When Worlds Collide: Next Generation ERP

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ADVANCED MANUFACTURING

RESEARCH

ADVANCED MANUFACTURING

RESEARCH

When Worlds Collide:

Next Generation ERP

Bruce Richardson

Vice President, Research Strategy

ADVANCED MANUFACTURING RESEARCH. INC.

When Worlds Collide

The View From The Marketplace The Next Generation ERP

• Market Perspectives • Products

• Technology • Channels

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AMR’s 1996-1998 ERP Activity

Since January, 1996, Evaluated/Negotiated 185 Contracts Deals -- $1.5 Billion Software Deal Size: 48 - 60,000 Seats

• More Than 10,000 Seats: 30%

• 5,000 to 10,000 Seats: 40%

• Less Than 5,000 Seats: 30%

1996 Range: $150K to $30 Million 1997 Range: $225K to $140 Million 1998 Deals: Three Over 20,000 Seats

What Clients Tell AMR:

“We Want an Enterprise Backbone.”

“We Need Real-Time Decision Support That Spans Our Operations.”

“We Want Fewer Software Suppliers.” Vendor Response: Push for Broader

“Footprints”

Conclusion: High End Market to

Consolidate! Fewer, But Larger Vendors; Use Stock as Currency!

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Next Generation ERP

A Look Back in Time (1990)

The World Before ERP and Client/Server MRP II Was $ 1 Billion Market

--“Back Office Only” Application Emerging Technologies:

• UNIX, RDBMS, 4GLs … Motif, OSI, POSIX, …

Four $100 Million Vendors

• ASK, Dun & Bradstreet Software, SAP, and SSA

SAP Closed FY90 at $313 Million

• $20 Million in North American Sales • 110 North American Employees

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Fast Forward to March 10, 1998

ERP is a $41 Billion Business Today!

• $ 13 Billion + in Software in 1998 • $ 17 Billion in Services

• At Least $ 11 Billion in Hardware, Database, Networks,

and Complementary Applications

AMR Forecast for 1998:

• 35-40% Growth

• Replacement Market in US and Most of Europe • New First Time Markets

• Growth Across the Spectrum

Not Just for Manufacturers Anymore!

Continued Growth Through:

An Expanded Footprint: Supply Chain, Customer Management, Internet Apps ... New Verticals: Retail ...

Global Coverage: Japan, Latin America New Channels: Service Bureaus, 3PLs ... Moving Down Market

Goal: Sell More Seats! Be As Pervasive as Microsoft Office

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The Backbone Concept

Financials Procurement Manufacturing Engineering Human Resources Supply Chain ERP Backbone ADVANCED MANUFACTURING RESEARCH. INC.

The Enterprise Backbone

Horizontal Applications

Finance and Accounting, Costing, Inventory Management, Procurement,

Human Resources, Web Applications …

Layer on Industry-Specific Applications

Shop Floor Control, Manufacturing Planning, Banking, Utilities, Public Sector ….

Infrastructure Support

Distributed “Standard” Object Model, Workflow Real-time Intelligent Messaging, Published APIs ...

Move to Component Architectures

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Next Generation ERP:

Increasing the Product Footprint

Three Directions

Supply Chain Management Customer Asset Management Linking to Engineering

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Supply Chain Management

A Brief History of Planning (1990)

Before Supply Chain Management! A Wave of Point Solutions:

• Mainframe Based DRP and Forecasting • Plethora of Finite Capacity Scheduling • “Fast MRP” Using Custom Hardware

• Custom Warehouse and Transportation Systems

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Supply Chain Planning and Scheduling

Market to Reach $3 Billion in 2000! Was $350 Million in 1996

Most Expensive ERP Add-on Widespread Belief in Optimization Move From Point Solutions to Suites

Supply Chain Planning Backbone

Distribution Manufacturing Demand Suppliers Transportation Enterprise Planning

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The Suite Spot

1. Demand Planning

• #1 Source of Pain

• Link Planning With Sales and Marketing • Promotion and Event Planning

• Need for Causal Forecasting • Point-of-Sale Integration …

2. Distribution Planning

• DRP

• Load Balancing and Distribution • Continuous Replenishment • Sourcing

• Dynamic Deployment

• Available-to-Promise/“Profitable-to-Promise”

Rounding Out The Suite

3. Manufacturing Planning and Scheduling

• Material and Capacity Planning • Line Balancing

• “Theory of Constraints,” Genetic Algorithms ... • Available-to-Promise/”Profitable-to-Promise” ...

4. Transportation Planning

• Transportation Management • Load Balancing and Distribution • “Profitable-to Deliver”

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The Fifth Dimension

5. Enterprise View

• Graphical, 3D Model of the Entire Enterprise – Coordinate Plants and Distribution Centers – Plan All Transportation Lanes and Modes

– Check Resources at Contract Manufacturing Sites,

Third Party Carriers, Suppliers …

• Links to Data Warehousing … • Opportunity for Strategic Planning

• Add Execution for “21st Century War Room”

The New Supply Chain Planning Backbone?

Demand Planning

Mfg Planning & Scheduling

Distribution Planning

Transportation Planning

Enterprise Supply Chain Planning

ERP/ Data Warehouse Strategic Planning Tactical Planning Operational Scheduling

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New Directions

Embedded Planning Engines Inside ...

