siebel Systems that still clings to its CRM leadership position (see Comparison of ERP and CRM Markets' Life Cycle Snapshots). Some demarcation line here could be that ERP vendors are successfully selling into their manufacturing install base, while CRM specialists stronghold remains the service sectors where ERP as not gained much religion.
ERP software's scope has also recently gone beyond traditional transactional business functions by enabling organizations to deliver real-time performance analysis directly on the desktops of CFOs, CEOs, and other business managers. Major ERP vendors have been shifting focus from routine users' transaction requirements to the overall organization's business imperatives, thereby helping lines-of-business (LOB) become more knowledgeable and proactive. Instead of requiring a collection of processes, the system should appear to each user as a vast source of information. While relational databases, currently used by ERP systems, are good at retrieving a small number of records quickly, they are not good at retrieving a large number of records and summarizing them on request. Most ERP products have a rich database, but, translating the data stored within the database to information useful for making enterprise decisions has proven difficult. With the availability of software analytic solutions, several dozens of ERP providers can supply their customers with a valuable tool for harvesting the business value out of their database. Therefore, major ERP vendors have been increasingly embracing OLAP (On-line Analytical Processing) tools that provide a high-level aggregated view of data.

While ERP and analytics have been inseparable ever since the idea of business automation via IT way back in the 1960s, they have had different user experiences, evolutionary paths, and so on. Namely, although ERP systems have positively transformed many enterprises' business processes, many users have still been left feeling as oversold to, due to the overwhelming notion that these systems inhibit access to the vital information "jailed" in them. Often indeed, in most traditional ERP systems a number of financial activities are grouped together to form artificially created processes, which bear little resemblance to the actual business activities, such as ERP systems' focus had often appeared to only be getting the correct figures into the general ledger, which has a transactional glut as a result.

Contrary to traditional core ERP, business intelligence (BI)/analytics provides an environment in which business users receive information that is reliable, consistent, understandable and easily manipulated (i.e., flexible). Because C-level executives and middle management have always had a need to understand their business' performance regardless of good or bad economic times—while the output from BI might change, the need is always there. Particularly since the recent massive demise of dot-com's, the depressed economic times, and the stringent Sarbanes-Oxley Act (SOA) reporting regulatory requirements following up the high-profile corporate fraud scandals (such as Enron, Tyco, and WorldCom) have additionally increased executives' focus on understanding and managing corporate performance.

New disclosure rules are prompting companies to share information faster (for example, accelerated filing of 10Q quarterly statements and 10K annual reports, report sales of stock by executives (insider trading) within days of the transaction, expanded list of "significant events" to include changes in debt ratings, inclusion of financial results of partnerships in earnings reports, etc.), and sophisticated data-collection and data-analysis applications come in handy in that regard. Given that the BI tools have neither been terribly complex nor expensive to deploy, but have still been helpful in facilitating the decision-making process, they have lately become considered necessary rather than as a luxury. Also, decisions are nowadays increasingly made at ever lower levels in organizations. For more information, see Business Intelligence Success, Lessons Learned.

To that end, various enterprise business intelligence (BI) solutions enable organizations to track, understand, and manage enterprise performance, and they leverage the information that is stored in an array of corporate databases/data-warehouses, legacy systems, and diverse enterprise applications. The latest evolutionary step introduces the concept of corporate performance management (CPM) (often interchangeably referred to as enterprise performance management [EPM] or business performance management [BPM], too), which is an emerging portfolio of applications and methodology with business intelligence (BI) architectures and technologies at its core. Historically, BI applications have focused on measuring sales, profit, quality, costs and many other indicators within an enterprise, but CPM goes well beyond these by introducing the concepts of management and feedback, i.e., by embracing processes such as planning and forecasting as core tenets of a business strategy.

For the above reasons, the vendor landscape remains diverse, with every vendor, including many ERP aspirants, touting some (or nearly total) CPM capabilities. Thus, the arms race to marshal the most complete CPM platform has lately intensified; see BI Market Consolidation Compared to ERP Market Consolidation.

Enterprise Applications—The Genesis and Future, Revisited Part Four: Another Step in ERP Evolution

Hence, enterprise resource planning (ERP) has entered another step in its evolution. While ERP packages traditionally excelled at combining financial control with multi-plant manufacturing and distribution coordination, they generally lacked extended planning and flexible execution functionalities beyond the four walls of the enterprise that can enable one business process today but change rapidly to handle tomorrow's new models. They were also often found lacking when it comes to delivering special financial features such as robust budgeting or international consolidation, summarized data for analysis and trending, as well as in handling real-time, physical events that occur on the factory floor, as opposed to the transaction-oriented bookkeeping functions (see Financial Reporting, Planning, and Budgeting As Necessary Pieces of EPM).

Therefore, there has been the imperative for the new generation of enterprise applications to be more customer-focused and to extend beyond the enterprise through e-commerce interaction and collaboration with business partners. The key to the Internet-driven, dynamic trade environment is agility, which is where traditional ERP packages have stumbled in the past. Thus, early ERP adopters discovered to their dismay that implementing these systems was only the first step toward creating a competitive information technology infrastructure. They and new users alike are now looking for significantly more comprehensive functionality—from advanced planning and scheduling (APS) (see Glossary*) and manufacturing execution systems (MES), to sales force automation (SFA) and even broader CRM;, to business intelligence (BI) and business-to-consumers (B2C); and business-to-business (B2B) e-business tools to name only some —and demanding that they be integrated into their ERP backbone (see Can ERP Meet Your eBusiness Needs?).

Users' visions of ERP are evolving from tactical to strategic, and users are no longer willing to choose between integration and function, since the "one-stop-shop" offering should mean that the releases are synchronized and the integration is maintained amongst all the components. ERP users who have gone live in the past several years have been making purchases of extended-ERP products (bolt-ons) to provide tangible return on investment (ROI) for their multi-million dollar investment. Recently, the enterprises have begun to analyze the viability of IT investments in a quantified manner, instead of doing only feasibility studies, which would consider only whether implementation of a system is possible but not whether it makes viable business sense. For more information, see Justification of ERP Investments; Part 1: Quantifiable Benefits from an ERP System.

Therefore, in response to the above-mentioned inadequacies of ERP software, a new breed of the above-mentioned specialized software has long emerged, named collectively as "ERP extension" software. These components can either be installed standalone or bolted onto existing ERP instances. They can usually be implemented relatively quickly and at a relatively low price, with much more immediate and quantifiable cost savings to the user. Accordingly, during the last several years, the functional perimeter of ERP systems has begun an expansion into these adjacent markets, as most ERP vendors have been busy developing, acquiring, or bundling new functionality so that their packages go beyond the traditional realms of finance; materials planning and management; and HR/payroll management.

As a result, many pundits have also jumped at the opportunity to name this new evolutionary phase by inventing names and acronyms like extended-ERP, ERP II, enterprise business applications (EBA), enterprise commerce management (ECM), comprehensive enterprise applications (CEA) and so on. More important than this contest for creating the catchiest buzzword, possibly in the unofficially accepted ideal form of TLA (three letter acronym), is the fact that most of these notions signify the evolution or enhancement of ERP, rather than its replacement or obsolescence.

