Adaptive Insights

Enterprise Odd Couple: Plex Systems Partners with Workday

Pre-Packaging 2-Tier ERP for Manufacturers

Last week at its annual PowerPlex user conference, Plex Systems announced Plex Connect, along with several new partnerships and packaged connections. The goal of this new open integration framework is to “make it easier for manufacturers to connect people, things and applications to the Plex Manufacturing Cloud.” One of these partnerships stands out as being somewhat unique in that it is forged with another Enterprise Resource Planning (ERP) solution provider… Workday.

At first glance these two might seem like the proverbial odd couple. As another ERP vendor, Workday would appear to be a competitor. But it is not, because Workday is not a solution that is focused on the needs of manufacturers. And companies that “make things” are the only targets for Plex Systems. So if Workday isn’t for manufacturers, why would any Plex customer be interested in connecting to it? Because typically corporate headquarters doesn’t make anything, but might have sophisticated accounting requirements to support global operations. This partnership is all about delivering a pre-packaged 2-tier ERP.

Making the Case for 2-Tier ERP

Operating across a distributed environment has become a way of life for a large percentage of manufacturers today, even smaller ones. In fact 77% of all manufacturers that participated in the 2015 Mint Jutras Enterprise Solution Study had more than one operating location served by ERP (Figure 1). And 67% operate as a multi-national company. Even those with annual revenues under $25 million average just over 2 operating locations and that average grows steadily as revenues grow. This means very few companies today are able to conduct business as a single monolithic corporation.

Each operating division will have operational needs and must then feed to corporate financials for consolidation and reporting.

Figure 1: Environments Are More Distributed and Remote

Plex WDAY Fig 1Source: Mint Jutras 2015 Enterprise Solution Study

Note In Figure 1 company size is determined by annual revenue.

  • Small: annual revenues under $25 million
  • Lower-Mid: $25 million to $250 million
  • Upper-Mid: $250 million to $1 billion
  • Large: revenues over $1 billion

In years gone by all the different operating locations depicted in Figure 1 were likely to be left on their own to evaluate, select and implement a solution to run their operations. However, that scenario is quite rare today. The vast majority (90%) has established corporate standards for enterprise applications (Figure 2).

Figure 2: Have you established corporate standards for enterprise solutions?

Plex WDAY Fig 2Source: Mint Jutras 2015 Enterprise Solution Study

But this doesn’t necessarily mean a single solution runs the whole enterprise. Very often the ERP solution installed at corporate was selected for its ability to report and consolidate across multiple divisions. Very often these corporate accounting solutions (like Workday) don’t have the necessary functionality to run the operations of its divisions, especially if those divisions are manufacturing sites. In these cases, the standard solution for these manufacturing operations is a different solution – one like the Plex Manufacturing Cloud. Hence…

The Emergence of 2-tier ERP

In fact this 2-tier standard has become quite commonplace. Of those that have established corporate standards, less than half (47%) uses a single standard where all units, including corporate headquarters, use the same solution (Figure 3). At the same time, 31% have established a 2-tier standard and another 22% have a multi-tier standard. This latter category is most typical in a diversified corporation where you might see different types of businesses at the divisional level – you might have distribution warehouses or sales and service locations in addition to manufacturing sites.

Figure 3: Is this a single, two or multi-tier standard?

Plex WDAY Fig 3Source: Mint Jutras 2015 Enterprise Solution Study

It is this middle 31% that is targeted by the Plex Systems/Workday alliance, although it might work equally well in the multi-tier scenario. In fact if the non-manufacturing sites are sales and service operations, Workday itself might be the chosen standard for those divisions, eliminating the need for more than two different ERP solutions.

Plex Systems acknowledges that its solution is not the best for non-manufacturers. In fact Plex makes that point in its bold move to implement Workday for its own operations. The initial knee-jerk reaction might be, “What? They don’t sip their own champagne?” (An analogy I much prefer to eating one’s own dog food!) But while Plex knows and serves manufacturing very well, it isn’t a manufacturer. It makes software. While software companies that deliver on-premise solutions might burn CD’s, package them with documentation and ship a physical product to a customer, as a pure cloud provider, Plex sells software only as a service. The accounting for software, services and subscriptions is very different than accounting for shipping and delivering a physical product. But at the same time, this decision also underscores the fact that Plex is not afraid to make the right business decision in managing its own business.

But getting back to the 2-tier scenario, in the past we have seen solutions from SAP and Oracle dominate the corporate scene. Yet solutions like Workday, born in the cloud, are starting to chip away at the dominance of these two major players. And an alliance like this will only serve to accelerate this erosion. Very often a decision for SAP and Oracle might have been influenced by the efforts involved in integrating and rolling up financials from the distributed sites. While these have typically not been “out of the box” in the past, popular sentiment is that if you go with one of these “giants,” you will likely find systems integrators and other service partners who have done it before. That means they have a lot of experience with SAP and Oracle. You still pay for the connection, but you are at least dealing with a higher level of expertise.

With pre-packaged connectors, the need for this prior experience goes away and the expense of forging the connection drops dramatically.

Impact on Roadmap

So after hearing about this and other partnerships (with Salesforce and DemandCaster) the first question I posed to Plex was regarding the impact these might have on their own road maps. In terms of Workday, my specific concern was over enhancements planned to make its ERP more “global.”

Plex already has customers running the Plex Manufacturing Cloud from more than 20 countries, but it has let its customers essentially “pull” them into those countries and doesn’t necessarily support all the localizations and legislative regulations required in each… or all the complexities of growing multi-national companies. About a year ago Plex Enterprise Edition made its debut at PowerPlex 2014 along with an aggressive roadmap to support complex, global, multi-plant manufacturing organizations with multi-entity financial and supply chain management requirements.