• ERP

• Order Management (Pre-Configured ATP) • WMS (ATP, Inventory Visibility)

• Sales Configuration (ATP)

Specialized Views

• Financial: Activity Based Costing Data • Executive: Performance Metrics • Procurement: Internet Applets

• Sales and Marketing: “Yield Management” • Partners: Collaborative Planning

But, Where Is the Execution?

Warehouse Management Transportation Management Order Management

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Customer Asset Management:

“Front End Applications”

“The Customer Interaction Chain”

Wave of Point Solutions and Suites High End Market is Consolidating Natural Extension to ERP

• Order Fulfillment: Pricing, Promotion,

Configuration/Packaging, Proposals, Delivery

• Link to Forecasting and Planning (Planograms)

Will ERP Vendors Dominate CAM?

• Yes, In Dominant Verticals • Adds Millions of New Seats • Standalone CAM or ERP Extension

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SAP To Make Aggressive SFA Push

Last Summer Formed Customer Review Board

In December, Buys 50% of K & V -- “People, Not Product”

New Development of SFA Components Add Industry Templates and Workbench New Set of BAPIs

First Shipments in 4Q98

Leverage Back Office/Front Office Ties

Customer Asset Management

Self-Service Apps Customer Support/ Call Center Field Service/ Logistics Sales Force Automation Sales Configurators “Marketing Automation” R/3 Backbone

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The Final Frontier:

ERP Meets Engineering

SAP to Unveil R/3 Engineering?

Customer Needs:

• LifeCycle Management -- “Concept to Volume,” New

Product Introduction, End of Life …

• Supplier Planning and Procurement • Uniform Part Numbering

• Single BOM

• Specification Management ...

What’s Available Now?

• New Configurator, PDM Component • Aspect Alliance

To Be Driven By A&D, Automotive, High Tech, Process Industries ...

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The Missing Link:

ERP-to-Engineering

Supplier Planning Component/ Supplier Mgmt Product Data Management LifeCycle Planning Product Configurator Specification Mgmt R/3 Backbone ADVANCED MANUFACTURING RESEARCH. INC.

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VIPER: A New Model ...

Vertically focused,

Integrated solution (Broad Footprint), spans Planning and Execution,

complete Replenishment management

system

Seriously, Though:

Market Wants an Integrated System Spanning, Planning, Execution, and Optimization

Provides Greater Visibility Re: Orders, Forecasts, Material/Capacity/Carrier Availability ...

Offers a Broad Footprint

Supports Complementary “Components” Delivers Measurable, Business Value -- Fast!

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The VIPER Suite

Planning: Demand Planning, Deployment Planning ...

Execution: Inventory Management,

Procurement, Order Management, WMS ... Optimization: Simulation, Enterprise

Optimization

Services: VMI, System Audits

Open APIs: Legacy ERP Systems, WMS, Transportation, Planning Add-ons, Merchandising Systems

Next Generation ERP: VIPER

SAP BIW SAP SFA

SAP Customer Care

SAP PDM

SAP Configurator

SAP: APO R/3 Backbone

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Why SAP is Well-Positioned:

Integration of R/3 to BIW to APO is Key Selling Point!

Strong Customer Base Business Benefit Sell

Focus on Rapid Implementations LiveCACHE, BAPIs, Other Enablers Challenges: Merging Planning and

Execution Mindsets; The TMS/WMS Void Does SAP Push Suite Vendors Back to Point

Solutions?

Next Generation ERP:

Enabling Technologies

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The Next Generation Is Here!

Business Framework

Workflow

Agents and Wizards

BIW: Data Warehousing / OLAP Business Engineer

Internet Commerce

Collaborative Applications Computer Center Mgmt System

LiveCache and New BAPIs!

Next Generation ERP:

New Channels

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Return of the Service Bureau:

The New Value Chain Utility

Initiation Fee, Monthly Charge, Set Contract Multiple Uses:

• IT Outsourcing

• Business Process Outsourcing • New Vertical Opportunities

While Ideal for Small Sites, Remote Locations, Technology Averse, … Applicable to Very Large Entities, too

A Monthly ERP Bill

“Rent” Software from SAP Or, a 3PL

Or, Set Up Your Own R/3 Utility

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Closing Thoughts

In Summary:

• ERP Becomes Enterprise Backbone

• Financials, Inventory and Procurement, and

HR Are Core Enterprise Apps

• Add Components for Specialty

Manufacturing, Supply Chain, Customer Asset Management, and Collaboration

• Final Frontier: Engineering

• Wave of New Enabling Technologies and

Delivery Options

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It’s January 4, 2000 ...

Do You Know Where SAP Is?

$ 12 Billion Run Rate By YE2000

Global Presence -- 30,000+ Employees Selling Business Solutions to Every Type of

Enterprise, Everywhere

Leveraging a Wide Variety of Channels, including 3PLs and Service Bureaus

$100 Billion+ Market Cap!

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Imagine That:

You Can Buy The New SAP VIPER Suite ... And the SAP Replenishment Applets You Can Buy All of This Via the Web ... Or Lease it from the SAP Service Bureau

Your Hasso Wizard Configures It for You! And You Run It All On Your New SAP Swatch

Web Watch/Cell Phone!