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What is ERP?

Enterprise resource planning software, or ERP, doesn’t live up to its acronym. Forget about planning—it doesn’t do much of that—and forget about resource, a throwaway term. But remember the enterprise part. This is ERP’s true ambition. It attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments’ particular needs.

That is a tall order, building a single software program that serves the needs of people in finance as well as it does the people in human resources and in the warehouse. Each of those departments typically has its own computer system optimized for the particular ways that the department does its work. But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.

That integrated approach can have a tremendous payback if companies install the software correctly.

Take a customer order, for example. Typically, when a customer places an order, that order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and rekeyed into different departments’ computer systems along the way. All that lounging around in in-baskets causes delays and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse’s computer system to see whether the item has been shipped. "You’ll have to call the warehouse" is the familiar refrain heard by frustrated customers.

ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems. Finance, manufacturing and the warehouse all still get their own software, except now the software is linked together so that someone in finance can look into the warehouse software to see if an order has been shipped. Most vendors’ ERP software is flexible enough that you can install some modules without buying the whole package. Many companies, for example, will just install an ERP finance or HR module and leave the rest of the functions for another day.

How can ERP improve a company’s business performance?

ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes it into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn’t handle the up-front selling process (although most ERP vendors have developed CRM software or acquired pure-play CRM providers that can do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer’s credit rating and order history from the finance module, the company’s inventory levels from the warehouse module and the shipping dock’s trucking schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. With luck, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee benefits or financial reporting.

That process may not have been efficient, but it was simple. Finance did its job, the warehouse did its job, and if anything went wrong outside of the department’s walls, it was somebody else’s problem. Not anymore. With ERP, the customer service representatives are no longer just typists entering someone’s name into a computer and hitting the return key. The ERP screen makes them businesspeople. It flickers with the customer’s credit rating from the finance department and the product inventory levels from the warehouse. Will the customer pay on time? Will we be able to ship the order on time? These are decisions that customer service representatives have never had to make before, and the answers affect the customer and every other department in the company. But it’s not just the customer service representatives who have to wake up. People in the warehouse who used to keep inventory in their heads or on scraps of paper now need to put that information online. If they don’t, customer service reps will see low inventory levels on their screens and tell customers that their requested item is not in stock. Accountability, responsibility and communication have never been tested like this before.

There are five major reasons why companies undertake ERP.

1. Integrate financial information—As the CEO tries to understand the company’s overall performance, he may find many different versions of the truth. Finance has its own set of revenue numbers, sales has another version, and the different business units may each have their own version of how much they contributed to revenues. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system.
2. Integrate customer order information—ERP systems can become the place where the customer order lives from the time a customer service representative receives it until the loading dock ships the merchandise and finance sends an invoice. By having this information in one software system, rather than scattered among many different systems that can’t communicate with one another, companies can keep track of orders more easily, and coordinate manufacturing, inventory and shipping among many different locations at the same time.
3. Standardize and speed up manufacturing processes—Manufacturing companies—especially those with an appetite for mergers and acquisitions—often find that multiple business units across the company make the same widget using different methods and computer systems. ERP systems come with standard methods for automating some of the steps of a manufacturing process. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce head count.
4. Reduce inventory—ERP helps the manufacturing process flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories of the stuff used to make products (work-in-progress inventory), and it can help users better plan deliveries to customers, reducing the finished good inventory at the warehouses and shipping docks. To really improve the flow of your supply chain, you need supply chain software, but ERP helps too.
5. Standardize HR information—Especially in companies with multiple business units, HR may not have a unified, simple method for tracking employees’ time and communicating with them about benefits and services. ERP can fix that.

Carlisle FoodService Products, in Oklahoma, USA, is a leading manufacturer of professional grade tools and tableware for the foodservice industry. Carlisle sells over 50,000 products via a network of over 10,000 distributors to restaurants, hotels and hospitals worldwide. Since 1995, Carlisle has used LANSA to streamline procedures and increase ROI in virtually every area of its business. Manufacturing plants and distribution centers use LANSA ERP Frameworks and Carlisle's distributors have Web access using a LANSA site

Ken Zaleski, MIS director at Carlisle FoodService, says, "We were the first in our industry to offer our customers a functional and user friendly Web site. Being the first certainly provided us with a competitive advantage. The efficiency the site brings remains a major selling point today. With a small team, we can maintain a system used by internal users, remote sales representative offices and distributors worldwide."

