ACCOUNTING STOCK: 2009

Saturday, December 5, 2009

ERP Systems and the ETO Manufacturing Market

One of the myriad of appalling consequences that result from fitting an engineer-to-order (ETO) environment with a repetitive-oriented ERP system, which does not have, in the very least, a product configurator facility with generic items (encapsulating options, variants, and constraints), generic bill of materials (BOM), generic routings, or pricing functionality, is that the sales order capturing clerk has to contact the engineering department for a product code or for the price or cost of a product, sometimes waiting days for a response. Needless to say the standard master data becomes bloated because each product variant has to have a separate stock item code, BOM, and routing as if it was a standard stock item and not a once-off made customized product (for example, a special color or gauge thickness). As a result, the ill-fated user company would have to literally close down operations so that the entire place can participate in a dreaded stock-taking exercise with an item master printout as thick as encyclopedia and with less than 10 percent of listed items expected to be really stocked. This is without considering the likelihood of identical products having a number of different item codes as different people created new codes unbeknownst to each other.

As for the production planning aspect, the differences do not come only from days- or weeks-long lead times for repetitive items versus months- or years-long lead times for an individual project. Further, as mentioned earlier, a simple count and addition of the purchasing and manufacturing lead times will not determine the overall lead-time or time-to-deliver a project, since projects often have numerous product definition activities and commissioning and installation to arrange before and after manufacturing respectively. Also, it is not a mere scope of the planning that differs in repetitive and project manufacturing, since there are other major differences in the way that these environments approach planning.

First, project manufacturers tend not think in elapsed time, given they calculate effort. For example, if a project is estimated to have one hundred hours worth of installation, it could mean one person deployed for one hundred hours, or that it could be deployed much quicker with a larger crew. Establishing and managing a critical path is the "motherhood and apple pie" of project management. Critical path is that set of activities that defines the duration of a project, and these activities have very little float or slack, usually zero, and thus a delay in any critical path activity will delay an entire project. Still, losses in one area may be made up in another. For example, if design is budgeted to take a team of five people, and one falls ill and cannot be replaced, the design time overrun will be inevitable. However a project organization may decide to make up the time by increasing the applied effort in downstream manufacturing /or installation activities in order to hit the overall deadline.

Secondly, project manufacturers know that they cannot always be in control of the lead-time even if this project is nearly a repetition of the previous one. All sorts of issues can impact the plan to deliver even a simple project. Customer late with the design approval? Subcontractor late with the delivery due to a strike in its plant? Cannot get access to the site on the day we need it? Wide load needs a police escort? Welding can't be inspected on time? All of these have an impact on delivering the plan. Although some may not be controlled, all must be accounted for since they can profoundly affect the overall plan.

Thirdly, traditional MRP based systems work without priorities, but rather with time-phased, back-loaded scheduling and with the "oldest order first" principle. Advanced planning and scheduling (APS) and some other job dispatching techniques may use more advanced algorithms (e.g., critical ratio), but they do not really recognize a "rush job" logic (see Advanced Planning and Scheduling: A Critical Part of Customer Fulfillment). In other words, it is often difficult to see why any one job on the factory floor is needed or where it is going to go. Since their business is often more cyclic, project manufacturers want clarity and simplicity to be able to juggle priorities within the network of remaining activities. They demand that everyone knows what the critical path is within the plan today.

This is not to imply that in repetitive manufacturing planning and re-planning are simple activities, given one has to take the maximum or optimal utilization of plant, equipment and absorption of overheads into account. It is to say that project manufacturers have just as complex albeit an entirely different planning problem. As such they need a system that thinks in terms of applied effort, can plan for items and activities outside the bounds of the company, is clear to understand, and is flexible enough to cope with rapidly changing priorities and circumstances.
When it comes to accounting, project-based manufacturers are more concerned with the profitability and cash flow of the project than of the departmental or organizational accounts. 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. Yet, 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.

The key difference here is project cost accounting versus standard cost accounting. According to APICS Dictionary, project costing is "an accounting method of assigning valuations that is generally used in industries where services are performed on a project basis. Each assignment is unique and priced without regard to other assignments. Examples are shipbuilding, construction projects, and public accounting firms. Project costing is opposed to process costing, where products to be valued are homogeneous." Conversely, standard cost accounting" is a cost accounting system that uses cost units determined before production for estimating the cost of an order or product. For management control purposes, the standards are compared to actual costs, and variances are computed."

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 and invoices, often in compliance with complex industry-specific and regulatory requirements. In fact, project managers tend to be obsessed with analyzing actual spend versus achievement. For each separate project, and at any point in time, they need to know exactly what they have committed in terms of purchases, WIP, billable hours, material etc. They want to be proactively alerted as soon as a job goes outside predefined parameters, so that the causes can be identified and the situation rectified. Equally important, they need to know how much work remains and "cost to complete", as well as what is left to spend in order to deliver the project, as an anticipation of profit or loss before the project is complete.

They have to be able to report revenues on the percentage-completed basis, which is more complicated than reporting on a basic completed product. Yet, traditional generic general ledger-oriented (GL) accounting systems have not been designed with project phases, work breakdowns or detailed time capturing in mind, and thus, they merely can report how much it has been spent or collected, but not why certain project is losing or winning money.

In project manufacturing, the received payments may be spread out over the life of the project—including retention for acceptance of the job a long time after its completion. These receipts, also known as "stage payments", may happen at any time in the project, and depending on the contract, may be based on committed purchases or major events in manufacturing. One should note that the effect of stage payments on cash flow may even drive the priorities in the production sequence. So once more, project manufacturers have subtly different needs which can make all the difference in the pursuit of "world class". At least, the ETO amenable ERP system should include project costing, which is kept separate from the ERP system's general ledger.

ERP Systems and the ETO Manufacturing Market Part Two: ETO versus Repetitive Differences

Having outlined the above, it might be useful for us to recap the major differences between engineer-to-order (ETO) and repetitive/volume-base manufacturing environments throughout different phases of a product life cycle as well within various functional departments within a manufacturing organization. First of all, prior to any manufacturing, there is extensive work in the product definition phase (i.e. estimation, design, and engineering) before anything can be made, bought or delivered. However, the major difference is that within ETO companies the product design is an integral part of production (if not even afterwards, during the site installation and commissioning), whereas for repetitive, standard items the design is typically completed and handed "over the wall" to the manufacturing well before the production starts.

In volume manufacturing, product definition work is amortized (recovered) over the items' life cycles, which are often measured in thousands of items and over several years of commercial use. Whilst a possible time overrun here will effect the time-to-market of the product, (which is often the competitive advantage (strategy) in addition to lower costs for repetitive manufacturers), it has no effect on the overall lead-time of any particular sales, job, or project order, and is therefore not handled in the same way. Moreover, the extensive costs of product definition are absorbed into the company overhead or standard product costing, so that an overrun of costs can be managed in the context of a long term pricing strategy.