Namely, we believe that, within recent years, ERP has been redefined as a platform for enabling collaborative e-business globally. Originally focused on automating internal processes of an enterprise, extended ERP systems increasingly include customer and supplier-centric processes as well. The conclusive evidence of this redefinition is the move of all major traditional ERP players into CRM, e-commerce, and SCM applications, which is the best illustrated by SAP's SCM revenue exceeding the former leaders i2 Technologies, Ariba, and Manugistics..
The reason for ERP vendors tackling SCM first might be the fact that, to circumvent MRP II's capacity planning limitations, planners have long turned to various ways of off-line (at first, given today's increasing use of memory resident, real-time systems) capacity planning: either manually, with the help of spreadsheet programs, or with the help of relatively new APS systems. APS systems were originally designed as bolt-ons with the idea of plugging into an ERP system's database to download information and then create a feasible schedule within identified constraints, such as finite capacity. The new schedule can then be uploaded into the ERP system thereby replacing the original MRP results. These APS systems typically offer simulation ("what if") capabilities that allow the planner to analyze the results of an action before committing to that action through the ERP system. Some of these systems go even one step further by offering optimization capabilities. They automatically create multiple simulations and recommend changes in the supply chain within the existing constraints. For more information, see Advanced Planning and Scheduling: A Critical Part of Customer Fulfillment.

Further, APS is a subset of supply chain planning (SCP) applications that are designed to provide forward-looking options for future time horizons, by sitting on top of a current transactional system (most often ERP) to provide planning, "what-if" scenario analysis capabilities and real-time demand commitments. SCP typically deals with activities such as developing demand forecasts, establishing relations with suppliers, planning and scheduling manufacturing operations, and developing metrics to ensure efficient and cost-effective operations. It also includes the determination of marketing channels; promotions; respective quantities and timing; inventory and replenishment policies; and production policies. Thus, the typical SCP modules would include network planning; capacity planning; demand planning; manufacturing planning and scheduling; and distribution and deployment planning.
On the other hand, while most traditional ERP software enables the integration and management of critical data within enterprises, companies have increasingly recognized the need to deploy more advanced software systems that manage the global supply chain by enhancing the flow of information to and from customers, suppliers, and other business partners outside the enterprise. More recently, the availability and use of the Web has created a demand for software that operates across the Internet and intranets. This global logistics concept merged the above described constraint-based optimization solutions called APS and specialized warehouse and transportation management software (WMS/TMS), resulting in more encompassing SCM, which should include all the processes from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies (see The Essential Supply Chain).

APICS Dictionary, the 10th Edition defines SCM as

"The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally."

In other words, at a high level, the SCM software scope could be segmented into supply chain planning (SCP) and supply chain execution (SCE), while strategic sourcing, procurement, spend management, supplier relationship management (SRM), and product lifecycle management (PLM) components are still considered the extension of the SCM rather than its constituents. Execution functions manage effective procurement and supply of goods and services across a supply chain to ensure completion of the plans, including creating purchase orders, taking customer orders, updating inventory, managing movement of products in the warehouse, and delivering goods to the customer. Hence, SCE includes light/assembly manufacturing, warehouse, and transportation execution systems, and systems providing visibility across the supply chain, given more comprehensive SCE suites have lately evolved consolidating execution components, such as WMSs, TMSs, distributed order management systems, and supply chain inventory visibility (SCIV), to provide a more unified solution to manage the outbound logistics process.

Still, there are two important business problems associated with today's manufacturing planning, materials planning and supply chain environments:

1. SCP applications need to address the lack of accurate logistics costs and service information that would enable more optimized decisions across the entire supply chain. SCP typically generates weekly or daily plans (in a better case scenario), but without adequately addressing the issues that arise almost every instant in dynamic logistics environments. Thus, plans are often invalid as soon as they have been made, while a mere re-planning does not answer the question what went wrong in the first place (i.e., there is no facility to learn from prior plans' inadequacy).

2. SCE applications need to further address the lack of real-time inventory visibility and event management feedback information needed for SCP to respond to frequent supply chain changes when building and executing manufacturing and materials plans.

The demand for near real-time supply chain collaboration will, in turn, place an increasing emphasis on any company's ability to immediately commit itself to promising orders' delivery dates on a global basis and to consistently meet those commitments ever after. This ATP/capable-to-promise (CTP) aptitude will be made more complex as companies rely on an increasing number of business partners and suppliers to procure raw materials, assemble, and deliver finished goods. SCE is therefore gaining increasing awareness among companies that realize that planning can do only so much without the ability to make the right and timely decisions and execute on the shop floor, in the warehouses or within the entire distribution chain

How the Mining Industry Benefits from ERP Systems

Mining is a multifaceted business, one that in many ways parallels a repetitive manufacturing business. The analogy is that exploration and marketing for a mining company, for example, is similar to the marketing research performed by a manufacturer, although a noted difference between the two is that most mines are of sizes to support decades of operation, whereas a manufacturer’s production runs last for much shorter durations.

Here in this article, a loose comparison is drawn between the mining industry and the manufacturing industry, and suggested is a method to follow in order to integrate financial reporting so that auditors can verify results. It concludes with concepts that are required to manage the entire organization.

In a mining company, each department has its own way of measuring outputs, which often is incompatible with legal or shareholder requirements. An enterprise resource planning (ERP) system allows each department to use its own reporting measures. The ERP software transforms data bidirectionally to the standard (legal) business reporting. However, it is this use of disparate methods by departments that causes confusion within the mining company.

The manufacturing industry has learned that integrated scheduling, materials management, production manufacturing, and distribution are the keys to profitability. Yet in a mining company, what is understood in one business department, if managed by non-ERP software such as spreadsheets and tailored stand-alone software, is that financial integration is time-consuming and fraught with errors, and it does not allow a coherent view of the company’s operations or a true measure of annual profit.

Table 1 depicts similarities between the basic departmental structure of a mining company and a manufacturer, but this article focuses specifically on one overview of the departmental structure of mineral mining.

	Major Mining Company Departments	Major Manufacturer Departments
1.	exploration	market research and product development
2.	ore extraction and excavation	raw material acquisition
3.	transportation	transportation
4.	smelting	manufacturing
5.	sales and marketing	sales and marketing
6.	human resources	human resources

Table 1. The corresponding departments of mining companies and manufacturers.

The Departments of a Mining Company

1. Exploration
Geologists are the mining company’s major explorers. Often the geologist’s work is to follow the ore vein at an existing mine, other times it is fieldwork. The geologist collaborates with the mining engineer in exploration and in extending operations at an existing site.

In the past, the land to be surveyed was walked; samples taken were labeled and put into knapsacks for later analysis. Newer methods now use aircraft with instrumentation to look at anomalies to the earth’s magnetic field as well as at soil colorations and vegetation as indications of vast ore bodies lying beneath the earth’s surface. This primary information is used to limit where the geologists begin the on-foot exploration and the extent of their survey. Once a potential ore-bearing area is targeted, the geologist arrives to take samples.

After a potential ore body is discovered, a secondary, in-depth analysis is performed to determine the economics of building a mine. Other (chemical) research determines the amount of the ores’ accompanying minerals, such as sulfur, gold, uranium, and others. Exploration costs include salaries, camps, insurances, aircraft and electromagnetic equipment, and other machinery and materials needed to estimate the ore body size.

Financial considerations that come after an adequate “ore body size” has been confirmed include a lifetime estimate of the mine (based on a prescribed rate of depletion), labor, installation and amortization of fixed assets; cost of converting currency and royalties; and taxes. All things being favorable, the infrastructure planning for roadways, railways, and so forth is done in conjunction with the ore extraction department.

Exploration costs are based on overheads and on time and materials. Typically, this cost is converted to a per diem charge (dollars per day, amortized over a year).

