Made For Midsize

Dec. 21, 2004
Smaller manufacturers seek precise solutions for their complex needs.

If there's one thing that Brian Lyman has learned, it's that business success requires more than an excellent product. These days, having the right software also is crucial. "It's essential to develop a workable strategy," says Lyman, manager of business systems at Cybex International, a manufacturer of sports fitness equipment in Medway, Mass. Cybex, with sales of $85 million last year and more than 400 employees, relies on a carefully crafted game plan for managing its software to help boost efficiency and profitability. Starting with a core enterprise resource planning (ERP) system from PeopleSoft Inc., Cybex has added an array of functions, including e-commerce, order management, production management, product configuration, asset management and accounting. At the same time, Lyman is only too aware that a small to midsize business has unique requirements and can't burn cash like the big boys. Thus, Cybex has acted with restraint, holding back on purchasing and installing other desired applications until the time and price is right. "We look at how we can help the business achieve the greatest efficiency and profitability," says Lyman. "We're willing to stick with manual and legacy systems until we're convinced that we can put new software in place and achieve outstanding results with it." In the struggle to remain profitable in today's tough economy, Cybex isn't the only small to midsize company scrutinizing its software needs. A growing realization that smart use of software often lies at the center of a successful business strategy has forced many companies to take stock of applications and devise a plan for their use. Some have focused on leading-edge vendor applications, while others make do with home-grown software or shrink-wrap applications, such as Microsoft Corp.'s Excel and GoldMine Software's business applications, which cost a fraction of a custom system or big-name enterprise package. As a measure of just how important the software market for midsize and small manufacturing companies is, enterprise software giant SAP AG found recently that 58% of its worldwide customer installations were at businesses with under $500 million in sales. IBM Corp. has identified "the total IT opportunity" for small and medium businesses -- defined as companies with fewer than 1,000 employees -- at more than $300 billion. And AMR Research reports that companies with revenues under $250 million make up about 30% of all spending on ERP software. "It's a major misconception that smaller companies have less complex technology needs," observes Rod Johnson, a vice president at AMR Research, Boston. "While larger companies can afford to pursue innovation around technology, smaller firms typically have to pick their spots and make sure that they're investing in solutions that will provide a significant payback. They face some tough decisions." Increasingly, he says, small to midsize firms are turning to vendors with products specially adapted to their needs or a range of smaller vendors that offer a better combination of functionality and price than the 800-pound gorillas of the industry. That's especially true with customer-relationship management (CRM) applications, which can prove incredibly difficult to integrate and complex to use. In many instances, AMR Research has found that divisions of larger companies also are turning to smaller and more specialized vendors that can provide more focused service. Donald Springer, manager of Information Systems at A.J. Antunes & Co., a Carol Stream, Ill., manufacturer of custom electronics, air and gas pressure components, believes that it's essential to find the right vendor and build a relationship. Beginning with QAD's MFG Pro ERP application, it has added supply-chain applications, CAD applications and collaboration software. A.J. Antunes, which has about 250 employees and annual sales of around $35 million, focuses on adopting software that "enhances our relationships with business partners. That's how we gain a competitive advantage." Other applications, though desirable, take a back seat to those that help the company achieve its primary goal. Another key consideration for smaller companies is balancing actual requirements against a wish list of technology. "What works for a large company doesn't necessarily work for a smaller one," explains Mitch Myers, vice president of operations for F.W. Murphy, a Tulsa, Okla., company that manufactures controls and instrumentation for various industries. The 400-employee firm, with 2001 revenues of about $50 million, settled on a J.D. Edwards ERP system in 1995. Within the next couple of years, it added financials, manufacturing resource planning (MRP II) and sales order and entry. Building a strategy centered on potential gains and ROI has helped F.W. Murphy cut costs and reduce integration headaches. In fact, when J.D. Edwards began offering CRM software to its customers, Myers realized that it could save F.W. Murphy approximately $100,000 a year compared with a Siebel Systems implementation that it already had in place. The company also has held off on a barcoding system because it hasn't found the right software at the right price. "We have limited funds, and we must maximize our resources. In some cases, it's necessary to give up some functionality if the return on investment isn't there or the application isn't exactly right," Myers says. Another challenge for many smaller companies is coping with larger supply-chain partners that dictate what applications they must use. At Kids II Inc., an Alpharetta, Ga., toy manufacturer and distributor with annual sales of nearly $100 million, this creates some real challenges. The company provides more than 400 toys for about 10,000 retail outlets, including Wal-Mart and Target stores, and works with 15 contract manufacturing partners in China and Taiwan. Although Kids II uses a sophisticated ERP system from MAPICS, it also has had to tie into corporate ordering and inventory systems from large retailers -- a process that took upwards of three months and required significant programming, notes Grant Gunnigle, vice president of MIS. Yet, by maintaining a steadfast focus on finding the right software and constantly adapting business processes, Kids II has scored impressive wins. It has trimmed the lead time on complex orders by 57%; improved on-time delivery from 95% to nearly perfect; boosted inventory turns by 100%; reduced financial closes from 20 days to five days; and slashed charge backs by 90%. Yet, Gunnigle too, takes a deliberate approach. "We examine ROI, our ability to improve efficiency and offer better service, and the lifespan of the software," he says. "If the numbers don't add up we'll wait a year and then re-examine the issue."

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