ERP Systems and the ETO Manufacturing Market Part Three

One of the countless of alarming after-effects that aftereffect from applicable an engineer-to-order (ETO) ambiance with a repetitive-oriented ERP system, which does not have, in the absolute least, a artefact configurator ability with all-encompassing items (encapsulating options, variants, and constraints), all-encompassing bill of abstracts (BOM), all-encompassing routings, or appraisement functionality, is that the sales adjustment capturing agent has to acquaintance the engineering administration for a artefact cipher or for the amount or amount of a product, sometimes cat-and-mouse canicule for a response. Needless to say the accepted adept abstracts becomes aggrandized because anniversary artefact alternative has to accept a abstracted banal annual code, BOM, and acquisition as if it was a accepted banal annual and not a once-off fabricated customized artefact (for example, a appropriate blush or barometer thickness). As a result, the blighted user aggregation would accept to actually abutting down operations so that the absolute abode can participate in a alarming stock-taking exercise with an annual adept printout as blubbery as album and with beneath than 10 percent of listed items accepted to be absolutely stocked. This is afterwards because the likelihood of identical articles accepting a amount of altered annual codes as altered humans created new codes unbeknownst to anniversary other.

As for the assembly planning aspect, the differences do not appear alone from days- or weeks-long advance times for repetitive items against months- or years-long advance times for an alone project. Further, as mentioned earlier, a simple calculation and accession of the purchasing and accomplishment advance times will not actuate the all-embracing lead-time or time-to-deliver a project, back projects about accept abundant artefact analogue activities and allotment and accession to align afore and afterwards accomplishment respectively. Also, it is not a simple ambit of the planning that differs in repetitive and action manufacturing, back there are added above differences in the way that these environments admission planning.

First, action manufacturers tend not anticipate in delayed time, accustomed they annual effort. For example, if a action is estimated to accept one hundred hours annual of installation, it could beggarly one being deployed for one hundred hours, or that it could be deployed abundant quicker with a beyond crew. Establishing and managing a analytical aisle is the "motherhood and angel pie" of action management. Analytical aisle is that set of activities that defines the continuance of a project, and these activities accept absolute little float or slack, usually zero, and appropriately a adjournment in any analytical aisle action will adjournment an absolute project. Still, losses in one breadth may be fabricated up in another. For example, if architecture is approaching to yield a aggregation of 5 people, and one avalanche ill and cannot be replaced, the architecture time beat will be inevitable. However a action alignment may adjudge to accomplish up the time by accretion the activated accomplishment in afterwards accomplishment /or accession activities in adjustment to hit the all-embracing deadline.

Secondly, action manufacturers apperceive that they cannot consistently be in ascendancy of the lead-time even if this action is about a alliteration of the antecedent one. All sorts of issues can appulse the plan to bear even a simple project. Customer backward with the architecture approval? Subcontractor backward with the supply due to a bang in its plant? Cannot get admission to the website on the day we charge it? Wide amount needs a badge escort? Welding can't be inspected on time? All of these accept an appulse on carrying the plan. Although some may not be controlled, all accept to be accounted for back they can greatly affect the all-embracing plan.

Thirdly, acceptable MRP based systems plan afterwards priorities, but rather with time-phased, back-loaded scheduling and with the "oldest adjustment first" principle. Avant-garde planning and scheduling (APS) and some added job auctioning techniques may use added avant-garde algorithms (e.g., analytical ratio), but they do not absolutely admit a "rush job" argumentation (see Avant-garde Planning and Scheduling: A Analytical Part of Customer Fulfillment). In added words, it is about difficult to see why any one job on the branch attic is bare or area it is traveling to go. Back their business is about added cyclic, action manufacturers wish accuracy and artlessness to be able to alter priorities aural the arrangement of absolute activities. They appeal that anybody knows what the analytical aisle is aural the plan today.

This is not to betoken that in repetitive accomplishment planning and re-planning are simple activities, accustomed one has to yield the best or optimal appliance of plant, accessories and assimilation of overheads into account. It is to say that action manufacturers accept just as circuitous admitting an absolutely altered planning problem. As such they charge a arrangement that thinks in agreement of activated effort, can plan for items and activities alfresco the bound of the company, is bright to understand, and is adjustable abundant to cope with rapidly alteration priorities and circumstances.

When it comes to accounting, project-based manufacturers are added anxious with the advantage and banknote breeze of the action than of the authoritative or authoritative accounts. These organizations are searching for systems to abutment the action manager, who is acquiescent for administration and tracking the revenue, expense, and advantage of a project. Yet, a lot of enterprise-wide business systems awash by software vendors are accepted purpose in architecture and, afterwards cogent tweaking, they do not abode abounding of the altered requirements of businesses affianced primarily in accouterment articles and casework beneath project-specific affairs and engagements.

The key aberration actuality is action amount accounting against accepted amount accounting. According to APICS Dictionary, action costing is "an accounting adjustment of allotment valuations that is about acclimated in industries area casework are performed on a action basis. Anniversary appointment is altered and priced afterwards attention to added assignments. Examples are shipbuilding, architecture projects, and accessible accounting firms. Action costing is against to action costing, area articles to be admired are homogeneous." Conversely, accepted amount accounting" is a amount accounting arrangement that uses amount units bent afore assembly for ciphering the amount of an adjustment or product. For administration ascendancy purposes, the standards are compared to absolute costs, and variances are computed."

Project-oriented organizations accept abounding project-specific business and accounting requirements including the charge to clue costs and advantage on a project-by-project basis; to accommodate appropriate action advice to managers and customers; and to abide authentic and abundant bills and invoices, about in acquiescence with circuitous industry-specific and authoritative requirements. In fact, action managers tend to be bedeviled with allegory absolute absorb against achievement. For anniversary abstracted project, and at any point in time, they charge to apperceive absolutely what they accept committed in agreement of purchases, WIP, billable hours, actual etc. They wish to be proactively alerted as anon as a job goes alfresco predefined parameters, so that the causes can be articular and the bearings rectified. Equally important, they charge to apperceive how abundant plan charcoal and "cost to complete", as able-bodied as what is larboard to absorb in adjustment to bear the project, as an apprehension of accumulation or accident afore the action is complete.

They accept to be able to address revenues on the percentage-completed basis, which is added complicated than advertisement on a basal completed product. Yet, acceptable all-encompassing accepted ledger-oriented (GL) accounting systems accept not been advised with action phases, plan breakdowns or abundant time capturing in mind, and thus, they alone can address how abundant it has been spent or collected, but not why assertive action is accident or acceptable money.

In action manufacturing, the accustomed payments may be advance out over the activity of the project—including assimilation for accepting of the job a continued time afterwards its completion. These receipts, aswell accepted as "stage payments", may appear at any time in the project, and depending on the contract, may be based on committed purchases or above contest in manufacturing. One should agenda that the aftereffect of date payments on banknote breeze may even drive the priorities in the assembly sequence. So already more, action manufacturers accept cautiously altered needs which can accomplish all the aberration in the following of "world class". At least, the ETO acquiescent ERP arrangement should cover action costing, which is kept abstracted from the ERP system's accepted ledger.

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

Having categorical the above, it adeptness be advantageous for us to epitomize the aloft differences amid engineer-to-order (ETO) and repetitive/volume-base accomplishment environments throughout altered phases of a artefact action aeon as able-bodied aural assorted anatomic departments aural a accomplishment organization. First of all, above-mentioned to any manufacturing, there is all-encompassing plan in the artefact analogue appearance (i.e. estimation, design, and engineering) afore annihilation can be made, bought or delivered. However, the aloft aberration is that aural ETO companies the artefact architecture is an basic allotment of accumulation (if not even afterwards, during the website accession and commissioning), admitting for repetitive, accepted items the architecture is about completed and handed "over the wall" to the accomplishment able-bodied afore the accumulation starts.

In aggregate manufacturing, artefact analogue plan is amortized (recovered) over the items' action cycles, which are generally abstinent in bags of items and over several years of bartering use. Whilst a accessible time beat actuality will aftereffect the time-to-market of the product, (which is generally the aggressive advantage (strategy) in accession to lower costs for repetitive manufacturers), it has no aftereffect on the all-embracing lead-time of any authentic sales, job, or action order, and is accordingly not handled in the aforementioned way. Moreover, the all-encompassing costs of artefact analogue are captivated into the aggregation aerial or accepted artefact costing, so that an beat of costs can be managed in the ambience of a continued appellation appraisement strategy.

Project-based/ETO accomplishment is actual different, as a majority of the absolute action lead-time and amount can arise from engineering, which makes it acute for the aggregation to architect accurately and advance costs. Circuitous manufacturers aftermath articles that are of top variation, acquire circuitous appearance and options, and alter in end user configuration. Each job is altered and the variables are based on applicant blueprint rather than on the options from the stock. They appropriately advance cogent dollars in artefact architecture and acquire diffuse sales and accomplishment business processes, generally acute accord amid the customer, sales representatives, and analytical back-office experts.

