The butterfly effect

From providers, to software, infrastructure, analytics and online communities, IT Brief talks to the industry on why ERP can work for you. Organic beer company Aotearoa Breweries is a small business that makes under a million dollars a year from its boutique brand, Mata. The company is situated in the picturesque Bay of Plenty, a world away from the hustle and bustle of the city and from high tech IT systems that cost a lot of money. Yet this little company that produces a few thousand litres of beer a year  installed the same ERP system as diary giant Fonterra uses.Aotearoa installed SAP’s Rolls-Royce of ERP systems, a system that had not been developed with a small business in mind. The business all-in-one platform, the “everything you ever wanted and needed” system, is aimed at companies with revenues of around $100 million to $1 billion. SAP said Aotearoa only had around six staff members on the payroll when the system was installed. The ERP system cost the company as much as its brewing equipment. SAP Managing Director Graeme Riley said the reason Aotearoa choose such a sophisticated system was because it wanted technology that would be able to keep up with the growth of the business and develop alongside it. SAP said Aotearoa approached the system as a long-term investment that would drive the business forward.This small company with big dreams has aspirations to take Mata to the UK, the US and Japan. Riley said an ERP system could help take a small company from New Zealand and make it into global success; that it could help maximise and extend a business’s profile into other markets. "It unites a lot of aspects of the business and puts it together in a single application,” he said. “Inside the system are areas of tiered security, which provide measures to prevent breaches of confidential information. This allows financial and human recourses to access information that other staff members do not have access to.” It may seem that a company such as Aotearoa would not need to worry about integrating systems such as logistics and human recourses, or systems that allow for tiered security, as staff who need to communicate are probably within shouting distance of one another. But ERP platforms are more than just integrated systems; they can track data to maximise business growth, Riley said. “ERP systems can be used to track and trace. To make the supply chain more transparent, it provides companies with business intelligence, with the ability to look at data collected and see a better representation of a business,” he said. “This makes it easier to identify where the problem is and how best to address it. It helps a whole raft of activity from human recourses, recruitment, managing rosters and supply chain management, to customer relations management. ERP systems help companies adhere to local and international accounting standards,” Riley said. He added a company like Aotearoa greatly benefited from SAP’s customer database and the knowledge of its some 82,000 customers. Riley said SAP provided software for different types of businesses of varying sizes, and used the information collected from these customers to help new clients. "Each of these companies has specific needs and we collect the data and use it to tailor solutions for specific businesses," Riley said. A company such as Aotearoa needs to be able to track inventory, stock, identify which stock is selling the best, where the stock is being distributed to, how long the delivery will take and what  the most effective mode of transport is. “All of this and more an ERP system can deliver solutions for”, Riley claims.Aotearoa founder Tammy Viitakangas said this of the system when it was first installed by SAP’s business partner Tango in 2007: “We need a system that can deliver key processes. Business all-in-one has the right combination of features for us and Tango understands how we need to use our technology. We can see it will enable us to do things at our own pace, and switch functionality on as we need it. We have a lot of interest in export and want to be able to empower our mobile sales representatives,” she said. The ERP systems allow Aotearoa to provide real-time information for customers, partners and suppliers, and further develop opportunities for growth. SAP said companies such as Nestlé and Fonterra would be in regular contact with each other through their ERP systems, as Nestlé needs milk products from Fonterra to be able to manufacture its chocolate. Through an ERP system Nestlé would be able to see how much milk powder was available in real-time, how long it would take to deliver it and how much it would cost. The system would also be able to tell Nestlé which trucks it had been placed on, the route the trucks were taking and whether it had already been placed on a ship or not. With this information Nestlé could then plan its production cycle around the delivery. But online community developer Nick Shier said ERP systems tried to be “everything to everyone” and then did not meet expectations. “ERP does not work well with collaboration. They are good at what they do but as soon as it comes to collaborating with business partners using different systems, ERP fails,” Shier said. “The reality is, companies all use different systems. ERP platforms are not aware of what is happening outside of their own systems.” Shier said the solution to this communication