ACS 606 and IFRS 15 Revenue Recognition Rules Are Coming

Are You Prepared? Intacct Has You Covered.

In May 2014, FASB issued Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). At the same time the International Accounting Standards Board (IASB) also issued International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers. In doing so, these two governing bodies largely achieved convergence, with some very minor discrepancies. These converged standards for revenue recognition go into effect the beginning of 2018 for public entities, and in 2019 for privately held organizations, bringing very significant changes to financial statements and reporting for any company doing business under customer contracts. And of course with these changes come new audit challenges.

“The core principle is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”

Source: FASB ASC 606-10-5-3 and 606-10-10-2 through 10-4

As a result of these changes, revenue is no longer recognized on cash receipt, but instead on the delivery of performance obligations. In summary, there are 5 steps:

  1. Identify the contract with the customer
  2. Identify the performance obligations in the contract
  3. Determine the transaction price for the contract
  4. Allocate the transaction price to the performance obligations
  5. Recognize revenue when or as the entity satisfies the performance obligation

Sounds simple enough, right? Not really. Unless your business is dead simple and you operate on a completely cash basis, the process of billing, accounting for and forecasting revenue, in conjunction with expense and revenue amortization and allocation has never been simple. But with these changes, it is about to get harder – at least for a while.

Why? First of all, while you can prepare for the change, you can’t jump the gun. You can’t recognize revenue based on the new rules until those new rules go into effect in 2018. At that point public entities must report under the new guidance and private companies can, but they have an additional year before they are required to do so. So any public entity better be ready to flip the switch, so to speak. But flipping the switch doesn’t only mean recognizing revenue in a new way. For any contract with outstanding, unfulfilled obligations, you also have to go back and restate the revenue for prior periods under the new rules. And for a period of time, you will need to do dual reporting: old and new. In addition, when contracts change, this can potentially have an impact on revenue previously recognized, including reallocation and amortization of revenue and expenses.

If you are managing billing, accounting and/or revenue forecasting with spreadsheets today… good luck. If you are an Intacct customer, luck is on your side. Earlier this week Intacct announced a new Contract and Revenue Management module. Intacct claims it is the first solution to fully automate the new complexities created by ASC 606 and IFRS 15. They are certainly not the only company working on it. In fact QAD (which targets a completely different market: the world of manufacturing) highlighted its efforts in its own event in Chicago recently. But I have to say, Intacct seems to be right out front leading the charge in helping companies deal with what is sure to be a complex and potentially disruptive transition.

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QAD Channel Islands: Multiple Stops on the Journey to the Effective Enterprise

QAD defines the Effective Enterprise as one “where business processes are operating at peak efficiency and perfectly aligned with strategic goals.” Yet given the ever-accelerating pace of change in our world today, QAD also recognizes that the Effective Enterprise is more of a journey than a destination. The journey is one of continuous improvement and carefully balanced objectives.

The same could be said for the software that runs the business. Which is why its “Channel Islands” initiative is divided into milestones that have QAD (figuratively) hopping from one island to the next. A year ago it released Anacapa and this year Santa Cruz is ready for early adopters. Next year, it will navigate to Santa Rosa and in 2018, San Miguel. With two releases a year planned, chances are San Miguel will simply be another stop along the never-ending journey, but by then QAD will likely be on to other additional adventures suitable to whatever the future might bring.

Channel Islands: An Appropriate Metaphor

In the meantime, QAD appears to have chosen the name of its latest initiative well. QAD’s Channel Islands initiative has a dual purpose. The metaphor is perfect because the first goal of the initiative is to re-invent the entire user experience of QAD ERP, making it more natural (intuitive), visually appealing and easy to use. The Channel Islands of California are a chain of eight islands located in the Pacific Ocean off the coast of southern California along the Santa Barbara Channel near QAD headquarters. The main attraction of the real Channel Islands is their natural beauty, providing relief from the cluttered, hard-to-navigate urban setting.

But the second goal of the initiative makes it even more appropriate. The islands are divided into two groups—the Northern Channel Islands and the Southern Channel Islands. The four Northern Islands used to be a single landmass, but as water levels rose (thousands of years ago), Anacapa, Santa Cruz, Santa Rosa and San Miguel emerged and evolved as separate islands. While QAD ERP was originally developed as a single, tightly integrated solution that needed to move forward in lock step, the goal now is to support more modular upgrades, allowing different modules and disciplines (think finance versus purchasing or production) to move forward independently at their own pace. Mint Jutras often refers to this approach as “loosely coupled” versus tightly integrated, but it should not be confused with a collection of point solutions with arm’s length interfaces. Just like the Northern Islands, under the surface all these different functional areas are still connected.

In fact that was why QAD named the first phase Anacapa. Of the four Northern Channel Islands, Anacapa appears to be the smallest, but in fact has an enormous land mass hidden under the surface of the water. This is representative of the work done to re-architect the underlying infrastructure, reworking the application programming interface (API) structure and protocols, and future proofing the user interface (UI), including the framework for connecting devices. This supports the theory that sometimes the best UI is no UI at all and paves the way for succeeding phases (Islands).

To better understand how QAD is delivering on this modular upgrade approach as well as a new and improved user experience, read the full report (no registration required):

QAD Channel Islands: Multiple Stops on the Journey to the Effective Enterprise

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Women in Manufacturing & Technology At PowerPlex 2016

I recently had the opportunity to participate in Plex Systems’ second annual Women in Manufacturing and Technology Forum. Held at PowerPlex 2016, Plex’s annual user conference, this year’s forum brought together over 85 women, providing an opportunity for networking and discussion. Plex also put together a moderated panel (on which I was honored to sit) to kick off the discussion. But in spite of the name of the forum, the topic of discussion wasn’t manufacturing or technology, but rather the challenges women face in working in what is still very much a man’s world.

So if the discussion didn’t touch on manufacturing or the Plex Manufacturing Cloud, or any kind of software for that matter, why did Plex do this? I believe it is ultimately because Plex cares deeply about its customers and their success. The depth of interest is evident in the level of customer engagement that strikes me as exceptional every time I meet Plex customers or attend one of its events. And while the software is the focal point of the engagement, customer success is always a combination of people, process and technology.

On the people side, amidst an overall skills shortage in manufacturing, women have so much to offer. Yet while our ranks are growing slowly, we remain a small minority. It is very challenging for a woman to get ahead and make it to the top and we need to support each other along the way. The best way to accelerate gender diversity in the worlds of manufacturing and technology is to create a supportive environment and highlight success. In the famous words of former U.S. Secretary of State Madeline Albright, “There should be a special place in hell for women that don’t help other women.”

Plex happens to have some great role models, with three women among its C-level executives: Heidi Melin, Chief Marketing Officer, Lilian Reaume, Chief Human Resource Officer and Elisa Lee, Chief Legal Counsel. These three women actively sponsored the forum. I applaud them for that. I would also like to share with everyone a couple of the main themes we discussed, as there are some good lessons both men and women can carry away from them.

Don’t Limit Yourself

While some women are indeed shattering the “glass ceiling” today, many (not all) of the limitations that hold others back are self-imposed. While no two women are exactly alike (just as no two men are), when asked to rate themselves on skills and accomplishments, women tend to under-estimate their own effectiveness, while men tend to over-estimate theirs. A woman will say she is good at A, okay at B and has never done C. A man with the same skill set will say he excels at A and B and could very easily learn C. It’s all about the presentation and the self-confidence with which it is presented. I am not advocating for shameless self-promotion, but whether this reticence stems from a lack of confidence or an overactive sense of modesty, it is equally detrimental in seeking advancement as it is in interviewing for a new job.