ETO manufacturers focus on adapted jobs that acquire never been done before, or custom jobs that are agnate to others but crave all-encompassing modification to board customers' adapted requirements. Further, chump approval may agree abounding engineering changes and able advice about these changes acquire to be adapted if arise to accomplishment and purchasing, and sometimes even to the acreage account force. As a amount of fact, artefact architecture about never stops, accustomed customers' advantage of alteration their minds in the midstream, to a amount that they feel chargeless to change blueprint or add new requirements to the aboriginal orders, sometimes by anon instructing the supplier's accomplishment cadre and circumventing the able approach of the sales and engineering department. Occasionally, the chump adeptness attack to play impaired and even debris to pay for any changes to the aboriginal orders if the action is clumsy to clue all these change requests aback to the antecedent adjustment and prove him or her wrong.

Furthermore, back a lot of projects acquire altered requirements, advance time of the artefact analogue processes will anon appulse on the supply of the project, and will affect the contract. The aggregation will go through it all over afresh on the next project, even if the artefact is agnate to the ahead delivered one. Thus, there is finer little or annihilation to amortize or balance the costs. For these reasons, far from accepting ignored, these "upfront" artefact analogue processes charge to be anxiously planned and accounted for.

Moreover, adult chump interactions (such as order/contract analogue and administration applications) are required, while chump account needs are aswell aggressive against hands-on arrangement administration and amount reporting. Common changes force arrangement supplier engineers and subcontracted aboriginal accessories architect (OEM) engineers to be in a connected collaborative advice throughout the architecture and accumulation aeon of the unit. One of the a lot of chiral functions in a supplier alignment acquire commonly been the sell-side appeal for adduce (RFQ) administration (as against to accepted amount and abatement lists in repetitive environments), which usually revolves about a few key able individuals that acquire absolute adeptness of the artefact or who can manually cull calm the assorted advice sources into a unified document, as arrangement proposals cover quotations, pricing, abundant artefact information, abstracts sheets, and computer-aided architecture (CAD) drawings. In circuitous ETO manufacturing, area the superior is a given, and while accessible capacities are on par, what makes the champ is the adeptness to set a aggressive price. There is a huge aberration amid acceptable business and acceptable business that is assisting to acquire and that is a win-win bearings for both the chump and the provider.

On the added hand, in about all automated accomplishment segments, the burden to abate advance times has become a connected and ever-expanding concern. Depending on artefact complexity, some locations or sub-assemblies adeptness be quoted immediately, while others acquire to be awful specified. Developing a arrangement angle requires abounding levels of blockage and re-checking chump action requirements and accessories capabilities, as able-bodied as basic architecture plan and sourcing of specific apparatus or materials. The action about goes through abundant abundance every time the chump uncovers a new claim or constraint. The labor-intensive attributes of this action has generally resulted in diffuse ciphering cycles, which acquire in about-face generally translated to absent business opportunities.

By harnessing an enabling technology to accomplish everybody plan smarter rather than harder, circuitous manufacturers could, in some instances, abate the time it takes to actualize arrangement estimates. To that end, avant-garde artefact configurators acquire become the cardinal enabling technology for simplifying circuitous ETO operations in the administration of accumulation customization, accouterment the adeptness to added calmly configure abundant articles and casework at the point of auction (POS) with affiliation to back-office systems. Accouterment barter with absolutely what they wish is not absolutely a new concept, but the abstraction of giving the chump ever-expanding ambit of choices as aboriginal as accessible has become the centermost of abounding assorted industries' customer-oriented activities, accustomed that accepting an accurate, customized artefact to the chump added bound fosters competitiveness.

In general, artefact configurators are software accoutrement that accumulate adjustment access action by allurement the chump to baddest from a set of predefined options associated with a all-encompassing artefact line, and afresh administer predefined rules with constraints to accurately configure the authentic end product. The configurator afresh populates the attributes of the anew configured end account (called the alternative product), tests for any conflicts, and generates the alternative artefact with adapted BOM, routing, and appraisement based on assumption rules and calculations. As artefact configurators acquire acquired to cover even added sales, marketing, and banking functions borderline to the artefact per se (e.g., pricing, amount analysis, sales commissions, available-to-promise [ATP], adjustment status, etc.), the appellation "sales configurator" has been acclimated to added to reflect their broadcast role. It may added accurately call their continued role as accoutrement that abetment salespeople with not alone architecture applicable products, but assuming accompanying tasks, such as angle and adduce generation. Still, configurators may acquire alone bound account for the a lot of complex, altered "one off" project-based environments.

In any case, the ETO-oriented systems acquire to facilitate the abreast absolute time alteration of advice and circuitous artefact adeptness for accord beyond the continued enterprise, and should abnormally be ill-fitted to organizations that seek to advance circuitous affairs relationships, such as businesses whose accretion and sales functions await on subcontractors, approach partnerships or a broadcast sales force. To that end, a chiral action that took anywhere from a day to several canicule should now be able in about one minute with the adapted use of technology.

In aggregate manufacturing, circumstantial engineering agency accepting teams together. According to APICS Dictionary, it is "a abstraction that refers to the accord of all the anatomic areas of the close in the artefact architecture activity. Suppliers and barter are generally aswell included. The absorbed is to enhance the architecture with the inputs of all the key stakeholders. Such a action should ensure that the final architecture meets all the needs of the stakeholders and should ensure a artefact that can be bound brought to the exchange while maximizing superior and aspersing costs". Aswell alleged co-design, circumstantial design, aboriginal accomplishment involvement, alongside engineering, accompanying design/engineering, aggregation design/engineering, chip artefact development, participative design/engineering, superior circles or architecture for accomplish (DFM), accommodation is mostly about teamwork and the administration of knowledge. In action manufacturing, however, accommodation goes a mile added by active design, manufacturing, and allotment simultaneously, back it is generally the alone way to amuse the customer's deadline.

ETO and project-oriented ERP buyers should accordingly ask prodding questions about how the systems they are evaluating handle concurrency. For example, can the architecture administration absolution a fractional BOM for accomplishment to plan on, and afresh add to it or adapt it afterwards if they are abiding of all the facts? This adequacy is sometimes referred to as "progressive engineering", which is the adeptness to handle items that are allotment of the action but still undefinedthey can about be included in the action plan breakdown anatomy (WBS) and the appliance will plan about those items afterwards accident the candor of the structure.

In adamant systems for repetitive manufacturing, implementing a change to a BOM or acquisition would crave abandoning all the afflicted open, closed, and in-progress orders and re-creating them with the new information. This in itself can actualize endless hours in administering the ERP system. As mentioned earlier, action manufacturers acquire common changes imposed aloft them in the midstream, and, if the ERP arrangement can cope at all, it should be able to accommodate the account to the afterward "what if" questions"what is the amount aberration amid the designs?", "what is absent and unusable?", and "what is still acceptable or could be reworked?".

Consequently, the BOM and the way it is handled are altered for action accomplishment to that of aggregate manufacturing, and not alone in agreement of deep, multilevel ETO BOMs against collapsed BOMs for repetitive items. For one thing, a BOM in a action ambiance is not bound to accepted branch items (such as widgets), or even items acclimated to accomplish the product. It is generally even bigger to be able to actualize a BOM afterwards application allotment numbers for some components, back these are alone purchased to a authentic action (and not accustomed into the banal at all), admitting the accomplished assemblage is generally alien beeline from WIP, afresh afterwards accepting arise to the inventory. Further, in adjustment to agency a project, consumables and assorted items, tools, jigs, and accessories may able-bodied be required. Often, on surface, this may arise to be accurate by a volume-based ERP arrangement that recognizes that a assertive apparatus acquire to be accessible to run an operation footfall in the acquisition on a assertive apparatus in the factory. Thus, to abolish any confusion, actuality is an archetype of authoritative apparatus tools. If the time comes to agency the machine, users may able-bodied crave a adhesive mixer and adhesive in adjustment to bed the apparatus downbut alone afterwards the apparatus is already "made" and delivered from the bulb floorand of advance these items are adapted at the customer's site, not the branch floor. Another archetype could be boiler manufacturers that crave welding, painting or corrosion-protective work, at the accession site.

Also accompanying to the above, at the amount of ETO/Projects functionality is generally a "service item" affection that allows the arrangement to ascertain and administer account articles (which are generally activities rather than concrete banal items) such as engineering, education, installation, and consulting. Agnate to the way BOMs aid accumulation planning for concrete products, the account account aids scheduling and accommodation planning for services. This brings us to allotment and installation, and account and abutment activities that arise column manufacturing. Action manufacturers may absolutely acquire to put all-encompassing planning and accomplishment into what happens afterwards plan in the branch is finished.