problem lay in cloud computing. He founded online community Viisibility, which was developed to sit on top of ERP systems and allow for better communication between suppliers, distributors, resellers and customers. “Most partner companies all use different systems but the Internet can help to collaborate this, without holding companies back. If you create an online community, communication between partners will be vastly improved.” Shier said companies could better share data through the community. “There could be five companies within the supply chain, all wondering what’s happening with their orders and when they will be delivered. Through this system all these companies would know when the delivery had left the warehouse, where they were and how long it will take to deliver the items.”ERP systems alone cannot function like this outside of their own technology, Shier said. “This standardises information and makes it easier to share across multiple ERP platforms. Companies like SAP have no desire to do this. They just want to sell more software. ERP systems are geared up for companies to buy and use it. They don’t have any influence on the business of their business partners.” Shier said through Viisibility, business transactions do not have to be tiered to one provider. “A single supermarket may want to place an order with 10 different suppliers through the community. Through this they know what has been picked up and they know when it is going to be delivered.” SAP and Microsoft have developed a program called Snap, which allows both SAP and Microsoft ERP systems to “talk to each other”, allowing for more efficient and transparent communication. But Shier said this would only work if companies were using SAP and/or Microsoft software.Analytics firm Teradata said business intelligence was the fastest developing trend within ERP because it gathered information from different sources and then used it to analyse businesses. The data could then illustrate whether a business was profitable or not, what its best-utilised products were and how to drive sales up further. Analytics can determine what the best route is for a truck to take, based on traffic, timing such as rush hour traffic and school runs, and road conditions. Analytics can also show the percentage of stock refusal and track the problem to determine whether a trend is developing. Teradata said if retailers had statistics on why certain brands sold more than others, they would be able to maximise the products better and target them to specific audiences. Teradata added that analytics allowed a company to analyse its performance and gather data around its strengths and weaknesses. This information can then be fed back into the ERP system to improve the business. Teradata’s Alec Gardner told IT Brief that companies such as Vodafone New Zealand used Teradata to discover trends within social demographics, which then helped them to target products to certain key audiences. Infor Chief Technology Officer Bruce Gordon said the ERP industry really “kicked off in New Zealand around 2003” due to the merger of companies. Gordon said ERP systems could help companies “that were strapped for cash” as it helped them to focus on their core business instead of spending time on administration. “There is a whole sweetshop of systems out there for businesses of different sizes. Size does not equal the complexity of a company or the simplicity of their problems. ERP systems are about designing solutions to make running the business easier. "ERP allows for better return on investment, it reduces administration costs and allows for a network focus for business.” Gordon added that the ultimately ERP systems made businesses more profitable. “There can be massive savings and massive reductions for companies who use ERP systems. In Japan 40% of companies have home-grown ERP systems.  The rest use standard packages which keep the costs down. In New Zealand about 70 to 80% of companies have standardised ERP packages,” Gordon said. Convex Plastics, which uses Microsoft Dynamicss' ERP system, said it had been “excellent for the company”. Chief Executive Officer Owen Embling added: “The system is very efficient. We know exactly what stock we have and can account for the cost of every single product we manufacture, which we were not able to do before.” Westland Dairy, another Microsoft user, added: “There are so many opportunities for us now. The success to date reinforces the decisions we made to remain independent. IT investment means we now have a competitive edge that enables us to be more productive as an organisation and ultimately more profitable for our farmer shareholders.”Hitachi, which does not manufacture ERP software but the infrastructure it is built on, said companies looking to invest in ERP systems needed to ensure their infrastructure could support the software.  Hitachi said people spent so much time worrying about software and not enough time ensuring their infrastructure would be able to grow with the company. “There are boarder implications if the foundation is not properly considered. A dynamic infrastructure promotes and demotes data according to its importance. It allows data to be moved from point A to point B without being disruptive. It has the potential to develop with the business as it grows. Take care of the foundation and the software will follow – it’s a butterfly effect,” Hitachi said.