Project-based/ETO manufacturing is very different, as a majority of the total project lead-time and expenditure can come from engineering, which makes it crucial for the company to engineer correctly and maintain costs. Complex manufacturers produce products that are of high variation, have complex features and options, and vary in end user configuration. Each job is unique and the variables are based on client specifications rather than on the options from the stock. They consequently invest significant dollars in product design and have lengthy sales and manufacturing business processes, often requiring collaboration between the customer, sales representatives, and critical back-office experts.

ETO manufacturers focus on special jobs that have never been done before, or custom jobs that are similar to others but require extensive modification to accommodate customers' special requirements. Further, customer approval may stipulate many engineering changes and adequate information about these changes must be timely when released to manufacturing and purchasing, and sometimes even to the field service force. As a matter of fact, product design almost never stops, given customers' prerogative of changing their minds in the midstream, to a degree that they feel free to change specifications or add new requirements to the original orders, sometimes by directly instructing the supplier's manufacturing personnel and circumventing the proper channel of the sales and engineering department. Occasionally, the customer might attempt to play dumb and even refuse to pay for any changes to the original orders if the enterprise is unable to track all these change requests back to the initial order and prove him or her wrong.

Furthermore, since most projects have unique requirements, lead time of the product definition processes will directly impact on the delivery of the project, and will affect the contract. The company will go through it all over again on the next project, even if the product is similar to the previously delivered one. Thus, there is effectively little or nothing to amortize or recover the costs. For these reasons, far from being ignored, these "upfront" product definition processes need to be carefully planned and accounted for.

Moreover, sophisticated customer interactions (such as order/contract definition and management applications) are required, while customer service needs are also oriented toward hands-on contract management and cost reporting. Frequent changes force contract supplier engineers and subcontracted original equipment manufacturer (OEM) engineers to be in a constant collaborative communication throughout the design and production cycle of the unit. One of the most manual functions in a supplier organization have traditionally been the sell-side request for quote (RFQ) management (as opposed to standard price and discount lists in repetitive environments), which usually revolves around a few key expert individuals that have direct knowledge of the product or who can manually pull together the diverse information sources into a unified document, as contract proposals include quotations, pricing, detailed product information, data sheets, and computer-aided design (CAD) drawings. In complex ETO manufacturing, where the quality is a given, and while available capacities are on par, what makes the winner is the ability to set a competitive price. There is a huge difference between winning business and winning business that is profitable to accept and that is a win-win situation for both the customer and the provider.

On the other hand, in almost all industrial manufacturing segments, the pressure to reduce lead times has become a constant and ever-expanding concern. Depending on product complexity, some parts or sub-assemblies might be quoted immediately, while others have to be highly specified. Developing a contract proposal requires many levels of checking and re-checking customer process requirements and facilities capabilities, as well as preliminary design work and sourcing of specific components or materials. The process typically goes through much iteration every time the customer uncovers a new requirement or constraint. The labor-intensive nature of this process has often resulted in lengthy estimating cycles, which have in turn often translated to lost business opportunities.
By harnessing an enabling technology to make everybody work smarter rather than harder, complex manufacturers could, in some instances, reduce the time it takes to create contract estimates. To that end, modern product configurators have become the pivotal enabling technology for simplifying complex ETO operations in the direction of mass customization, providing the ability to more easily configure individualized products and services at the point of sale (POS) with integration to back-office systems. Providing customers with exactly what they want is not exactly a new concept, but the idea of giving the customer ever-expanding range of choices as early as possible has become the center of many various industries' customer-oriented activities, given that getting an accurate, customized product to the customer more quickly fosters competitiveness.

In general, product configurators are software tools that streamline order entry process by asking the customer to select from a set of predefined options associated with a generic product line, and then apply predefined rules with constraints to correctly configure the particular end product. The configurator then populates the attributes of the newly configured end item (called the variant product), tests for any conflicts, and generates the variant product with appropriate BOM, routing, and pricing based on preconceived rules and calculations. As product configurators have evolved to include even more sales, marketing, and financial functions tangential to the product per se (e.g., pricing, cost analysis, sales commissions, available-to-promise [ATP], order status, etc.), the term "sales configurator" has been used to increasingly to reflect their expanded role. It may more accurately describe their extended role as tools that assist salespeople with not only building viable products, but performing related tasks, such as proposal and quote generation. Still, configurators may have only limited usefulness for the most complex, unique "one off" project-based environments.

In any case, the ETO-oriented systems must facilitate the near real time transfer of information and complex product knowledge for collaboration across the extended enterprise, and should especially be suited to organizations that seek to maintain complex selling relationships, such as businesses whose procurement and sales functions rely on subcontractors, channel partnerships or a distributed sales force. To that end, a manual process that took anywhere from a day to several days should now be accomplished in about one minute with the appropriate use of technology.

In volume manufacturing, concurrent engineering means getting teams together. According to APICS Dictionary, it is "a concept that refers to the participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs". Also called co-design, concurrent design, early manufacturing involvement, parallel engineering, simultaneous design/engineering, team design/engineering, integrated product development, participative design/engineering, quality circles or design for manufacture (DFM), concurrency is mostly about teamwork and the sharing of knowledge. In project manufacturing, however, concurrency goes a mile further by running design, manufacturing, and commissioning simultaneously, since it is often the only way to satisfy the customer's deadline.

ETO and project-oriented ERP buyers should therefore ask prodding questions about how the systems they are evaluating handle concurrency. For example, can the design department release a partial BOM for manufacturing to work on, and then add to it or modify it later when they are sure of all the facts? This capability is sometimes referred to as "progressive engineering", which is the ability to handle items that are part of the project but still undefined—they can nevertheless be included in the project work breakdown structure (WBS) and the application will plan around those items without losing the integrity of the structure.

ERP Systems and the ETO Manufacturing Market Part One: Event Summary

n our relatively recent article about the still ongoing consolidation in the market, What Does Vendor Consolidation Mean To The End User? , we mentioned that the market will not stop short at the eventual "Big Five" or so of the largest leading vendors. Namely, we expect the market for application software to further segregate into two tiers.