2. Ore Extraction and Excavation
In a typical manufacturing company, a production order is issued to respond to a sales order, sales contract, or a marketing request to make goods to forecasted sales. The mining industry operates in a similar way. The mining sales contract is more often a multiyear (10 years or more) deal. This deal marks the beginning of the refining or smelting process. Multiple sales contracts combined initiate the mining of the ore. Extraction and transportation of the ore is subject to sales and to seasonal requirements, and these operations are managed by the geologist and the engineering groups. In the extraction environment, analysis is performed to determine decline (the angle of a tunnel or the angle of the walls) at an open pit. This ongoing work allows for maximizing safety while ensuring the lowest cost of excavation possible as the dig expands. Too sharp an angle increases risk of collapse, whereas too shallow an angle cuts into the available area for excavation.

At a working mine, consumables and spare machinery parts are inventoried. Geologists now active in the quality control (QC) role measure the quality of the excavated material and its accompanying minerals. Extraction may be performed by many means, including strip, pit, or in-situ mining (the latter of which uses solutions to dissolve desired metals). As much as possible, the ore is separated from the soil and other accompanying material.

New environmental laws require mining companies to minimize the pollution they might create, with overburden being a prime example. Overburden is the unwanted material that is excavated along with the ore. After separation from the ore, overburden is spread over the exhausted area and covered with topsoil. Other pollutants are recyclable, permitting reuse with a minimal increase in excavation costs. Typically, the financial exercise at the mine is to derive a standard cost per metric ton of metal and to establish a standard quantity of ore that can be extracted to produce a metric ton of metal.

Consumables (e.g., diamond drill bits, dynamite, chemicals, fuel, food, etc.) and fixed assets (e.g., buildings, heavy haul equipment, generators for electricity, air conditioning, etc.) are factored into the cost equation.

Amortizations, depreciation, and the like feed into a set of financial ledgers, weighting factors, and a few transformation rules assigned to each variable, when manipulated, and a cost per metric ton of the ore is derived.

3. Transportation
In the transportation department of large manufacturing organizations, management (logistics) plays a major role in minimizing costs and optimizing delivery routes. But companies in the mining industry have a larger requirement. These companies often need to build their own routes as well as purchase all their rolling stock, since mines are usually located some distance from the smelter or the stockpile area. This stockpile area could be at a wharf, at a smelter, or can even be the ore in transit. (In transit, ore and refined metal are parts of the inventory, and they are added to the measured inventory).

Specific to the mine operation are capital investments for roads, railways, and wharfs and barges needed to haul the ore to the smelter or the delivery of work-in-process metal or finished goods. Actual transportation of product requires another method of costing, based on weight and distance. Truck, rail, and boat each have their weight-distance rates. Costs for fixed assets (overhead cranes or vehicles required for ore transfer from one form of transport mode to another, based on destination) are apportioned out. The operational costs are generally converted and blended to provide an amount per ton–kilometer.

Project-Oriented Versus Generic GL-Oriented ERP/Accounting Systems

The unique business needs of project-oriented organizations, when addressed by large ERP vendors that offer general-purpose enterprise software, require heavy customization in order to work. On the other hand, when project-oriented organizations turn to small off-the-shelf project-management solutions, these solutions are soon outgrown by the user company. These organizations are looking for systems to support the project manager, who is responsible for sharing and tracking the revenue, expense, and profitability of a project. Most enterprise-wide business systems sold by software vendors are general purpose in design and without significant tweaking, they do not address many of the unique requirements of businesses engaged primarily in providing products and services under project-specific contracts and engagements.

Project-oriented organizations have many project-specific business and accounting requirements including the need to track costs and profitability on a project-by-project basis, to provide timely project information to managers and customers, and to submit accurate and detailed bills/invoices, often in compliance with complex industry-specific and regulatory requirements. Yet, traditional generic GL-oriented accounting systems have not been designed with project phases, work breakdowns or detailed time capturing in mind, and thus, they can merely report how much has been spent or collected, but not why a certain project is losing or winning money.

Not many enterprise products will support the following project-based processes: job costing, managing the sub-contactor, financial reporting, managing the workforce, process time and expense, winning new business, purchasing goods and services, managing the project, and build to order. If these high-level processes sound too ordinary, then digging to a level deeper might reveal their true intricacy and attention to detail such as employee time, billing rates, budgeting, collections, or project proposals, which are supported by only a few vendors.

For example, the job costing process can be broken down into the following steps: setup project work breakdown structure (WBS), pay suppliers, pay employees, accrue purchase orders, allocate indirect costs, calculate estimated time to completion, calculate contract ceilings, compute revenue, bill customer, and report the project status. The process time and expense cycle would have the following steps: create project, create project workforce, enter timesheets by project, enter labor adjustments, enter travel expenses, apply project business rules, approve time and expenses, pay expenses and payroll, bill expenses and payroll, revenue recognition and project status reports (PSRs, which are used for period reporting on a project/task/phase level, and which can be regarded as the financial statement for the project).

The managing-the-project process would feature the following detailed steps: create opportunity plan, establish detailed scope of services, create project plan with work breakdown structure (WBS), establish task schedules, search and add resources to plan, establish budget at resource level, add consultant and expenses to project plan, add direct costs for plan, establish profit performance, save baseline budget, monitor time and expense costs, monitor schedule projected profit and revenue, and submit the project deliverables and closeout project. A build-to-order process would involve ERP materials management functionality through support for the following steps: customer demand, bills of materials (BOM)/routings, engineering change notice (ECN), materials requirement planning (MRP), capacity planning, purchase requisition/order, receiving and quality assurance, fill inventory, issue manufacturing orders, final subassembly and finished goods, customer delivery, billing, revenue recognition, and PSR.
Furthermore, many project-oriented organizations provide products and services under government contracts, and project accounting for these organizations often requires the use of sophisticated methodologies for allocating and computing project costs and revenues. There are many different types of contracts governments use and within each of those there are dozens or more variations, whereby each variation will drive its own type of billings, revenue recognition and requirements for reporting back to the government customer. Due to expected increases in defense and national security spending, US federal government contract spending and activity is also expected to increase in the next several years (see Fed Gives ERP A Shot In The Arm).

The US government requires its contractors to collect and allocate costs in certain ways; for example, according to the Defense Contract Audit Agency (DCAA) rules, labor costs must be recorded daily. Also, a contractor is required to keep track of several contracts simultaneously, meeting the rules for different types of contracts and being consistent in accounting for a number of indirect costs. According to the Small Business Administration Pro-NET sourcing service database, there are tens of thousands of small and minority-owned companies that are doing business with the federal government. With the new emphasis on improving homeland security and expanding anti-terrorism operations around the world, many of these firms will likely experience significantly greater demand for their services and grow rapidly over the next several years.
Additionally, service business application software systems are expanding as a result of a number of economic trends. Service organizations traditionally have utilized project accounting more than manufacturing firms due to the need to customize services for each client and to properly allocate the associated revenues and costs. Therefore, as the shift from a manufacturing-based economy to a service-based economy continues, the market for project-oriented organizations is expanding. Furthermore, the trend towards outsourcing an increasing range of activities broadens the market for project-oriented organizations as both customers and vendors need to track the costs associated with their projects.

Finally, many organizations with significant internal development activities can benefit from the use of project accounting systems to closely monitor progress and costs. Also, although somewhat conversely, more progressive firms may even try to boost their marketing, advertising, and PR expenditures in order to gain more project contracts during the market contraction, where for example, a proposal automation capability can come in handy. While project management and resource planning software applications help service organizations deliver within a budget, in the long term, these organizations need to win a new stream of projects or customers, which involves pre-sales customer relationship management (CRM), marketing and proposal management, and post-sales elements like travel and expense (T&E) management.

