Seven Hard Questions to Ask Green ERP Vendors

May 12, 2010
Learning how to reliably and efficiently measure and manage environmental footprint

While manufacturers are under pressure from regulators, investors and their own customers to document and reduce their impact on the environment, they do not have the technology today to reliably and efficiently measure and manage their environmental footprint.

Manufacturers with any degree of environmental footprint measurement and management capabilities rely almost exclusively on either standalone carbon footprint software or on one-off integrations between ERP tools and either packaged or custom software. A more elegant, affordable and flexible solution involves the inclusion of environmental footprint management directly in the ERP package as a native piece of functionality.

ERP vendors are coming to an understanding of this market dynamic, and due to studies like one completed recently for IFS North America, are cognizant of the unmet need in the market. In future months, we may see announcements of thorough, complete green ERP functionality that manufacturers need.

But how can manufacturers evaluating offerings from software vendors ensure they are getting what they really need, not only now, but into the future? How can they avoid paying for extensive integrations projects and being hit by other hidden costs? And how can they avoid offerings that are in essence "vaporware" ... software that does not yet and my never really exist? Determining who truly has this functionality and who does not should be a major concern for those evaluating enterprise software packages designed to deliver environmental footprint management.

To this end, here are seven questions to ask enterprise software vendors that claim to offer a solution in this area:

Question #1: Can you track environmental impacts like you can track cost? Because that is exactly what environmental impacts are ... a cost, and they are driven by the same types of activities that drive financial cost. Every manufacturer keeps track of cost to some extent, including standard cost or actual cost, at varying levels of granularity. Remember everything that is purchased, every time materials or products are moved, every manufacturing activity, every business process, drives cost and also carries an environmental impact. How does the environmental footprint management solution take advantage of the existing costing system to reduce complexity in measuring environmental impacts?

Question #2: How is the environmental management tool linked into supply chain and materials management? One major contributor to a manufacturer's environmental footprint is its supply chain. Manufacturers need to understand what their products are made up of on a raw material level, the environmental impact of creating those materials, manufacturing them or mining them and the impact of transporting them to their plant.

Question #3: How is the environmental management tool linked to manufacturing operations functionality? After all, once you understand the environmental impact of your supply chain, you need to keep track of your own operations and your manufacturing processes. How will a solution help you see how much energy these processes consume, what emissions are associated with them, what chemicals they consume and what potentially dangerous chemicals like lead, cadmium or mercury are involved?

Question #4: How will the environmental management tool track product lifecycle impacts? The environmental management tool will need to allow you to measure how your product is used, how much energy it consumes, does it emit any substances when in use, whether substances like cadmium, lead or other substances leak from it, etc.

Question #5: How will the environmental management tool help measure and plan for the end-of-life impacts of the product? Particularly if some portions of a product can be poisonous, end of life disposal or decommissioning can be a major concern. But even under ideal circumstances, attention will need to be paid to how much of the product can be reclaimed or recycled, how product design impacts the ease or difficulty of recycling, and certainly how any potentially dangerous substances within the product are to be taken care of. This type of data must be on hand for each and every part across the product structure, and that means you need to keep track of your product structures at a very granular level of detail.

Question #6: How much flexibility to change, expand and reconfigure the environmental management tool will you have, and what is the cost of that flexibility? Environmental measurement and management requirements are not static. New regulations will be promulgated. New reporting demands will be placed upon you by your customers and the market. New products will bring with them new challenges.

So an environmental management solution that can measure only one impact, like carbon emissions, is of little value. Moreover, environmental management solutions that rely on extensive integrations that are limited in capability or expensive to change and expand are equally undesirable. Indeed, when it comes to environmental management, a manufacturer ought to start small and plan to expand their program over time as needed or as it becomes desirable to do so. An initial decision ought to be what should be measured first. There might be immediate environmental reporting demands that must be satisfied, or obvious environmental impacts that receive priority. For instance, a company that manufactures industrial chillers may want to measure impacts stemming from refrigerants like ammonia, Hydrogenated Fluorocarbon Refrigerants (HFCs) and Hydrogenated Chlorofluorocarbon Refrigerants (HCFCs).

Eventually, for that industrial chiller company, an environmental footprint management program may be extended to manufacturing and installation operations, but measuring impacts stemming from these chemicals is the best place to start. It is obvious, though, that for any manufacturer, it makes little sense to invest heavily in a solution that will meet only immediate needs and will require additional major investments to expand and be reconfigured over time.

Question #7: How much will it cost to implement this solution, including integration costs and middleware? And how much will it cost each time I upgrade my ERP package to uplift any necessary integrations? What are the costs associated with maintaining this solution over time?

Manufacturers about to commit to an enterprise software solution that includes embedded environmental footprint management need to do extensive due diligence. They need to ensure that they are actually getting ERP with a native, built-in module that is pre-integrated with the rest of an enterprise suite. The degree to which other parts of an enterprise suite must be implemented in order to feed data into the environmental footprint solution will vary from one manufacturer to the next and from one product to the next. But another, final, question to ask might be "what else do I need to buy?"

So once again, when it comes evaluating ERP vendors claims in the area of environmental footprint management, the phrase "caveat emptor" certainly applies. Ask questions about the flexibility and broad capabilities of these tools. Ask questions about not only initial purchase cost but about the cost to reconfigure or expand the type of data included in an environmental footprint. And be sure to think not only of your immediate needs, but of how your needs could change in the coming years and how the various enterprise solutions can continue to accommodate these changing environmental needs.

Pr Hammarstrm is Product Director for IFS' Eco Footprint Management solution, an embedded component in the company's enterprise software suite, IFS Applications.

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