Change comes hard to many of us. My friends will agree that I am not immune to this. I personally over analyze the situation looking for reasons to keep the status quo. While on occasion this serves me well its result is often missed opportunities and sticking with a situation much longer than warranted.
In more than 20 years of implementing systems for formula manufacturing companies I would suggest that there are many of you in the same boat. Many of us are holding onto existing ERP system well beyond their useful lives.
Like me holding onto my obsolete phone system many are holding onto formula manufacturing systems well longer than we should.
In the following blog entries I will provide insight into the primary reasons formula manufacturers typically hold onto their obsolete solutions, key indicators that a time has come for a change and alternatives to the current systems.
In my experience there are 3 primary categories of formula manufacturing systems that need to be reviewed and serious consideration should be given to determine if they are still providing value to your organization.
- Excel spreadsheets running the formula manufacturing business
- Obsolete formula manufacturing application that is no longer up to date
- Custom written solution that has not been updated with changes in the business environment
Excel spreadsheets – While I have never seen a static supporting this claim I think it is a fair assertion that the most prolific formula manufacturing solution on the market today is – EXCEL.
You would be amazed at how many companies trust their greatest asset – their formulas – with an easy to customize but impossible to integrate tool such as spreadsheets. Every month I am approached by companies that store all of their formulas in hundreds – if not thousands – of spreadsheets or one mammoth spreadsheet. Over time they have become obsolete and the company is dependent on one person to update and maintain the data. Great job security if you can get it.
It is obvious to me why these installations exist.
In the infant stages of a formula manufacturing company the R&D director (or equivalent) decided that writing the formulas on the backs of envelopes or in the lab notebook was "old school' and there was a better way to centralize the formulas. Armed with their version of Excel that shipped with their desktop computer version of Microsoft Office they began creating spreadsheets to store this data. After all the software was already owned, Excel is easy to use and new employees already had experience with the tool. What more would we want?
Well as time went on one copy of a formula became the basis for another formula. Someone requested more information to be tracked and every subsequent formula had this new addition. Changes to existing formulas made duplicates of the master formula and often multiple copies of the formulas were stored on various workstations. You know – just in case something happened to the original.
This approached worked fine as long as only one person maintained the formulas or virtually no changes to the formula structure changed. Also as long as no one needed any information across multiple formulas or the inventory data (such as price) never changed – then you were golden.
Well life does not work that way. Things change. Yes I said it – things change – and so should we.
With the growing compliance requirements such as Country of Origin, allergen disclosure, SQF audits and HACCP our life is no longer simple enough to be trusted with a spreadsheet written in the back room of an R&D laboratory. Instead formula manufacturers need centralized formulas that feed production data. We need formulas that have integrated QC functionality and the ability to perform cost rollups on the fly without additional data entry.
Excel spreadsheets are fine for analysis of existing data – such as yield trending or material usage – but to store master data such as formulas and batch tickets – we need a database oriented formula management system.
So are you one of these companies relying heavily on spreadsheets to store your master formula and production data? If so take a long hard look at what you are building. Do you really think it can continue into the future? The odds are against that design. Fortunately with enlightenment comes education and with education comes change. I am a poster child for that enlightenment – once again ask my friends.
Over the past 20 years many solutions have come and most have gone. The key is that each of the successful applications are built around a central database of master file data that multiple users can access. There is only one set of data and a change in one place affects all other parts of the organization. In this case that is a good thing.
If you are interested in a state of the art solution priced at a reasonable level then you should check out Vicinity from Vicinity Manufacturing (www.viciintymanufacturing). There are others but this one was written from the ground up with the sole purpose to address the formula manufacturing needs and is not attempting to be everything to everyone.
So take a look at your existing system. Are you using excel to store data or to analyze results? I challenge you to dig deep take a long hard look and make changes where they make sense. Once centralized source of formula data will do wonders for your company and believe it or not will save you significant profits in the months and years to come.
In the meantime stay tuned to the next couple installments where we look at obsolete market leaders and what to do with that custom solution the "Bob" wrote before he headed to Tahiti.
In working with a bakery prospect last week I was inspired to write this blog.