Believe in Yourself, But Don’t be Afraid to Ask for Help

If you are a woman and have trouble believing in yourself, you’re not alone. Many of the most successful women in the world today grew up believing they could do anything they set out to do. Very often they had the support of family or an early mentor who encouraged them to pursue their dreams.

I had the opportunity to hear Dr. Condoleeza Rice speak recently and walked away with a quote that I think is priceless. She was talking about growing up with the support of her parents. Dr. Rice and I are about the same age. But while I had the advantage in the 1950’s of growing up white in the northeast, she was a little black girl in Birmingham, Alabama where segregation was the norm. And yet she said, “Somehow my father believed that the little black girl that couldn’t order a hamburger at the lunch counter at Woolworth’s, could grow up to be the president of the United States.” That belief system carried Dr. Rice very far.

But just as many women (probably more) didn’t have that level of encouragement growing up and still don’t have it today. But it’s never too late. Seek out that encouragement. It doesn’t have to come from another woman, but it should be someone who is successful in his or her own right, either in business or just in life.

Be Yourself

One of the most common mistakes women make in entering a man’s world is trying to think, behave, act or communicate like a man. A piece of advice from someone who has worked in a man’s world for over 40 years … Don’t. Yes, develop your ability to think, analyze and be decisive. Yes, work on your communication skills, both listening and speaking. Yes, be conscious of how you come across (confidently or defensively). The list of skills you should develop will vary based on your role. Regardless of your role, trust me, it will be long. But as you work on that list, work just as hard to be yourself. Don’t try to be a man. It’s OK – even good – to be a woman in a man’s world as long as you remain you. If you haven’t figured out who that is yet, don’t worry, you will. I may not see it before I retire, but if we all do that, perhaps the man’s world will indeed give way to a world of diversity.

 

 

 

 

 

 

 

 

 

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Welcome to the New World of Exact Macola

Did you ever walk purposefully into another room and forget what you came for? It happens to me all the time. My pantry is less than 20 steps from my kitchen, and yet, 9 times out of 10, I open the door, step in and wonder what I came for. I wind up stepping out, looking back into the kitchen to see what I was doing. Usually that will trigger my memory. It’s gotten worse with age, but I’m not that old. It happens to all of us. When something we need is not visible and clearly within reach, it’s easy to get distracted and lose track of what you’re looking for.

It’s bad enough when you’re puttering around the house or making dinner. It’s even worse when it happens when you’re sitting at your desk at work. You get a call or an alert on your smart phone, or something doesn’t look quite right on that report you’re scrolling through, or you’re preparing to present performance results to your boss and you need to dig a little deeper. You have a question in mind but even though you know the answer is buried someplace in your enterprise data, it’s not immediately visible and clearly within reach. If you have to hunt and peck, traversing a series of menus, to find what you’re looking for, it’s easy to be distracted along the way. Sometimes you wind up going down a rat hole and 2 hours later, you realize you still haven’t answered your own question. No wonder the days just seem to get longer and longer.

This is clearly the problem Exact Macola is trying to solve in its newest version of Workspaces. A Workspace in Exact Macola 10 gathers together all the data you might need to perform a process, make a decision or monitor performance… in other words, to do your job. Some will come right out of the box. But because your role in your organization and your job is unique, new Workspaces must be easily constructed and standard Workspaces must be easily tailored.

Exact Macola describes Workspaces as “one of the most unique and powerful pieces of Exact Macola 10 – allowing personalized role-based views of your business information and creating a natural and intuitive experience.” I came into the Exact Macola Evolve conference last year with a pretty favorable impression of this technology and that impression became even more favorable as I watched the “Dueling Developers” session this year, which pitted a senior consultant (Thijs Verberne) against product manager David Dozer, in creating Workspaces on the fly as the audience watched.

That exercise proved development was fast and easy. But how does this keep users from wandering into the pantry and forgetting what they came in for? A new feature of Workspaces 2.0 is the ability to add Workspaces menus to transaction screens and/or perform transactions directly from Workspaces. Do you have a job where you spend the majority of your time in transaction screens (e.g. you’re a buyer researching and creating purchase orders)? You can stay there all day doing your primary job, but when you need to do some further investigation, (right from a transaction) you can bring up a Workspace from a pull down menu and it appears as a popup. This feature alone drew a huge round of applause from the audience.

Or maybe you are a manager that prefers to monitor status of a series of key performance indicators (think dashboard). But occasionally you need to perform a transaction like approving those purchase orders or requesting a change. You can stay in your dashboard-like Workspace, and attach a drop down menu (or 2 or 10) that allows you to divert and run a transaction without ever leaving your preferred space.

Marry these two features together and you don’t have to worry about anticipating all your needs up front. Get the basics set up and let your work naturally direct the evolution of your Workspaces. At first you might not think you would ever have a need to go directly to a transaction. But sure enough…. No problem, it can be added in minutes (really!)

While Workspaces 2.0 was (in my mind anyway) the highlight, it is not the only innovation that has been delivered by Exact Macola over the past year. Here are some other areas the team has been working on:

  • Phase 1 support for IFRS
  • Workflow conditional statements (rules, if-then statements, more control and flexibility)
  • Financial consolidation across divisions
  • Business Intelligence delivered through a partnership with Qlik, but sold by Exact under the Exact Insights brand
  • Forecast Pro integration
  • Avalara integration
  • New web services and some underlying architectural changes

All this innovation (and more to come) seemed to infuse a new energy and vibrancy into the Exact Macola community and created more urgency for those still running older solutions like Exact Progression or the Enterprise Suite (ES) to upgrade/migrate to the newer Exact Macola 10.

Not only has the Exact Macola team been delivering innovation at a much accelerated pace, it has also been responding to several trends in the market today. Beyond those features listed above, Exact Macola has been working on full web enablement and the overall user experience. In addition to Workspaces, the company has renewed its focus on ease of use, bringing in experts to help deliver a more natural user experience (UX). This includes both the access anytime, anywhere convenience of the cloud, as well as more mobility. After delivering mobile functionality on iOS last year, it added Android this year. And it has been delivering more analytics, as well as a more end-to-end integrated solution.

Indeed these are exciting times for Exact Macola and its customers. But for those still running those older solutions (Progression and ES), the excitement might soon fade, unless of course they decide to make the leap forward. I would strongly encourage them to do so.

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Epicor Announces It Will Grow Business, Not Software

Epicor has a new tag line: “[We] grow business, not software.” The declaration is not quite as radical as it would first appear. In fact it appears to me to be much more evolutionary than revolutionary.

Epicor’s mantra for years was “Protect, Extend, Converge.” As in:

  • Protect its customers
  • Extend its solutions
  • Converge its product lines

However, in 2014 it appeared Epicor was diverging a bit from the convergence strategy, primarily as a result of the merger of (the original) Epicor and Activant. Both had grown through acquisition, but while Epicor’s ERP solutions were multi-purpose ERP (focused primarily on discrete manufacturing) and therefore ripe for rationalization, each of Activant’s products was purpose-built for distribution, and over time each had become even more focused and fine-tuned to specific segments of wholesale distribution. And then there was the SolarSoft acquisition (2012), which brought along an ERP which focused on more process-oriented industries, and also a “best of breed” manufacturing execution system (MES). And finally there was Epicor’s retail business, which was actually spun off last year.

So while the “Protect” and “Extend” sentiments of the message are still very much alive, convergence gave way to a new message. Last year, Epicor’s (new) CEO, Joe Cowan declared the company would be “totally focused on the customer.” This year’s tag line seems to me to be a simple extension of that customer focus. Software is not the end goal. The goal is to help Epicor customers grow their businesses. It just so happens Epicor will develop software and provide services to make that happen. And a lot of the software will be delivered as a service, as evidenced by the appearance of a fluffy white cloud in the middle of the tag line.