In answer to my question, Plex has assured me none of these partnerships will result in taking planned innovation off the table. It will continue to invest in these globalization efforts. Similarly, other solutions such as DemandCaster will not prevent Plex from developing its own forecasting / demand and supply planning software. The alliance with Adaptive Insights will not prevent Plex from developing more robust financial planning and budgeting offerings. But I am thinking Plex doesn’t really need to compete against Salesforce for CRM.

 Conclusion

In the meantime and well into the future, Plex Connect should indeed make it easier for manufacturers to connect people, things and applications to the Plex Manufacturing Cloud. And in today’s connected, digital economy, isn’t that what it’s all about?

A Side Note: Is Workday ERP?

In the past I have posed the question about Workday: Is it ERP? Does it Matter? Many refer to Workday as ERP, but by my definition (an integrated suite of modules that provides the operational and transactional system of record of a business) an integrated finance and accounting solution that does not manage the “order” falls a bit short, But it does manage a contract, which for “talent intensive organizations” including software and Internet service companies like Plex) is equally, if not more important. Feel free to read my full analysis in the highlighted link above but for purposes of our discussion here in terms of 2-tier ERP, I am comfortable in referring to Workday as ERP.

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The Changing Manufacturing Landscape: Why Corporate Performance Excellence is No Accident

Excellent corporate performance seldom happens by accident. In order to excel in performance you need a good plan; you need to monitor, analyze and manage performance against that plan and you need the agility to adjust as business conditions change. This is tough in any type of business, but the complexities of manufacturing are even more challenging, where you are likely dealing with global supply chains, pressures to reduce cost and cycle times, and a new competitive landscape.

This requires planning and reporting applications and analytics. And if you operate in any sort of distributed environment (and most companies do), you need to consolidate across multiple sites/divisions/operating locations.  While most manufacturers have been forced to implement applications like Enterprise Resource Planning (ERP) just to survive, planning and performance management largely remains buried in spreadsheets. With more choices for solutions and the option for convenient cloud deployment today, there is no longer any excuse for ignoring this need.

Sound Familiar?

Do any of these scenarios describe your current state?

  • Are you operating across multiple manufacturing plants, but only have tools that allow you to plan and manage at a corporate level?
  • Or are you planning and managing at the operating level but unable to consolidate to get the big picture? Does this cause redundancy of capacity even as you struggle to meet customer demand?
  • Are you completely reliant on IT for consolidation and reporting and therefore unable to simulate the potential effect of different scenarios?
  • Is your “plan” still in spreadsheets?

If you answered “Yes” to any of the above, it may be time for a change. While Mint Jutras research indicates the vast majority of manufacturers prefer a suite-based approach to their enterprise solutions, 61% will be cautious before sacrificing functional requirements for either ease of integration or to stay with a single vendor (Figure 1). Planning, performance management and analytics are likely candidates for these “add-on” solutions providing they can effectively interoperate with ERP and the data residing within.

Figure 1: Preferences for a Suite?

Adaptive Fig1

Source: Mint Jutras 2014 Enterprise Solution Study

Most manufacturers today operate across multiple locations, requiring the need for a consolidated view. While rolling up financials is a one-way street, relationships between manufacturing locations can be far more complex and therefore it may actually be easier to plan in a corporate performance management system that is ERP neutral.

While these types of tools used to be only within the reach of very large enterprises, with deep pockets, the good news is that today there are many more options. The overriding goal is to put the right tools directly in the hands of the business decision makers responsible for formulating and executing the plan. Because these solutions may potentially need to interoperate with a variety of different solutions at the corporate level, as well as at various divisions, a cloud-based solution may be the best way to go.

In a study dedicated to understanding perceptions and preferences for SaaS solutions (the Mint Jutras 2012 Understanding SaaS survey), we asked survey respondents to prioritize the various potential benefits of SaaS.

Cost savings remain at the top of the list of perceived benefits, by a significant margin. Reducing the cost and effort of upgrades is second. Next is the support of distributed environments. Sixty-six percent (66%) of manufacturers participating in our Mint Jutras 2014 Enterprise Solution Study operate in a distributed environment with the number of different operating locations increasing with annual revenues, so this is a very common need. It is an aspect particularly relevant in the context of planning and performance management, especially during the process of planning and executing a merger or acquisition. A cloud deployment breaks down the barriers created by existing (or nonexistent) on-premise solutions at remote locations, including those newly acquired.

The fact that no hardware purchase is required, and the on-going maintenance associated with that hardware, is marginally more important than the need for less Information Technology (IT) expertise and staff.

So….

What’s in your plan? Is it a pure macro financial plan or does it dive into the realities at the operational level? Does it incorporate plans for growth? Are those plans just a result of a board level decision to set goals or are they reflective of the capacity required to deliver against the plan? The planning and performance management of a manufacturer requires a delicate balancing of many different moving parts across a potentially distributed environment:

  • Actual and forecasted demand
  • Supply from trading partners and sister divisions
  • Logistics and cycle times
  • Headcount
  • Travel and expenses
  • Facilities and equipment, including factory automation
  • Etcetera….

What level of confidence do you have that you will be able to roll with the punches thrown at you through the course of the planning period? What tools do you have at your disposal to boost that confidence, along with your ability to deliver? If…

  • If your plan is just based on numbers handed down from the top…
  • If it is not reflective of operational realities…
  • If it doesn’t allow for change that is bound to occur during the planning period…
  • If you are still working in spreadsheets…
  • If you are waiting for added features and function from your ERP solution provider…
  • If you assume you can’t afford better tools…

Then you are leaving a lot to chance.

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