As the number and type of project-oriented and professional service organizations increases, such businesses are demanding increasingly sophisticated tools to address their core information and accounting needs, including project accounting, employee time collection, project budgeting, project reporting, CRM, sales force automation (SFA), and proposal generation. At the same time, these organizations are recognizing that because most aspects of their businesses revolve around their customer project relationships, they can achieve efficiencies in a number of project accounting and core back-office business functions. These accounting and business functions such as general ledger, accounts payable, accounts receivable, materials management, and human resources, are supported through the use of software applications designed to address the special needs of project-oriented organizations. Like other businesses, project-oriented and professional services organizations are also demanding solutions that allow them to combine their business software applications into a single integrated, enterprise-wide system.

Time is of the essence for any business that bills for its services rather than sells a physical product, but the concept can be particularly tricky for design/construction firms that may need billing at different rates depending on, for example, project phase, task, client type, or escalation clause. At the same time, the industry is quite fragmented, with legions of specialist contractors, and it also has a long tradition of technophobia.

Project-Oriented Versus Generic GL-Oriented ERP/Accounting Systems

The unique business needs of project-oriented organizations, when addressed by large ERP vendors that offer general-purpose enterprise software, require heavy customization in order to work. On the other hand, when project-oriented organizations turn to small off-the-shelf project-management solutions, these solutions are soon outgrown by the user company. These organizations are looking for systems to support the project manager, who is responsible for sharing and tracking the revenue, expense, and profitability of a project. Most enterprise-wide business systems sold by software vendors are general purpose in design and without significant tweaking, they do not address many of the unique requirements of businesses engaged primarily in providing products and services under project-specific contracts and engagements.

Project-oriented organizations have many project-specific business and accounting requirements including the need to track costs and profitability on a project-by-project basis, to provide timely project information to managers and customers, and to submit accurate and detailed bills/invoices, often in compliance with complex industry-specific and regulatory requirements. Yet, traditional generic GL-oriented accounting systems have not been designed with project phases, work breakdowns or detailed time capturing in mind, and thus, they can merely report how much has been spent or collected, but not why a certain project is losing or winning money.

Not many enterprise products will support the following project-based processes: job costing, managing the sub-contactor, financial reporting, managing the workforce, process time and expense, winning new business, purchasing goods and services, managing the project, and build to order. If these high-level processes sound too ordinary, then digging to a level deeper might reveal their true intricacy and attention to detail such as employee time, billing rates, budgeting, collections, or project proposals, which are supported by only a few vendors.

For example, the job costing process can be broken down into the following steps: setup project work breakdown structure (WBS), pay suppliers, pay employees, accrue purchase orders, allocate indirect costs, calculate estimated time to completion, calculate contract ceilings, compute revenue, bill customer, and report the project status. The process time and expense cycle would have the following steps: create project, create project workforce, enter timesheets by project, enter labor adjustments, enter travel expenses, apply project business rules, approve time and expenses, pay expenses and payroll, bill expenses and payroll, revenue recognition and project status reports (PSRs, which are used for period reporting on a project/task/phase level, and which can be regarded as the financial statement for the project).

The managing-the-project process would feature the following detailed steps: create opportunity plan, establish detailed scope of services, create project plan with work breakdown structure (WBS), establish task schedules, search and add resources to plan, establish budget at resource level, add consultant and expenses to project plan, add direct costs for plan, establish profit performance, save baseline budget, monitor time and expense costs, monitor schedule projected profit and revenue, and submit the project deliverables and closeout project. A build-to-order process would involve ERP materials management functionality through support for the following steps: customer demand, bills of materials (BOM)/routings, engineering change notice (ECN), materials requirement planning (MRP), capacity planning, purchase requisition/order, receiving and quality assurance, fill inventory, issue manufacturing orders, final subassembly and finished goods, customer delivery, billing, revenue recognition, and PSR.
Furthermore, many project-oriented organizations provide products and services under government contracts, and project accounting for these organizations often requires the use of sophisticated methodologies for allocating and computing project costs and revenues. There are many different types of contracts governments use and within each of those there are dozens or more variations, whereby each variation will drive its own type of billings, revenue recognition and requirements for reporting back to the government customer. Due to expected increases in defense and national security spending, US federal government contract spending and activity is also expected to increase in the next several years (see Fed Gives ERP A Shot In The Arm).

The US government requires its contractors to collect and allocate costs in certain ways; for example, according to the Defense Contract Audit Agency (DCAA) rules, labor costs must be recorded daily. Also, a contractor is required to keep track of several contracts simultaneously, meeting the rules for different types of contracts and being consistent in accounting for a number of indirect costs. According to the Small Business Administration Pro-NET sourcing service database, there are tens of thousands of small and minority-owned companies that are doing business with the federal government. With the new emphasis on improving homeland security and expanding anti-terrorism operations around the world, many of these firms will likely experience significantly greater demand for their services and grow rapidly over the next several years.
Additionally, service business application software systems are expanding as a result of a number of economic trends. Service organizations traditionally have utilized project accounting more than manufacturing firms due to the need to customize services for each client and to properly allocate the associated revenues and costs. Therefore, as the shift from a manufacturing-based economy to a service-based economy continues, the market for project-oriented organizations is expanding. Furthermore, the trend towards outsourcing an increasing range of activities broadens the market for project-oriented organizations as both customers and vendors need to track the costs associated with their projects.

Finally, many organizations with significant internal development activities can benefit from the use of project accounting systems to closely monitor progress and costs. Also, although somewhat conversely, more progressive firms may even try to boost their marketing, advertising, and PR expenditures in order to gain more project contracts during the market contraction, where for example, a proposal automation capability can come in handy. While project management and resource planning software applications help service organizations deliver within a budget, in the long term, these organizations need to win a new stream of projects or customers, which involves pre-sales customer relationship management (CRM), marketing and proposal management, and post-sales elements like travel and expense (T&E) management.

As the number and type of project-oriented and professional service organizations increases, such businesses are demanding increasingly sophisticated tools to address their core information and accounting needs, including project accounting, employee time collection, project budgeting, project reporting, CRM, sales force automation (SFA), and proposal generation. At the same time, these organizations are recognizing that because most aspects of their businesses revolve around their customer project relationships, they can achieve efficiencies in a number of project accounting and core back-office business functions. These accounting and business functions such as general ledger, accounts payable, accounts receivable, materials management, and human resources, are supported through the use of software applications designed to address the special needs of project-oriented organizations. Like other businesses, project-oriented and professional services organizations are also demanding solutions that allow them to combine their business software applications into a single integrated, enterprise-wide system.

Time is of the essence for any business that bills for its services rather than sells a physical product, but the concept can be particularly tricky for design/construction firms that may need billing at different rates depending on, for example, project phase, task, client type, or escalation clause. At the same time, the industry is quite fragmented, with legions of specialist contractors, and it also has a long tradition of technophobia.

Project-oriented versus Generic GL-oriented ERP/Accounting Systems

The unique business needs of project-oriented organizations, when addressed by large ERP vendors that offer general-purpose enterprise software, require heavy customization in order to work. On the other hand, when project-oriented organizations turn to small off-the-shelf project-management solutions, these solutions are soon outgrown by the user company. These organizations are looking for systems to support the project manager, who is responsible for sharing and tracking the revenue, expense, and profitability of a project. Most enterprise-wide business systems sold by software vendors are general purpose in design and without significant tweaking, they do not address many of the unique requirements of businesses engaged primarily in providing products and services under project-specific contracts and engagements.