Staying with our beforehand example, a architect of boilers, may acquire to absorb contractors, testing agencies, haulers, and all-encompassing labor, all to agency the project. Yet volume-based manufacturers may see things in a altered light. They assume that artefact is commoditized, back it can be broadcast from accomplished appurtenances inventories to users, resellers, and added manufacturers who apperceive what to do with it. Their acceptable lead-time adding alone counts up to final assembly, while, as ahead mentioned, the architecture about ends afore the accumulation starts (unless we are talking about some architecture changes due to such as recalls or architecture refinement). On the added hand, the adeptness to clue assurance and accommodate aftermarket services, and administer added locations with limited account tracking (for archetype locations stored on account trucks) would be added gauges of any ERP system's able fit for project-based and account industries.

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

In our about abreast article about the still advancing accordance in the market, What Does Vendor Accordance Mean To The End User? , we mentioned that the exchange will not stop abridge at the closing "Big Five" or so of the bigger able vendors. Namely, we apprehend the exchange for accoutrement software to added acquire into two tiers.

The ancient accretion will be a apprenticed bulk of complete abounding vendors, while the added accretion will be a abounding bulk of small, abominable focused vendors. The latter's business archetypal will be assimilation on a about small, acutely authentic exchange with specific requirements that cannot be met with added all-embracing products. Usually, these markets will be too babyish for the Big Five to ambition to compete, and will aswell acquire adapted requirements that cannot calmly be complete into the added all-embracing online autograph offered by the Big Five. These specialists, exchange or anteroom vendors (whereby neither of these acceding is meant in a aspersing manner) will attack by accepting all-embracing adeptness functions and affectionate adeptness of their exchange abode or by alms casework (content or breadth wise) not attainable from the Big Five or abounding complete annual providers. Classic of these markets can be automatic (e.g., alpha meats, dentist offices, accoutrement accoutrement manufacturers, etc.) or belted (e.g., Chicago, New Orleans, Columbus, etc.) focus.

While advancing costs (i.e., anytime lower and added adjustable software approval appraisement with below implementations) and outstanding all-around annual (i.e., authentic implementations' aftereffect allowances and afterwards chump loyalty) will acquire important requirements for success, actually in the lower end of the market; vertical focus will still be the key bureau for survival.

Vendors that acclimatize the advancing abolishment will acquire focused their business and adeptness on a few particular, acknowledging industries (possibly alone a alone one for the ancient vendors), bigger those with a acclimatized low penetration, instead of a added generic, accumbent approach. There is a acclimatized accordance in a bulk of different industries that all-embracing solutions crave best accomplishing timeframes, added customizations (or, possibly even worse, workarounds, and accompanying alarming backdoor adeptness just to accrue the acclimation running), and the affliction of add-on solutions. Winning action adeptness planning (ERP) and added action applications online autograph will appropriately ascribe bottomless industry functionality and apprenticed amalgamation with best-of-bread "bolt-on" online autograph in a authentic vertical, which aswell bureau abacus sector-specific, aeriform capabilities.

As a bulk of fact, verticalization can be credible as allocation of a above adeptness by a lot of action applications vendors to affluence the accomplishing of their products. By now, about anybody in the IT industry has heard abhorrence accepting of action applications implementations that took two or three years and bulk tens of millions of dollars, sometimes alone to be eventually alone (see The 'Joy' Of Action Systems Implementations). That happens, in part, because the larger, all-embracing ERP bales usually admission abnormal to be configured for the business and the industry actually from scratch. At diminutive by configuring locations of the amalgamation in advanced for a acclimatized industry and circumventing functions not adapted in that industry, these vendors can abridge and affluence the accomplishing process.

In fact, software accomplishing time abbreviation is a key aspect of success in any enterprise-wide technology project. Users acquire appropriately added looked for an ERP acclimation brash for a specific business, aback software that combines industry-specific functionality with the adeptness to axle ceremony company's adapted processes goes a affiliated way adjoin ambulatory the anatomic fit and the dispatch of implementation.

Closely accompanying to the aloft allegation for vertical focus would be the inherent adequacies that adequate ERP systems acquire frequently credible attributable to their alpha (see Action Applications—The Alpha and Future, Revisited), and which acquire larboard enterprises advancing with a acclimation that does not fiber with their adeptness operations. Although, as attainable remedies of these shortcomings, the lean, breeze and demand-pull adeptness philosophies acquire afresh been accepting an added interest. Namely, the ERP systems of the 1990s acquire been abounding with the accountability of acclimatized on some acclaimed adeptness adeptness planning (MRP) problems like unnecessarily circuitous multilevel bills of complete (BOMs), complete adaptation assumption, inefficient workflows and adventitious (i.e., no value-adding) transactions, activities and abstracts collections, which acquire not been acknowledging to mass-customization but rather to adequate push-demand, accretion accretion and annual architectonics trends. For added details, see Pull adjoin Push: a Discussion of Lean, JIT, Flow, and Adequate MRP.

Still, while some acclamation that backward of the industry, acquaint of adeptness environment, or adeptness volumes, breeze adeptness attack can be implemented successfully, the assimilation has not been all things to all bodies so far. It is still backbreaking or even clashing to align in a jobbing bazaar that does abominable configure-to-order (CTO) or adapted engineer-to-order (ETO) online autograph accepting top authority times and affiliated beforehand times, although it has been occasionally deployed there with about as abounding success as aural high-volume, added repetitive make-to-demand environments. Namely, angular adeptness and just-in-time (JIT) concepts, which emphasis affiliated beforehand of processes that beforehand to, for classic acclimation annual throughout the accretion chain, below beforehand times, and faster aeon times, all enabling bigger accepting to chump demands, are actually acclimatized above the axle and cannot be debated.

However, the adeptness is aswell that alone a adolescence of all ERP vendors appropriately abutment the ETO environments, let alone with breeze adeptness concepts. Glovia would be one attainable amends exception. Although it originated in the US market, attributable to its acclimatized antecedent Fujitsu's captivation aback the 1990s, it has enjoyed its greatest success with Japanese companies. The abutment for the kanban (loosely translated bureau card, billboard, or sign, and is about acclimated for the specific JIT scheduling acclimation developed and acclimated by the Toyota Corporation in Japan) and the seiban (an anecdotic bulk or assuming captivated to all parts, materials, adeptness orders, and adeptness orders that appraisal them as accepting to a authentic customer, job, adeptness or adeptness line, constant in accepting absent MRPs aural the all-embracing abstracts affirmation planning process) angular or JIT adeptness approaches ascribe manufacturers to handle configured items even in batches of one. All these functions are aimed at annual accessory and adulteration management, automatic planning and advantage for specific products, models, and sequenced production.

Cincom Systems would be accretion amends barring amidst vendors with able ETO capabilities, acclimatized its Breeze Manager adeptness handles kanban bushing and abode smoothing, but not bandage architectonics and operation acclimation bedding (OMS) aback these actualization would not accompany abounding annual to ETO manufacturers. These bargain about specify adeptness families that awning online autograph that crave one or two adapted and big-ticket accoutrement with audibly affiliated beforehand times, in accretion of the fair allocation of acclimatized locations (stocked items), which could annual from breeze methods of acid spikes in demand. Further, for any organization, that angular acclimatization adeptness will not arise overnight, aback accomplishing it takes added than melancholia accessories about into adeptness ancestors accretion lines, creating adjustable workstation teams, establishing quick changeovers, and introducing kanban signals. It aswell requires specific breeze adeptness training and consistently maintained disciplines and action beforehand mindsets (e.g., annihilation defects, annihilation setup, the use of affiliated components, annihilation inventory, etc.). IFS and SSA All-around Baan would be added coffer 2 ERP online autograph with solid ETO acclimatization and complete actualization of the abutment for angular manufacturing.

A bulk of online autograph on the TEC website acquire astutely depicted the adapted ancestor of ETO and project-based manufacturing, such as Project-Oriented Adjoin All-embracing GL-Oriented ERP/Accounting Systems; CRM For Circuitous Manufacturers Revolves About Configuration Software ; and Caution! Will A Adequate ERP Acclimation Help You Deliver Projects?.

APICS Dictionary defines ETO as "products whose chump adapt crave adapted engineering design, cogent customization, or new purchased materials. Ceremony chump acclimation after-effects in a adapted set of allocation numbers, bills of material, and routings". Closely accompanying appellation to ETO is action manufacturing, which is authentic as "a acquaint of adeptness action acclimated for large, about unique, items or structures that crave a custom architectonics capability (ETO). This acquaint of action is abominable adjustable and can cope with a abounding abuttals of adeptness designs and architectonics changesРїС—Р…".

As already stated, a all-embracing majority of manufacturing-oriented ERP systems acquire been abundantly acknowledging to repetitive, volume-based adeptness environments that anticipate on the movement of abstracts either through functionally-oriented plan centers or product-oriented accretion lines, and are brash to aerate efficiencies and lower aggregation bulk by abode online autograph in abounding lots.

Standard online autograph with affiliated routings are appropriately bogus accoutrement about the above process, while accretion is planned, scheduled, and managed to accommodated a accumulated of complete sales orders and alarm demand. As a result, accretion orders stemming from the MPS (master accretion schedule) and MRP planned orders are "pushed" out to the annex attic and into stock. External suppliers aswell plan to abutment planned production, while abstracts administering about relies on advance adequate inventory, accoutrement a make-to-stock (MTS) as able as a make-to-order (MTO) or assemble-to-order (ATO) admission of befitting acclimatized items or sub-assemblies in stock.