The first group will be a limited number of very large vendors, while the second group will be a large number of small, highly focused vendors. The latter's business model will be focusing on a relatively small, tightly defined market with specific requirements that cannot be met with more generic products. Usually, these markets will be too small for the Big Five to want to compete, and will also have unique requirements that cannot easily be built into the more generic products offered by the Big Five. These specialists, boutique or niche vendors (whereby neither of these terms is meant in a derogatory manner) will compete by having in-depth product functions and intimate knowledge of their market place or by offering services (content or location wise) not available from the Big Five or large independent service providers. Example of these markets can be industrial (e.g., fresh meats, dentist offices, machine tools manufacturers, etc.) or regional (e.g., Chicago, New Orleans, Columbus, etc.) focus. i
While competitive costs (i.e., ever lower and more flexible software license pricing with shorter implementations) and outstanding global service (i.e., proven implementations' payback benefits and subsequent customer loyalty) will remain important requirements for success, particularly in the lower end of the market; vertical focus will still be the key factor for survival.

Vendors that weather the ongoing carnage will have focused their business and product on a few particular, manageable industries (possibly only a single one for the smallest vendors), preferably those with a current low penetration, instead of a more generic, horizontal approach. There is a general consensus in a number of diverse industries that generic solutions require longer implementation timeframes, more customizations (or, possibly even worse, workarounds, and related dreaded backdoor knowledge just to keep the system running), and the complication of add-on solutions. Winning enterprise resource planning (ERP) and other enterprise applications products will thus demonstrate deep industry functionality and tight integration with best-of-bread "bolt-on" products in a particular vertical, which also means adding sector-specific, fine-grained capabilities.

As a matter of fact, verticalization can be seen as part of a larger effort by most enterprise applications vendors to ease the implementation of their products. By now, almost everyone in the IT industry has heard horror stories of enterprise applications implementations that took two or three years and cost tens of millions of dollars, sometimes only to be eventually abandoned (see The 'Joy' Of Enterprise Systems Implementations). That happens, in part, because the larger, generic ERP packages usually arrive needing to be configured for the business and the industry entirely from scratch. At least by configuring parts of the package in advance for a given industry and circumventing functions not required in that industry, these vendors can shorten and ease the implementation process.

In fact, software implementation time reduction is a key element of success in any enterprise-wide technology project. Users have thus increasingly looked for an ERP system designed for a specific business, since software that combines industry-specific functionality with the flexibility to accommodate each company's unique processes goes a long way toward improving the functional fit and the speed of implementation.

Closely related to the above need for vertical focus would be the inherent adequacies that traditional ERP systems have commonly exhibited owing to their genesis (see Enterprise Applications—The Genesis and Future, Revisited), and which have left enterprises struggling with a system that does not mesh with their manufacturing operations. Although, as possible remedies of these shortcomings, the lean, flow and demand-pull manufacturing philosophies have lately been getting an increased interest. Namely, the ERP systems of the 1990s have been burdened with the liability of carrying on some well-known manufacturing resource planning (MRP) problems like unnecessarily complex multilevel bills of material (BOMs), infinite capacity assumption, inefficient workflows and unnecessary (i.e., no value-adding) transactions, activities and data collections, which have not been amenable to mass-customization but rather to traditional push-demand, mass production and inventory building trends. For more details, see Pull versus Push: a Discussion of Lean, JIT, Flow, and Traditional MRP.

Still, while some tout that regardless of the industry, type of manufacturing environment, or product volumes, flow manufacturing principles can be implemented successfully, the concept has not been all things to all people so far. It is still challenging or even unsuitable to deploy in a jobbing shop that does highly configure-to-order (CTO) or unique engineer-to-order (ETO) products having high setup times and long lead times, although it has been occasionally deployed there with almost as much success as within high-volume, more repetitive make-to-demand environments. Namely, lean manufacturing and just-in-time (JIT) concepts, which emphasize continuous improvement of processes that lead to, for example reduced inventory throughout the supply chain, shorter lead times, and faster cycle times, all enabling improved response to customer demands, are indeed universal across the board and cannot be debated.
However, the fact is also that only a minority of all ERP vendors properly support the ETO environments, let alone with flow manufacturing concepts. Glovia would be one possible honorable exception. Although it originated in the US market, owing to its current parent Fujitsu's involvement since the 1990s, it has enjoyed its greatest success with Japanese companies. The support for the kanban (loosely translated means card, billboard, or sign, and is often used for the specific JIT scheduling system developed and used by the Toyota Corporation in Japan) and the seiban (an identifying number or label attached to all parts, materials, purchase orders, and manufacturing orders that identify them as belonging to a particular customer, job, product or product line, resulting in having separate MRPs within the overall materials requirement planning process) lean or JIT manufacturing approaches enable manufacturers to handle configured items even in batches of one. All these functions are aimed at inventory optimization and waste management, streamlined planning and control for specific products, models, and sequenced production.

Cincom Systems would be another honorable exception amongst vendors with strong ETO capabilities, given its Flow Manager product handles kanban replenishment and demand smoothing, but not line design and operation method sheets (OMS) since these features would not bring much benefit to ETO manufacturers. These customers often specify product families that include products that require one or two unique and expensive components with distinctly long lead times, in addition of the fair share of common parts (stocked items), which could benefit from flow methods of smoothing spikes in demand. Further, for any organization, that lean orientation feat will not happen overnight, since achieving it takes more than moving equipment around into product family production lines, creating flexible workstation teams, establishing quick changeovers, and introducing kanban signals. It also requires specific flow manufacturing training and continually maintained disciplines and process improvement mindsets (e.g., zero defects, zero setup, the use of standardized components, zero inventory, etc.). IFS and SSA Global Baan would be other tier 2 ERP products with solid ETO orientation and certain features of the support for lean manufacturing.

Syspro Hatches 'Encore' IMPACT On SME Manufacturers

On September 7, the Syspro Group, a privately held Worldwide provider of enterprise software for small to medium enterprises (SMEs), with its US headquarters in Costa Mesa, CA (www.sysprousa.com), was named a recipient of the START Magazine Vision Technology & Business Award for 2001 in the Manufacturing ($50 million to $200 million) category. In naming Syspro Group as the winner of the START Vision Award, the judges expressed admiration for the company's recent development of the Material Yield System, a software solution that enables manufacturers and distributors to maximize the use of scraps.

This Part One of a two-part note on Syspro. This part details recent developments. Part Two discusses the Market Impact and makes User Recommendations.
On July 30, Syspro announced the general release of a new module designed to fill the specific needs of manufacturers and distributors that rely on the cutting of shapes and pieces from standard size materials, e.g., sheets, tubes and rods, as part of the manufacturing process. Specifically, the new Material Yield System is targeted at the Plastics, Steel, Rubber, Paper and Lumber industries that need to maximize yields, minimize waste and, where possible, return remnants to inventory.