Epicor tag line

Of course in having a tag line like this, Epicor needs to be careful not to make the message itself too fluffy. And in promising to help customers grow, Epicor will have to execute a delicate balancing act, balancing what the customers say they want and what Epicor knows they need. This is particularly true of those customers still running older legacy solutions. Epicor has promised not to sunset those products. And yet if you really understand the demands and opportunities of the new global, digital economy, you know you can’t be competitive without modern, advanced technologies.

Customers running legacy solutions won’t benefit as much from the latest and greatest development, but that’s not to say they won’t benefit at all. Epicor has been a bit quiet on the technology front for the past few years, but that is not the result of lack of attention. In fact it has been doing a lot, sometimes at the expense of new features and functions. Its advanced technology architecture (ICE), visionary at the time of its initial release circa 2009, has undergone a technology refresh of its own, and it also paves the way forward for both strategic products like Epicor 10, Prophet 21 and others, as well as legacy solutions like Vista and Vantage,  etc.

Now that that refresh is complete (for now… after all, technology continues to advance at an ever-accelerating pace), you’ll see more aggressive development of features and functions. Epicor is picking up the cadence of releases, shooting for twice a year (spring and fall) for its strategic products, which of course will garner more of its resources. But even legacy solutions will benefit from the development of external components, which can be used across different product lines. Prime examples include web portals, dashboards, self-service functions, mobile apps and other new features. And developing these components as web-based services (delivered through the cloud) will have the dual purpose of extending solutions and gently pushing those running primarily (or exclusively) on-premise towards the cloud.

I agree with Epicor’s new CTO, Himanshu Palsule, who called the transition to the cloud “inevitable.” But it won’t happen overnight (Figure 1). Part of the reason for this slower, yet steady growth is the fact that there are so many on-premise solutions in production today. And many remain reluctant to simply rip and replace solutions that are essentially getting the job done.

Figure 1: What percentage of your business software is deployed as SaaS?

Fig 1 EpicorSource: Mint Jutras 2016 Enterprise Solution Study

In his main stage keynote, Himanshu also (very astutely) observed that for a topic that is so widely discussed, “cloud” is still misunderstood and means different things to different people. My research supports his observation. While many use the terms cloud and SaaS interchangeably (I find myself guilty of this at times), they are not the same. While all SaaS is cloud, not all cloud is SaaS. While only a small percentage (12%) in 2015 didn’t know how they preferred cloud to be delivered, that percentage didn’t shrink in 2016 (Figure 2). There is still some education to be done. If you count yourself among those that “don’t know,” don’t be afraid to ask. You’re not alone.

Figure 2: How would you prefer cloud to be delivered?

Fig 2 EpicorSource: Mint Jutras 2016 Enterprise Solution Study

I’ve written extensively about the anticipated appeal of SaaS, along with the benefits actually realized. But I wouldn’t disagree with Himanshu’s conclusions about what cloud should stand for:

  • Choice
  • Convenience
  • Cost Control
  • Customization
  • Collaboration

However, I would qualify two of his bullet points. A few years back, my survey participants placed a high value on choice of deployment options. They seemed to like the idea of portability and the ability to move from on-premise to SaaS and from SaaS back to on-premise. Today many are looking for a path that helps them move from on-premise to SaaS, but once they move to SaaS, they almost never go back unless forced to (e.g. they get acquired by a company running a licensed, on-premise solution). So having multiple deployment options available is no longer such a high priority. Prospects simply pre-qualify those solution providers based on the deployment option they prefer.

I agree that choice is important. But it is more important to Epicor as the solution provider than to its customers and prospects. There are still some environments where a real multi-tenant SaaS solution might not be the best choice – at least not right now. These might be heavily regulated industries that require solutions to be certified, and re-certified when they change. Or a heavily customized solution may be required. And customization is the other bullet from Himanshu’s list that needs to be well-qualified.

Not all customizations are created equal. First of all, some simply aren’t needed. They might be left over from an implementation of a solution with far fewer capabilities than available today. Or they might have resulted from a “that’s the way we’ve always done it” mentality. If customization does not differentiate you in your market, I would seriously question whether it is justified.

Furthermore, customizations can be implemented in a variety of ways. Invasive code changes and SaaS don’t make for a good combination. But if customizations can be added as external components and linked back to ERP through Web APIs, or if they can be implemented through configuring the software without mucking around in the code, they may be perfectly compatible.

So Epicor’s announcement this week of its “cloud-first focus to support digital transformation of wholesale distributors is spot on”. The Mint Jutras 2016 Enterprise Solution Study found wholesale distributors lagging behind other industries in preference for and adoption of SaaS solutions. We also found 47% to 73% still relying heavily on paper for their operational and transactional system of record (customer and purchase orders, expense management, payments, etc.). They lag behind other industries in spite of the fact that ecommerce and their proximity to consumers puts them at a higher risk of disruption from the digital economy. Perhaps this “cloud-first” focus will be the gentle push wholesale distributors might need to start down the path of digital transformation.

Indeed, Epicor says it will be “…doubling-down on helping distributors adapt to these shifting dynamics of the marketplace—with an added focus to ushering customers’ journey to leverage the power of cloud-based solutions to drive increased productivity and achieve a differentiated customer experience to grow their business.”

Indeed wholesale distributors aren’t the only Epicor customers that will benefit from this “doubling-down.” I heard similar plans from the Epicor 10 side of the house, including planned features and functionality, along with efforts to improve simplification and usability. Yes, it’s about the overall user experience, but those driving the products seem to understand it’s not just about the “pretty software” you hear so much about today. As business models change, as technology advances and as new innovative products come to market, Epicor’s product must be easy to use, easy to install, easy to manage, and easy to change when the need arises.

Epicor “gets” it. We’ll be watching to see if it delivers.

 

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Unit4’s Self-Driving ERP Gets a Digital Assistant

Don’t you envy those top-level executives with personal assistants who seem to sense and deliver on the bosses’ every demand, even before the bosses have figured out what they need? You see them on TV and in movies all the time. Unfortunately for the vast majority of us in the business world today, the trend is in the exact opposite direction. Even prior to the emergence of the digital economy, electronic communication changed everything. Back in the day, many of us (old enough to remember) first relied on secretaries and then administrative assistants, telephones and paper. Today we rely on emails, texts, instant messages, along with specialized apps for things like purchase requisitions, travel and expenses and personnel administration and management. This makes us administratively self-sufficient – all in the name of productivity and efficiency. Sure it’s faster. Sure, we’re better connected. But that doesn’t mean it’s easy. Or fun.

It also doesn’t necessarily relieve us of the burden of mundane tasks. Yes, we have elevated employees to become more “knowledge workers,” and we eliminated a lot of menial jobs, but we haven’t entirely eliminated all the grunt work. We’ve just distributed it more democratically across the organization. Wouldn’t it be nice if we could eliminate more of it?

That’s exactly what Unit4 has in mind in developing what it calls its “self-driving ERP.” I introduced the concept to my readers back in June 2015 with a blog post: What is Unit4’s “Self-Driving” ERP? Unit4’s latest announcements, coinciding with its customer conference in Amsterdam last week, showed the company is making headway in fulfilling its “promise of self-driving business solutions which free people from repetitive tasks and allow them to focus on high value activities.” In fact that is a direct quote from its press release on Unit4 Business World On! – the biggest release ever of its business suite for services industries.