Carlisle FoodService Products is part of Carlisle Companies Incorporated, a diversified global manufacturing company headquartered in Charlotte, North Carolina, USA, that serves the construction material, commercial roofing, specialty tire and wheel, power transmission, heavy-duty brake and friction, foodservice, data transmission and process systems industries. Carlisle FoodService Products has U.S. distribution centers at Oklahoma City in Oklahoma, Charlotte in North Carolina, Reno in Nevada and a distribution center in the Netherlands to serve Europe. It has manufacturing plants at Oklahoma City in Oklahoma, Atlanta in Georgia and Sparta in Wisconsin, as well as Chihuahua in Mexico. The LANSA-based systems integrate with LogPRO warehouse management system software. Carlisle FoodService Products uses a single iSeries model 810 for all its operational system, the Web site and for development. Carlisle's ERP system has 250 internal users, while 50 sales representative companies and 5,000 distributors use the Web site regularly.

The Challenge

The Carlisle FoodService Products story started in 1955, when Continental Plastics, a small custom molding shop in Oklahoma, created the world's first plastic Bains Marie. This was followed a few years later by the world's first commercial plastic beverage pitcher. Both innovations dramatically changed food storage and beverage transport.

In 1978, Continental Plastics joined the Carlisle Group of companies. In 1991, Continental Carlisle merged with SiLite Incorporated – a manufacturer of plastic foodservice products, giftware and decorative accessories.

Several other acquisitions and one more name change followed, but Carlisle's IT history took shape with the SiLite merger. Zaleski, who originally worked at SiLite, explains that after the merger in 1991, the AS/400, with a hybrid of MAPICS and a custom order entry system, became the corporate standard.

"However, MAPICS didn't fit the way we wanted to run our business," says Zaleski. "MAPICS was strong enough on the process side, but it didn't meet our requirements on the distribution side. We were modifying MAPICS so much that it made no sense to continue. Moreover, neither system was Year 2000 compliant, so we were looking for another solution."

Carlisle used LANSA since 1995. Initially for MAPICS modifications and extensions. They bought LANSA because for them it was far more productive than RPG and a lot easier to use than Synon.

They didn't want to go back to RPG or COBOL ever. And so they started to look around for a ERP solution that was written in LANSA.

In 1997, they saw a LANSA-based ERP solution, at the time called Garnet, which is now the LANSA ERP Frameworks. They said it was a very good match and it met their main requirements right out of the box. Because the framework was LANSA-based, it was very easy to modify and extend," says Zaleski.

Implementation started in 1998 and the ERP Frameworks is now used company wide at Carlisle's manufacturing and distribution centers in the USA and Mexico, where it integrates with LogPRO warehouse management software.

Why do ERP projects fail so often?

At its simplest level, ERP is a set of best practices for performing different duties in your company, including finance, HR, manufacturing and the warehouse. To get the most from the software, you have to get people inside your company to adopt the work methods outlined in the software. If the people in the different departments that will use ERP don’t agree that the work methods embedded in the software are better than the ones they currently use, they will resist using the software or will want IT to change the software to match the ways they currently do things. This is where ERP projects break down. Political fights break out over how—or even whether—the software will be installed. IT gets bogged down in long, expensive customization efforts to modify the ERP software to fit with powerful business barons’ wishes. Customizations make the software more unstable and harder to maintain when it finally does come to life. The horror stories you hear in the press about ERP can usually be traced to the changes the company made in the core ERP software to fit its own work methods. Because ERP covers so much of what a business does, a failure in the software can bring a company to a halt, literally.

But IT can fix the bugs pretty quickly in most cases, and besides, few big companies can avoid customizing ERP in some fashion—every business is different and is bound to have unique work methods that a vendor cannot account for when developing its software. The mistake companies make is assuming that changing people’s habits will be easier than customizing the software. It’s not. Getting people inside your company to use the software to improve the ways they do their jobs is by far the harder challenge. If your company is resistant to change, then your ERP project is more likely to fail.

One cautionary tale that came to light in 2008 illustrates that sometimes there is a big difference between what an ERP vendor promises to deliver in its software and what actually is ready for prime-time enterprise use. Trash-disposal company Waste Management announced in March 2008 that it was suing SAP, seeking the recovery of $100 million in project expenses that related to a failed ERP implementation that had started in 2005. In the complaint, Waste Management alleges that SAP executives participated in a fraudulent sales scheme and that SAP's Waste and Recycling ERP product was actually "fake software" that was still not ready for Waste Management's use by spring 2008.