The new Material Yield System reportedly accommodates a seamless integrated workflow to satisfy a series of common requirements that include customer specific dimensional requirements, automatic yield calculations from full sheets and stock remnants, and the return of scraps to inventory with the automatic creation of new part numbers and pricing. Moreover, the new module will attempt to fill custom orders from existing inventory, another branch's inventory, the purchasing of material from a vendor, or a combination of each.

These latest awards are the culmination of a year, which to date, has seen the Syspro Group honored by numerous publications and associations. This should be no surprise given the company's rather busy product enhancements' activity in recent times.
On August 21, Syspro announced a new release of its flagship IMPACT Encore Enterprise software. Version 5.1, which supersedes IMPACT Encore Version 5.0, offers expanded system functionality, new e-business-centric capabilities and added support for multi-site facilities with a new module and numerous enhancements to existing modules. The new module encompasses Engineering Change Control. Enhancements include Goods in Transit and Blanket Purchase Orders functionalities.

IMPACT Encore 5.1 also features other numerous module enhancements. For example, General Ledger financial reports can now be published as extensible markup language (XML) documents for viewing on the Internet or an intranet. The documents have drill down capability from the general ledger codes to the source documents as well as full report editing and journal posting capabilities. IMPACT Encore 5.1 stores archived sales orders and work orders as XML documents which can be recreated as HTML pages using a Web browser. The archived data is accessible using any XML-aware tool. Archiving in this manner allows the user to store files off-line for security or practical reasons. Archived data can also be easily retrieved for the purpose of creating new items, such as a new work order.

Business-to-business (B2B) trading has been enhanced with the optional use of XML documents with published schemas for transferring purchase orders and sales orders. IMPACT Encore Version 5.1, available since September 15, is being offered in two versions, the Microsoft SQL Version and a C-ISAM version.

SouthWare Excellence Series: Making Excellence Easier Part Five: Competitive Analysis

SouthWare Excellence Series: Making Excellence Easier Part Four: Application Analysis & Development Environment

SouthWare Excellence Series: Making Excellence Easier Part Three: Application Analysis

The process of selecting mid-market accounting software usually starts with products that have achieved some name recognition and that's fine as long as the search does not end there. SouthWare Innovations (http://www.southware.com) has created in its Excellence Series� a worthy competitor serving a number of industries and offering users a surprising array of functionality, either directly as SouthWare applications or through one of their independent sales vendors (ISV).

Detailed Application Analysis

ExcelReport�

This unique application allows users to establish both subjective and objective—financial—goals, grade progress toward achieving these goals, measures progress over time, and thereby help people do their jobs better.

The system supports a completely user-defined set of critical success factors for each business, business unit, or even individual employee. These success factors can be financial values or ratios that are then associated with specific grades or subjective factors that will be evaluated and assigned a grade. In addition to calculating and displaying grades on a period basis—with up to five years history—, the system will display both trend lines as well as a grade point average (GPA), just like in an educational setting.

Although there is any number of success factors that can be established and tracked, here are some questions that can be asked and answered.

* Which areas of the business need attention?

* Are we making progress toward our goals?

* Are we able to fulfill customers' orders?

* Are we shipping orders on time?

* What's the average approval rating on sales orders?

* Which items are returned the most due to poor quality?

* How much are errors and complaints costing us?

* What do our customers think about us?

* Are we hitting our financial goals?

* Which vendors are giving us good service?

* What are the recent events involving this customer?

* Have we responded to all the ideas and suggestions we've received lately?

* How solid are our vendor relationships?

* Are our employees satisfied with their careers?

* How well are we preparing for the future?

TaskWise� is SouthWare's vision of a completely integrated business management system that includes task management, relationship management, exception management, and information sharing or collaboration. Users can manage their daily work through one convenient portal that gives them access to both information and functions, all wrapped around a central task manager.

* Task Management: Users can define individual or linked tasks that can be text oriented, such as reminders or descriptions of issues that need to be addressed but are not tied to specific accounting functions. Other tasks can be tied directly to accounting functions such as approving purchase orders, invoices, or hyperlinks to specific SouthWare functions, such as order entry for an order clerk. In essence, SouthWare has taken the concept of user-defined menus, which it supports, to the next logical level whereby the concept of a menu has been replaced by a completely integrated task management system that presents those tasks the user should address.

* Relationship Management: TaskWise can function as a complete relationship management system. Since this is a task manager and not a CRM system, TaskWise can handle vendor and employee relations just as easily as it can handle customer relations. TaskWise can also integrate with Microsoft Outlook via SouthWare's OfficeLink� application.

* Exception Management: TaskWise is tied into a robust Alert Driver application that identifies exceptions and assigns them to specific named individuals as one or more tasks. Standard tasks can be linked together to form a complete business process. User can also create new alert drivers as an integral part of their daily business functions. For example, they may be worried about the cost of specific items rising very quickly in the future. Rather than checking the prices every day, they can define a new alert driver and prompt the system to notify them if the price rises above a specified value or if the price is rising faster than a certain rate. Many products support alerts, but SouthWare is one of the very few products that provides users with a software-driven business management system that helps them address potential or actual problems. The key concept here is the notion of a system that incorporates what used to be manual control processes into a single software-driven and software-supported business methodology.

* Collaboration: By presenting a software-driven business management system, SouthWare by default supports collaboration. Alerts and tasks can be shared with anyone in the organization, together with supporting e-mails. While there will always be one person who is responsible for a particular exception as an example, that person can send that "file" to another person and ask that they handle it, but they can also ask that person to send them a confirmation that the task has been completed.

SouthWare Excellence Series: Making Excellence Easier Part Two: What Makes SouthWare Different?

The process of selecting mid-market accounting software usually starts with products that have achieved some name recognition and that's fine as long as the search does not end there. SouthWare Innovations (www.southware.com) has created in its Excellence Series� a worthy competitor serving a number of industries and offering users a surprising array of functionality, either directly as SouthWare applications or through one of their independent sales vendors (ISV).

SouthWare is a senior player in the middle market, having been founded in 1984. While its roots are in the distribution industry, the Excellence Series is not just a distribution play. It serves a number of industries and supports a very large number of users.

While many products have moved to more "modern" development environments, SouthWare has stuck with Acucobol and this decision appears to have been wise. Revision ten of the Excellence Series runs in any operating environment and yet the product supports all of the leading graphical expectations.

The Excellence Series is in fact a superior product that provides users with a powerful business management framework that is in many aspects far ahead of other middle market products.

* Portability: The Excellence Series is compatible with Windows and LINUX/UNIX, as well as over 600 other platforms, allowing users to mix and match computers in a network as needed.

* Versatility: The Excellence Series offers users significant functionality, particularly in the area of distribution and service management, but has recognized that all companies do not require every application. This granular approach to product development allows users to select only what they need without having to cope with overly complex or costly functions they do not need.