Unit4 Business World On! is built on Unit4’s People Platform Premium Edition, which is the technology foundation for Unit4 applications, enabling self-driving capabilities based on predictive, event-centric and pattern recognition technologies. It is available as a true multi-tenant SaaS solution, but can also be delivered and deployed on-premise without sacrificing the mobile-access capabilities. Unit4 has put a lot of work into the user experience, but you need more than a visually appealing user interface to be “self-driving.” And I am a firm believer that the best user interface is often no user interface at all. (Refer back to my previous blog post to get a better handle of what makes it “self-driving.”)

But what really caught my eye this time around was the press release on its Digital Assistant. I was kind of hoping for someone (or even something) to shadow me (even if it is virtually), anticipating my every need. But if you look closely you see this is a “Digital Assistant for business software” not an assistant to industry analysts or presidents of small companies. Business software needs an assistant more than I do?!?

Actually yes. As I noted last June, enterprise applications like ERP are meant to capture transactional data (which happens to be the basis of a lot of our decision-making) and streamline and automate business processes. Yet while ERP was originally meant to make our business lives easier, it hasn’t always delivered on that promise. It’s gotten a lot better over time, but we still need to be expert navigators. We often have to fill some gaps. Sometimes we play the role of the (human) glue that holds everything together. If Unit4’s Digital Assistant can help the business software do all that for us, then sign me up!

The Digital Assistant is scheduled for general availability in 2017. In the meantime the glimpses I have had of Unit4’s “self-driving” capabilities are impressive.

Now, if only it could make a great cup of coffee!

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A Changing of the Guard at IQMS

A new president and CEO took the stage at IQMS Pinnacle this week as customers and long time employees bid a fond farewell to founders and leaders Randy and Nancy Flamm. IQMS has been one of the best kept secrets in the world of ERP for manufacturing, but new investors hope to break out of the stealth marketing mode of the past and really put the company on the path to increased market awareness and a new level of growth. New CEO Gary Nemmers, previously with HighJump, stepped into this new role about six months ago and has been assembling a team that will shift the strategic focus, but also leverage successes of the past.

Under Randy’s leadership the customer base has grown quite steadily to about 500 customers (not too shabby!) and those customers have been instrumental in developing manufacturing functionality that is both broad and deep. Indeed product development has been almost exclusively driven by Software Enhancement Requests (SERs) submitted by customers. While that approach was smart in the early stages of the company’s growth, building “real world” functionality that expressly meets the needs of its users, at some point it also has some drawbacks.

The breadth of functionality that IQMS can deliver is impressive, particularly for a relatively small ERP player. Scratch the surface of other solutions from vendors comparable in size and you get more surface. Scratch the surface of EnterpriseIQ (IQMS’ ERP) and you find remarkable depth. And you also have a very engaged user community. But having been driven by existing customers, the development process has not been entirely well organized. One customer noted, “It’s like a house that started out small and then additions were added on piecemeal. In the end you might have everything you need, but not necessarily where you need it. You might find the oven in the living room.”

Development of some of IQMS’ mobile apps provides us a good example. The development team has produced some pretty cool features like its Android Bulletin Board, described as “Twitter for your shop floor” or “Messenger-like instant communication to workers on the shop floor.” This includes the ability to attach the equivalent of sticky notes to business objects (e.g. orders, work centers, etc.). As the status of these business objects changes, an update is automatically sent. But while most of this development work is now transitioning to HTML5, making it compatible with a range of devices including Android, iOS and Windows devices, many of the existing apps run only on Android – not very useful if your company has standardized on iOS or Windows.

This example is symptomatic of a larger limitation inherent in being completely customer-driven. Customers will never push a vendor to do a major revamp of the underlying technology – particularly small to midsize manufacturers They already have too much to worry about without asking their software provider to fix something that isn’t broken. And yet today that underlying technology is critical in building and/or maintaining a competitive advantage in our digital economy.

Questions inserted (new this year) in our 2016 Enterprise Solution Study lead me to believe many companies over-estimate their “digital preparedness.” A two thirds majority (67%) of manufacturers feel they are close to or very well prepared for the digital economy, yet Table 1 tells us a very different story.

Table 1: To what extent is your operational and transactional system of record digital?

IQMS Table 1Source: 2016 Mint Jutras Enterprise Solution Study

*B2C Commerce is Not Applicable to 18% of our respondents

Generally over half still rely heavily on paper for their transactional system of record – more proof no solution provider can rely on existing customers to push for a major technological shift (e.g. to full web-enablement, support of HTML5, social, mobile and cloud capabilities).

For this kind of progress, as well as growth and expansion into new markets, you need a strategic plan and a well-defined product road map. That is exactly what new VP of Product Management, Rob Wiersma, is setting out to do. This shift in overall product and corporate strategy will take some time to put in place, but this is not Rob’s first rodeo. He is only in his second month on the job, so right now customers and prospects will need to wait and watch for this. But I would expect to see some major progress within months, not years.

Another area that bears watching is IQMS’ cloud strategy. The catch phrase at IQMS Pinnacle was “Cloud is the new choice.” The choices from IQMS today include a traditional on-premise license, a hosted model or cloud managed services. Notice there was no mention of Software as a Service (SaaS). And just to be clear, we know that while all SaaS is cloud, not all cloud is SaaS.

While the two terms are often used interchangeably (I admit to falling into that trap as well), they are not the same thing. So let’s distinguish between the two:

  • Cloud refers to access to computing, software and storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public.
  • SaaS is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It is generally paid for on a subscription basis and does not reside on your computers at all.

Again – all SaaS is cloud, not all cloud is SaaS. While the IQMS customers I spoke with are not expressing a strong desire for SaaS (in fact some are still trying to understand the difference between client/server and SaaS and cloud), many are also faced with the challenge of aging servers that ultimately will need to be replaced… or not. Moving to a hosted model may eliminate the need for upgrading this hardware, but it also might not, depending on who and how it is hosted. Moving to SaaS eliminates this problem by eliminating the need to invest in hardware and its ongoing maintenance, among all the other potential benefits of SaaS. And I am now seeing a shift in preference away from hosting and to a real SaaS solution (Figure 1).

Figure 1: How do you prefer your “cloud”?

IQMS fig 1Source: 2016 Mint Jutras Enterprise Solution Study

So far IQMS “cloud” options provide reasonable choices to customers not demanding SaaS, but this could limit growth in the future. IQMS added about 100 new customers in 2015 and is expecting to increase that number to 140 in 2016. So it will be interesting to watch as IQMS continues to further define its overall strategy, including cloud and SaaS.

Mr. Nemmers has also made some other changes in his (so far) short tenure with the company. On the advice of his head of customer support (a 20 year veteran of IQMS) he deployed new call center software (Five9 Call Center), which went live about a month ago and is now operating 24X7 and providing faster response time and quicker resolution of customer issues. The software features skill-based browsing to connect the customer to the right support technician, and a nifty feature that facilitates an automatic call back (without losing your place in line) when high call volume precipitates a longer than usual wait time.

In order to emerge from its stealth marketing mode, IQMS also has a new CMO, Steve Biesczcat, on board now for almost a year. I think we will see some significant changes in the near future, since Mr. Nemmers has doubled the SEO and brand recognition budget from a year ago.

There have been some changes on the sales side as well with a new VP of Sales Operations (long time industry veteran Gary Gross) and the formation of a new Customer Success Team (think account management), leaded by Ken Kratz, providing a better front line link from the customer to IQMS. Also expect growth in EMEA (Europe, Middle East and Africa) through value added resellers (VARs) using the same model that has been successful in covering the Asia Pacific area.

In summary, I think 2016 will prove to be a year of transition for IQMS. I think fewer and fewer industry observers and potential prospects will be saying, “IQMS? Who’s that?” I look forward to seeing an aggressive and progressive road map and certainly more splash on the marketing side. I expect to see growth in North America and internationally. And through this transition I would expect customers to remain engaged and productive.