Project-oriented organizations have many project-specific business and accounting requirements including the need to track costs and profitability on a project-by-project basis, to provide timely project information to managers and customers, and to submit accurate and detailed bills/invoices, often in compliance with complex industry-specific and regulatory requirements. Yet, traditional generic GL-oriented accounting systems have not been designed with project phases, work breakdowns or detailed time capturing in mind, and thus, they can merely report how much has been spent or collected, but not why a certain project is losing or winning money.

Not many enterprise products will support the following project-based processes: job costing, managing the sub-contactor, financial reporting, managing the workforce, process time and expense, winning new business, purchasing goods and services, managing the project, and building to order. If these high-level processes sound too ordinary, then digging to a level deeper might reveal their true intricacy and attention to detail such as employee time, billing rates, budgeting, collections, or project proposals, which are supported by only a few vendors.

For example, the job costing process can be broken down into the following steps: setup project work breakdown structure (WBS), pay suppliers, pay employees, accrue purchase orders, allocate indirect costs, calculate estimated time to completion, calculate contract ceilings, compute revenue, bill customer, and report the project status. The process time and expense cycle would have the following steps: create project, create project workforce, enter timesheets by project, enter labor adjustments, enter travel expenses, apply project business rules, approve time and expenses, pay expenses and payroll, bill expenses and payroll, revenue recognition, and project status reports (PSRs), which are used for period reporting on a project/task/phase level, and which can be regarded as the financial statement for the project.

The managing-the-project process would feature the following detailed steps: create opportunity plan, establish detailed scope of services, create project plan with work breakdown structure (WBS), establish task schedules, search and add resources to plan, establish budget at resource level, add consultant and expenses to project plan, add direct costs for plan, establish profit performance, save baseline budget, monitor time and expense costs, monitor schedule projected profit and revenue, and submit the project deliverables and closeout project. A build-to-order process would involve ERP materials management functionality through support for the following steps: customer demand, bills of materials (BOM)/routings, engineering change notice (ECN), materials requirement planning (MRP), capacity planning, purchase requisition/order, receiving and quality assurance, fill inventory, issue manufacturing orders, final subassembly and finished goods, customer delivery, billing, revenue recognition, and PSR.

Dealing with Government Contracts

Furthermore, many project-oriented organizations provide products and services under government contracts, and project accounting for these organizations often requires the use of sophisticated methodologies for allocating and computing project costs and revenues. There are many different types of contracts governments use and within each of those there are dozens or more variations, whereby each variation will drive its own type of billings, revenue recognition and requirements for reporting back to the government customer.
The US government requires its contractors to collect and allocate costs in certain ways; for example, according to the Defense Contract Audit Agency (DCAA) rules, labor costs must be recorded daily. Also, a contractor is required to keep track of several contracts simultaneously, meeting the rules for different types of contracts and being consistent in accounting for a number of indirect costs. According to the Small Business Administration Pro-NET sourcing service database, there are tens of thousands of small and minority-owned companies that are doing business with the federal government. With the new emphasis on improving homeland security and expanding anti-terrorism operations around the world, many of these firms will likely experience significantly greater demand for their services and grow rapidly over the next several years.

Expanding Market

Additionally, service business application software systems are expanding as a result of a number of economic trends. Service organizations traditionally have utilized project accounting more than manufacturing firms due to the need to customize services for each client and to properly allocate the associated revenues and costs. Therefore, as the shift from a manufacturing-based economy to a service-based economy continues, the market for project-oriented organizations is expanding. Furthermore, the trend towards outsourcing an increasing range of activities broadens the market for project-oriented organizations as both customers and vendors need to track the costs associated with their projects.

Finally, many organizations with significant internal development activities can benefit from the use of project accounting systems to closely monitor progress and costs. Also, although somewhat conversely, more progressive firms may even try to boost their marketing, advertising, and PR expenditures in order to gain more project contracts during the market contraction, where for example, a proposal automation capability can come in handy. While project management and resource planning software applications help service organizations deliver within a budget, in the long term, these organizations need to win a new stream of projects or customers, which involves pre-sales customer relationship management (CRM), marketing and proposal management, and post-sales elements like travel and expense (T&E) management.

As the number and type of project-oriented and professional service organizations increases, such businesses are demanding increasingly sophisticated tools to address their core information and accounting needs, including project accounting, employee time collection, project budgeting, project reporting, CRM, sales force automation (SFA), and proposal generation. At the same time, these organizations are recognizing that because most aspects of their businesses revolve around their customer project relationships, they can achieve efficiencies in a number of project accounting and core back-office business functions. These accounting and business functions such as general ledger, accounts payable, accounts receivable, materials management, and human resources, are supported through the use of software applications designed to address the special needs of project-oriented organizations. Like other businesses, project-oriented and professional services organizations are also demanding solutions that allow them to combine their business software applications into a single integrated, enterprise-wide system.

Time is of the essence for any business that bills for its services rather than sells a physical product, but the concept can be particularly tricky for design/construction firms that may need billing at different rates depending on, for example, project phase, task, client type, or escalation clause. At the same time, the industry is quite fragmented, with legions of specialist contractors, and it also has a long tradition of technophobia.

Essential ERP - Its Functional Scope

The comprehensive definition of enterprise resource planning (ERP) software is a set of applications that automate finance and human resources departments and help manufacturers handle jobs such as order processing and production scheduling.

ERP began as a term used to describe a sophisticated and integrated software system used for manufacturing. In its simplest sense, ERP systems create interactive environments designed to help companies manage and analyze the business processes associated with manufacturing goods, such as inventory control, order taking, accounting, and much more. Although this basic definition still holds true for ERP systems, today its definition is expanding.

Savvy ERP users, increasing customer expectations, changes in manufacturing requirements, and technology's relentless pursuit of innovation are just some of the forces reshaping the definition of ERP. In today's dynamic and turbulent business environment, there is a strong need for organizations to become globally competitive. The survival guide to competitiveness is to be closer to the customer and deliver value-added product and services in the shortest possible time. This, in turn, demands integration of the business processes of an enterprise, which is the stronghold of ERP.
Today's leading ERP systems group all traditional company management functions (finance, sales, manufacturing, human resources) and include, with varying degrees of acceptance and skill, many solutions that were formerly considered peripheral (product data management (PDM), warehouse management, manufacturing execution system (MES), reporting, etc.). While during the last two years the functional perimeter of ERP systems began an expansion into its adjacent markets, such as supply chain management (SCM), customer relationship management (CRM), business intelligence/data warehousing, and e-Business, the scope of this document is limited to the traditional ERP realms of finance, materials planning, and human resources.

The Three Major Functional areas of ERP are as follows:

* Manufacturing & Logistics

* Finance & Accounting

* Human Resources & Payroll.

This encompasses a group of applications for planning production, taking orders, and delivering products to the customer. Some of its most common modules and their high-level functions are:

Operations (Production) planning - Performs capacity planning and creates a daily production schedule for a company's manufacturing plants. It involves forecasting, production scheduling and material planning, etc.

Engineering - Provides the ability to integrate at the engineering level to ensure accurate updated product information. It involves bills of materials & routings creation, engineering change management, etc.

Shop floor control - Provides control and tracking of the status of production orders in the plant. It involves production orders dispatching, capacity planning, resource allocation, production tracking & reporting, waste/reject tracking, etc.

Procurement management - Controls purchasing of raw materials needed to build products. Manages inventory stocks. It involves creating purchase orders/contracts, supplier tracking, goods receipt & payment, etc.