* Development Environment: While the Excellence Series supports unlimited modification, it does so using tools that guarantee access to software updates.

* Responsibility: If a programming issue is identified, it receives priority until it has been resolved. People do not have to wait for bug fixes.

* Task and Exception Management: SouthWare has recognized that systems have to move away from accounting (data input and report generation) and toward a more proactive business management orientation whereby the system itself will help people do their jobs better. Many systems generate alerts (exception management), but few actually provide people with the tools (task management) required to resolve these issues.

* Job Assessment: The Excellence Series is the only product in the middle market that helps people "grade" their performance. ExcelReport� is the only application of which I am aware that helps users establish both objective—financial—and subjective—performance—goals, measure performance over time, and actually grade that performance.

* Maturity: SouthWare produces a mature business management system that has been thoroughly tested in the field.

* Internet and Intranet Functionality: SouthWare's NetLink� provides controlled access to business data via Internet and intranet browsers. It offers easy-to-use standard web pages as well as a development environment that allows users to easily create their own real-time data web pages without requiring a high-level of technical expertise.

* Extended Data: SouthWare has recognized that organizations may want to track data that is unique to either their industry or their business model. Additional fields can be added throughout the system, but unlike other products, these fields are recognized instantly by the system and are available for reporting or other uses.

SouthWare's Excellence Series utilizes a development methodology labeled "S.M.A.R.T." for Strengthening Mature Applications with Recent Technology. Specifically, SouthWare uses tools from Acucorp, Inc. (http://www.acucorp.com/) and has blended these mature tools into a development philosophy that combines product stability and processing speed with modern business programming methodologies to give users the "best of both worlds."

Acucobol-GT with graphical extensions, the newest version of Acucobol, provides many graphical user interface options to take advantage of graphical system capabilities. The current version of the Excellence Series fully utilizes these features. The latest release does have that graphical look and certainly acts a lot like a fully graphical system. SouthWare is improving the look and feel of the system and will continue to move in that direction as quickly as it can. This does not mean SouthWare is abandoning other platforms. In fact, the latest release can still be utilized by companies with text-based workstations. However, some new features are supported only by Windows workstations.

The use of a technology such as Acucobol-GT also allows the Excellence Series to run on virtually any client or server system, including Linux.

The Excellence Series uses Acucobol-GT's proprietary Vision file system out-of-the-box. For added flexibility users can replace or mix in other file systems including C-ISAM, Btrieve, MINISAM, and relational databases such as MS SQL and Oracle.

outhWare Excellence Series: Making Excellence Easier Part One: Company Background and Product Overview

The process of selecting mid-market accounting software usually starts with products that have achieved some name recognition, and that's fine as long as the search does not end there. SouthWare Innovations (www.southware.com) has created in its Excellence Series� a worthy competitor serving a number of industries and offering users a surprising array of functionality, either directly as SouthWare applications or through one of their independent sales vendors (ISV).

Founded in 1984 and based in Auburn, Alabama (US), SouthWare is a relatively small company of very dedicated people (80 percent of its employees have at least twelve years seniority), which has created what may be one of the best examples of a true business management system, not just an accounting system. What may be even more important to companies of all sizes is that the Excellence Series operates on many platforms and databases, giving users the option to select the environment that best suits their technology requirements rather than forcing them to accept a single option.
The Excellence Series supports a significant number of applications, most of which complement its historical strengths in the distribution industry. However, users should not eliminate the Excellence Series simply because they are not in this single industry. In fact, the Excellence Series supports accounting, distribution, e-business, service management, rental management, and job costing out-of-the-box. Together with its third-party developers the Excellence Series also supports manufacturing and a whole host of other industry verticals.

Currently, SouthWare supports 6,000 sites in the US—it has no plans to expand internationally. The largest site supports 500 users—a cellular telephone company—with the next largest site supporting 300 users—high-end photographic equipment.

While we will discuss some of SouthWare's applications in more depth a little later, let's start by summarizing what's available out-of-the-box. I have elected to segregate this list into four categories

* Business Management Functions
* Accounting Applications
* Productivity Tools
* Technology Features

The Excellence Series, and every other business management system for that matter, is not all-powerful, but it does offer advanced functionality in several areas and outstanding business management support.
* ExecuMate II� is a powerful executive information system that presents to executives and managers user-defined summary data (expressed numerically and graphically) that allows them to take the company's pulse. If more detailed information is required, extensive drill-down is available. The system even posts alarm warnings for key financial areas (Note: These same alarms could also generate a standard alert in TaskWise�, SouthWare's unified task, relationship management, and exception management system).

* ExcelReport�: This unique application helps users establish both subjective and financial goals and grades progress toward achieving them. We will discuss this in more detail later.

* TaskWise�: Combines into one application business processes such as task management, relationship management, exception management, and information sharing (collaboration). SouthWare has taken the concept of user-defined menus, which it supports, to the next logical level whereby the concept of a menu has been replaced by a completely integrated task management system that helps users carry out their jobs both more efficiently (do it cheaper) and effectively (do it better). This will be discussed in more detail later.

* Collections Adapter: Full-featured collections management application. This will be discussed in more detail later.

* AnswerReady� is a tool that lets users set up a searchable database of topics, instructions, company policies, documents (e.g., employee handbooks), as well as questions and answers. The system has but one purpose and that is to help people do their jobs better by giving them ready access to the information they need. Users can create a table of contents to form the basic framework of the information management system, and add or modify topics (with appropriate access controls) as required.

Food and Beverage Industry: Overview of Software Requirements The basic features and functions common to enterprise resource planning (ERP) and suppl

The basic features and functions common to enterprise resource planning (ERP) and supply chain management (SCM) software will only be briefly discussed herein. It is assumed that the reader already has a good understanding of these capabilities relative to process manufacturing. However, if this is not the case and you want more information in this regard, please see my article entitled, Process Manufacturing Software: A Primer.

This article will concentrate on those features and functions that present considerable challenges to traditional software vendors trying to gain a foothold in the food and beverage industries.

Specifically, this article provides an overview of the requirements for software offerings catering to food and beverage by discussing the following aspects:

* ERP Functions and Features
* SCM Functions and Features
* Additional Considerations

ERP Functions and Features

The software should offer the standard functionality expected from ERP software to support manufacturing and back office activities. The modules to support these activities include financial management, specifically general ledger (GL), accounts payable (AP), accounts receivable (AR), and fixed assets; financial control, specifically budgeting, cash flow, and standard and actual cost accounting; human resource (HR), specifically payroll and time and attendance; production and manufacturing; order taking; and customer service.