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New Group at Infor Helps Customers Navigate Digital Disruption

Hook & Loop has been part of Infor now for several years. It is the “creative lab” inside of Infor. Notice I didn’t say “creative agency.” That is a term that is typically associated with advertising agencies, full of those creative types like writers and graphic artists, even filmmakers. There are a lot of those creative types at Hook & Loop, but its charter goes way beyond that of the typical agency. In their own words, Hook & Loop’s is “a collaborative team of designers, information architects, developers, project managers, writers, and filmmakers who are redesigning the user experience for Infor’s software products and envisioning the future of the Infor brand itself. Our mission: change the way people work and think about work.”

Back in early 2015, Diginomica’s Jon Reed did a great job of describing what Hook & Loop was setting out to accomplish. If you aren’t up to speed, you might want to take a moment and review Jon’s Inside the Enterprise UX revolution – a day at Infor’s Hook & Loop. But for here and now, it suffices to say that the Hook & Loop charter went beyond a fresh new user interface (UI). It set out to create a whole new “holistic” user experience (UX) using a unified design methodology.

Infor is now taking this a step further and spinning out a new group from Hook & Loop. It’s called H&L Digital and its proclaimed mission is to create “Differentiation through personalized digital experiences at scale that help enterprises outpace digital disruption and unlock digital growth opportunities.” That’s a mouthful that exposes Hook & Loop’s “agency” lineage.

So let’s move beyond the “agency-speak.” The real purpose of the new group is to help customers navigate digital disruption and achieve a competitive advantage. How do they do that? At its recent Innovation Summit (really an industry analyst day held at corporate headquarters in New York City), Infor attempted to answer that question through examples. We heard about some of its biggest, best and most impressive projects.

Among them was Sports City, a large franchise of stores featuring sports apparel and accessories. H&L Digital helped them transform their brand from a big box retailer surviving on promotion-driven transactions to a branded, sporting goods community leader, attracting those with a passion for sports. This was as much of a branding exercise as it was an ecommerce project, but indeed there were many moving parts from store design to custom application development.

Part of the project was developing an app for coaches of clubs, community and school teams. Through this app, coaches can share online all the equipment kids on the team will need, including specific product options and recommendations within different price ranges and even a pre-owned marketplace. Equipment fitting and a fitting room app also help take the guesswork out of shopping for equipment. That results in Sports City brand loyalty and increased sales. Coaches also can set up their own dashboards for player performance and team optimization, making Sports City the “go to” online destination for all their needs – a far cry from a big box retailer.

H&L Digital also helped transform Nutritious Feed Co. from an animal feed supplier to an animal health provider. Several different customer-facing applications emerged from that project, including Connected Cow Tracker, Total Farm Management, Farmer App, and Animal Health – hardly apps that are in the typical enterprise app portfolio. But the project also attacked more universal challenges like employee engagement and operational efficiency.

Through these presentations and others I was struck by how truly innovative this approach is. H&L Digital helped these companies not only with tools to help them run their businesses; they helped them uniquely re-brand themselves in a completely new light within a digital economy. But I also walked away thinking, these are very big, very custom projects. Translation: very expensive.

In a way it felt like déjà vu all over again. These “custom” projects were reminiscent of the homegrown apps of the 70’s and 80’s. Nobody believed you could have pre-packaged apps back then. Companies believed themselves to be unique and therefore built their own applications. And of course only large companies with deep pockets could (can) afford something with this kind of “Wow!” factor. So the big companies got bigger and stronger and smaller companies “made do.”

Of course, we all know what happened after the 70’s and 80’s. Over time vendors were able to package more functionality and more flexibility, at a more affordable price, so the playing field was leveled and virtually everyone began using pre-packaged solutions. But sitting through these presentations I was beginning to feel like the playing field was no longer level. There would definitely be the “haves” and the “have nots.” Somehow I don’t see Connected Cow Trackers and coaching dashboards becoming part of a standard enterprise application portfolio. So is H&L Digital destined to simply be a high-end provider of custom “luxury” apps?

That’s what I thought at first, but a visit to the H&L Garage (where all this stuff is built) made me think differently. The “creative” teams at H&L Digital do indeed start with a pretty blank sheet when they start to strategize and design. But when it comes to delivering new applications, it is very much an assembly process. The teams talk a lot about creating “wizards.” Wizards essentially assemble a series of components – some custom, some standard (re-usable) under a unique, custom-designed skin, so to speak. This is what makes each project look and feel entirely unique and custom. But if you look under the covers, the components of many of these “unique” processes share a lot of common components.

Outfitting a little leaguer is really just a standard configure-price-quote function and Infor has standard products that deliver that functionality. Is managing player performance really all that different from a sales manager monitoring sales rep performance? The metrics used might be different, but the dashboards probably look and behave quite similarly. Couldn’t you use a lot of the capabilities of monitoring movement of a fleet of trucks to help track cows? I bet “maintenance” schedules of equipment and cows share some common components as well, even though the user interface might appear very different.

So far all these projects have a healthy dose of custom development. But the more of these components Infor develops, the more it will have on the shelf. Over time, more and more components will be standard. This is crucial because companies of all sizes face risk of digital disruption.

Our 2016 Mint Jutras Enterprise Solution Study asked survey respondents to identify the level of risk of their industry (and their business) being disrupted, citing examples like Uber, Airbnb, NetFlix, etc. Almost two thirds (63%) face medium to high and imminent risk and the risk level of small companies (those with revenues under $25 million) is only slightly lower.

Figure 1: How much risk do you face in your industry being disrupted?

Infor fig 1Source: 2016 Mint Jutras Enterprise Solution Study

And yet small to mid-size companies are not nearly as well prepared to face these challenges.

Figure 2: How prepared are you for today’s digital economy?

Infor fig 2Source: 2016 Mint Jutras Enterprise Solution Study

So if Infor is able to successfully come down market and satisfy the needs of both large and small companies – even those with small budgets – there is certainly a big market waiting for it. I, for one, am routing for the little guys and hope to see H&L Digital continue to leverage Infor’s vast tool set and product portfolio to become the “go to” vendor for all companies facing the challenges of digital disruption.

 

 

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Protected Flow Manufacturing: A New Approach To Production Planning and Execution

 Overcoming the Limitations of MRP and Finite Scheduling

Back in the day, Material Requirements Planning (MRP) was a game changer. In taking a combination of actual and forecasted demand, cascading it through multiple levels of bills of material, netting exploded demand against existing inventory and planned receipts, it was able to create a plan that included purchase orders, shop orders and reschedule messages. Given these bills of material can be many layers deep and encompass hundreds or even thousands of component parts and subassemblies, without automated MRP there is simply too much data and complexity for a human to possibly work with.

Yet, while MRP was able to replace other archaic, clumsy and inaccurate planning methodologies, it has always had its limitations. Because MRP only planned for materials, it ignored labor and equipment resources and assumed infinite capacity. Finite scheduling helped but both were slow and static (and often clumsy), while the pace of business accelerated and change became the only constant. The harsh reality is: Even today, production planning and execution are still largely dependent on spreadsheets, hand-written schedule boards and the ubiquitous daily production meeting, leading many to desperately think, “There has to be a better way!”

That is exactly what MRP veteran Richard T. (Dick) Lilly thought. As an early pioneer, working alongside Ollie Wight, he helped make MRP the game-changer that it was in the 1960’s. He later went on to become the founder of three successful software companies, including Lilly Software Associates where he obtained a United States Patent (5,787,000) for his concurrent (finite) scheduler. He later sold that business to Infor, but he still continued to search for “a better way.” And he found it.