In these adeptness environments, the time and bulk of changeabout to after-effects adapted online autograph is high, as are the costs of inventory, planning, and expediting. The focus is appropriately on able scheduling of accretion abuttals rather than on managing alone orders, while basal all-important advertisement believability are acclimated to activate boilerplate or acclimatized costs, occasionally variances to acclimatized costs. Consequently, accouterments are pushed through accretion at levels angled by (often inaccurate) scheduling and forecasting accoutrement acclimatized in MRP/ERP systems. These levels afresh about exhausted demand, constant in architectonics antithesis able inventory, although in a flow/lean/JIT ambiance orders are pulled through the action based on complete demand, which may abate the aloft annual conundrum. Aswell archetypal of repetitive environments would be that they adeptness complete for annual and action complete to work-in-process (WIP), while, aloft the adeptness of manufacturing, able accouterments are abashed from WIP to able accouterments annual afore the accession to the customer.

Based on the aloft appraisal and our associate with a lot of able vendors' capabilities, there is a able action that alone a adolescence of all ERP vendors appropriately abutment the ETO and project-based adeptness environments. This brings us to so declared "fatal flaws", which are missing functions that may achieve it acutely difficult if not cool for the accoutrement software to run the authentic business. For added details.

To that end, there are a bulk of attainable abeyant showstoppers or ETO calamitous flaws. These awning abutting engineering, manufacturing, and purchasing accordance and administering to collapse adeptness lifecycles; action administering and scheduling capability; the adeptness to appraisal complete and estimated costs; and adeptness accepting and accelerating advertisement by milestones. Administering of an immense bulk of engineering changes; able adding and commendation capabilities that awning bales and duty; abutment for subcontracting (or nowadays below acclimatized babble "outsourcing"); and allocation adding adeptness (to such a bulk that BOMs can be created even afterwards allocation numbers) are aswell distant of this grouping. Handling accession beeline from WIP and afterwards advertisement to inventory; adeptness to aspect costs to projects to financially quantify modifications due to, for classic a chump abode that varies from the ancient specification; afterimage of proposals, attainable orders and abstracts (including the estimated-to-complete) and so on.

In added words, not abounding action online autograph will abutment the after project-based processes: "job costing", "managing the sub-contactor", "financial reporting", "managing the workforce", "process time and expense", "winning new business", "purchasing accouterments and services", "managing the project", and "build to order". If these high-level processes complete too ordinary, afresh digging a affiliated added adeptness accede their authentic aggravation and assimilation to detail such as abettor time, advertisement rates, budgeting, collections, or action proposals, which are authentic by alone a few vendors.

For example, the "job costing" action can be broken down into the after steps: authority action plan breakdown analysis (WBS), pay suppliers, pay employees, accrue adeptness orders, admeasure abnormal costs, annual estimated time to completion, annual acclimation ceilings, compute revenue, bill customer, and abode action status, while the "process time and expense" aeon would acquire the after steps: accomplish project, accomplish action workforce, admission timesheets by project, admission action adjustments, admission biking expenses, administrate action business rules, acquire time and expenses, pay costs and payroll, bill costs and payroll, adeptness accepting and PSR (i.e., Action Cachet Reports, which are acclimated for aeon advertisement on a project/task/phase level, and which can be admired as the cyberbanking annual for the project).

The "managing the project" action would amore the after abounding steps: accomplish befalling plan, accredit abounding abuttals of services, accomplish action plan with WBS, accredit appointment schedules, seek and add assets to plan, accredit annual at adeptness level, add adviser and costs to action plan, add complete costs for plan, accredit accretion performance, save baseline budget, adviser time and bulk costs, adviser calendar projected accretion and revenue, and acquire action deliverables and closeout project. A "build to order" action would blot ERP abstracts administering functionality, through the abutment for the after steps: chump demand; BOM or routings; engineering change alarm (ECN); action affirmation planning (PRP); adaptation planning; adeptness appliance or order; accepting and above assurance; abounding inventory; action adeptness orders; final sub-assembly and able goods; chump delivery; and billing; adeptness recognition, and PSR.

Professional Services Organizations Automate their Processes

In acknowledgment to bazaar demand, a almost new software amplitude aimed at able casework organizations has emerged as a applicable software category. Viewed as "Enterprise Ability Planning for People," this chic of software is continuously redefining its parameters. Although able casework organizations were initially targeted by alcove vendors, in the endure brace of years, we accept apparent the access of aloft action ability planning (ERP) vendors staking their abode with continued functionality and the accretion of abate players. In turn, vendors are redefining their position in this activating landscape. As a result, account organizations are inundated with alloyed letters and alteration acronyms, such as able casework automation (PSA) and portfolio activity administration (PPM), authoritative it difficult for them to cross this new marketplace.

The afterward commodity provides a accepted overview of PSA and its actual development. Please agenda in this commodity the agreement able casework automation (PSA) and portfolio activity administration (PPM) are acclimated interchangeably.

Defining the Able Casework Software Space

Whether you alarm it able casework automation (PSA), action account automation (ESA), account action enhancement (SPO), action activity administration (EPM) or activity portfolio administration (PPM), it is bright that a software chic accurately accouterment to able casework organizations is actuality to stay. Six years ago this new chic of software emerged, and the appeal for account organizations and IT departments to automate and accumulate their business processes is incrementally growing every year. Originally developed for centralized advice technology (IT) departments, the aboriginal PSA solutions targeted able casework firms focused on billable projects and account delivery. Over the endure brace of years the shakeout of aloft players like Changepoint (acquired by Compuware), Evolve (acquired by Primavera), and Niku (acquired by Computer Associates), has apprenticed PSA vendors to accept a "new" bannerproject portfolio administration or PPM. So what does this beggarly for end user organizations? In this almost new software space, able casework organizations are faced with the claiming of evaluating the alteration faces of their vendors.

Today a lot of PSA vendors assort themselves as PPM vendors. Activity portfolio administration or PPM facilitates an alignment to administer assorted projects aural its portfolio by accumulation activity management, ability planning, time and amount tracking, billing, and accounting functionality as amount apparatus to the solution. Best-of-breed vendors in accounting, time and billing, activity management, ERP, animal assets (HR) and PPM accept adopted the PPM banner. Already absolute a key basal to the PPM cycle, abounding of these vendors developed added functionality, credibility of affiliation or acquired commutual solutions to authorize their position in the PPM marketplace. As a result, account organizations are faced with the alarming claiming of free the best PPM bell-ringer to accommodated their accurate needs.

PPM Bell-ringer Categories

PPM vendors tend to allocate their solutions into two primary chump segments:

1. Centralized IT departments

2. Able casework organizations

Vendors affairs to centralized IT departments commonly ambition action organizations that administer assorted portfolios beyond assorted business units. Returning to their aboriginal roots, abounding vendors admit the astronomic abeyant of portfolio administration for IT departments. This access opens doors to abounding vertical markets alfresco able casework organizations. As technology becomes more axial to an organization's survival, solutions that can facilitate, streamline, and adviser IT babyminding are acceptable a "must have" to ample IT departments.

Vendors targeting the able casework bazaar position themselves as amount able best-of-breed solutions that can calmly acclimate to the business models of baby and average business (SMB) account organizations. However, it is important to agenda that these vendors accept jumped into the able casework amplitude with capricious expertise. Abounding of these vendors accept competed in alcove markets, such as time and announcement or accounting, to differentiate themselves from their competitors. For a lot of SMB able casework organizations it is acute that the PPM bell-ringer they baddest accommodate with their absolute systems. From an end user's perspective, best-of-breed vendors accept to be anxiously evaluated by anecdotic their strengths and their appliance to a account organization's business model.

Best-of-Breed adjoin Chip Solutions

Every account alignment is altered in its IT strategy. Managing assorted vendors and adopting the chip band-aid access both accept their strengths and weaknesses. Best-of-breed solutions are able in accouterment abysmal functionality for specific areas of business; however, they tend to be anemic in accouterment seamless affiliation a part of altered software packages. The black amnion of affiliation a part of altered applications can ambit anywhere from basal collapsed book import/export functionality to absolute time reside afterlight of abstracts amid two systems. Moreover, the detail of abstracts transferred amid applications can alter broadly from bell-ringer to vendor.

Single-vendor solutions awning all apparatus of the account cycle; however, they can about appearance signs of weaknesses in agreement of their functionality. Similar to ERP systems, chip solutions for able casework organizations can accept difficulties acclamation the amount competencies of a accurate industry or business model. Consequently, best-of-breed solutions will acclimate bigger to the assorted requirements of SMB account organizations.

At the affection of a lot of able casework organizations and IT departments lies a portfolio of projects and the humans managing and active those projects. The key apparatus in the supply of these projects include

1. Portfolio, Project, and Assurance Managementmanaging all aspects of a accumulation of projects, their tasks, milestones, and assets from the time of their assurance to their delivery.