However, there may be additional and integrated modules not normally found in ERP packages. These modules may be worth investigating to determine if a vendor can supply this functionality later, when and if needed. This functionality can encompass warehouse management systems (WMS), maintenance management and control (computer maintenance management system [CMMS], enterprise asset management [EAM]), performance management and reporting (enterprise performance management [EPM]), logistic management (third-party logistics [3PL]), financial reporting and consolidations, and material safety data sheet (MSDS) management. Having the flexibility to incorporate this added functionality from a single vendor can eliminate many of the interface issues when similar modules are purchased from third party vendors. Let's look at the maintenance function to illustrate this point.

When you purchase a third-party maintenance management system, you would most likely get only an interface with your inventory and purchasing systems so that you could procure needed but out-of-stock repair parts. With an effective and more encompassing software offering, additional interfaces to payroll (such as using hourly rates to calculate labor costs of repairs); human resource (such as matching an employee's skills with equipment being repaired); warehouse management (such as homogeneously slotting repair parts); and supply chain planning (SCP) (such as providing visibility to planned equipment downtime) now become available. Furthermore, this type of integration can facilitate the cost justification of acquiring and utilizing these optional modules.

As one would expect from software tailored generally to process manufacturing but specifically to food and beverage, an ERP package should ably support the subtleties needed by food and beverage producers. Formulas should be scalable so that production batches can be sized based on the minimum quantity of on-hand ingredients. For example, if you are making a car and you only have two of the required four tires, you cannot make half of a car. Conversely, in the beverage industry, what if you want to make 1,000 gallons of soda but you only have 500 gallons of the required 1,000 gallons of carbonated water? You have the option of making half of the 1,000 gallons of soda. You should expect the software not only provide this type of re-formulization but automatically suggest such alternatives to keep your customers, at least, partially satisfied.

By maintaining the formulas and packaging recipes separately, the software should be able to accommodate "brite" stock and make-to-order (MTO) production runs, typical requirements in the food and beverage industries.

The term, "brite" stock, is common for private label food processors. For example, large grocery chains sell products, such as soups, soda, and meats, under their own brand names, hence private labels. Don't think, however, that these chains have their own manufacturing plants. Chains contract for these products to be produced. In the case of soups, food processors create and warehouse non-descript, non-labeled aluminum cans of soup, hence the term, "brite" stock. Once a confirmed order is received, the private labels are then applied in a separate packaging run. A similar analogy can be made for a MTO scenario. Namely, you wait until the order is confirmed before you complete the manufacturing process.

As you would expect from packages serving the food industry, the software should offer "catch weight" functionality. By definition, catch weight is the recording of the actual weight of a product. For example, whereas a 50-pound case of meat lists for $100, in actuality the case is sold at $2 a pound based on the actual weight of the meat less the packaging material. Accordingly, capturing of this actual weight, which can be used for pricing, is known as the catch weight of the product. The software should take the process one step further by using catch weight to calculate the actual cost of manufacturing the product. Use of catch weight in costing is important because it provides a more accurate picture of the true production costs based on actual yields. The lack of incorporating catch weight in the costing calculation is tantamount to buying shoes without soles. They may look good but their lack of functionally will hurt your performance and ability to walk.

Thursday, December 3, 2009

Integrating Customer Relationship Management and Service Resolution Management

A customer relationship management (CRM) system that accommodates complex customer-facing processes requires four key factors to give the system a competitive advantage.

The first key factor lies in the application's ability to develop a complete customer profile that supports multiple business units and products. Service organizations need a wide range of customer data, including demographics, financial status, and current and anticipated lifestyle changes (for example, college-age children, retirement concerns, newborn kids, house or condo purchase, changing insurance requirements, etc). To gain a true understanding of customers' needs and wants, any interaction with them must be captured and analyzed.

For example, when a customer with a savings account inquires about a home loan, a full-service financial services company would want the customer-facing employee, whether in the branch or contact center (if not even an intelligent online software agent), to recognize that here lies an opportunity to cross-sell a home insurance policy to the client as well.

Having a complete customer profile enables users to quickly identify key attributes about a customer, such as whether the customer has multiple accounts with the bank, and therefore is a customer the bank would not want to lose. Naturally, customers are highly sensitive to how they are treated; they notice such things as whether their service institutions answer the phone quickly and recognize the customer when he or she calls, or whether the establishments answer questions astutely or resolve issues promptly. Also of importance is whether the institution provides rapid turnaround for specific offerings, such as new account origination, new loan origination, refinancing a home, and so on.

Most customer-serving institutions need software solutions that can deliver services that are personalized to the customer's needs. Take, for example, an insurance company that has many distinct lines of insurance products but no common customer database, leading to the disastrous result of several agents calling on the same accounts. Such disorganization is not only costly and inefficient, but it also creates a great deal of customer dissatisfaction, annoyance, and ultimately, defection. By implementing a unified solution to market more than one product to the right customers, the service company should be able to improve revenues while driving down the costs—and retaining customers.

The second key factor is that the CRM application should provide companies with the ability to customize their solution to address their unique business needs and evolving external requirements. In a dynamic business environment, the service enterprise must be able to sense and react, almost instantly, to changing market conditions. These conditions vary depending on whether they are caused by shifts in market structure, new competitive threats, micro- or macro-economic changes, or other factors. A company must also adapt to its users' needs, since not all users are alike; an adaptable system should provide a personalized interface for the user, based on his or her specific information needs. Ideally, the system should also be able to dynamically modify its behavior, depending on what the user is doing.

Financial industry enterprises—especially those competing with larger organizations—claim that they win and keep customers because they leverage their in-depth knowledge about the client to offer more personalized service. These clients do not want a cut-and-dried solution that looks and acts like the same CRM system that their next-door competitor uses. Rather, they want a flexible solution that they can tailor to their products, services, and business operations.
The third essential factor of a CRM system that accommodates customer-facing processes is that it should offer organizations the ability to adapt to customer and market changes, since most traditional enterprise CRM offerings require users to write lots of expensive, time-consuming custom code as part of their deployment. This often creates many problems, starting with most customers finding that by the time they have completed the development cycle and are ready to roll out the software, something in their business has yet again changed (such as a new, fierce competitor has entered the market; new legislation has been passed; the company is involved in a merger; management has decided to add or drop a new product line, etc.). Thus, these firms may find themselves stuck using their old model and needing to go through another long, expensive software development cycle to add the changes they need. On the other hand, customized environments can be very difficult to upgrade when the vendor comes out with a new release of its software.