The Solution

Carlisle sells almost exclusively to foodservice distributors, but also deals directly with very large restaurant chains such as Yum Brands, Pizza Hut and Wendy's.

In 2000, less than a year after implementing the LANSA ERP Frameworks, Carlisle gave its distributors and sales representatives real-time Web access to its ERP system. "The driving force was the vision of our president, Dave Shannon, who wanted us to have a Web presence that went beyond the static Web sites our competitors offered," explains Zaleski.

The initial version of the Web site of Carlisle took less than four months for the developer to develop and implement. Since then they have extensively enhanced the Web site with their own IT team.

Distributors and sales representatives worldwide can place orders, view inventory, switch from default to an alternate warehouse and trace shipping details, with a direct link to UPS and other carriers for package tracking.

Distributors can set up a cross-reference file that lets them link their own internal product numbers to Carlisle's product numbers, then work with either product number throughout the Web site. The solution also offers customer specific pricing, up to two years order history and a feature called 'My Favorites', where distributors can monitor inventory to maintain a minimum volume of inventory.

Distributors can search orders by their purchase order number, Carlisle's order number, date range, product number (either Carlisle's or their own), invoice number and order status.

Distributors are given one high-level user-id, which allows them to set up additional users with varying authorities. For example, some user types may view order and shipping information, but without the pricing.

The Benefits

Carlisle is the first industry to offer customers a functional and user-friendly Web site. Being the first certainly provided them with a competitive advantage. And the efficiency the site brings remains a major selling point today.

Carlisle don't expect distributors to key in their large orders on site. What they are offering is an efficient way to trace orders, look at inventory and view account details. However, distributors do use their site to place small emergency orders that they drop-ship directly to their customers, that way boosting their customer service. Small Web orders that are drop-shipped can also save their distributors a few days on cash flow. They can check in real time which orders have shipped and invoice their customers the same day. They can also get advance shipping notices by email, so their costumers don't even have to go online to check.

LANSA ERP keeps track of all their order, shipment and invoice history, and some of their smaller distributors even use their Web site as their purchase system. They also have several distributors who provide links on their Web site to their catalog. Their customers can see the products but don't see prices or inventory, because the ordering goes via the distributor.

The Web site also allows their representatives to better and more easily prepare for a business call to a customer. For example, if it has taken more than a week to fulfill a specific order, the representative now has the opportunity to find out before the meeting why there was a delay. And if needed he can make a call to the responsible manufacturing plant or supplier to speed things up. It is all about customer service," says Zaleski.

Conclusion

Their plan with the LANSA ERP Frameworks has always been to buy it and then take ownership of it, because they knew that they were going to modify it themselves, so there is no need for vendor maintenance.

Zaleski added that LANSA doesn't lock them into any specific platform, even though they love the iSeries. They never had to reboot the system because of problems. The box is very robust and so is LANSA. They have a planned reboot of the system once or twice a year, just to check their procedures and to restart some files.

They get about 600 orders per day, but a lot of their costumers are still coming in by fax. Next year they will have a look at offering their customers XML transacting with LANSA Integrator. They already offer EDI and several formats of file transfers, said Zaleski.

They have also offered their customers that if they enter orders on the Web site, they will send them a flat file back with the order information, so the costumer can import that information into their purchase system, without a need for additional data entry.

The LANSA ERP Frameworks and the Web extension are completely integrated. They run the same programs and use the same database. Any changes they make to the ERP system are instantly available in the Web extension as what Zaleski said.

Dennis Wallis, iSeries development manager at Carlisle FoodService Products, adds, "We now use LANSA for our PC applications that access a Microsoft SQL Server database, as well as for iSeries and Web development. We find LANSA easier to use than any other tool for the Windows, Web and iSeries development."

The company have only four developers, including Zaleski himself.. With that small team they maintain and enhance a system that is used by 250 internal users in their offices, plants and distribution centers, 50 remote sales representatives and 5,000 distributors worldwide. It testifies how LANSA's productivity and scalability.

Ref: http://www.cio.com/article/40323/ERP_Definition_and_Solutions#erp

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