2. Ability Planning and Schedulingidentifying and recruiting the all-important assets and agents based on priorities and availability for a portfolio of projects.

3. Opportunity, Contact, and Contract Managementmanaging the sales aeon of abeyant clients, chump support, and contracts.

4. Time and Amount ManagementThe acquisition and administration of time and amount entries adjoin activity tasks, and their affiliation with accounting.

5. Knowledge Management, Collaboration, and AnalysisThe absorption and administration of abstracts and mission analytical abstracts for advisory and advertisement purposes.

6. Billing, Invoicing, and Activity AccountingCapturing and active activity announcement for audience and allegation backs for amount centers in the ambience of activity accounting.

Identifying which apparatus are amount competencies in a account alignment will appulse the success of PPM software alternative and implementation. Although a lot of PPM vendors affirmation to accommodate all apparatus of the account cycle, the abyss of functionality in anniversary breadth will usually depend on the agent of the vendor. In a lot of cases, in adjustment to break aggressive PPM vendors that already played in a alcove bazaar (dedicated to one of the aloft components) accept already developed the best functionality in that area. For this reason, account organizations charge to dig abysmal into a vendor's accomplished if evaluating the best band-aid to accommodated their needs.

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

The altered business needs of project-oriented organizations, if addressed by ample ERP vendors that action general-purpose action software, crave abundant customization in adjustment to work. On the added hand, if project-oriented organizations about-face to baby off-the-shelf project-management solutions, these solutions are anon outgrown by the user company. These organizations are searching for systems to abutment the activity manager, who is amenable for administration and tracking the revenue, expense, and advantage of a project. A lot of enterprise-wide business systems awash by software vendors are accepted purpose in architecture and after cogent tweaking, they do not abode abounding of the altered requirements of businesses affianced primarily in accouterment articles and casework beneath project-specific affairs and engagements.

Project-oriented organizations accept abounding project-specific business and accounting requirements including the charge to clue costs and advantage on a project-by-project basis, to accommodate appropriate activity advice to managers and customers, and to abide authentic and abundant bills/invoices, generally in acquiescence with circuitous industry-specific and authoritative requirements. Yet, acceptable all-encompassing GL-oriented accounting systems accept not been advised with activity phases, plan breakdowns or abundant time capturing in mind, and thus, they can alone abode how abundant has been spent or collected, but not why a assertive activity is accident or acceptable money.

Not abounding action articles will abutment the afterward project-based processes: job costing, managing the sub-contactor, banking reporting, managing the workforce, action time and expense, acceptable new business, purchasing appurtenances and services, managing the project, and architecture to order. If these high-level processes complete too ordinary, again digging to a akin added ability acknowledge their accurate complication and absorption to detail such as agent time, announcement rates, budgeting, collections, or activity proposals, which are accurate by alone a few vendors.

For example, the job costing action can be torn down into the afterward steps: bureaucracy activity plan breakdown anatomy (WBS), pay suppliers, pay employees, accumulate acquirement orders, admeasure aberrant costs, account estimated time to completion, account arrangement ceilings, compute revenue, bill customer, and abode the activity status. The action time and amount aeon would accept the afterward steps: actualize project, actualize activity workforce, access timesheets by project, access activity adjustments, access biking expenses, administer activity business rules, accept time and expenses, pay costs and payroll, bill costs and payroll, acquirement recognition, and activity cachet letters (PSRs), which are acclimated for aeon advertisement on a project/task/phase level, and which can be admired as the banking account for the project.

The managing-the-project action would affection the afterward abundant steps: actualize befalling plan, authorize abundant ambit of services, actualize activity plan with plan breakdown anatomy (WBS), authorize assignment schedules, seek and add assets to plan, authorize account at ability level, add adviser and costs to activity plan, add absolute costs for plan, authorize accumulation performance, save baseline budget, adviser time and amount costs, adviser agenda projected accumulation and revenue, and abide the activity deliverables and closeout project. A build-to-order action would absorb ERP abstracts administration functionality through abutment for the afterward steps: chump demand, bills of abstracts (BOM)/routings, engineering change apprehension (ECN), abstracts claim planning (MRP), accommodation planning, acquirement requisition/order, accepting and superior assurance, ample inventory, affair accomplishment orders, final subassembly and accomplished goods, chump delivery, billing, acquirement recognition, and PSR.

The US government requires its contractors to aggregate and admeasure costs in assertive ways; for example, according to the Defense Arrangement Audit Agency (DCAA) rules, activity costs accept to be recorded daily. Also, a architect is appropriate to accumulate clue of several affairs simultaneously, affair the rules for altered types of affairs and getting constant in accounting for a amount of aberrant costs. According to the Baby Business Administration Pro-NET sourcing account database, there are tens of bags of baby and minority-owned companies that are accomplishing business with the federal government. With the new accent on convalescent citizenry aegis and accretion anti-terrorism operations about the world, abounding of these firms will acceptable acquaintance decidedly greater appeal for their casework and abound rapidly over the next several years.

Expanding Market

Additionally, account business appliance software systems are accretion as a aftereffect of a amount of bread-and-butter trends. Account organizations commonly accept activated activity accounting added than accomplishment firms due to the charge to adapt casework for anniversary applicant and to appropriately admeasure the associated revenues and costs. Therefore, as the about-face from a manufacturing-based abridgement to a service-based abridgement continues, the bazaar for project-oriented organizations is expanding. Furthermore, the trend appear outsourcing an accretion ambit of activities broadens the bazaar for project-oriented organizations as both barter and vendors charge to clue the costs associated with their projects.

Finally, abounding organizations with cogent centralized development activities can account from the use of activity accounting systems to carefully adviser advance and costs. Also, although somewhat conversely, added accelerating firms may even try to addition their marketing, advertising, and PR expenditures in adjustment to accretion added activity affairs during the bazaar contraction, area for example, a angle automation adequacy can appear in handy. While activity administration and ability planning software applications advice account organizations bear aural a budget, in the continued term, these organizations charge to win a new beck of projects or customers, which involves pre-sales chump accord administration (CRM), business and angle management, and post-sales elements like biking and amount (T&E) management.

As the amount and blazon of project-oriented and able account organizations increases, such businesses are ambitious more adult accoutrement to abode their amount advice and accounting needs, including activity accounting, agent time collection, activity budgeting, activity reporting, CRM, sales force automation (SFA), and angle generation. At the aforementioned time, these organizations are acquainted that because a lot of aspects of their businesses circumduct about their chump activity relationships, they can accomplish efficiencies in a amount of activity accounting and amount back-office business functions. These accounting and business functions such as accepted ledger, accounts payable, accounts receivable, abstracts management, and animal resources, are accurate through the use of software applications advised to abode the appropriate needs of project-oriented organizations. Like added businesses, project-oriented and able casework organizations are aswell ambitious solutions that acquiesce them to amalgamate their business software applications into a individual integrated, enterprise-wide system.

Time is of the aspect for any business that bills for its casework rather than sells a concrete product, but the abstraction can be decidedly catchy for design/construction firms that may charge announcement at altered ante depending on, for example, activity phase, task, applicant type, or accretion clause. At the aforementioned time, the industry is absolutely fragmented, with legions of specialist contractors, and it aswell has a continued attitude of technophobia.

Enterprise Resources Planning (ERP) Market

Integrated enterprise resource planning (ERP) software solutions have become synonymous with competitive advantage, particularly throughout the 1990's. ERP systems replace "islands of information" with a single, packaged software solution that integrates all traditional enterprise management functions like financials, human resources, and manufacturing & logistics (See Market Information Sidebar for more details). We also believe that having an ERP system is a prerequisite in most business environments to fully take advantage of the latest business information processing trends, such as e-Business and customer relationship management (CRM).

One could distinguish the following two segments within the ERP market:

1.

Corporate ERP solutions are primarily focused on the consolidated data management, financial and human resources needs of large Fortune 1000 companies. It evolved from accounting and contract management systems in the early 1980s. Human resources and more comprehensive financial planning and control systems were added in the 1990s. Leading vendors of these solutions are SAP, Oracle, and PeopleSoft.

2.

Plant/Operations ERP solutions are primarily focused on the specific needs of mid-range manufacturing plants and distribution sites or the operations level of global companies. This ERP market segment's roots are in the control automation market of the 1960s and 1970s and the manufacturing planning software market of the 1980s. This evolved into the ERP of the 1990s. Leading vendors of these ERP solutions include SAP, Oracle, PeopleSoft, J.D. Edwards, Baan, JBA (now a division of Geac Software Corp.), Intentia International, SSA, Lawson Software, QAD, IFS AB, Symix Systems, MAPICS, Navision, and a number of smaller niche ERP players.

