Feature: ERP special - Fruitful partnerships.

ERP has a reputation for size. It’s the stuff of huge corporations, massive implementations, and big returns on investment; but it’s also highly complex and extremely costly, while setting up company-wide systems takes years of effort. As a result, many potential users are put off it. However, there are plenty of customers – even some multinationals – that have deployed ERP without breaking the bank or turning the reins of their firms over to outsiders for years on end. The key, some say, is to use ERP as a tool, not an IT fetish object. One example of this approach is fruit processor Del Monte, which is one of the first companies in the UK to roll out Baan’s latest ERP software. In a £2m project to overhaul its IT infrastructure, Del Monte replaced its existing IBM 9672, which was running MVS/ESA software, and downsized to an AS/400. On top of that, the company is also implementing an IP-routed network to replace the current IBM SNA infrastructure that links its seven international sites. Well over half-way through, the entire project is on course for completion on time, by November 1999. The revamp of Del Monte’s architecture stemmed from a strategic decision. The company concluded that the only way it could unite its global operations and open its system to its customers, which are mainly large retailers, was through ERP. Other key factors that forced the issue were the need for millennium compliance and the Internet, which the company wanted to embrace as a future e-commerce platform. According to Nick Cheesman, Del Monte’s computer systems manager, the company’s existing bespoke package, which was designed for the MVS/ESA application environment, had been in place and doing sterling work for over seven years, but was simply not up to the job any longer. “The old system was inflexible, and prevented the business from responding to its needs,” he says. “But with a shrink-wrapped ERP package we can open our business up.” So Del Monte became one of the first UK companies to opt for BaanSeries. “Baan’s latest release has really given us what our business wants,” says Cheesman, who explains that the system is particularly attractive because it will enable Del Monte to automate its supply chain. BaanSeries has been specifically designed for business-to-business applications, which is important to Del Monte because its major customers include Tesco, Safeway and Sainsbury’s, all of which are encouraging suppliers to automate links. And anyway, with Britons spending over £10m a year on Del Monte’s fruit and fruit juice products, it is essential that the company can better exploit its supply chain. Cheesman says the system will give Del Monte a competitive edge. “We need to be able to respond to our customers – for example, Tesco – by actually pushing information on our special offers to them. Tesco is a real driver for us and we can already see Tropicana and Sunny Maid coming along this path.” Del Monte is a beta test site for the BaanSeries implementation, and Cheesman admits that being among the first to use the package might seem risky. Nevertheless, he maintains that the added functionality of the suite he is implementing makes this risk worth taking. So far the project has gone smoothly and being a Baan beta site has its advantages: Cheesman says his company has received unparalleled support from both Baan and IBM. “This is about much more than who has the best software, because they all have strengths,” he says. “What we wanted was a company we could build a long lasting relationship with, and we have been able to do that with Baan.” The ability to complete the project in a year was also critical to the decision to go with Baan’s newest product. The supplier sells the software as a package that is rolled out in a continuous stream of components, with gradually widening functionality, rather than as a single monolithic application. Cheesman says this aspect was essential to keeping the project’s head of steam up. Another key was the Del Monte committee, which has managers from every interested department and has made decisions on all system issues within 24-hours. Del Monte’s change to Baan has also required a move off the mainframe. But the twist here was that the shift was not to Unix, but to IBM’s mid-size family, the AS/400. According to Cheesman, most of the ERP vendors are aiming their packages at IBM’s S/390, not the four-year-old hardware that Del Monte had, which would have incurred annual upgrade costs. The AS/400, on the other hand, is a one-off cost that does not “need an army to support it”. But the decision to stick with IBM over Microsoft (with NT) was not taken lightly; it took over six months of research before it was decided that IBM’s reliability and security simply outmatched that of its rival. “Microsoft makes lots of promises. But I can’t run my business on promises. NT5 has just slipped again; it’s a joke,” Cheesman says. “To be honest, I want to sleep at night, I don’t want to run in, in a cold sweat, to find my critical NT server showing that Blue Screen Of Death.” So the combination of a refreshed IT infrastructure and a move to ERP seems to have paid dividends for Del Monte. But gaining payback from ERP doesn’t have to be quite so strategic as it is there. For instance, British Aerospace (BAe) is confident that ERP has enabled it to achieve two specific business critical goals. “We already had best of breed products or point solutions deployed across our operation,” explains Paul Bishop, IT director of the aeronautical giant. “But we needed our diverse businesses to share information and cut costs.” Fulfilling these aims is a project that began five years ago. So far, ERP is delivering, and Bishop is confident that the investment is paying off across its eleven business units, most of which chose to implement ERP titan SAP (although its military aircraft unit chose Baan’s specialist defence packages). “We have gained a marked reduction in business development time and time to market,” says Bishop. The benefits ERP has brought to BAe have far outweighed the initial concerns about sacrificing tailored processes served by best-of-breed products for a more “standardised” approach. This standardisation worry is one that many observers of the ERP market have aired, but according to Bishop, the business needed to change to