Lean manufacturing depends heavily on eliminating waste. It's for this very reason that ERP (enterprise resource planning) software systems have exploded beyond manufacturing and expanded into far flung unrelated industries.
But waste, nonetheless, still exists in the area of system integration. Companies can save anywhere from $100,000 to several millions in personnel and direct expenses through more effective integration.
How? That's the challenge. According to several experts in the field, the most common problems that arise when companies set out to integrate procurement, distribution, warehousing and communication systems with customers come not in executing their plans, but rather in conceptualizing them.
|"What I see most often is that there's not a shared view of success at an enterprise level."|
Bergstrand, who served as CIO for the Cola-Cola Co., says he sees many companies fall into the trap of thinking there's a definitive line of organization that will be established, only to discover during implementation there are many more questions to be answered.
"A lot of times, people aren't clear on where they're going or why," says Bergstrand. "They may be clear in their own minds, but that's not the same. Once projects get started -- and you see this if there's a restructuring of a company, or when there's a merger or acquisition -- you have to define where the centralization and decentralization lines are. It's for these reasons that even to this day, after 30 years of learning curves, 70% of enterprise projects fail to deliver on their initial promise."
Stanley Supply & Services, a supplier of products for assembling, repairing and testing electronic equipment, is one of the exceptions. As one of the chief suppliers to companies such as Honeywell and BAE Systems, Stanley established an integrated system that allows high-volume customers to automate their ordering process -- reducing transactional costs associated with purchasing agents and sales people.
In establishing this system, more time was spent on the planning stages that in coding, according to Eric McDowell, the company's e-business manager.
"It's very easy to make changes prior to the point in which you start to code," says McDowell. "Another area that we found is not considered enough is in the failure mechanism. In many cases, when you're connecting with customers you can get the data to exchange easily, but it's the failure mechanisms that make or break the success of the program. If the list of transactions we made this morning aren't received, what backup is in place to ensure we know about that?"
Mergers and acquisitions play a driving force in the push toward integrated systems. Pharmaceutical giant Pfizer, for example, spent an estimated $208 million primarily on system integration and consulting in just three months, in order to integrate new acquisition Wyeth, a large part of which went toward a global SAP rollout.
"The M&A that's gone on basically means you've got a tremendous amount of fragmentation within these enterprises," says Peter Scott, vice president of marketing for Exostar, a provider of e-business services for the aerospace and defense industry. "That complexity means you've got to find enough volume of information and business process between two parties to provide integration and automation."
Which is why establishing the concept becomes the primary challenge -- not the implementation, says Brand Velocity's Bergstrand.
"It really breaks down to being clear and connecting the dots between where you want to go and why, what you need to do when, how you can best do those things, and who is responsible for which tasks," says Bergstrand. "The more clear you are on those four questions, the better the systems integration, and the faster and more successful it will be."