I was having some pain in a tooth for quite some time and my dentist sent me to an Endodontist for a root canal. While there I was taken aback by the degrees, diplomas and accreditations proudly displayed by the doctor. When I asked about the educational requirements to perform my root canal my appreciation only increased. This person really knows what they are doing. I was impressed.
My bakery prospect is a family run company and has very limited resources and does not have a defined IT department. That is pretty typical for our prospects. When they came to me they were wrestling with the development models being presented to them – All-in-One vs Best of Breed.
I told them – "I am just glad that my general practitioner did not perform my root canal. The same can be said for business software."
It seems to me that the software development world is firmly planted in one of two worlds related to formula manufacturing. All-in-one (general practitioner) vs Best of Breed (Endodontist).
The All-in-One model of development requires one software vendor to develop, write, support and document every aspect of an information system for a formula manufacturer. This includes financials (AP, AR and GL), distribution (Pos, Sales Orders and Inventory), manufacturing and every other related feature (warehouse management, CRM, eCommerce). Some notable examples are SAP and Ross on the high end. On the lower end you have small boutique development firms that are pouring all their available resources into the products and barely keeping up with technology changes and changes in manufacturing, compliance and scheduling. Some are not even on SQL as the database and few are on .NET as a platform – each have been available for many years but some of these boutiques have not yet managed the transition to current technologies.
The other group of applications takes a best-of-breed approach where one central application is the key and additional functionality is added by smaller laser focused development firms. With this approach 75% of the features most companies require are delivered by out of the box widely distributed software such as Microsoft Dynamics. A company buying into this approach will rely on Microsoft for core functionality such as financials (AP, AR and GL), distribution (Pos, Sales Orders and Inventory). The remaining functionality is often industry specific and is delivered by ISV (Independent Software Vendors) that work very closely with the core ERP system.
So which approach is better for me?
Each has strengths and weaknesses and each has their own legacy.
All-in-One – The biggest advantage of this approach is that all development is controlled by one company. That is also the biggest liability. With exception of some large developers (SAP, Ross etc) these firms are rather small - less than 50 employees. The development resources are pulled in the direction that results in more sales, often leaving core functionality unaddressed. For example: most boutique formula manufacturing development firms spend most of their time on manufacturing issues (that makes sense) but they often overlook new developments in core product offerings such as electronic disbursement, CRM, sales taxes, commissions, warehouse management, eCommerce just to name a few. Finally – as the product matures so too does its development platform. If a developer is not careful either the product will become obsolete or a significant re-write of their product will be required – stopping all new development for at least a year. Neither is good.
Best of Breed – The biggest advantage of this approach is that the unique business requirements are developed by firms that focus entirely on solving that business issue. For example: a company specializing in formula manufacturing such as Vicinity Manufacturing writes this component, warehouse management experts provide their addition and eCommerce by people that eat sleep and breath those issues. It is all tied together by Microsoft Dynamics. In the end the total solution is tailored to meet the specific needs of the company at a very competitive price. Twenty years ago this approach would not have been feasible. But with .NET as a development platform Microsoft has made this model very attractive and the cost effective option for companies to consider. The biggest challenge of this approach is to ensure the local VAR (Value Added Reseller) can assist the implementation in ensuring the proper tools are brought to the table. In the Microsoft Dynamics channel that is easy to deliver.
So in the end it comes down to your comfort level as well as your understanding of technology advances.
If you feel your company is better served by a single (often small) company that controls all the feature functionality entering your company, if you are not interested in realizing technology improvements before changing software again and the all-in-one application has everything your company may ever need – then you would go with this approach.
If your company is dynamic in nature and experiences changes in requirements as years go along, your company has limited development resources in house to address gaps in your system functionality and you embrace competition as a way to reduce cost and increase functionality then the best-of-breed is a better model for you.
Personally – I am not excited about getting a root canal but if I have to get one then I want the person with the most experience, most up to date on the latest developments and only does root canals every day working on my mouth. If I have a problem with my foot I go to the Podiatrist or headaches to a Neurologist. While I like my family doctor I will take a team approach to my medical care thank you very much and I feel the same about my business software.
How about you?
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