Business Network

Bob Anderson
research director

Despite ongoing turbulence in the global economy, manufacturers continue to generate a large share of the world’s economic output. In the U.S. for instance, manufacturers’ contribution to the gross domestic product has remained steady - at roughly 20 percent a year - for the past three decades.

Recently, however, manufacturers are discovering that their continuing success is linked directly to their ability to conduct business beyond old, familiar borders. New economic development in places such as China and Eastern Europe - which is turning these regions into huge potential sources of both consumers and producers of goods - is just one of many developments that are changing the way manufacturers operate.

But not all borders that must be crossed are geographic. To capture business in newly emerging markets - while also maintaining a competitive edge in developed markets such as Europe and North America - manufacturers must execute the age-old fundamentals of building and delivering quality products within a reasonable amount of time, and at a fair price. The problem is customers’ perception of what constitutes a reasonable amount of time and a fair price keeps changing.

The new business mantra is faster, better, cheaper. And as experts such as Gail Fosler, chief economist with The Conference Board, a New York City-based think tank, have noted, manufacturers’ best hope for conquering this environment is expanding the use of information technology to “drive down costs and add greater value through integration of the downstream value chain.”

In short, Fosler and others are saying that manufacturers need a computing infrastructure that makes it easy to share data and create new business processes on-the-fly. They also say that these new business processes must involve both internal personnel and outside business partners such as customers and suppliers.

Architecturally speaking
Just a few years ago, in the midst of the dot-com boom, pundits and other would-be sages declared that manufacturers would need a whole new generation of software applications to support this new B2B e-commerce model. As it turns out, what manufacturers really needed was a next-generation architecture - one based on Internet technology - to extend and enhance the enterprise resources planning (ERP) systems that have long been the backbone of most manufacturers’ information technology (IT) business systems.

In simple terms, an ERP system is a collection of applications that manage all the information related to a company’s business - including customer, product, production, employee, and financial data. All of these applications are linked to a single database, and users access the applications, and the information in the database, through a single interface.

Brings order to chaos
The advantages of this design are manifold, starting with the ability to quickly organize the process of storing and sharing critical information throughout an enterprise.

“Without an ERP system in today’s business climate, we’d face management by chaos,”says Kevin Lehoullier, CFO at Fairfield, N.J.-based Arthur Schuman Inc., the largest importer of Italian-style hard cheese in the U.S. “Managers would have to shoot from the hip when making decisions because they wouldn’t have the right information at the right time. Business would be much more stressful, morale would be low, and profits would be slim.

“Using the Microsoft Business Solution’s ERP system has enabled us to solve 60 percent of our headaches by integrating and coordinating operations,” Lehoullier continues. “For instance, by improving inventory control, we were simultaneously able to reduce inventory levels from $40 million to $30 million, while increasing fill rates to 99-percent accuracy. The result is a better bottom line and improved customer-service levels.”

Arthur Schuman is among the growing number of medium-size manufacturing and distribution companies benefiting from the emergence of Microsoft Business Solutions, Fargo, N.D., as a major player in the enterprisewide software market.

As one of the seven core business units of Redmond, Wash.-based Microsoft Corp., Microsoft Business Solutions has created a technology platform that allows small- and medium-size manufacturers and distributors to assemble a complete, integrated set of leading-edge business applications. And those applications can be deployed without the overly expensive licenses, complicated customizations, and drawn-out implementation projects that led to the widespread perception that ERP was only practical for very large corporations, or within industries with fat profit margins.

“We actually have four great manufacturing solutions for a wide variety of industry and customer requirements,” says Mike Frichol, general manager for manufacturing at Microsoft Business Solutions.“Our focus is on helping each of our customers find the solution that will best help them gain a competitive advantage in their specific markets.”

Extended functionality
Microsoft Business Solutions constructed its manufacturing solutions portfolio primarily by acquiring previously independent software vendors (See “Pieces of the Puzzle” ), but it can easily tailor these solutions to any of its customers’ needs because they were all built on the same open Microsoft technology platform. That platform also is proving useful in Microsoft Business Solutions’ own efforts to enhance its solutions by adding what industry analysts refer to as extended ERP functionality.

The recent release of the Microsoft Business Solutions CRM (customer relationship management) application marked the first step on that road. Other extended ERP modules - or what Microsoft Business Solutions calls its “surround” products - cover professional services automation and retail management. An enterprise portal also is in the works, along with a platform called the Microsoft Business Network that will support Internet-based collaboration with customers and suppliers.

Each of these products will work seamlessly with each of the four Microsoft Business Solutions enterprisewide packages, as well as with the ubiquitous Microsoft desktop products such as Word and Outlook. And looking forward, forward, Microsoft Business Solutions already is working to put all of these applications - both the core enterprisewide solutions and the surround products - on Microsoft’s next-generation .NET technology framework. (See “What is .NET,” for more).

“Through ongoing development, the existing product lines will gain more commonality and become more like editions’ of a single system rather than the completely different products they are today,”explains Satya Nadella, corporate vice president, Microsoft Business Solutions. “Additionally, under the .NET Assurance program, when the next-generation system becomes available, users will be able to migrate to equivalent functionality without having to repurchase existing functionality.”

Meeting customer demands
All this is a boon for small- and medium-size manufacturers - often defined as those with annual revenues between $5 million and $500 million - which typically have to adhere to business rules that are spelled out by their customers and suppliers.

