Smaller and Even Less Flexible

I don’t know what it is about SAP, but they definitely have a better marketing department than Oracle.  Every day there’s some new announcement, which means that virtually every day we have to pick on them.  I don’t mean to, but Oracle and the others simply don’t present the opportunities.  And there’s plenty to rant about… overcomplexity, internal squabbles, and even the ethically questionable battles between Oracle and SAP.

But my most passionate complaint is often with their customers, especially the small ones.  The companies with potentially simple processes that feel compelled, often due to peer and advertising pressure, to implement a complex ERP system.  As we described many months ago, a cheap whiteboard and some pizza can often do a better job.  The key is that the company has to really poke at its internal processes and realize how simple they really can be.  The response to that post was rather overwhelming, with many readers telling similar stories.

Last week SAP announced a new product, Business By Design, focused squarely on the smaller organization.

SAP on Wednesday introduced Web-hosted business-management software aimed at customers with 100 to 500 employees. The new offering, known as Business By Design, will run on SAP’s own servers and be accessible over the Internet for as little as $54 a month per user.

The Web subscription model — pioneered by SAP rival Salesforce.com and increasingly pursued by such disparate providers as Google Inc. and IBM Corp. — allows for less of the customization that mega-corporations require. But its simpler design is meant to accommodate the lesser financial and logistical resources of small and mid-sized companies.

Basically their own announcment supports my original point:

• lesser financial and logistical resources of small and mid-sized companies
• allows for less customization

So now we have smaller companies that can implement a complex piece of software to govern what should be, at least after any real effort at value stream mapping and lean analysis, fairly simple processes.  If you minimize transportation, implement pull-based one piece flow, improve quality, and thereby dramatically reduce raw/WIP/finished inventory… your logistical tracking efforts become minimal.  Visual factory concepts let you see, manually, everything that is on the shop floor and empowers the cells and operators to take direct action.   If you implement lean accounting methods (by the way, don’t forget the Lean Accounting Summit in Orlando later this week… there’s still time!) you can dramatically reduce transactions while getting a truer sense of the financial performance of each operation.

So let’s say that you don’t believe manufacturing can really be that simple, and you dive head-first into Business By Design.  Then you hire someone a bit more brilliant that you who does believe in lean manufacturing, and she begins to simplify your operation.  She finds better ways of doing things.  She creates incredible enthusiasm among your most valuable asset, your people.  The world is your oyster and all that jazz.

Until she, and the rest of your newly-motivated organization, run smack dab into the "less customizable" aspect of the software.  SAP and the others have historically tried to force organizations to operate according to their algorithms, unless you could pop for the big bucks for some customization… which then got blown away at the next software update.  Now there is no choice.  You operate how Business By Design wants you to.  Period. 

Pfffffft (sound of air being let out of a brightly-colored balloon, rendering it limp and flacid… and uncompetitive).

Compass Pharma Services is mentioned as an example in ther article, and a related article in last Wednesday’s Wall Street Journal detailed their experience even further.

Compass is a pharmaceutical packaging company with about 200 employees in Clifton, N.J.  In the past, the company had no central software program – when an order came in, workers from the various departments either emailed or walked over to each others’ desks to check up on it.

Kevin Flanagan, Compass CEO, expected to buy a bunch of programs for manufacturing and order management.  Instead the company became an early guinea pig for A1S [previous name for Business By Design].  Mr. Flanagan said the new system has helped cut the time the firm takes to process an order from about a week to two days, which is a "light years change for us."

A week to two days is a nice improvement.  But this is a packaging company.  They take stuff and throw it in a package.  Two days?  Try for two hours.  200 employees probably means 100 to 150 are on the production floor.  I really bet a white board could do it, especially since I’ve seen such a "system" completely run a couple large companies that actually built products.  $54 per user per month could buy a nice whiteboard and an andon or two. 

Take a look at your internal operations, and figure out how simple they really could become.  SAP and other ERP software may be appropriate for some very truly complex operations, but not for most.  Think hard about where you are now and where you want to be in five years, before you agree to be assimilated.