Order entry and processing - Automates the data entry process of customer orders and keeps track of the status of orders. It involves order entry, order tracing and status reporting, pricing, invoicing, etc.

Sales, marketing, and after sales - Provides a basic functionality for lead tracking, customer information, quote processing, commissions & rebates, etc.

Warehouse (Inventory) management - Maintains records of warehoused goods and processes movement of products through warehouses.

Distribution (Transportation) management - Arranges, schedules, and monitors delivery of products to customers via trucks, trains, and other transport means. It involves transportation planning and execution, loading and shipping documentation, etc.

Project management - Monitors costs and work schedules on a project-by-project basis. It usually includes the following sub-modules: project control, project analyzer, project budgeting, project timekeeping, project billings, contract management, and workflow communicator.

Plant maintenance - Sets plans and oversees upkeep of internal facilities. It enables the control of every aspect of both routine and unscheduled equipment maintenance so as to provide uninterrupted work order process.

Customer service management - Administers installed-base service agreements and checks contracts and warranties when customers call for help.

Financial Reporting, Planning, and Budgeting As Necessary Pieces of EPM Part Two: Challenges

Naturally, financial reporting and forecasting analytic solutions will have weaknesses. For one, they are still limited to only the data within general ledgers. Optimizing financial management processes is only a first step on the road to their better alignment with other organizational business processes. Hence, various enterprise business intelligence (BI) solutions enable organizations to track, understand, and manage enterprise-wide performance, and they leverage the information that is stored in an array of corporate databases/data-warehouses, legacy systems, enterprise resource planning (ERP), supply chain management (SCM) or customer relationship management (CRM) applications.

Once limited to the finance department of large companies, BI/analytics has expanded across departments and now even addresses the needs of customers, suppliers, and partners outside of the firm, given that if BI can help any department understand and serve customers better, that should in turn lead to better financial results. Companies have become adept at storing huge quantities of data on customers, products, and employees. However, this valuable data is often wasted, because it is analyzed in pockets, thus preventing valuable insight throughout the enterprise and beyond. To that end, nowadays, popular uses of BI include management dashboards and scorecards, collaborative applications, workflow, analytics, enterprise reporting, financial reporting, and both customer and partner extranets, to name some. These solutions enable companies to, for example, gain visibility into their business, acquire and retain profitable customers, reduce costs, detect patterns, optimize the supply chain, analyze project/product portfolio, increase productivity, and improve financial performance.
The latest evolutionary step introduces the concept of corporate performance management (CPM), which is often interchangeably referred to as enterprise performance management (EPM) or business performance management (BPM), and is an emerging portfolio of applications and methodologies with business intelligence (BI) architectures and technologies at its core. Historically, BI applications have focused on measuring sales, profit, quality, costs, and many other indicators within an enterprise, but CPM goes well beyond these by introducing the concepts of management and feedback, i.e., by embracing processes such as planning and forecasting as core tenets of a business strategy.

CPM also crosses traditional department boundaries (i.e., silos) to manage the full life cycle of business decision-making, combining business strategy alignment with business planning, forecasting, and modeling capabilities. In other words, it would entail mapping a structured set of data against predefined reports, alerts, dashboards, analysis tools, key performance indicators (KPIs), etc., to monitor and improve business processes based on the upfront established corporate strategic objectives. Further, CPM creates a closed-loop process, starting with developing high-level corporate goals and subsequent predefined KPIs, through measuring actual results against the KPIs and representing this comparison in a scorecard, with the results reported to management through intuitive reporting tools, and ultimately feeding these results back into the business modeling process for corrections in the next planning cycle.

CPM leverages the performance methodologies such as the balanced scorecard or activity-based costing (ABC), and although these approaches help determine how and what to measure, they lack a mechanism for dynamically changing values to keep abreast of the business reality. Ensuring the closed-loop management is CPM's enhancement of BI applications, which traditionally focus on measurement, which is basically worthless without the ability to act on it. Consequently, a perplexing variety of existing tools and techniques can lay claim to being part of the CPM trend—ranging from business intelligence tools and analytics (e.g., packaged data-marts; data mining tools; extract, transform and load [ETL] tools; and dashboards or executive information system [EIS]) to BPM applications and scorecard products.

Thus, CPM is the evolutionary combination of technology and philosophy, building on the foundation of technology and applications that many enterprises will have likely already implemented. The demand for these applications lies in the fact that they incrementally add value to already installed business applications, even the legacy ones, to a degree that the enterprises may finally see some long belated benefits and feel somewhat better about implementing cumbersome ERP systems. Indeed, many enterprises have already deployed some BI products too, such as querying and reporting tools, planning and budgeting applications, analytic applications, incentive management systems, portals, and scorecards, along with data warehouse technology, data models, and integration software, and what not. Anyone attempting to conduct the technology inventory stocktaking will likely find some CPM components already in use.

Financial Reporting, Planning, and Budgeting As Necessary Pieces of EPM Part One: Executive Summary

While ERP/accounting back-office systems and analytics have been inseparable ever since the idea of business automation via IT formed way back in the 1960s, they have nonetheless had different user experiences, evolutionary paths, and so on. Namely, although ERP systems have positively transformed many enterprises' business processes, many users have still been left feeling they were oversold due to the overwhelming notion that these systems inhibit access to the vital information "jailed" in the system. Many have inevitably felt that mixing real time back-office transactions with astute reporting is like mixing oil and water.

Business intelligence (BI)/analytics provides an environment in which business users receive information that is reliable, consistent, understandable and easily manipulated (i.e., flexible). C-level executives and middle management have always had a need to understand their business's performance regardless of good or bad economic times—while the output from BI might change, the need is always there. Particularly the recent massive demise of dot-coms, depressed economic times, and the stringent Sarbanes-Oxley Act (SOA) reporting regulatory requirements following up the high-profile corporate fraud scandals (e.g., Enron, Tyco, and WorldCom) have additionally increased executives' focus on understanding and managing corporate performance.

New disclosure rules are prompting companies to share information faster (for example, accelerated filling of 10Q quarterly statements and 10K annual reports, report sales of stock by executives [insider trading] within days of the transaction, expanded list of "significant events" to include changes in debt ratings, inclusion of financial results of partnerships in earnings reports, etc.), and sophisticated data-collection and data-analysis applications come in handy in that regard. Given that the BI tools have neither been terribly complex nor expensive to deploy, but have still been helpful in facilitating the decision-making process, they have become considered necessary rather than only a luxury. Also, decisions are nowadays increasingly made at ever lower levels in organizations.
On the other hand, the financial statement reporting process been important ever since the establishment of capitalist business practices. In addition to the tight economy's revelations of many companies' inability to proactively manage their financial performance (thus, repeatedly missing earnings and, in a knee-jerk fashion resorting time and again to last-minute layoffs, restructuring and operational expenditure freezes), its importance has particularly been emphasized with the outbreak of attention now being paid to the above-depicted accurate and certifiable reporting to external markets and government agencies.

However, creation, maintenance, and dissemination/publishing of financial statements (e.g., profit and loss [P&L] statements, balance sheets, and cash flow reports) have traditionally been maintenance-intensive tasks, with users expending significant effort just to meet basic requirements. Not to mention that everyone amongst the top brass always wants something more and different, such as different views, complex comparative reports, and drill-down analyses, but still within the familiar form of the financial statements.