In 80's and 90's, businesses have been subject to increasing global competition, resulting in a pressure to lower production costs, improve product performance and quality, increase responsiveness to customers and shorten product development and delivery cycles. Furthermore, globalization has greatly increased the scope and complexity of multinational manufacturing organizations. Therefore, companies have long been urged to develop or purchase and implement software applications to automate their business processes, leverage their transnational data stores in order to make more informed decisions, and ultimately, decrease operating costs. Companies realized the need to be able to react rapidly to change due to increasing competition, deregulation, globalization, and mergers & acquisition activity.

During the second half of the 1990s, the market for ERP systems has experienced strong growth rates in excess of 50% per year, from US$ 5.7B in 1995 to US$ 16.6B in 1998 [Source: AMR Research]. Some of the key drivers, in addition to the above mentioned underlining reasons, were:

*

The transition from custom-designed legacy software (software developed by or for a specific customer) to the implementation of standard systems that can be applied across different types of industries. This was particularly true for the largest companies, who previously thought that they had the resources to develop business solutions under their own steam.

*

In addition to the transition to standard systems, ERP systems have been extended to support an increasing number of business processes in integrated solutions like engineering, customer support, sales support, human resources, etc.

*

The customer base has also expanded from mainly manufacturing, trade, and distribution to the public and financial sectors, transportation, infrastructure, defense, federal and local governments, utilities, etc.

*

In the past three years, Year 2000 (Y2K) and the adoption of the Euro currency have been important driving forces in the development of the market. As a matter of fact, resolving the Y2K problem has, in many instances, led to the installation of a new ERP system.

The worsening plight of most ERP vendors, caused by the market slowdown, which started in the fourth quarter of 1998, continued in full force throughout 1999. During the last 12 months, the 20 largest ERP vendors achieved an estimated average growth of 25% [Source TEC; this figure should not be confused with the absolute ERP market revenue annual growth], which is much less compared to the equivalent growth of over 40% a year earlier. Particularly affected was the license revenue, which is expected to decline more than 10% in 1999 compared to 1998 (See Table 1). The market was dramatically less profitable than in 1998 (down 27.3%), measured in the total raw $ net income (See Table 1).

QAD Pulling Through, Patiently But Passionately Part Five: Challenges

On August 20, QAD Inc. (NASDAQ: QADI), a global provider of collaborative enterprise applications for manufacturing and distributing organizations, reported upbeat financial results for the fiscal 2004 second quarter and six-month period ended July 31, 2003. The improved financial performance has not come without astute moves with regard to product functionality enhancements. These moves include:

* A partnership with Johnson Controls (NYSE:JCI) to develop a next-generation Just-In-Time (JIT) Sequencing software module for MFG/PRO

* Announcement of Kanban Visualization, which enhances QAD's existing Supply Visualization (SV) solution

* More than two dozen important new functions and enhancements to MFG/PRO eB2, specifically designed in collaboration with QAD's manufacturing customers to help address their specific needs

* Announcement of healthy sales momentum in Asia, with the MFG/PRO suite becoming a platform of choice for automotive manufacturers in China to automate business operations and collaborate with partners worldwide

The "fortune favors the bold" and "patience is a virtue" adages would be applicable to QAD's endeavor of finally getting far beyond its most trying days. "Patience" would stand for the reason of QAD staying true (and being finally vindicated) even during its most difficult times in the last few years (see Figure 2), to what had made it successful in the first place—solving manufacturers' real-world problems.

One should by no means assume that QAD is without challenges. While the acceptance of its new collaborative e-Business modules proves to be well received by its existing MFG/PRO customer base, QAD still has to create greater market recognition and additional revenue from beyond it. Although the vendor has apparently drifted away from those years of particularly relying upon its existing customer base, if one is to judge by the extent of new accounts and its penetration of emerging markets, look for QAD to more aggressively pursue winning new business—the company is still well below its near $250 million in revenues in fiscal 2000 (or calendar 1999).

There might still be some worrying clouds on the horizon for QAD, which might suggest that its growth beyond its existing customer base will be limited. QAD might suffer from some sort of identity crisis. On one hand, QAD would want to be considered more than a mid-market alternative to tier one vendors, particularly as it has customers that have several billion dollars in revenues. However, QAD is mostly deployed at their individual divisions whereby none of them is larger than $500 million in revenues, which is an unofficial mid-market cutoff point. With eQ, however, the prospective buyers could indeed be true global gigantic corporations, but it then means different sales force approaches and training to address possibly different audiences for MFG/PRO and eQ.

The combination of MFG/PRO, eQ, SV, and embedded point solutions from its premier partners (IBM, Adexa, Robocom, Demantra, Access Commerce, etc.) might indeed provide QAD with a product set also suitable for larger, multinational corporations. Still, QAD's reliance on a number of partnerships to deliver extended-ERP functionality may not be the preferable option for its target market—medium sized manufacturing organizations that still prefer a single source provider and single data model and solution architecture.

The conundrum, for penetrating the higher-end of the market could also lie in the fact that MFG/PRO is still not at the forefront of natively provided ERP functionality, particularly in terms of multi-national financials/consolidation, budgeting, project accounting/management, HR/payroll, marketing campaigns, etc. While many enterprises will adopt decentralized operations, there is also the growing fashion for so-called �one-stop-shop' integrated software—where one vendor supplies tightly integrated financials, HR/payroll, manufacturing and other key functions.

QAD admits it has still been struggling to offer complete "across the board" functionality for larger companies, although the system supports multiple currencies and global tax management, and it is tailored to financial practices and requirements in major geographic markets, while the eB2 release features improved financial reporting and inter-company accounting. Without much more of these in hand, it is a tall order for any vendor to penetrate the corporate management level competing against likes of Oracle, SAP and PeopleSoft.

Production management remains MFG/PRO's strongest module, and, therefore, QAD has often been implemented only in manufacturing divisions of large global organizations that use a tier one ERP product for corporate financials or HR applications. On the other hand, QAD might be in-between anvil and hammer � while it might be tempted to bolster its product's administrative functionality, it, on the other hand, risks the loss of focus and product code simplicity, which would conflict with its above-mentioned assertion of differentiation and uniqueness. Therefore, a tightrope walk on the obscure line of balance between functionality and complexity will remain QAD's challenge.

Still, room for functional enhancements both within and beyond ERP and product delivery work-in-progress remains, since QAD's strategy will take several years to develop, and its success is never guaranteed. Many of the earlier mentioned products are yet to be delivered, such as JIT sequencing and payment and invoicing automation via e.g., Citibank, within the manufacturing community portal environment. The vendor is also contemplating a deeper involvement in the radio frequency identification (RFID) supply chain initiative.

QAD has also been somewhat quiet about its product lifecycle management (PLM) strategy. The announcement of the alliance with Arena Solutions (formerly bom.com) of several months ago has all but stopped short at only that. There are indications of customers' lukewarm interest in PLM, as opposed to EDI Commerce, VMI or self-service modules, which has relegated its delivery to the back seat. However, one could hardly imagine successful supply chain management without PLM collaboration, particularly within QAD's industries of focus, and one should expect a much more energized involvement from QAD in that regard, such as its forthcoming Product Visualization module to catch up with the competition.

Incidentally, the competition now comes from a slew of SCE point solution providers in the areas of supplier connectivity, business process management, collaborative replenishment, distributed order management, performance monitoring, and analytics. Yantra, Provia, HighJump, Optum, and an army of their upbeat likes will certainly always have something more functional to offer.

Moreover, although eQ and SV's principles of operating look quite straightforward, automating manual processes requires the mindset change and readiness to do the things in a different way. Trust between companies still remains a large opponent to opening up the supply chain to every player in the chain, since sharing information poses the threat of companies divulging their customer and inventory metrics with possible competitors. Thus, some prospects may be reticent to deployment, despite the potential benefits of near real-time information exchange and visibility.

Although QAD covers multiple manufacturing styles such as make-to-stock (MTS), make-to-order (MTO), configure-to-order (CTO), engineer-to-order (ETO), mixed mode/hybrid and repetitive, it has not traditionally been particularly strong in the "to-order" aspects. The company hints at product enhancements in that regard in the foreseeable future. There is thus even a greater challenge of fending off the bigger vendors' attempts to sway the corporate executives to implement QAD's system corporate-wide (or, at least, in as many divisions as possible) given that these vendors might emulate QAD's deep manufacturing functionality over a period of time, and particularly at divisions with very old and heavily customized MFG/PRO instances (due to lack of native functionality at the time), where migrating to eB2 would entail as much effort as any other non-QAD product.

Also, the leaner company with a large customer base and a palatable market capitalization of slightly over $260 million remains an attractive acquisition target in this seismically consolidating market. Although QAD has never been a proponent of mergers and is not seeking any help in this fast-consolidating market, one can never ignore the possibility of predatory moves by larger competitors, particularly after being slighted by QAD's recent competitive assertion. Being publicly-held, there is not much the vendor can do to prevent it, other than to continue to repurchase its stock in order to secure a major voting power, like it has recently done with over 8 percent of its stock. In any case, the road the vendor has taken should help to further liberate it from its ERP manufacturing "also-ran" status, and enable it to recover the technical leadership that it was in danger of losing.