“Small- and medium-size manufacturers typically supply larger companies - the original equipment manufacturers - that tell the small- and medium-size manufacturers how they will do business,”says Jim Shepherd, a senior vice president with Boston-based analyst firm AMR Research. “These large customers are demanding electronic connectivity from their suppliers because they want to collaborate on schedules, receive order status updates, and view other critical information in real time. To be an effective supply chain partner, the medium-size company must make its applications appear to be part of their customers’ and suppliers’ systems.”

To satisfy this need, more and more small- and medium- size manufacturers are turning to Internet-based enterprise application suites like those offered by Microsoft Business Solutions. Katherine Jones, managing director, enterprise business applications, for Boston-based Aberdeen Group, says manufacturers are adopting these suites for a number of reasons.

The ability to forge communication links with trading partners is key. But equally important, in Jones’ view, is the deep integration between the various applications - and the link to a single database - that comes with an enterprisewide software suite.

“The use of disparate software systems is a big problem, particularly for small- and medium-size manufacturers,” Jones argues.“It promotes inefficiencies and hinders productivity. The overall lack of coordination, limited communications capabilities, and the need to constantly re-enter data costs time and money.”

A unified front
That certainly was the case at MAAX Spas, a Chandler, Ariz.-based manufacturer of hot tubs and spas sold by more than 200 specialty retailers, as well as major chains such as Atlanta-based Home Depot. Having grown through acquisitions, MAAX Spas had three manufacturing facilities - in Chandler, as well as Langley, British Columbia, Canada; and Beamsville, Ontario, Canada - running separate business systems.

“It was pretty inefficient,”recalls MAAX Spas CIO Bill Conati.“The same information was entered into multiple systems, then rolled up into our corporate systems.” When customers called for order status, Conati says there was no way to get that information “without actually going out on the shop floor and looking around.”

All that changed when MAAX Spas installed a Microsoft Business Solutions enterprisewide system. “We now broadcast an e-alert every afternoon that notes which orders are on the shop floor, how long they’ve been there, and why,”Conati says.

More important, the new software suites allow MAAX Spas to run the entire business from a single location - and in a much more organized fashion. For instance, with all of its facilities on a single system and adhering to uniform business processes, Maax Spas has reduced its number of working bills of material from more than 3,000 to 40.

“We used to have a number of ways of doing things because each division had its own format,”Conati says. “Standardizing on part numbers across the enterprise reduces the time it takes to enter those part numbers. It also reduces possible data entry errors, and improves visibility across the enterprise.”

Conati says the open nature of the underlying Microsoft Business Solutions architecture also makes it easy for Maax Spas to add unique features to the system that enhance its ability to serve customers.“We’re able to build business software layers to give our customers - who are independent dealers selling spas to retailers - critical information,” Conati says. “The end result is the dealers now have the ability to go on-line and determine order status and expected shipping dates, which gives them a competitive advantage so they can make additional sales.”

Make the complex simple
Frichol says the transformation at MAAX Spas is a reflection of what Microsoft Business Solutions sees as its primary mission, which is to help its customers make complex things simple.“We realize that just because a company is small, its business isn’t necessarily simple,” Frichol says.“Our systems are designed to help manufacturers manage complex business processes without having to build a large, and expensive, IT infrastructure. The required care, feeding, and maintenance of the Microsoft Business Solutions systems is simplified and minimized. We also make it easy for our customers to learn to use our systems.”

In addition to building systems that are inherently easy to use, Microsoft Business Solutions relies heavily on its global network of more than 4,500 value-added resellers to help its customers configure its systems to the customers’ exact needs.

“Small- to medium-size manufacturers typically prefer a local partner - whether local applies to a city, state, or region,”Frichol says.“But that proximity doesn’t come at the expense of vertical industry expertise. We encourage our resellers to focus on developing expertise for the target industries they serve. The customer benefits on multiple fronts: [access to] an authorized Microsoft Business Solutions partner with local geographic presence and relevant industry expertise, and working with a vendor that is part of the local business community.”

That idea resonated with Malibu Boats, a manufacturer of tournament-quality boats used for water skiing and wake boarding based in Merced, Calif.“We stay competitive by leveraging technology, but we also know that software’s effectiveness often is governed by how people use it,”says Barry Bennett, the company’s inventory control manager.

Add it up
For some time now, two classes of enterprisewide solution vendors have attempted to serve small- and medium-size manufacturers. Large enterprise vendors have offered slimmed-down versions of their systems, often at the cost of needed functionality, with far too much complexity still apparent. They also have continued to sell those systems through direct sales channels and consultant-driven implementations that drive up overall costs.

At the other end of the spectrum, some smaller vendors can deliver enterprisewide functionality at an affordable price. But few of these vendors have the resources to keep their systems technically up-to-date.

Microsoft Business Solutions solves all these problems. It has an outstanding portfolio of enterprisewide solutions, along with the financial resources, technical expertise to improve those systems over time, and an outstanding and costeffective implementation channel to deliver solutions for the mid-market manufacturer.

As Bob Anderson, research director, small and medium-size business practice, enterprise/ supply chain management, with Gartner, Stamford, Conn., says, “When you add these factors up, they give Microsoft Business Solutions a long-term edge on the market.”

For more information on innovation from Microsoft Business Solutions,
go to www.microsoft.com/businesssolutions or call 1-888-477-7989 option 1

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Pieces of the puzzle