It’s called Protected Flow Manufacturing, a new methodology that simplifies planning and execution. Protected Flow Manufacturing prevents premature release of work, reduces time jobs spend waiting, protects promise dates and provides a clear priority to each operation, without complicated finite scheduling. It accurately predicts when each job will arrive at a specific work center (resource), monitors risk and makes the decision about what to work on next dead simple.

 What’s Wrong With MRP?

The introduction of packaged Material Requirements Planning (MRP) software for the masses (of discrete manufacturers) back in the late 1970’s was transformational, although nobody really called it that back then. “Transformative” innovation is very much a 21st century term. But MRP truly was game-changing back in the day.

While the concept dates back to the 1950’s, for years afterwards, many struggled to apply the methodology. Although the concept was simple enough, bills of material could be many layers deep and encompass hundreds or even thousands of component parts and subassemblies. Without software to automate MRP there is simply too much data and complexity for a human to possibly keep track of. Adding to the dilemma in the period from the 1950’s through the 1970’s, the concept of packaged software solutions was scoffed at. The prevailing sentiment was that (of course) everyone is different and needs a custom-designed system. This left automated MRP systems available only to those with large information technology (IT) staffs capable of developing their own custom versions of MRP.

That started to change in the late 1970’s when packaged applications made an entrance, not just on massive mainframes, but on “mini-computers” as well. But MRP didn’t turn out to be the savior the experts expected it to be. Why not?

Infinite Capacity Throughout the Black Hole of Production

First of all, MRP assumes infinite capacity and “trusts” production run times and supplier lead times implicitly. These assumptions proved to be troublesome for some and a fatal flaw for others. First of all, lead times are treated as constants, even though they can be quite variable. Even when the lead-time of a manufactured product is calculated from setup and run times, it can be inaccurate because of the added lead-time component of wait (or queue) time. MRP treats this as a constant as well when in fact it is anything but.

MRP took a demand due date and backed off the lead-time to give you a release date for production orders. It didn’t really concern itself with what happened in between those two dates. It was up to you to figure that out. Most manufacturers used backward scheduling for the individual operations…again ignoring capacity. Capacity requirements planning (CRP) modules were used to highlight trouble spots, but didn’t offer much else.

Some might argue that finite scheduling is the answer. But the reality is: Finite schedulers are beyond the reach of many companies, require a lot of work and assume standards are more accurate than they typically are. And even if those setup, run and wait times are an accurate measure of the average time, they are just that – an average. Finite schedulers treat them as a constant, when again, they can often be quite variable.

Finite schedulers must determine relative priorities of tasks and tend to do so on an order-by-order basis. Traditionally finite scheduling assumes jobs have the same relative priority throughout all operations. But that’s not necessarily the case, sometimes sacrificing efficiency and due dates unnecessarily in order to preserve that priority.

Speed and Complexity

And then there is the issue of speed and complexity. It was not unusual for early MRP runs to take a full weekend to process, and during that time nobody could be touching the data. This didn’t work so well in 24X7 operations or where operations spanned multiple time zones. Of course over time, this was enhanced so that most MRPs today run faster and can operate on replicated data, so that operations can continue. But that only means it might be out of date even before it completes.

And MRP never creates a perfect plan. So while most planners were relieved of the burden of crunching the numbers, they were also burdened with lots of exceptions and expedited orders.

Human Nature: It’s a Trust Issue

And finally, there is human nature. MRP required a paradigm shift and the planning process executed by MRP is complex. Not everyone intuitively understands it. While MRP is not rocket science it is hard to rewind, step through and “see” all that is going on. And if planners and schedulers, or even operators don’t really understand it, they are unwilling to relinquish control, hence the end-runs and work-arounds with spreadsheets, scheduling boards and meetings.

It’s basically a trust issue. Without complete and implicit trust, it’s just human nature to pad standards to create a buffer, allowing for disruptions along the way and Murphy’s Law (if something can go wrong, it will). As these estimates (vendor lead times, production and wait times) get inflated, performance might look good on paper, but in reality it declines along with productivity and utilization.

Yes, MRP brought a new dimension to material planning. But has it really helped manage the execution of the plan? No. Some might even argue it was never intended to. It might help get the materials to supply the production process on time, maybe even just in time. It can tell you when to release an order and when to complete it. But it does little to help in between, which is where the real execution happens.

Yet through the past three decades, planning and execution hasn’t changed all that much. Yes MRP has gotten faster. Yes, there are viable finite schedulers on the market. But in general, solution providers have primarily addressed issues by throwing technology at solutions, assuming the functionality was perfected decades ago.

Next generation solutions add speed. They are moving to the cloud, becoming accessible through mobile devices and are perhaps even enhanced with analytics. But little has been done to improve the methodology or the functionality. Protected Flow Manufacturing is the first completely new approach to production planning and execution in decades.

It’s Time for a Fresh Approach

Recognizing all these limitations, Mr. Lilly and his associates formed a new company called LillyWorks, and set about re-evaluating how MRP and other scheduling tools were implemented in the real world. In doing so, the group challenged assumptions that were made decades ago, but were somehow never revisited. This resulted in a new concept they call Protected Flow Manufacturing.

The concept is based on Little’s Law. Since few manufacturing folks are interested in queuing theory, suffice to say it is based on the same theory we all intuitively employ in our daily lives. When you walk into a bank (or store, or registry of motor vehicles), the fewer people there, the less time you wait.

Applying that same reasoning to a work center or piece of equipment, the less work you bring out to the shop floor, the less time jobs wait between operations. And you know that wait (or queue) time is the reason why it takes you four weeks to complete a job even though run and setup times add up to a single week.

So Protected Flow Manufacturing prevents the premature release of work. You might think you are being smart in starting early, in order to allow yourself some extra time, but doing so can result in unintended consequences that have a negative impact on this and other jobs. Everyone would agree releasing a job too late is bad. But releasing it too early can be equally bad. That implies there is a “right” time to release it. And Protected Flow Manufacturing will calculate that.

In doing so, Protected Flow Manufacturing uses setup, run and move time to calculate the “operating time,” but ignores queue times at individual work centers or operations.

In a perfect world, with nothing else competing for resources, this operating time is how long it would take you to manufacture the product. But of course we don’t live in a perfect world and of course you don’t simply work on one job at a time. You have different orders competing for the resources on the shop floor.

Therefore we have to budget in some protection. But even though traditional queue time is defined as a constant, it is indeed quite variable. Trying to predict that variability at the level of granularity of each operation is complicated, maybe even impossible. But you know generally how long it takes to get something all the way through the process. Maybe that is four weeks. And you know the operating time. Let’s say that is one week. That means you are actively working the job for a week and it spends another three weeks waiting. So you have a 3:1 ratio of buffer time to operating time and in this case, a buffer of three weeks.

So that’s exactly what Protected Flow Manufacturing has you do: Define the ratio of work to buffer time for the entire work order, or maybe even a category of work orders. If you have a 3:1 ratio today and are largely hitting your due dates, maybe you set it at 2.5:1. See how it works for you. Chances are you will find yourself whittling that down over time as you build more confidence in the system.

Sounds simple enough, but your next question might be, “Without queue times for each operation, how do I schedule the order?” The answer is, you don’t. Not in the traditional “order by order” sense. Instead, you predict what will happen at each of the resources (work center, machine, etc.) at future moments in time. After the work order has been released, that’s actually where the decisions must be made. With multiple jobs sitting in the queue, which should the operator work on next? Protected Flow Manufacturing provides a clear priority to each operation without finite scheduling.

Once these decisions are made, you find you actually have an implicit schedule for each work order, step by step, indicating when the work will arrive at the resource and when the operation will start. If you follow the rules, you will be able to predict when the job will be completed. And along the way, you can assess the risk of missing that due date. But Protected Flow Manufacturing is designed to minimize that risk and protect promised dates.