The fourth factor is the CRM application's ability to integrate, in near real time, with other complex systems, and its adaptability to users' existing infrastructure. It is not at all uncommon to find dozens of systems in the service firm's back offices, all of which have data that needs to be integrated with the new CRM system. Some of these systems can even go back a decade or more. Many of these systems, although ancient in the IT timescale, still deliver mission-critical services reliably and effectively, day in and day out. Thus, a modern CRM solution must easily and seamlessly share data bi-directionally with these systems, using open industry standards.

As the first factor indicates, an adaptive service enterprise must be sensitive to ever changing customer requirements, and must foster an optimal customer experience by creating and delivering incremental services that customers want and are willing to pay for. This requires an IT infrastructure capable of seamlessly tracking and managing interactions across all customer touch points, such as the retail store, the Internet, e-mail, fax, the call center, etc.

Though CRM mega-vendors often want users to rip and replace their entire IT infrastructure with the mega-vendor's software stack, many clients view their legacy systems as mission-critical, and might prefer a CRM solution that will protect their investment by plugging into their existing infrastructure.

To be sure, services institutions live and die by the services and products they provide to fickle and demanding customers, and they need to be able to change direction quickly in order to meet competitive challenges or to take advantage of emerging opportunities. Only by deploying astute CRM technology will they be able to capture customer and market data, sense and understand how their customer segments want to be served, and be able to analyze and respond to changes in customer needs and wants.

Because CRM processes touch so many parts of a business, they can have a major impact on both cost and revenue. The improvement of sales and marketing processes can bring in new revenue, while call center productivity can drive down the costs of servicing customers, as well as present up-sell and cross-sell opportunities (and maintain customer satisfaction).

The business case for call center applications is becoming increasingly obvious, especially given the recently established National Do Not Call Registry in the US. The revenue driver will thus become inbound customer calls rather than companies trying to generate leads via outbound telemarketing efforts, which have too often proved to be annoying to customers, and ultimately counterproductive.

Best Practices for Transporters and 3PL Service Providers

The current state of the goods transport business is such that most transporters and third party logistics (3PL) service providers are forced to offer their services at lower rates while faced with the continual rise in costs for doing business (e.g., increasing fuel prices, employee salaries, and other operating expenses). This scenario calls for transporters and 3PL service providers to streamline business processes and provide value-added services to boost their top lines and improve their bottom lines.

Such results can be achieved by implementing software systems equipped with built-in best practices and with the ability to adapt for future growth, entry into new markets and market segments, and changes in business practices. It also makes sense for transporters to enter into new business lines (e.g., providing services to manage entire supply chains for clients, including managing inventory, warehousing, in-plant services, etc.).

Transportation is the crucial link among all partners in any supply chain. Goods move from suppliers to manufacturers, from manufacturers to distributors, and from distributors to retailers. In cases of rejections, repairs, and customer service, goods move in the reverse direction. Transportation of goods is the lifeblood of most businesses, and in an ever-increasing global market, its role is becoming increasingly vital.

In the agrarian societies of yore, transportation of goods was limited to taking farm produce to the central market of the village. Then came trading communities, which would ship and receive goods via sea routes. Slowly, after the dawn of industrial era, goods were being made on a mass scale, and they were shipped both nationally and internationally.

Now, in the era of global trade, some industries manufacture parts at different geographies, and these goods are then transported and assembled at locations close to end customers. In other industries, products are made at contract manufacturing sites that are located in faraway countries having low labor and materials costs, and are transported and consumed at other locations.

Transporters Have Distinct Needs

Because of the nature of global trade, goods are being transported to faraway places in larger quantities. Transporting goods over long distances both economically and with minimal transportation time requires special knowledge, resources, and expertise. Since the size of transport operations is becoming huge, transport organizations need reliable transportation management systems (TMSs) to communicate effectively with suppliers, distributors, retailers, and service providers. With the help of a capable TMS, transporters can plan and execute their shipments with more accuracy and with less effort. They can also lower their operations costs by means of optimized loading (to get better fill rates) and by reducing empty run miles and wasted time.

Best Practices for Transporters

The unique nature of the goods transport business calls for unique features in a TMS. Transporters deal with many organizations, so they need to have a system to which all of these organizations have access to perform everyday transactions.

Best practices related to goods transportation can be divided into six parts: 1) supply chain management (SCM), 2) billing management, 3) key performance areas measurement (KPAM) management, 4) key account management, 5) quotation management, and 6) fleet management.

1. Supply Chain Management

Transporters need to understand their clients’ requirements and to be an integral part of their clients’ supply chains. They should help their clients achieve the desired visibility level of inventory during transit, as well as reduce transit times, maintain service levels, and reduce transportation costs.

Transportation Management Systems: The Glue of the Supply Chain

Supply chains are becoming increasingly complex, and as manufacturers create a “value chain” that spans many countries, transportation of final goods or raw materials is a critical component to their business. If goods do not arrive at their destination on time, the manufacturing process will come to a halt and links within the supply chain will break, causing problems for other entities down the chain.

Along with this, the import and export of products is increasing, leading to greater movement of goods through distribution centers (DCs) and to a higher volume of products that need to be moved.

And then there is the issue of how companies deal with ever-increasing fuel costs.

It’s hard to imagine how companies can deal with the difficulties described above, but transportation management systems (TMSs) can do plenty to help manage the complexities of manufacturing today.

A Solution for the Complexities of Manufacturing

Given the growing need to move products inland and the increase in fuel prices, TMS software is a vital tool for today’s logistics industry, and the need for this enterprise application will only increase in the next five years.

As manufacturers’ supply chains continue to expand, developing networks and using different modes of transportation (truck, rail, air, and boat) can be quite a challenge. Networks and the use of these transportation modes need to be optimized. Otherwise, the following basic questions will be exceedingly difficult to answer, leading to serious visibility problems for the manufacturer:

* Where are the goods now?
* When and where are the goods to be shipped?
* What mode(s) of transport should be used to ship the goods?

So, what exactly is a TMS?

A TMS is designed to manage the different modes of transportation used to move products, whether finished or semi-finished. Transportation modes consist of ground, air, rail, and sea transport. A TMS determines the optimal path to transport products based on distance, location, and route.

The Anatomy of a TMS

A TMS’s basic functionality is comprised of the following:

Lane set-up: This has to do with multimode types of transportation. If moving a certain product requires three types of transportation methods (for example, rail, truck, then rail again), the system will be able to schedule all three of these means of transport.

Geographic set-up: This will link geographic locations together, as well as set up the service levels between different parties along the logistics chain.

Best Practices for Transporters and 3PL Service Providers

Cash Management 101

Cash management is a need common to both large and small businesses alike. In its simplest terms, cash management is the assurance that today's receivables plus today's account balances exceed today's payables. Failure to practice this business management process guarantees bankruptcy.