Unfortunately, the financial reporting programs delivered with the traditional back-office financial management and accounting applications have proven only their rudimentary or pesky nature. Consequently, financial savvy users, having a strong preference to see results in the traditional P&L statement or balance sheet form, have long sought for ways to improve the report creation and maintenance process. On the other hand, the formatting and calculation constraints of the above statements, which require user-defined sorting and grouping, have been nearly impossible for generalist BI providers to fully accomplish.
Most ERP products have a rich database, but, translating the data stored within the database to information useful for making enterprise decisions has proven difficult. With the availability of software analytic solutions, dozens of ERP providers can supply their customers with a valuable tool for harvesting the business value from the database. For example, the list of current back-office solutions whose GLs have been integrated with FRx financial reporting analytic solutions is impressive, and the following are just some more prominent ones: Advanced Data Systems, Best Software, Epicor Software, Expandable Software, Flexi International, Geac Enterprise Solutions, IQMS, Made2Manage Systems, MAPICS, McKesson, Ross Systems, Softrax Corporation, and naturally MBS Great Plains and Solomon (the integration with Navision and Axapta is under way). Other financial reporting providers like F9 or Timeline have almost as impressive a list of ERP partners.

As an example, MBS for Analytics—FRx (formerly FRx Financial Reporter), with its spreadsheet-like interface, can consolidate financial data from disparate accounting systems even if they use different code structures, fiscal years, or server sites. By pulling information already set up in the GL, the product automatically understands the fiscal periods, chart of accounts, detail transactions, and various types of balances. Due to built-in accounting intelligence, it even recognizes concepts such as current and year-to-date amounts, debit versus credit balances, positive and negative variances, and posted and un-posted transactions. Furthermore, users can leverage the rows, columns and formulas that they may have created in Excel and import the information, with all data intact, directly into FRx.

The key tenets of FRx's flexibility have been the following three building blocks:

1. Row format, which lets users specify the data source and what they want to do with each row of a report. By using a link to the GL, users can select individual accounts, a range of accounts or a list of non-continuous accounts to be included in a report. Once created, a row format can be saved and used again as required.

2. Column layout, which lets users specify the data source and select the type of column they want from a list. Combined with row format, Column Layout lets users include period actuals, budget information, or other types of data in a report, either from the GL or from another data source like a spreadsheet. Math formulas across columns can be applied to identify variances, projections, or percentages. Like with row format, once created, a column layout can be saved and used again.

3. Reporting trees, which lets users create a hierarchical picture of their organization to understand or change their organizational and reporting structures. An auto-build function constructs reporting trees directly from the organization's chart of accounts, while an intuitive drag-and-drop functionality enables users to create alternative structures and multiple rollups of various accounts without having to make costly modifications to their GL or charts of accounts. Once created, a reporting tree can be saved and used again.

In addition to the on-the-fly reports creation option, application servers provide report scheduling and automatic e-mail report distribution. Using one of many customizable report templates, users can often get started creating relevant financial reports right away using the building-block approach and auto-build functionality, without much help from IT resources or other technically-minded personnel. Then, these reports can be posted to the Web or be sent via e-mail to be accessed immediately by on-site and off-site users alike, while a connection to the GL is not required.

Deploying Lean Principles to ERP Implementation Projects

The competitive environment that both Manufacturers and Distributors alike have experienced in recent years in the era of Globalization, Currency Fluctuation, and Market Pressures has given rise to the business impetus to run a leaner operation to remain competitive. These issues have trickled down to the IT department. IT Professionals are at times facing an enormous obstacle. They are expected to align the organization’s IT infrastructure with the strategic and operational components of the Business to improve upon Service Delivery. The other part of the issue is to reach those goals with fewer resources. Many IT Managers have had to adopt techniques to run a lean IT shop and extend that to the principles of the IT projects that are under development.

An ERP project is an ideal area to utilize lean concepts to further understand how this can be achieved, but we must first understand the basic principles of lean and how they relate to an ERP project implementation.

Lean Definition
Lean Principles have evolved from the Lean Production Philosophy which has its origin in the set of business philosophies developed in post-war Japan known as T.P.S. (Toyota Production Systems)— which has as its core philosophy cost reduction through elimination of waste (muda Japanese).The principles deployed in Lean made Toyota the pre-eminent auto-manufacturer in the world and by extension helped shape Japan into an economic power.

The concepts outlined in Lean Manufacturing evolved into a series of principles which evolved into a business concept known simply as Lean which can be applied across several disciplines i.e. Project Management, IT Deployment, etc.

The Organization known as APICS (American Production Inventory Control Society) has defined Lean as “A Philosophy of Manufacturing based on planned elimination of waste and continuous improvement of productivity.”

How ERP & LEAN Work Together
One of the ways in which ERP & Lean complement one another is in areas such as: Machine Setup Time, labor costs, and materials handling.

During Machine setup, time is lost due to the time the machine operator must setup or take down and change tooling. At other times the employee must spend valuable time looking for tools or preparing for many delays related to machine setups as a result of constant changes to the production schedule at the same work station. One of the core values of Lean Manufacturing is known as the “5S Method.”

* Sort - Eliminate all unnecessary tools, parts, instructions
* Simplify - A place for everything and everything in its place
* Shine - Maintain a tidy and organized work environment
* Standardize - Document the rules for maintaining the first 3S instructions
* Sustain - Operations carried out in sequence, eliminating waste

Execution of the” 5S Principles” meant that resources were planned in ahead, tools were in place and readily accessible, and (where possible) production jobs were scheduled to run in a sequence that minimized machine set-up. When the “5 S Principles” were applied to an ERP environment they looked like this:

* Sort - Use only parts of the ERP system which benefit the company
* Simplify - Use ERP to enable integrated business processes i.e. inventory control
* Shine - Ensure that you work with accurate and timely data
* Standardize - Document and standardize, business processes
* Sustain - Business Processes executed by ERP executed on a consistent and timely basis

The results achieved by the ERP system deployment have resulted in cost reductions and improvements in efficiency meant that work in process has to be managed closely to ensure that no bottlenecks in production occur, The tools within ERP such as Capacity Planning and Costing Modules to define direct vs. indirect labor now mean that only the time the job runs in production are calculated as direct labor.

The efficiencies gained by the ERP implementation produced reduction in set-ups, and other shop floor time management processes, means direct labor costs are also maximized. Through the use of data collection devices, you can account for time spent “on the clock” and nonproductive time spent while a work-order is in queue. This way, non-productive time no longer figures as a basis for calculating direct labor. Finally, as ERP itself evolves with the use of BI tools, along with lean techniques and philosophies such as lean pull-production principles, you will achieve business gains as you introduce JIT (just-in-time), resulting in greater capacity to monitor inventories, manage more efficiently, and align your suppliers to lean-pull production techniques. In the lean ERP model, especially where cellular production techniques in manufacturing are introduced, there is going to be less handling of materials. Once a production job begins on the shop floor, production raw materials flow through the plant rather then sitting idle waiting to be used in Production.

The Utilities Knowledge Base

The utilities industry ERP knowledge bases (list of criteria used to evaluate business software) is probably the largest knowledge base created by TEC. When building it, we started with the criteria for customer care and billing (CCB), which is the core activity of any utilities company. Then, we added functionality specific to the industry, such as vehicle fleet management, and electricity generation and supply. We also added project management, quality management, etc., which are also important for a utilities company, as well as and some modules that are common to all our ERP knowledge bases such as financials, human resources (HR), analytics, and product technology.