meet the demands of customers and competition, and deploying ERP ensured it happened in a uniform way across the board. “We recognised our business was not so special or different that a package from one vendor could not fit it,” says Bishop. “Customers want a service, and we had to adapt our infrastructure to ensure we could deliver.” One example of this is the kind of demands being made by one of BAe’s biggest customers, British Airways, which is asking for a deal where it no longer owns an aircraft but wants it “available” to fly. “Managing this would be a huge issue – but we expect our IT systems to enable us to do it,” he says. Rolling the system out to thousands of users in diverse business units has required military-style precision and planning. Each project has a cycle of about 18 months, comprised of a series of mini-projects. According to Bishop, it is essential to break the work down into bite-sized chunks like this, because that way there is less that can go wrong. In addition, the deployment teams have kept their eyes fixed firmly on the goal. “They know this is not about IT. This is a business project aided and abetted by IT.” The roll-out has not been a bed of roses though, despite bonuses such as improved data integrity, which it has given BAe. One added pressure is increased demand and expectation from customers. In addition, the tools to manage the initial sales and marketing capture were a little disappointing, Bishop says. The company was also very worried about losing staff, once they become skilled SAP users. “We hear the turnover rate for SAP trained staff is high and we were concerned. But so far we have not experienced any problems,” he says. BAe has spent millions of pounds on its ERP projects, yet Bishop is comfortable with the financial return from the investment. The reason for this is that the business has been clear about what it wanted to get from the software: a specific, focused result, not transformation. “We didn’t expect ERP to give us competitive advantage. To us, it is basic bread and butter stuff,” he says. Even so, he adds: “We needed to make a major change in the business, and we could not have driven such a huge project without an ERP package.” Other users second this opinion. At Thomson-Thorn Missile Electronics (TME), Oracle’s ERP package has enabled the company to pull its disparate data together and get on target to control corporate direction. TME is Europe’s largest supplier of missile fusing systems. Together with its sister company in France, it designs, develops and manufactures seekers and fusing for ordnance and guided weapons. Part of Thomson-CSF, TME employs 400 people in the UK and has a turnover of £45m. But according to Simon Sparrow, project manager with TME, without making significant changes to its IT infrastructure, it would have faced problems. He says that although several IT applications had been installed over a number of years, there was too much data, but still insufficient useful information to support strategic management. So the company replaced its ageing Cincom and Coda systems with Oracle’s manufacturing and financial application equivalents. One of the first projects was to enable the company to gain a better picture of its performance. Previously, managers extracted data from reports using PC-based spreadsheets. However, the results were often marred by the bespoke interfaces between systems. And, not only did maintenance increase IT costs but reconciliation was always difficult. “Managers spent too much time analysing the past rather than managing the future,” says Sparrow. Following the merger of the UK and French companies in 1995, a major review was launched. By creating a business system model suitable for both countries, the company wanted to simplify processes across the whole enterprise. Reduced systems complexity would cut IT costs while managers were promised faster, more accurate information. Named the Combined Operation and Management Process Automation System (COMPAS), the plan drew together all business areas. It also relied on an earlier development and cost agreement between Thomson-CSF corporate IT and Oracle UK. This meant Oracle Applications could be installed for financials, manufacturing, supply-chain management and project accounting at an attractive price. Sparrow says that the fact that Oracle’s application was packaged did not prevent TME from tailoring it to meet the company’s exacting needs. “It was flexible enough to be configured for our processes, capable of rapid implementation and would also support any future changes,” he explains. Once Oracle Applications was installed in August 1997, the system was configured and the existing data loaded. In early 1998, the new financial applications were rolled out to the UK and France, for 350 users. This was followed by the addition of several manufacturing modules, incidentally successfully passing an external ISO/TICK IT quality audit along the way. The deployed system now runs on HP9000 and NT platforms, with an Oracle 7 relational database at its centre. The total investment was around £1.5m, covering the implementations on both sides of the Channel. “The new system was completed over a relatively short period of time. As well, through close liaison with Oracle, we received attentive support during the transition,” says Sparrow. TME is now planning to integrate Artemis Views 4, a project planning and control tool, with the Oracle Project applications. For TME the benefits have been considerable – but it has been the tight integration between business applications using the single corporate database that will provide the real payback for the company. Now, instead of spending a week reconciling manufacturing systems, it takes just one hour. Providing ad-hoc management information is also a simpler process for IT staff. What’s more, having decommissioned the old systems, there are further substantial savings. “Oracle Applications is a very reliable solution that’s backed by good technical support. The accuracy and timeliness of corporate information has improved, with far better access on the desktop. Not only have we met all our business systems requirements but TME is now more flexible and better able to meet changing market demands,” says Sparrow. So the lesson is clear. Own ERP – don’t let it own you – the rewards are worth the effort.