Every large organization has a cash management group, sometimes called the treasury. This group's function includes management of such items as investments and borrowing in addition to the organization's daily cash flow. In small to medium businesses (SMBs), usually the chief financial officer (CFO), president, or owner performs the task of cash management.

Regardless of a company's size, the important thing is that cash management is practiced on a regular basis—at least weekly—and with sufficient attention to details. In difficult times, when liquidity is "tight" (at a minimum), it should be performed daily.

Crucial to organizations' successful cash management are the deals they make with their financial institutions for short-term placements and for borrowing funds. Unlike in other countries, in the United States, a bank account that is credited with deposits does not begin to earn deposit interest until three business days have passed. Furthermore, an American business account specifically may not be overdrawn, which necessitates cash management to be the most important activity of a business's financial management.

For all companies—and in particular, public traded companies—major financial statements include the income statement, the balance sheet, and the statement of cash flows. An organization's CFO, accountant, or proprietor will likely share this snapshot of financial performance with lenders, equity investors, and the company directors and key stakeholders.

Surprisingly, most SMBs and large organizations find spreadsheets a useful tool for cash management. The cash management facilities serve as the basis for entries on the spreadsheet. The spreadsheet is easy to manipulate and allows for what-if scenarios and forecasting. Yet cash management for many companies is a mix of financial software and spreadsheets, with the majority of decisions based on spreadsheet manipulations.

Cash Management Operations

Effective cash management requires having a firm handle on the following two areas:

1. Cash inflows

Daily morning and afternoon deposits from the Automated Clearing House (ACH)—where morning deposits are received from local banks and afternoon deposits are received from banks located more than two time zones away—electronic data interchange (EDI) transfers, e-mail notifications, etc.
Forecasted deposits for the day, generated from cash management software. These are based on reliable deposits taken from sales invoice dates plus credit days allowed (e.g., net 30, 2 percent net 10, etc.).
Checks received in the mail.
Over-the-counter cash receipts.
Credit card receipts.
Forecasted deposits based on disputed invoices (i.e., invoices where credit notes may have to be issued) or the "poor payer" category of customers, generated from cash management software.
Investment income.

2. Cash outflows

"Must pay" accounts (e.g., payroll).
Commissions; local, state, and federal liabilities (e.g., taxes, social security, etc).
Payment to liability accounts (e.g., insurance, mortgages, leases, employee travel expenses).
Valuable suppliers that provide payment discounts for early payment.
Suppliers whose limits within agreements can be stretched (e.g., net 30 days).
All bank account balances.
Loan payments due.
Interest payments or term deposits due.

The Price of Cash Mismanagement

When cash flow is tight, cash management helps a company decide who must be paid and whose payment can be skipped for a given week. Mismanagement of cash inflows and outflows will cause a company to face a liquidity crunch. A liquidity crunch forces a company to borrow money at a disadvantage, meaning a company that is in dire need of short-term cash will pay more interest on a loan or line of credit than it would have had it used better cash management techniques.

Poor decisions and practices by a company's financial managers can have disastrous effects on the business too. Following are examples of poor decisions and practices:

Transferring too much of the business's liquid assets into the acquisition of fixed assets, such as machinery or real estate. Monthly commit¬ments must be properly managed by obtaining long-term financing for such large capital investments.
Failing to budget properly. To avoid this problem, construct a spreadsheet with columns that represent weeks or months, and with rows that represent inflows or outflows. Lay out, by month, the known inflows and outflows. Toward the bottom of the sheet, place the less-certain inflows and outflows. Each period's column total (closing balance) should be brought forward to the next column as an opening balance.
Failing to make use of a business line of credit (LOC), or exceeding the LOC limit, resulting in refinancing with factorers. Factorers are organizations that provide funds to a business, using the business's inventory as collateral. A factorer can be a vendor's representative as well, selling on commission. Factorers can also provide cash based on a business's future confirmed receivables. Their rates for lending money are usually higher than bank rates.

Business Performance Management Basics: An Overview of Business Performance Management and Its Benefits to the Organization

The market uses the terms business performance management (BPM), corporate performance management (CPM), and enterprise performance management (EPM) interchangeably. Vendors and industry analysts use these terms to describe performance management, but essentially they all mean the same thing. BPM represents the next generation of business intelligence (BI), and is defined as the use of software to help organizations manage their processes and measure their key performance indicators (KPIs) in order to optimize performance and help drive corporate strategy.

This article will focus on the key aspects to take into account when considering implementation of performance management software:

*

the way KPIs are defined by an organization's focus
*

the meaning and importance of data mining
*

the importance of scorecards and dashboards in driving business decisions
*

the benefits and challenges of implementing a BPM solution

BPM versus BI: A Brief Overview

BPM applications allow organizations to implement an approach to data analysis. Data mining tools identify trends and enable organizations to plan intelligently for the future. Additionally, performance management software provides organizations with visualization features (such as dashboards), which give them the opportunity to view summarized data and to drill down to operational data stores for relevant details. This differs from traditional BI software, which identifies data patterns by using historical rolling data to drill down on dimensional data over time.

Traditionally, organizations developed month-end processes to generate financial reports or queried data at specific intervals in order to provide data to decision makers throughout the organization. Additionally, throughout the organization, reporting processes were implemented to provide users and decision makers with regular static reports over time. With increases in competition and potential client bases (due to globalization and technological advances), organizational needs have evolved, and require more powerful reporting tools to capture significantly higher amounts of data more often. Businesses are shifting to accommodate increased data demands, and are attempting to become proactive in their corporate planning. The realization that BI and data warehousing concepts can be leveraged to drive business decisions has helped drive the evolution of BI toward encompassing business performance functionality.

Key Performance Indicators and Data Mining

The terms KPI and data mining are often used to discuss the benefits of BPM and the ways in which BPM drives business decisions. Knowing what those terms mean, however, does not alone guarantee business success. Instead, organizations should identify appropriate ways to apply KPI and data mining in order to determine the metrics required for making the right strategic decisions.

KPIs are defined as the critical metrics set by an organization to reflect its financial or nonfinancial success. They help organizations identify and monitor factors that are quantifiable, measurable, and important to the organization's overall success. Although KPIs can help drive business decisions, they are only beneficial if they are set properly and reach the right people at the right time. For example, with traditional BI online analytical processing (OLAP) cubes, sales data can be reflected multidimensionally with rolling sales data over a three-year period. This, however, pales in comparison to dashboard functionality, which allows a sales manager to see up-to-date sales figures in real time, and to compare them against predefined metrics. The sales manager can then drill down on the data to access and analyze operational data in order to determine a plan of action.

Saturday, December 5, 2009

Thursday, December 3, 2009

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