Crystal gazing for the 21st century

Related tags Enterprise resource planning

Enterprise resource planning and advanced planning systems can both help companies with their forecasting. But which one is best suited to you? Kathy Watson reports

Do computer software systems like enterprise resource planning (ERP) fit the planning and scheduling needs of food manufacturers in a fast changing world? Or are they an expensive waste of time and money?

This issue was raised in the spring by Professor Daniel Jones, who heads up the newly formed Lean Enterprise Academy. He forecast the demise of ERP systems claiming they were too centralised and inflexible and that IT houses had too much power in dictating what manufacturers should buy.

What's more, he warned that the next generation of ERP systems linked to radio frequency identification (RFID) systems could bring things to a grinding halt.

Instead he argued for an event driven approach with more synchronisation of operations so that suppliers could replenish the same day.

He isn't the only one putting the boot it. Providers of advanced planning systems (APS) argue that they are the only ones whose systems have the sophistication to cope with the 'what ifs' of modern day food manufacture.

Bernard Godward, md of Index Systems, is the first to spring to ERP's defence. "It is enterprise-wide and allows the left hand to know what the right hand is doing," he says.

Since all information is embedded, any changes will automatically update other parts of the system. Godward believes food manufacturers have special needs. Large supermarkets call the shots and there can't be any delay in supplying. Other industries may get away with a six-week or more delivery time. Not food manufacture.

His client Brian Butcher, operations director at Rowse Honey, the UK's largest honey packer, doesn't see how people can manage without ERP. "Maybe Professor Jones is talking about some global operation, but I am working in a little factory in south Oxfordshire and everything I need is delivered to this site."

He admits 98% of his business is predictable so by drilling down into historic data he can fine-tune his scheduling to ensure he is not caught out. Typically the company is producing 400 different products for several hundred different customers. What's more, they all need to be traceable in case of adulteration. "I don't think you can do it without an IT system," he says. He also has to keep stocks in house to meet unexpected supermarket demands.

Among the ERP providers, Indigo Software's supply chain consultant Jonathan Ogg is the first to admit that supply chains need careful management. You can't take the risk of relying too much on others in a supply chain when production time is tight. "When you are making lasagne you only have 20 minutes [to complete it] or it goes into the skip, because it is in the open air and will start to dry out," he says.

But on the other side of the coin, Ogg often finds new clients swamped under the weight of spreadsheets and Gantt charts all doing a lot of fire fighting and counting stock every day. "There's usually quite a few control issues around the business as well," he notes wryly.

Ogg says directly implemented ERP systems are very good for inventory and production movement, for traceability, order processing and financials, especially with orders placed by electronic data interchange. Small and medium sized firms can capture the same benefits as the big boys, in his view. "They are doing the same things: ordering, manufacturing, and despatching."

His colleague, Keith Montgomery, business development manager, believes some of the big names in ERP have given the business a bad name because of their high costs to install and train. Disenchanted customers have switched to smaller ERP companies to get a better service. His company is running a series of free seminars over the next few months about best practice in collaborative supply chain planning.

Ogg believes that often ERP implementation fails because customers don't devote enough time to change management implementation and training. "Traditionally these cost a lot and people do make the mistake of cutting them to lower costs."

His advice to small to medium sized firms is to know what they want before they buy the systems and to identify the benefits any new systems will bring. "They need to know what is causing pain or costing money or affecting service. And whether their planning capability is at fault."

One of the challenges of the ERP suites of software is that they each have their particular strengths. This is fine if it equates with your needs as a user but irritating if you know there are better individual programmes around but which won't integrate with what you have already.

Into this category some people would put some of the specialist APS, which are excellent for the 'what if' scenarios that food manufacturers have with the ever rising demands of clients like supermarkets. Their attraction lies partly in the fact users can set a wide range of parameters within which to work, such as limitations of individual equipment, staff and supplies. It will identify options in the event of sudden urgent orders, seasonal changes or equipment failure and show how much it will cost.

Sharon Crawford, product manager for Geac's System21 Aurora, admits clients are pushing the supplier to customise its ERP systems. "We tell them that the difference between the ERP system and some of the specialist ones is the visualisation, ie the graphics are good. So we are now considering putting in planning boards to plug this gap.

"She admits that some of the APS software has greater capability than the software suites on offer under ERP systems for those companies who need to do a lot of off- line speculation of this sort. While she admits the company is debating how it can better meet these needs, she is cautious about the practice of mixing and matching software -- they won't necessarily talk to each other and you could find the data is not being transmitted to key areas, like requirements planning.

a balancing act

Customers are already in danger of being challenged by software and it is a delicate balancing act to meet their needs without overloading them with complexity. In some firms people may not want to take responsibility for challenging areas of planning; in others staff may resent having their expertise overridden by software.

She has reservations about applying business theories like Kanban (stock control by visual means, ie ticketing), Just In Time supply management and APS to the real world. "The theory is great, but you shouldn't let your planners go, it is people who should make the final decisions.

Roger Randle, sales director of Production Modelling, which focuses on planning and scheduling, says there is a big difference between rule-based and goal-based scheduling.

In the food sector, he says there is often a trade-off. What might be a good schedule from one perspective may not be from another." So to achieve the goal of high customer service the manufacturer may have to tolerate high stock levels or poor equipment utilisation. But the benefit of goal-based systems is that you easily plot 'what-if' scenarios. Demand management is notoriously difficult in the food industry because of changing labels, packaging, ingredients and sizes often at very short notice.

In a changing world the ability to adapt the 'what-if' capability is, he says, a boon to senior management and planners alike. "It means the former can investigate future strategies eg, what if we increase capacity, buy more machines, sell more products. Equally, day to day, the planners can see the effects of introducing last minute order, shift changes etc and quickly re-plan accordingly."

Once a system is in place, food manufacturers are often the most pro-active customers in pushing their software provider for enhancements.

Nick Williams is finance director of G Costa, which covers three manufacturing organisations including Keddie, which produces the Blue Dragon brand, and Zest Foods. He is chairman of the national user group for Geac, the ERP provider, and of the food special interest group. He admits this influence helps his company to get the software enhancements it needs, sometimes at the expense of other sectors.

But with IT spend as high as it is he believes G Costa needs to get full value for its commitment. "With System21 we get a base platform and where there is a standard piece of software that works, you take it." That might be a new part of the suite of software from Geac or it could be from outside, although his preference is to use Geac-approved systems.

Over the past 10 years, the two biggest nightmares that have evolved for him that his software helps to soothe are: the Delia Smith triggered avalanche of orders, and the stringent quality assurance requirements.

"I guarantee that most food manufacturers question sometimes why they are in the business because it is so difficult to trade." His software, he says, helps him cope.FM

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