Earlier this month QAD quietly announced what some in the industry might call a “tuck in” acquisition of DynaSys Société Anonyme. DynaSys is a supply chain solution provider based in Strasbourg, France. I say “quietly” because many acquisitions these days, large and small, strategic and tactical, are accompanied by so much hoopla, even before they occur, that you lose sight of the real value of the merger. QAD announced this as a done deal, after having kept on all Dynasys’ management and staff. Dynasys will continue to operate from Strasbourg as a division of QAD.
Why call it a “tuck in”? Because this is not a move to acquire a huge customer base (i.e. buy market share), but instead one to further strengthen QAD’s offering and presumably to garner a larger share of its customers’ wallet. According to Gordon Fleming, QAD’s Chief Marketing Officer, the company has seen supply chain planning as “becoming more important to our clients’ success, especially following the economic crisis which has caused companies to place far more emphasis on optimizing resources to meet variable global demand and other competitive pressures.”
This makes sense. For years we saw manufacturers increasingly sourcing components, raw materials and even operations from offshore, low-cost countries. But then as the price of oil rose and rose and the whole energy market became increasingly volatile, often the savings achieved by going offshore were eaten away by rising transportation costs. Supply chain planning and optimization became increasingly important, but also harder to achieve given the added complexities of global sourcing.
QAD sees a great demand for supply chain capabilities and while it offered forecasting, supply chain planning, trade management and a supply chain portal, Dynasys offers a much more extensive portfolio both in terms of depth and breadth. Its product, called n.SKEP is a demand and supply chain planning suite of solutions and its expertise in food and beverage, pharmaceuticals, chemicals, cosmetics, distribution and retail is a nice complement to the industries in which QAD is strong.
The Mint Jutras ERP Solution Study examines this hybrid type of environment by distinguishing between modules of ERP (i.e. what QAD already has) and extensions (what it adds through Dynasys). Let’s be clear on terminology used here. Any ERP solution, simply by definition, consists of a suite of integrated modules. All the modules of ERP use a single data base model. Integration is built in and there is little or no redundancy of data elements, except where there is a specific need. All modules are built with the same development tools, on the same architecture as the core of ERP. While a module can be implemented incrementally, its release cycle is in lock step with the remainder of the core ERP modules. The advantage to implementing a suite of modules is full and seamless integration. The downside is that everything and everyone using ERP has to move forward (or not) together. And a complete ERP solution extends very broadly across the business and impacts many departments and individuals.
“Extensions” to ERP are enterprise applications that might extend the functionality, but are sold and implemented as separate applications. This might eliminate the need for upgrades and release cycles to be in lock step, but also introduces the potential need for integration and the possibility of redundant data. It is fairly common for ERP vendors to use an acquisition strategy to add more robust functionality. But the value is typically directly proportional to the level of seamless integration between their ERP and the newly acquired product. Too often these same vendors would like you to believe that simply by acquiring the product they have a fully integrated solution. But there is no magic fairy dust you can sprinkle on to make this happen overnight. It is refreshing to see QAD acknowledging this.
QAD is being very conservative in predicting revenue growth in the first year but sees n.SKEP as augmenting its existing supply chain capabilities and ultimately becoming a “single coherent model to allow real-time planning of Demand, Distribution, Procurement and Production. The DynaSys suite will also provide the heart of QAD’s ‘next generation’ Sales and Operations planning capability.” As a result QAD’s first priority will be to integrate n.SKEP into the QAD Enterprise Applications. It will then roll it out to its global market. Beyond that it intends to invest in the Dynasys product, seeking a competitive advantage to other ERP solutions.
The Dynasys suite includes:
- Sales Forecast (Demand Planning)
- Sales and Operations Planning (S&OP)
- Distribution Requirements Planning (DRP)
- Master Planning
- Network and Inventory Optimization
- Master Production Scheduling
- Procurement Planning and Optimization
Some of these components will at first appear to compete directly with modules that QAD already offers. But Mint Jutras research shows that sometimes what appear to be competing modules and extensions are in fact complementary. In our 2011 ERP Solution Study we intentionally included some functions as both modules and extensions and supply chain planning is a perfect example. A manufacturer or distributor might look to its ERP solution for supply chain functionality, while others might purchase a separate application. And it is clear from our results that some combine the two.
We presented a list of modules specific to a general industry (e.g. manufacturing or wholesale distribution) and captured which modules were fully implemented or partially implemented. We also allowed participants to indicate if certain modules were not relevant to their business. From this we can get general adoption rates across all companies, but more importantly adoption rates only counting companies where the modules are applicable.
As part of our solution study we also benchmark the performance of ERP based on a combination of results realized since implementing a solution, progress achieved against company-specific goals and selected metrics measuring current performance. The top 15% in terms of these performance metrics are determined to be World Class. We found that 92% of World Class implementations (where supply chain planning was relevant) had either partially or fully implemented these modules. And 39% had implemented supply chain planning extensions. Clearly this adds up to more than 100%, indicating some had both.
Even in All Others (those not World Class), 64% had (partially or fully) implemented supply chain modules. Yet only 7% of All Others had implemented extensions. Just this data alone does not prove that supply chain planning applications are necessary for World Class performance in manufacturers and distributors, but it certainly makes a case for QAD’s assumption that they are of strategic importance.
QAD’s strategic vision is for every one of their customers to become what they call an “Effective Enterprise.” It defines an effective enterprise to be one where every business process is working at peak efficiency and perfectly aligned to the strategic goals of the organization. Having an effective plan to manage the supply chain is an important step in realizing this level of effectiveness. And planning is what Dynasys solutions are all about.