As mentioned above, the core of the system is based on CCB functionality. Our model of CCB covers mediation, provisioning and activation, rating, customer billing and customer care, electronic bill presentment and payment (EBPP), etc. To better address the needs of the customers without necessarily using a customer relationship management (CRM) solution, utilities companies can take advantage of the sales and marketing functionality, which helps them manage packages, discounts and promotions. Finally, meter reading or automated meter reading system (AMRS), service contract and entitlement management, automatic service activation, and service order management are important functionality that a utilities company can look for when selecting business software.

Among the functionality specific to the industry, electricity generation and supply is the most important. It contains criteria concerning generation operations and management, transmission, distribution and dispatching, and energy data management. Vehicle fleet management is the other module specific to the utilities industry, allowing companies to maintain vehicle master, monitor vehicle performance, track fleet availability and use, manage warranties and vehicle documentation, perform vehicle refueling, etc.

Though it can overlap with vehicle fleet management, asset management is another important software feature for the utilities industry, since utility companies usually need to manage a wide range of equipment, machinery, tools, etc. This includes lease management, resource scheduling, decommissioning (for phased-out equipment), and mobile requirements (for field service). Scheduling can also be found in project management, which monitors cost and work schedules for all projects. Using project analyzer, project budgeting, timekeeping and workflow management, utilities companies can easily track complex activities.

The Utilities Evaluation Center

Even though the Utilities Evaluation Center has not been officially launched, you can still preview it here. TEC also offers a list of certified software and services for utilities, grouped by software type: ERP for discrete manufacturing, CRM, supply chain management (SCM), etc. Also, our online decision support engine ebestmatch™ allows you to compare systems side-by-side.

TEC’s New Utilities ERP Evaluation Center: A Preview

From TEC’s perspective and based on our understanding of the industry, the utilities industry consists primarily of the following service providers: electric power generators, network operators, customer power retailers, natural gas, steam supply, water supply, and sewage removal. All of these business segments have common criteria such as a mass customer service department and billing process, remote service supply or power generation, and high cost of asset owning and maintenance. Also, a big part of the utility business is project based as well. Below are some challenges the industry faces:
• Traditional challenges: geographical spread and remote subdivisions and office lots; mass customer service that requires specific and unique business processes; global fuel price increases leading to the need to optimize transportation processes; and constant cost-cutting issues.
• Government regulatory challenges: electric power suppliers’ fragmentation to avoid monopolies and encourage competition in the utilities market; low emission and other green initiatives that have a high impact on current situations, future investments, and development trends; new local, country-wide, and international compliance requirements; elevated degree of competition.
• New challenges that divert huge amounts of resources and attract significant human efforts: new business technology and information technology that often work together; and a higher level of demand on customer service, correlated with higher customer expectations because of demographics and educational changes and advanced e-commerce service capabilities.

Despite the global and long-term trend of energy consumption, which is supposed to be higher during the next 10 to 15 years, the current economic situation is not helping the majority of businesses within this segment. With time, the industry will becomes less predictable and more risky, but information technology (e.g., a new generation of enterprise resource planning [ERP] systems that are seamlessly capable of facilitating and serving the growing requirements of utilities companies) will continue to play a significant and increasing role in the utilities companies’ businesses.

Michael Jackson: Greatest Hits for ERP Users

You Are Not Alone – a customer representative will be with you shortly. Please hold the line!
Beat It – I’ll fix the label printer myself!
Dangerous – The old server is on fire because your boss decided that a new one is not necessary.
In the Closet – Where’s that interface the vendor promised us?
Black or White – As a project manager, you probably already know that implementation can only be a success or a failure
Remember the Time … when you could still track inventory without having to go check in the warehouse?
Who Is It … that sent all invoices to the wrong customer?
Keep the Faith – Still waiting for those bugs to be fixed?
Don’t Stop ‘Til You Get Enough … sales orders into the system and then please try NOT to use the “delete all” button.
Heal the World – try lean manufacturing. If that doesn’t work, try this:

Blame It on the Boogie
Blame it on yourself (sunshine)
Ain’t nobody’s fault (moonlight)
But yours and that boogie, boogie, boogie (good times)
All night long (boogie)

How Charismatic Is Your ERP System

While conducting “research” for another project, I stumbled across Max Weber’s notion of classification of authority, which was news to me, as is most serious Western thought.

According to Weber, there are three types of authority:

1. Charismatic
2. Traditional
3. Legal

Weber defined charismatic authority as being derived primarily from, well, charisma, or personal magnetism. Examples of leaders that embody charismatic authority include Barack Obama, Ronald Reagan, Adolf Hitler, and Mahatma Gandhi.

As for traditional authority, Weber defined this as a type of authority exemplified by the “handing down,” or inheritance, of power from generation to generation, as in a monarchy.

Legal authority is exemplified by the majority of modern states, and it refers to, you know, the boring kind of leadership, where people are elected peacefully, and nobody talks about riots, military coups, or chads. Examples include Canadian Prime Minister Stephen Harper and German Chancellor Angela Merkel.

As you may have noticed, much of what I write has a wandering point that I like to, uh, “disguise” as sheer nonsense. So here’s the point (sort of):

What Kind of Authority Does Your ERP System Wield?

That depends on which of the following applies to your organization:

1. CHARISMATIC - We bought our ERP system based on a charismatic salesperson and a glitzy demo.
2. TRADITIONAL - We are ruled by our legacy system, and always will be.
3. LEGAL - We used a structured selection methodology to purchase an ERP system.

ERP Vendor Shootout – Redefining the “Shootout” Stereotype

While the term ‘shootout’ may conjure up images of a Wild West scenario - vigilante cowboys taking shots at each other from the shattered windows and tumbleweed strewn, empty streets of a deserted Midwest town - a group of likeminded ERP Value Added Resellers (VARs) in the mid to south East USA are redefining it.

A little historical context:

Early 2007, TEC was approached by one of our VAR partners with a concept of a live event with the following thinking:

“I am SO confident that my product stands up against the competition that I would be willing to line it up alongside those competitors and in front of some project minded individuals to demonstrate what it can do in a controlled environment.”

“Our competitors will do the same thing and the attending audience will be allowed, without bias, to make up their own mind as to what products look good to them in terms of functionality, usability and efficiency.”

Ballsy? Definitely!

Foolhardy? Time would tell!

In order to add some impartial 3rd party muscle, TEC was invited to moderate and to assist in marketing the event.

Our VAR partner reached out to their competitors, thus creating and coining the phrase ‘VAR community’, and on November 29th 2007 at Georgetown University, Washington, D.C. the doors opened to the first Annual ERP Vendor Shootout, featuring six industry leading products:

* IFS Applications
* Oracle JD Edwards
* Oracle E-Business Suite
* Sage MAS 500
* Infor Visual
* Microsoft Dynamics AX

Attending, were a group of manufacturing and distribution companies, all of which were in the process of evaluating ERP software and all of whom had some preconceptions as to what they would see.

This is where being a 3rd party, impartial attendee was interesting:

How would these companies react to the event and the ability to watch the same scenario play out up to six times?

And what would they really get out of it?

After a collective nine hours of information gathering, presentations, keynote speakers and seminars, the response was overwhelmingly positive:

“The scripted presentations create a format that allows for a true ‘apples to apples’ comparison of products and functionality”

“The ERP Vendor shootout allowed my company to see a variety of ERP systems go head to head in only one day”

“I found all aspects of the ERP Vendor Shootout to be helpful in our software selection process”

In the end, while there was no ‘last man standing’ scenario, everyone (and I mean EVERYONE, from attendees, to VARs and dare I say it, even TEC) walked away with some value, whether it be a better understanding of the buying ‘public’, the state of ERP in today’s manufacturing world or the functionality available to the buyer.