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March 9, 1999
Web posted at: 3:26 p.m. EST (2026 GMT)

by James Connolly

(IDG) -- So, you thought ERP (Enterprise Resource Planning) was all about tracking factory inventory and crunching paychecks. Well, listen to the opinions of a couple of dozen managers -- some who were pioneers in ERP and some who are just launching their implementations -- and it becomes clear that enterprise resource planning strategies were really designed to get the corporate house in order.

Computerworld explored ERP user experiences -- why they chose their vendors and what types of benefits and challenges they discovered -- through in-depth interviews conducted in January by Framingham, Mass.-based Market Data Group.

Yes, better inventory management and faster order processing were on the minds of some people when they set out on an ERP course. But the real benefits most people have been chasing have revolved around matters such as standardizing business processes, building a clean base of data and erasing the complexity, expense and year 2000 problems surrounding legacy systems.

"We certainly didn't do it for performance. We still haven't gotten the performance. What we were doing was tidying up our house, and the year 2000 gave us a deadline," says Julie Peeler, corporate vice president at Aerostructures Corp. in Nashville. Peeler says Aerostructures' implementation of Baan Co. ERP software gave her company new capabilities. "We desperately needed the ability to put data in the managers' hands so that they could have the information to make real-time business decisions."

The managers interviewed included a mix of information technology executives and executives from departments such as human resources and finance. When they were asked to cite the forces that drove their ERP strategy and the benefits they have seen, 13 of the 23 said new ERP systems give them the chance to standardize or improve their business processes. Most mentioned several benefits. They cited lower costs in 11 cases, year 2000 problems in 10 and the need to support corporate growth or market demands in seven.

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Below, these ERP managers share their experiences and offer advice for their peers.

Their vendors

Most managers said they chose the vendor that most closely matched their company's business needs -- typically needs defined by financial managers. Some said they found that particular vendors were more focused on their vertical markets, and several said a vendor's corporate stability was a key factor in their decision.

"It enables our users to modify parameters in the operation of the system, minimizing the need to call on technical people for changes. The flexibility enables our company to react more quickly to changing business demands, resulting in a more nimble operation... the direction of J. D. Edwards was positive." — David Mewes, vice president and CIO, Champion Laboratories, Albion, Ill. (J. D. Edwards & Co. user).

"At the time when we chose J. D. Edwards, some of the fundamental applications they had for our industry were head and shoulders above the competition." — Patrick Thompson, vice president and CIO, Turner Industries, Baton Rouge, La. (J. D. Edwards user).

"The greatest strength is what I call ease of setup . . . the way they market their product to companies with less than $100 million in sales, is with a product called Genesis... It takes a history built by J. D. Edwards and, based on your type of manufacturing company and how you want to do business, it sets a good number of those preferences to historical answers. It saves a lot of time." — Dennis Vandereplow, manager of MIS, SK Hand Tool Corp., Chicago (J. D. Edwards user).

"One of our lead strategies was to leverage new technology. That was also a PeopleSoft lead strategy. We had heard that the PeopleSoft install process might be easier than some of the competitors." — Diana Near, assistant director information systems, The Principal Financial Group, Des Moines, Iowa (PeopleSoft user).

"We liked their strategy of focusing one of their marketing groups on the education and government markets." — Helen Mohrmann, director of administrative systems and distributed technology, Cornell University, Ithaca, N.Y. (PeopleSoft user).

"They are committed to improving their product and adding features. They already had most of the features we were looking for. We've already been able to do a lot with very few modifications." — Robert Hyche, Baan project manager, Progress Rail Services Co. Albertville, Ala. (Baan user).

"The global presence of SAP... The best-of-breed strategy starts to fall apart when you're dealing with global companies. SAP was willing to modify their product to allow us to bring it up in many different countries all over the world. " — Peter Burrows, chief technology officer, Reebok International Ltd., Stoughton, Mass. (SAP AG user).

"SAP invests heavily in developing new applications and improving the capabilities of their current product offerings," — Wayne Sylvanowicz, program manager, Hewlett-Packard Co. Medical Products Group, Andover, Mass. (SAP user).

"The company has been in business with a single, consistent vision for 25 years... ability to execute... global support organization." — Michael Cromer, managing director, GATX Capital Technology Services, San Francisco (SAP user).

"SAP is bulletproof. It has few bugs and is a widely used financial system." — Sam Precket, RFMS manager, Chevron Products, El Paso, Texas (SAP, Indus International Inc., Meridium Inc. and Broadbase Information Systems Inc. user).

"At the time, SAP was so far ahead of their competition in two areas... breadth of functionality... Their user interface was superior." — Rodney Rogers, vice president and general manager, consumer products, Florida Crystals Corp., Palm Beach. (SAP user).