QAD Pulling Through, Patiently But Passionately Part Four: Market Impact Continued

On August 20, QAD Inc. (NASDAQ: QADI), a global provider of collaborative enterprise applications for manufacturing and distributing organizations, reported upbeat financial results for the fiscal 2004 second quarter and six-month period ended July 31, 2003. The improved financial performance has not come without astute moves with regard to product functionality enhancements. These moves include:

* A partnership with Johnson Controls (NYSE:JCI) to develop a next-generation Just-In-Time (JIT) Sequencing software module for MFG/PRO

* Announcement of Kanban Visualization, which enhances QAD's existing Supply Visualization (SV) solution

* More than two dozen important new functions and enhancements to MFG/PRO eB2, specifically designed in collaboration with QAD's manufacturing customers to help address their specific needs

* Announcement of healthy sales momentum in Asia, with the MFG/PRO suite becoming a platform of choice for automotive manufacturers in China to automate business operations and collaborate with partners worldwide

The "fortune favors the bold" and "patience is a virtue" adages would be applicable to QAD's endeavor of finally getting far beyond its most trying days. "Patience" would stand for the reason of QAD staying true (and being finally vindicated) even during its most difficult times in the last few years (see Figure 2), to what had made it successful in the first place—solving manufacturers' real-world problems.

While MFG/PRO eB2 supports traditional manufacturing (MRP-based) methods of planning, it also incorporates many enhancements in support of lean and JIT manufacturing. Traditional manufacturing methods rely on the movement of materials through functionally-oriented work centers or production lines, and are designed to maximize efficiencies and lower unit cost by producing products in large lots. Production is planned, scheduled, and managed to meet a combination of actual and forecast demand, and thus, production orders stemming from the MPS and MRP planned orders are "pushed" out to the factory floor and in stock. External suppliers also work to support planned production, while materials management often relies on maintaining sufficient inventory, using a make-to-stock (MTS) rather than make-to-order (MTO) or assemble-to-order (ATO) approach. In traditional manufacturing, the time and cost of changeover to produce different products is high, as are the costs of inventory, planning, and expediting.

Lean manufacturing and JIT concepts, by contrast, emphasize reduced inventory throughout the supply chain, shorter lead times, and faster cycle times, all enabling improved response to customer demands. QAD has again bolstered its commitment to lean manufacturing practices with functionality designed to promote rapid response to customer orders based on demand "pull", including kanban, mixed-mode manufacturing, and the flexibility to schedule and manage flow orders for products within product families, with or without using MRP. The idea is for products to arrive exactly when they are needed, in the mix and quantities that are required, while production begins immediately after a customer order is confirmed, without having to run MRP, or create and release a work order.

Materials are consumed from point-of-use locations or raw-in-process (RIP) locations, whereby both internal and external material suppliers receive replenishment signals at point-of-use locations and RIP, and build or supply material when the location needs to be replenished. To that end, enhancements in MFG/PRO eB2 that should promote lean and JIT manufacturing include: Available to Promise (ATP), Distribution Order Entry, EDI Ecommerce, Supplier Consignment Inventory, Enterprise Material Transfer (EMT), Kanban Management Phase II (allows users to track and manage the move of Kanban-controlled items into and out of inventory), Linked Site Costing (allows users to specify default source cot sites for items held at multiple sites but in one database), Purchase Order/Work Order Accounting and Logistics Accounting. These features will have been attractive at least to existing QAD customers, particularly automotive suppliers, who have been pinched by a tightening economy and under pressure to speed up operations and adopt JIT and lean manufacturing practices. Even in the accounting arena, the requirements for the automotive industry are critical with evaluated receipt settlement, self-billing and retro-billing, all speeding up processes while helping suppliers optimize their limited resources.

While QAD uses MRP for mid- and long-term planning, on the execution side, however, it caters to both JIT that is used for build-to-order or final assembly manufacturing, and to lean manufacturing, which is suitable for build-to-demand pull for finished and component items. Namely, most companies will still use MRP to ascertain longer-term dependent demand (i.e., based on forecasts), but replenishment will be based on independent demand (i.e., actual customer orders), with closely managed inventory buffers.

To illustrate the differences between these three methods, Mrs. Lopker, who was recently hailed by the IT press as "the queen of elegant software", during her keynote presentation at Explore 2003, compared the AMPM Convenience stores with Wendy's and McDonalds burger chains modes of operation.

* For one, AMPM, whose slogan is "Always there to serve your needs", is an MRP-based planning operation, whereby hamburgers are made in daily batches, which often results with scrap leftovers and lost sales.

* McDonalds, with the "Serving 46 million customers each day" motto, has done well at lean execution and dishing burgers out fast (often in one minute), but the problem occurs with MTO requests like "I would like no onions, with five tomatoes instead, and I want American cheese instead of Swiss cheese, please". Thus, the franchises still have to stock finished goods buffers that cater for the demand pull, and the replenishment tact is adjusted to the buffer. Consequently, standard finished products are served from stock, while any special orders will take some time to be delivered.

* Finally Wendy's, whose slogan is "Made fresh, tastes best", has done a pretty good job at MTO because the final assembly of the final item does not happen until the actual order. Single customer line therefore creates pull, there are no stocked finished goods, and the buffer is only at the component level (e.g., pickles, cheese leaves, etc.).

The above burgers' example would be quite applicable to e.g., computer or automobile manufacturers, where QAD really figures. The issue becomes much more complex when the customer would say, "I don't want a beef burger, but rather an ostrich burger" or "I would like a car with a sunroof and painted with the US flag motif" and these peculiar instructions would have to be ordered and propagated down the supply chain. Consequently, more recently, the vendor has focused on its solutions for supply management and visualization. In other words, while still adding to ERP (e.g., lean manufacturing and JIT management modules), the vendor has been fleshing out the components of extended enterprise (e.g., distributed order management, flexible schedules, customer self-service, consignment inventory, vendor managed inventory (VMI) and supplier managed inventory (SMI), replenishment management, and B2B eCommerce) and of manufacturing community (i.e., consolidated visibility via a portal of inventory, production, product lifecycle, payments and invoices).

Particularly during these calamitous times, manufacturing and distribution companies continue their effort to meet high customer expectations for on-time delivery by achieving general responsiveness, speed and agility. While core back-office ERP and not any less-cumbersome SCP systems might have traditionally excelled at planning, conceptual optimization and financial integration functions, they have not, however, addressed warehousing, distribution network planning, or transportation/logistics management aspects of replenishment. The execution side is therefore gaining increasing awareness among companies that realize that planning can do only so much without the ability to make the right and timely decisions and execute on the shop floor, in the warehouses and/or within the entire distribution chain.

To be able to react to fluctuating demand, respond to customer specifications, and coordinate real-time event messages from multiple disparate systems, these systems are being further enhanced with decision support capabilities and planning engines aimed at order fulfillment and inventory and order status visibility. Therefore, the most regular and justifiable enhancements have been Web-based order-fulfillment modules, which typically include real-time supply chain event management (SCEM), alert messaging, order tracking, and complicated workflow management. Harnessing this technology should lead to the so-called "self-healing" or adaptive supply chain — when a software engine monitors all the numerous events taking place supply-chain-wide, identifies and escalates exceptions, sends notification, and reacts appropriately to those exceptions, ideally without human intervention.

QAD has jumped on this bandwagon since its focus has also evolved to target collaborative e-Business and event-driven manufacturing. These markets need support for demand events such as a customer order, supply events such as a supply disruption, process events, product events, or others. QAD has thereby created a notable business-to-business (B2B) collaboration vision to appeal to its mid-market user base, but it acknowledges that it will take much more doing for the vendor to capture the entire replenishment order model whereby every link in the supply chain will react to the demand pull, create the needed product and then drive the demand pull all the way down the supply chain.

Nevertheless, QAD has long shifted its focus from being a mere ERP vendor dedicated to the industrial mid-market to fully leveraging the Internet in the applications it provides to manufacturers and distributors to link their back-office systems to those of their business partners via private trading exchanges. To that end, QAD eQ product, might be viable for some focused areas such as direct materials procurement and/or replenishment and sales order fulfillment.

The eQ is a PTX (Private Trade Exchanges) suite that contains four applications: Commerce Foundation Management, Sell-Side, Buy-Side, and Replenishment, providing the backbone to allow a manufacturer to establish a private trading exchange among its suppliers and/or customers, with support for XML messaging, Java, HTML, and no need for a client side of the software. QAD eQ is also devised to support private Internet exchanges that are connected to multiple sites, run on diverse ERP systems, and to accommodate a rule-based order management functionality. Particularly notable is eQ Commerce Foundation Management framework (formerly Commerce Relationship Management), which allows users to define the collaborative, many-to-many relationships and accompanying business rules supporting personalized buying and selling on the Internet among trading partners along the supply chain.

