ERP: complexities, ironies, and advances - Manage - enterprise resource planning

Automotive Design & Production, July, 2002 by Lawrence S. Gould

Enterprise resource planning (ERP) is still what it is: your back-office automation system for managing the vast majority of business transactions in your enterprise. But now ERP is stepping out in multiple directions.

The acronym "ERP"--for enterprise resource planning--was defined in 1990 by Gartner, Inc. (Stamford, CT). That was then. This is now. Gartner's Research Director in the Business Process and Applications Group, Brian Zrimsek, sees three major changes affecting ERP now:

1. Process extensions. "Today, ERP is still for the enterprise, but the enterprise is changing. It's becoming more virtual." consider how the OEMs are outsourcing aspects of car design and the rise in contract manufacturing. Both of these business processes span physical enterprise boundaries. "ERP starts to struggle as you outsource more activities," says Zrimsek. The build/made items in ERP become bought/purchased items. The visibility that comes from routings, work-order statuses, and work-in-process data acquisition gets lost. Hence the drive for collaborative information systems among outsource partners. But remember, points out Zrimsek, "ERP wasn't built with the Internet in mind."

2. Verticalization of functionality. ERP was initially built for manufacturing and distribution. Now, fully integrated, feature-rich, ERP systems have extensions for supply chain management (SCM), customer relationship management (CRM), warehouse management, and several other business processes. Zrimsek has seen ERP deployed in just about all industry sectors; food, petrochemical, aerospace and defense, the armed services, and even the public sector. Consequently, ERP vendors are deepening the functionality of their systems to meet the needs of the target industries.

3. Architecture. Before client-server computing in the early 1990s, which was kind of the birth of ERP, resource planning systems were very monolithic. ERP deployments were basically mainframe deployments. Upgrading meant taking out the whole thing and putting in a new system. Today, users are loathe to pay 20% to 60% of what they paid in system implementation for upgrades! migrations. This is putting pressure on ERP vendors to provide software that is open, component-oriented, and migratable in pieces--thereby leaving existing, desired, ERP components (as well as SCM, CRM, etc.) in place and functional.

Add that all together and you see why Gartner is coining the term "ERP II" to label the "next act in the evolution of ERP, which expands beyond enterprise-centric optimization and transaction processing to a new focus on improving enterprise competitiveness." So, dismiss anything written that ERP is dead. "It's not accurate to say there's nothing happening in ERP. There's lots happening. ERP is still growing and evolving," exclaims James Shepherd, Senior Vice President at AMR Research (Boston, MA). ERP is still doing what it's supposed to: provide a common database for an entire enterprise. "ERP is truly the enterprise backbone. That can't go away," says David Schaap, Product Marketing Manager for BRAIN North America, Inc. (Ann Arbor, MI). If anything, ERP is manufacturing's equivalent to Microsoft's Office Suite: lots of core functionality and changes that are far more incremental than they once were.

Automotive ERP

"What's new in ERP is no different than what has always been new in the product category currently known as 'ERP,' formerly 'MRP II' [manufacturing resource planning], formerly 'MRP' [material requirements planning]: The difference has to do with what's being added to ERP," says Shepherd. That is, the scope, features, and functions of ERP continue to expand. Some of these, points out Shepherd, are invented by the ERP vendors; most are invented by small, niche vendors, later co-opted by the ERP vendors. "That's progress as usual in ERP," Shepherd adds.

And yet, ERP still doesn't fit automakers very well mainly because they have evolved their own way of doing business, which is sufficiently different than other industry sectors. However, ERP does fit the operations of the suppliers. Nowadays, suppliers are implementing ERP packages rather than writing their own systems or modifying "off-the-shelf" to some unrecognizable system state, as they did in the past. One key reason is that because automotive is a key target market for the ERP vendors; automotive-specific functionality is now the "price of admission." For example, look at Release Management from Oracle Corp. (Redwood Shores, CA). This module manages customer schedules, then reconciles demand with existing requirements. It posts shipping and sequence schedules, and generates updates to sales orders and forecasts. The module lets OEMs and suppliers automate the receipt and processing of inbound planning, shipping, and production sequence schedules. As necessary, the module generates exceptions if data i s missing or invalid; valid schedules will continue to be processed. Once validated, customer schedules are archived and accessed by schedule history, original schedule date/quantity, associated sales order, and customer authorization information using the Release Management Workbench.