"We wanted instant, consolidated worldwide information, and we wanted to manage the system with a single-site support team. In addition to having strong integration in its modules, SAP R/3 is easy to extend with custom Web applications." — Frank Holland, general manager of IT integration and planning services. Microsoft Corp., Redmond, Wash. (SAP user).

Challenges in ERP implementation

The ERP project teams tackled a broad spectrum of issues and problems, ranging from PC compatibility issues to management challenges such as selling an ERP plan to the CEO. The most common problems centered on networking issues, knowing when to allow users to modify the packaged software and user training.

"The scope of the project was the largest challenge. To implement a fully integrated suite meant we had to change every application in the company... Our mind-set had to change from our traditional way of doing business: user specification, design, write the application, implementation. We had to become accustomed to buying something 'off the shelf' and using it as it came." — David Mewes, Champion.

"There had been no standardization among desktop computers. Although it seemed as if we were changing only the accounting system (or desktop), we were implementing a large culture change. We faced a training challenge when we asked people to transition to a Windows 95 environment from DOS." — Terry Smith, IT director, Knight Ridder Shared Services Center, Coral Gables, Fla.

"Mapping our business and re-engineering model with SAP functionality. We needed to find the way to build a leasing application layer with R/3 architecture without changing a line of R/3 code." — Michael Cromar, GATX.

"In 1993, SAP resources were incredibly hard to find." — Rodney Rogers, Florida Crystal (SAP user). "The need to purchase new hardware — there was no existing [wide-area network]. The need to keep the old system running during the changeover." — Juan Garcia, systems manager, Heads and Threads, Northbrook, Ill. (SAP user).

"To keep our old environment functional while going forward with ERP." — Wally Hayes, vice president of IT and corporate planning, Kinetico Inc., Newbury, Ohio (J. D. Edwards user).

"Finding qualified Baan people here was quite a challenge. We have had to move in people from other parts of the country, develop people on our own, recruit younger staff, etc... Communications have also been a challenge. Figuring out how to lay out a wide-area network to handle this." — Robert Hyche, Progress Rail.

"To do an ERP selection for shared services has its own nuances. The strength of ERP is the integration within the enterprise. But when you're in shared services and dealing with distinct and different business lines, you're dealing with multiple enterprises. That's kind of the myth behind integration. We're trying to make the ERP package fit multiple enterprises." — Vicky Pafk, executive director, payroll operations and technology services, Tenneco Inc. (SAP user).

"J. D. Edwards doesn't really get into [the apparel industry] very well, so we had to put some programming around the system to meet the needs of our company and industry." — John Lessmeuller, director of IT, VANS, Santa Fe Springs, Cal. (J. D. Edwards user).

"Implementing a common business process across multiple brand groups that were considered independent businesses." — Peter Burrows, Reebok.

"Within higher education, decision-making processes are not as hierarchical as they are in corporations. We needed very strong support from senior management to obtain policy decisions under a deadline." — Helen Mohrmann, Cornell.

"From an MIS perspective, it was the planning and incredibly long hours. My hat's off to those folks and their families." — Julie Peeler, Aerostructures.

"Gaining CEO endorsement... Cultural challenges. Our company had not developed software in over 11 years." — Michael Cromar, GATX.

"Change-management and getting the staff time to effect implementation. We are going from a very comfortable system that everyone knows... When a problem arises, all of us know how to respond to it. Good, bad or indifferent, we are comfortable with it." — Dennis Vandereplow, SK Hand Tool.

Benefits so far

Just as the rollouts and modifications will continue for years, some benefits could take years to come together. However, some managers already cite cash benefits -- one manager is saving $1 million per month through inventory management -- and better management in general.

"We can clearly identify savings... because of the negotiation and compliance with nationwide contracts. We saved many dollars and man-hours in avoiding Y2K upgrades. We have fewer people focused on transaction processing at the business units, allowing them to spend more time on reviewing and analyzing financial results." — Terry Smith, Knight Ridder.

"It's still early for this. Data quality and clean up is obvious already. Compliance to customer requirements can be seen already. We look different and more modern. We've seen benefits in terms of operational efficiencies and effectiveness. We're achieving Y2K compliance without spending a lot on remediating legacy code." — Peter Burrows, Reebok.

"Cost savings. For example, $165,000 per year on salary administration. Technical support staff cut from 12 to five." — Diana Near, The Principal.

"Reliability." — Sam Precket, Chevron.

"Our sales increased two and a half times from the time we started the study through implementation. If we had remained on the legacy system, we would have needed to add at least 20 people in manufacturing, order entry and shipping to support that sales growth. I would estimate that we saved approximately $1 million in 1997, with recurring savings every year." — Wally Hayes, Kinetico.

"In just the operations group, with the two legacy systems we had... it would have cost between [$5 million and $7 million] to do an upgrade for the Y2K and over $1 million to do an upgrade for the euro. Second, we are able to really quickly implement a new business model or business stream." — Frank Holland, Microsoft.