Sounds like a lot of work? Perhaps if you had to do this manually, but of course all these predictions can be automated, just like MRP was automated.

Here’s How It Works

Protected Flow Manufacturing calculates when each operation of each job will start and finish, based on

  • Resource capacity
  • Estimated setup and run times (and move times if applicable)
  • A defined buffer to operating time ratio
  • Other jobs also waiting for the same resources
  • Material availability (which may include lead time for ordering additional material)

Protected Flow Manufacturing starts with a due date for the job. It then calculates the operating time from the setup, run and move times for each operation and adds a buffer based on the ratio you define. Let’s say you have Job A where you will spend 3 days working and you have 12 days of buffer (a ratio of 4:1). Protected Flow Manufacturing would make the order available to be worked on 15 days prior to the due date, and not before.

At that point you could start working on the first operation, but obviously only if the resource is available. It might sit waiting for that resource. No work is being done, but some of the buffer is being eaten up. When released, it has 100% of its buffer left. After two days of no activity, it has 83.3% of its buffer remaining. If there is another job (Job B) waiting for that resource, when it is projected to free up, Protected Flow Manufacturing says you should work on the one with the smallest percentage of its buffer remaining. If Job B has less than 83.3% of its buffer remaining, it goes first. Meanwhile more buffer will get eaten away on Job A until it is the job projected to have the smallest percentage of its buffer remaining at the next (future) moment in time when you would need to decide “what’s next?”

In order to accurately predict outcomes, Protected Flow Manufacturing travels forward in time to these future moments. That might be when capacity will become available (an operation is predicted to finish) or an operation is predicted to arrive at a resource. Protected Flow Manufacturing then answers the question of “what’s next?” based not on the conditions of the present moment, but on conditions projected for that future moment in time. It then “loads” that job.

Ultimately Protected Flow Manufacturing loads all work left to be scheduled and completed. With all the parameters established (capacity, operating times and buffer ratios), this can all be automated. Operators simply need to follow the rules and suddenly planners/schedulers can turn their attention to improving processes rather than figuring all this out and then fighting fires when the best laid plans go astray.

What About Materials?

The accuracy of predicted start and completion of operations is predicated on the needed materials being available. So even if the resource has the required capacity available when the operation is predicted to arrive, Protected Flow Manufacturing will not load the job unless the materials are available. How does it do that without MRP? It links them directly to the operation. Of course it can “see” existing inventory and looking out into the future, it can determine from scheduled receipts when additional material is due to arrive. If there are no (or insufficient) scheduled receipts, it uses the lead-time.

This is fairly intuitive for simplistic, single level bills of material (BOMs), but unless you are running a simple repetitive manufacturing process, seldom do you have the luxury of a single-level or a simple linear and sequential process. If you do, you are probably using much simpler methodologies than MRP.

In a more complex environment, perhaps in a job shop, there is a lot more involved than just a multi-level BOM. You might have multiple processes overlapping or running in parallel, perhaps making subassemblies or semi-finished goods, then converging in a final stage. Or perhaps you start with a common process and then diverge. Think of cutting a piece of sheet metal and then sending different cuts to different work orders.

So instead of relying on a multi-level BOM, the Protected Flow Manufacturing concept assumes a multi-level work order, where the interdependencies are not just implied, but defined specifically. This might add a level of complexity to your operation, but it also makes it a lot more like the real world.

This approach also addresses an additional limitation of MRP. MRP assumes a shop order for each level in the BOM. Even a very simple product assembled from two manufactured items requires three shop orders: one for each of the components and a third to assemble them. Also, MRP requires you to receive these components back into stock even if you never keep an inventory of them on hand. You might record the receipt to inventory and then immediately issue them back out to the shop floor. Oftentimes this is a paper-only transaction that never really occurs, which creates extra, unnecessary transactions.

Also, each shop order has its own due date. Yet the due dates of the shop orders making the components are not directly connected to the final assembly order. So when the due date from the customer changes, someone has to remember to go back and adjust the due dates for the shop orders making the manufactured components. These limitations are most troublesome in a job shop environment where work is driven by actual orders for non-standard products.

Protected Flow Manufacturing’s multi-level work order approach eliminates these problems. So, does this mean Protected Flow Manufacturing is applicable only to job shops where material is purchased directly for individual jobs and nothing is ever made to stock? No, it just means it needs to accommodate stock orders for both purchased and manufactured parts.

Bonus: Rush Orders Become Self-Expediting

With the automation of MRP, planners/schedulers really became expediters. MRP came up with a plan, but no plan is ever perfect and neither is supplier or shop floor performance. Capacity is proven to not be infinite. Due-dates change. Suppliers miss scheduled deliveries. And of course a rush order trumps all other exceptions. So how does Protected Flow eliminate expediting of a rush order?

Remember Job A? It had 3 days of work and 12 days of buffer. So we released it 15 days before it was due. What if all of a sudden you only have 10 days to complete a similar job? When you release the job with the rush due date, it has already lost 5 days of its buffer. So it hits the first operation and instead of having 100% of its buffer remaining, it only has 58.3% of its buffer remaining. It will automatically get prioritized ahead of those released with the full buffer, with absolutely no manual intervention.

Conclusion

Protected Flow Manufacturing obviously takes a new and novel approach to execution. But is it better? It is definitely a lot more simple and easy to understand than MRP and finite schedulers. It addresses the real-life challenges job shops have perennially faced and reflects the realities of actual operations, whether you are operating in the mode of make-to-stock, make-to-order or somewhere in between.

It is “better” because it makes predictions that respect the reality that job priorities change over time, including the ripple effect to upstream and downstream operations. It reflects what is likely to occur in the future when workers perform according to the priorities that it calculates for them, while also acknowledging limited capacity resources. And it enhances the material plan with a production schedule that can be trusted and executed simply by following the rules.

But the proof is in the execution. Interested in how Mr. Lilly and his associates at LillyWorks have incorporated Protected Flow Manufacturing concepts into a new solution? Click here to learn more.

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NetSuite In Transition

 From “Graduations” to Full-Scale Replacements

After years of supporting “graduations” from the likes of QuickBooks and desktop solutions, more and more larger, more well-established companies are turning to cloud native NetSuite for whole-scale replacement of entrenched Enterprise Resource Planning (ERP) solutions. This transition comes at an opportune time as the demand for scaleable solutions escalates and the acceptance of software as a service (SaaS) grows. NetSuite OneWorld’s cloud-based ERP, including support for global financial consolidation and embedded omnichannel commerce, along with its scaleable platform that supports customization and extensibility, makes it a viable contender as a replacement strategy for legacy solutions.

Cloud and SaaS, Not Just For the Little Guys

Many confuse the terms cloud and SaaS. In fact Mint Jutras has been guilty of using them interchangeably. But in fact they are not the same and this means not all “cloud” solutions should be viewed as equals.

  • Cloud refers to access to computing, software, storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public.
  • SaaS is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It generally is paid for on a subscription basis and does not reside on your computers at all.

All SaaS is cloud computing, but not all cloud computing is SaaS. Traditional on-premise or hosted solutions might (or might not) be accessed via the cloud, although this is more likely to be a private cloud. NetSuite is a real multi-tenant SaaS solution, which puts it in a different class of applications than those that just deliver web-based access.

For many years, many also made the assumption that SaaS was just for small companies. And yet for the past several years, Mint Jutras Enterprise Solution Studies have found a growing preference for SaaS across all sizes of companies. Below we present those results in two different ways.