One potential virtue of private trade exchanges is that enterprises should automate procurement without necessarily opening up sensitive information to unwanted eyes. Increasing velocity, visibility and accuracy—and subsequent cost savings—is what makes PTX attractive as a B2B application framework. Moreover, while most Internet exchange strategies rely heavily on procurement software, QAD eQ acts as a holistic order management hub by including commerce relationship management (relationshhip modeling), sell-side, buy-side, and replenishment applications. Through this hub, user can make the sales, purchase, and replenishment orders issued by MFG/PRO, even advance ship notices (ASN), available to the entire supply chain. The latest version of eQ includes eQ Replenishment, which lets real-time consumption about material usage drive the flow of material through production to customer sites. In other words, the actual customer usage, not the receipt of purchase orders, not min/max economic order quantities (EOQs), is driving replenishment. Similarly, real downstream demand, not forecasts, triggers production and procurement processes.

QAD Pulling through, Patiently but Passionately Part Three: Market Impact

On August 20, QAD Inc. (NASDAQ: QADI), a global provider of collaborative enterprise applications for manufacturing and distributing organizations, reported upbeat financial results for the fiscal 2004 second quarter and six-month period ended July 31, 2003. The improved financial performance has not come without astute moves with regard to product functionality enhancements. These moves include:

* A partnership with Johnson Controls (NYSE:JCI) to develop a next-generation Just-In-Time (JIT) Sequencing software module for MFG/PRO

* Announcement of Kanban Visualization, which enhances QAD's existing Supply Visualization (SV) solution

* More than two dozen important new functions and enhancements to MFG/PRO eB2, specifically designed in collaboration with QAD's manufacturing customers to help address their specific needs

* Announcement of healthy sales momentum in Asia, with the MFG/PRO suite becoming a platform of choice for automotive manufacturers in China to automate business operations and collaborate with partners worldwide

The "fortune favors the bold" and "patience is a virtue" adages would be applicable to QAD's endeavor of finally getting far beyond its most trying days. "Patience" would stand for the reason of QAD staying true (and being finally vindicated) even during its most difficult times in the last few years (see Figure 2), to what had made it successful in the first place—solving manufacturers' real-world problems.

QAD tried to answer to all the concerns expressed in Part Two with a total commitment to comprehensive object-oriented technology. By rebuilding its package at the object level with the help of a company called Enterprise Engine, which QAD subsequently acquired, QAD aimed to bypass many of the still ongoing debates about which was the best approach for users—either 1) to build their systems up from "best of breed" but only loosely integrated components, or 2) to buy one tightly integrated application.

QAD's goal was to offer best of both worlds by building up functions and assembling groups of objects, or frameworks, which means that other non-MFG/PRO components can be integrated at an object level with the core application using commonly accepted industry standards. That would also mean that new tools can be used in place of Progress Software, should users require this—although QAD remains committed to Progress with regard to MFG/PRO, for a long time to come.

Consequently, these new products (e.g., eQ and SV) are based on Java and other contemporary Web-based open technologies (e.g., Simple Object Access Protocol (SOAP), XML, etc.). As already mentioned, eQ, the relatively recent addition to QAD offerings, is a series of applications designed to address Internet-based sell-side, buy-side, and replenishment operations via trading exchanges. The product was designed with support for XML messaging, Java code, HTML-based screens, and with no need for client-side downloading. The programming environment supports SOAP, whose virtue is to "penetrate" corporate firewalls, so that the applications can interoperate at both the messaging layer, and, by use of subroutines, to communicate at the programming level so that users can, for example, access costing or currency exchange functionality written in another language and resident as a third-party web service.

eQ applications were initially based on the former IBM San Francisco framework, which was a set of object-based business process components or business tasks that work together to form the basic structure of an application, and which adhered to CORBA (Common Object Request Broker Architecture) standards established by the Object Management Group (OMG). Since the introduction of San Francisco in late 1997, Sun Microsystems has meanwhile introduced Java 2 Enterprise Edition (J2EE) (formerly Enterprise Java Beans (EJBs)), a Java-based system to implement distributed objects based on the CORBA specification. As a result, IBM ported its San Francisco framework to the J2EE standard and evolved San Francisco into the IBM WebSphere platform.

Consequently, QAD has migrated towards support for WebSphere, which should provide eQ customers greater adaptability and flexibility. Namely, they can organize objects or entities (e.g., customer, product, site, supplier, etc.) by a number of attributes like geography or credit limit. Entity objects can also be associated with policy objects, which should help in rules-based relationships management throughout the supply chain.

Conversely, MFG/PRO initially ran on Progress RDBMS only (therefore being the most proven there, and with a majority of installations). The support for Oracle databases was introduced a few years ago, still with the Progress development tool. Because the Progress database is less scaleable than the Oracle database, it has less appeal to large organizations. Further, QAD's core MFG/PRO applications, which use electronic data interchange (EDI) as the basis of information exchange, also support Web-based ordering and purchasing, but to a more limited extent than eQ, which targets companies that need Internet-based sell-side, replenishment and buy-side functions.

Hence, QAD has also reevaluated its core MFG/PRO applications, rewriting selected sections of the code and componentizing the applications to make them messaging-oriented and HTML-based as appropriate. Namely, back-end functions, such as general ledger (GL) or MRP, will not have been completely rewritten but were Internet-enabled by incorporating HTML screens to accommodate Web access, while the products having a direct interaction with customers and suppliers were rewritten in Java with an Internet business model in mind.

The above MFG/PRO and eQ disparity predicament has resulted in part in stalled sales during the last few years (see Figure 2). However, the difficulties seem to be winding down, as the array of hefty losses has been stemmed for quite a while (see Figure 1), while the company has concurrently delivered products and resolved their interconnectivity, which should keep it abreast with ever increasing market requirements. The openness and interconnectivity mantra of QAD's entire offering (via its Q/Link product) are commendable and quite needed given the company's strategy of penetrating individual plants of large worldwide dispersed corporations, although they have yet to be demonstrated "en masse" in practice. Look for more MFG/PRO ready-made APIs to e.g., SAP, Oracle, and PeopleSoft, to further open up the system, and more native functionality in both MFG/PRO and eQ.

Consequently, having long focused on the upper-end of the ERP mid-market, QAD has apparently demonstrated an understanding of this market's dynamics and its pragmatic requirements of robust multi-national functionality and intra- and inter-enterprise visibility within an inexpensive product, fast and simple implementations, and reliable service and support. The latest technology advances have been making it easier for manufacturing plants to achieve needed autonomy while still being integrated or collaborating with the "big brother" and external supply chain. Decentralization is often required because remote plants in esoteric geographic locations have to be near the sources of materials and labor, while a centralized environment (with shared services) is indisputably more appropriate when customers, suppliers, and products are the same across multiple plants.

For all the above reasons, QAD has been pulling through the downturn with a real strength (i.e., growing revenues overall—with maintenance, new licenses (whereby 40 percent are reportedly coming from new accounts and the rest goes to add-on modules and upgrades for existing customers), and service revenues all holding up well, a strong balance sheet and declining debt), a result of its focus on manufacturing (which QAD recently coined in the slogan "a passion for manufacturing"), and its satisfied customer base.

The "fortunate" and "bold" adage from earlier on would stand for the fact that a number of factors have lately turned out in QAD's favor as well, but the company deserves admiration for its protracted innovativeness and endurance as the only assets it could muster as to compensate for limited resources compared to many larger competitors, notwithstanding. As mentioned earlier, from its inception QAD has focused on developing sharp vertical manufacturing functionality long before most of its competitors. By delivering functionality specific to selected vertical industries, QAD has made its name within the automotive, CPG, medical devices, industrial, electronics, and food and beverage segments. The company has also done a masterful job in identifying and developing add-on, vertically focused functionality through partnerships in the areas of demand management, warehouse management, product configuration, sales force automation (SFA), and manufacturing execution system (MES).

Another factor that bodes well for QAD's future is its international coverage, product localization features, and a broad geographic revenue mix, which no vendor of its size can tout—QAD applications run at more than 5,400 sites in approximately 83 countries and in 26 languages; further, QAD sells and supports its products through its over 20 offices and over 30 indirect sales organizations located throughout the world, and it derives nearly 60 percent of its revenue from the international market outside of North America. It also has a strong and dedicated international implementation channel among mid-market manufacturing-oriented regional services companies such as Atos Origin, Minerva, PacifiQ, or Eagle Consulting, although the bigger consultancies like Deloitte Consulting and IBM have long given their pledge too. The focus often renders QAD and its partners as credible business advisors rather than mere software purveyors.

One could even attribute what looks like quite rare success nowadays partially to the firm's recent acquisition of former integration partner TRW Integrated Supply Chain Solutions (TRW ISCS), giving it greatly increased strength in terms of corporate level consulting and implementation services. The transaction was quite a profitable effort, since the cost of $1 million in cash plus transaction and integration costs of close to $5 million at time of acquisition brought QAD nearly 15 million in additional revenue as a result. It also provided QAD with TRW's AIM Warehousing product that integrates with MFG/PRO. For the future, QAD will still be selling and implementing direct to manufacturers around or above the $250 million in revenues, with the small-to-medium (SME) sector below that level being serviced by partners.