Figure 1 shows the progression of preference over the past several years, in intervals of two years. The question posed to survey respondents was this: If you were to select a solution today, which deployment options would you consider? Respondents are allowed to select all that apply.

Figure 1: Which Deployment Options Would You Consider?

NS Fig 1Source: Mint Jutras Enterprise Solution Studies

* Option added in 2015

We found 2013 to be a turning point, where we saw a very sharp drop-off in willingness to even consider a traditional on-premise solution, and in 2015 we saw almost a 20% increase in willingness to consider SaaS. Very early feedback from our 2016 Enterprise Solution Study indicates both trends are continuing.

But this doesn’t answer the question as to whether SaaS is just for small companies. To answer this question we need to examine the responses by size of company. Figure 2 defines size of company by annual revenue and we find nearly as much interest in SaaS in large enterprises as we do in small companies.

Figure 2: Percentage that Would Consider SaaS (by company size)

NS Figure 2Source: Mint Jutras 2015 Enterprise Solution Study

Note: annual revenues determine company size:

  • Small: Annual revenues under $25 million
  • Lower Mid: $25 to $250 million
  • Upper Mid: $250 million to $1 Billion
  • Large: Over $1 billion

Mint Jutras believes this is largely fueled by the way companies grow and expand today. Gone are the days when companies grew to be large, monolithic giants. While companies may be large and centrally owned and operated, they typically expand into multiple operating locations, oftentimes distributed across the globe. Indeed 80% of companies surveyed in our 2015 study operate in more than one location (Figure 3).

Figure 3: Number of Operating Locations (by company size)

NS Figure 3Source: Mint Jutras 2015 Enterprise Solution Study

Even where these operating locations are semi-autonomous subsidiaries, when it comes to software that runs the business, it is no longer common to leave those decisions to the individual business units. The vast majority (87%) has defined corporate standards for these applications. As the company grows, along with the number of operating locations, the potential for complexity grows faster. What better way of managing and enforcing these standards than through a centrally maintained SaaS solution like NetSuite OneWorld?

Case In Point: Dent Wizard International

Dent Wizard International has been the leader in the development of Paintless Dent Removal (PDR) technology since its establishment in 1983, and today is North America’s leading provider of SMART Repairs (Small to Medium Area Repair Techniques). In 2010, Dent Wizard was acquired by a private equity firm, and therefore needed to transition off its legacy IT environment, including an on-premise ERP and custom accounts receivables and payroll applications running on an IBM AS/400. With over 1,800 employees, 1,500 of which are service technicians in the field, Dent Wizard needed a solution with access to business data any time, from anywhere capabilities, so cloud was a “must.” But beyond that, Dent Wizard sought added scalability and the ability to automate labor-intensive processes. Dent Wizard was specifically looking for:

  • a broad range of functionality to run complex and mission-critical business processes across multiple subsidiaries on the same platform;
  • speed of implementation and time to value;
  • a platform that removes the burden of having to manage upgrades and servers and dealing with version lock issues;
  • real-time visibility into and control of its business across all business entities and subsidiaries through a single version of the truth;
  • the agility, scalability and flexibility to support business growth.

When it first selected NetSuite in 2012, the majority of its invoices were entered manually, which necessitated a massive amount of data entry. Since then, the company’s revenue has grown by more than 60% and it now processes more than 1.8 million invoices per year, and has increased electronic invoice processing by 30%.

Many of those invoices are filed directly by field service technicians using its Wizard Pro mobile invoicing application running on mobile devices. This eliminates the need for the lion’s share of that manual data entry. The mobile application was developed using the NetSuite platform and integrates directly with OneWorld. It gives technicians the ability to manage tools and equipment on site through NetSuite inventory management.

Value and scalability were key elements of the decision to go with NetSuite OneWorld. “NetSuite gives us a platform for growth and scalability, and from an IT infrastructure standpoint—we don’t have to manage servers,” said Tammy Conner, Dent Wizard Chief Information and Accounting Officer. “NetSuite has enabled us to run a very lean IT department, and that makes our organization much more efficient. Our people are happy with NetSuite and routinely evaluate how we can optimize the solution for our business.”

Now Is the Time

Now is certainly an opportune time for NetSuite itself to be graduating into this new realm. Only 36% of Mint Jutras survey respondents gave us a definitive “no” when asked if they would purchase an ERP system within the next two years. Of course some (20%) of the remaining 64% are still undecided and some of these purchases will be “graduation” from a solution like QuickBooks that might not qualify as a full-fledged ERP. But a follow-on question lends a bit more clarity around those switching out old solutions versus supporting new sites or perhaps even a first time purchase. While 38% will be replacements, another 43% will combine replacement with accommodation for a new site not previously supported by ERP (Figure 4). Needless to say, this is a huge opportunity for ERP solution providers.

Figure 4: First Time Purchase or a Replacement?

NS Figure 4Source: 2015 Mint Jutras Enterprise Solution Study

We know the time is right for NetSuite, but is the time right for you? If you are in the “undecided” camp, it may be helpful to understand what spurs these replacements. We asked survey respondents to select the top three reasons that would prompt a replacement of a current solution. Figure 5 shows the five reasons with the most votes.

Figure 5: What Prompts Replacement? (select top 3)

NS Figure 5Source: Mint Jutras Enterprise Solution Studies

Interestingly enough these align quite well with what we find to be the appeal of SaaS (see sidebar). Quite often legacy solutions fail to meet the functional needs of their owners. Early solutions lack the depth and breadth of functionality available in newer solutions based on advanced technology, leading to customizations that further exacerbate the problem by building in barriers to upgrades and innovation.

Not only does a multi-tenant SaaS solution lend itself to more frequent updates (the vendor has only a single line of code to maintain), but also NetSuite’s platform makes extending the solution relatively easy. Dent Wizard’s Wizard Pro mobile invoicing application is the perfect example. This mobile process is quite unique to Dent Wizard and therefore not likely to be satisfied right out of the box. But in treating this as an extension to OneWorld the barriers traditionally built in with invasive code changes are removed. Even as NetSuite delivers innovation, this type of extension simply moves forward as well. Nothing breaks.

A SaaS solution also is a key enabler of growth. No capital expenditure required; no need to build out a data center, or even put hardware or a huge information technology (IT) staff in country. The access any time, from anywhere nature of a cloud solution is conducive to supporting distributed users and bringing up remote sites rapidly and easily while conforming to and enforcing those corporate standards mentioned earlier.

Those saddled with outdated technology can rest assured they will never wind up in such a situation in the future. A good SaaS solution also addresses the cost of obsolescence.

And finally, sometimes you need to spend money to save money. An old, outdated solution can be costing you in terms of time, effort and real money to maintain it. The good news is that with a SaaS solution such as NetSuite’s you don’t need a capital investment.

Based on survey responses gathered in past Mint Jutras surveys, NetSuite customers place a lot of emphasis on costs. Back in 2013, in rating the appeal of SaaS, 50% of NetSuite customers selected lower total cost of ownership (TCO). Two years later when we asked what actual benefits had been realized, NetSuite seemed to have over-delivered on this promise with 61% indicating they had realized lower TCO.

Conclusion

Indeed, the time is right for NetSuite to be coming up market, targeting not only those seeking their first ever real ERP solution, but also those who are hindered by older solutions that lack the functionality and the technology to keep pace with growth and change. NetSuite’s solution has been developed over its long history as a cloud-native solution to address the needs of larger, global and distributed environments with financials and consolidation. Customers have proven the solution can handle massive transaction volumes while helping organizations like Dent Wizard run lean and efficiently.

Do your current solutions allow you to grow efficiently? If not, perhaps the time is right for you. If so, NetSuite is definitely worth a look.

 

 

 

 

 

 

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