PUNCHERP WITH A1-2 TWO-TIER

ERP STRATEGY:

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ERP with a 1-2 Punch: Using a Two-Tier ERP Strategy to Compete

TWO-TIER ERP STRATEGIESINCREASE COMPETITIVE ADVANTAGE

or a variety of reasons, manufacturers havefound that operating with a single-instanceERP system is like fighting with one hand

tied behind their backs: it restricts their ability tocompete. Companies looking for an advantagehave found it in a Two-Tier ERP strategy. Thesecompanies have discovered that a second tier cansave thousands of hours and millions of dollars inlost opportunities. It gives them the 1-2 knockoutpunch they need to floor the competition.

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Why One-Punch ERP Isn’t EnoughManufacturing today requires flexibilityand the ability to adapt quickly to change.While standardizing systems acrossbusiness units provides some value, thereare also large costs associated with themaintenance and implementation of thesehuge systems. As these systems grow insize, so does the cost. They become lessflexible, slower to upgrade, and inhibitthe ability to compete. Like an agingboxer, time is not their friend.

$$

$$$$Increasing ERP Flexibilities

Single ERP

$

$ $

$ $

$ $

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$

$

$

$

$

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$with Two-Tier $$ $$ $$

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1Q2013

3Q20131Q2014

Global ERP Upgrade Schedule

3Q2014

1Q2015

3Q2015

Increasing ERP FlexibilityThe addition of Two-Tier ERP strategies gives manufacturers the flexibility to reach business opportunities that less-flexible systems can’t.

Compounding the difficulty in building competitiveadvantage through an ERP system is the homogeneousnature of global ERP systems. When everyone is operatingthe same solution, they have the same capabilities andno competitive advantage is gained. Any move is easilyanticipated and defended. The result is a draw.

Manufacturers often find that a single, global systemcan’t address their specific, local, competitive needsand can be too slow to implement. After lost timewaiting, the end result is a tremendous amount ofcompromise for a less-than-optimal system that can’tdeliver the competitive advantage they need today.

Many companies are forced to schedule ERPupgrades years in advance due to the resourcesrequired and cost of implementation. It couldliterally be years before upgrades hit localshop floors. Then the process starts all over.

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Four Winning Ring Strategies for Two-Tier ERP The following are the best practices of complex manufacturers we’ve identified using Two-Tier ERPstrategies to knock out their competition.

1. Go to the body—make local factories strategicin support of global value chains.

More often than not, competitions are won by executing rather simple actions consistently, over andover. In boxing, that means working the opponent’sbody. In manufacturing, that means operating withextreme efficiency at the local level. Two-Tier ERPsystems provide the very specific localized data youneed to operate in real time that global systemscan’t or don’t accommodate. This information iswhat enables you to innovate at the local processlevel and adjust your product strategy globally.

Adopting to Production Changes

Print Production

Laptop Production

X XX

X

When markets change, being able to adaptand source locally delivers huge time advantagesand eliminates production interruptions.

The example here shows how one global electronicsmanufacturer was able to quickly shift production fromprinters to laptops because of their ability to integratewith local supply chains.

2. Eliminate distractions—conquer bad complexity.

A boxer that takes his eyes off of his opponent is askingfor a very short fight. Manufacturing is no different.Focusing on too many things or the wrong thingsleads to inefficiency. Simplifying every phase of thevalue chain is the key to rooting out unnecessarycomplexity and becoming more efficient.

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“Inactivity is the biggest sinin boxing.”

Sugar Ray Leonard, "Boxer of theDecade" for the 1980s.

Focus on Core Business RequirementsFocus on Core Business RequirFocus on Cor ementse Business Requirements

Eliminating unnecessary information enablesyou to focus on your core business differentiatorsand hit your competition where it hurts the most.

In a recent study, IDC Manufacturing Insights identifiedthe following as the top three impediments to gettingmore value from existing ERP systems:

• 23.3 % - Existing ERP systems are too complex to integrate seamlessly with other existing applications.

• 20.1 % - Financial ERP and operational capabilities areweak or nonexistent.

• 18.4 % - Too complicated and expensive to upgrade.

What’s behind these statistics? In many instances,the needs of different departments, divisions andcountry subsidiaries are outpacing the centralizedERP systems.

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“All the time he's boxing, he'sthinking. All the time he wasthinking, I was hitting him.”

Jack Dempsey, World HeavyweightChampionship from 1919 to 1926.

3. Stick with the plan—unite enterprise systemsto a common strategic objective.

Just like a good fight plan, your ERP strategy shouldbe designed to go the distance. Leading companiesare using Two-Tier ERP systems as a central part of theirstrategy to streamline operations and gain customerinsights over the long haul. It enables companies tokeep pace with technology whether they’re dealingwith aging legacy systems, expanding into new marketsor integrating acquisitions into the organization. Someof the advantages companies are achieving include:

• Cultivating the local supply chain

• Streamlining process management and new product development

• Increasing flexibility

• Improving channel assembly programs

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“In boxing, you create a strategyto beat each new opponent;it`s just like chess.”Lennox Lewis, Three-time Heavyweight Champion

Unite Systems to ImproveSpeed-to-Market

A

B

One manufacturer displaced a long-standingrival by cultivating a local supply chain whiletheir competitor continued to outsource. Byusing a Two-Tier ERP strategy and sharing acommon system of record through MasterData Management (MDM), this company successfully displaced 34% of its competition.

4. Rely on your corner—capitalize on the knowledge of existing teams.

Nobody knows a boxer better than his corner. Similarly,nobody knows your business better than your in-houseexperts. Manufacturers that get the greatest benefitfrom a Two-Tier ERP strategy don’t chase the lowestcost hour around the world. Instead, they makemanufacturing a strategic role in their businessmodels. They use manufacturing centers as a meansto connect with, understand and ultimately gainmarket share in new markets through the following:

• Greater analytics and enterprise performancemanagement accuracy

• Concentrating on accelerating business modelsand time-to-market rather than cost reductions

• Gaining a time-to-market advantage and penetratingnew markets

• Capitalizing on analytics to become customer-driven

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“Throw a straight left down themiddle and we all go home.” Manny Stewards, Prince HamedNaseem’s cut man. (Naseemknocked out his opponent with astraight left in the next round.)

Experience Beats Low Cost Experience Beats Low Cost Experience Beats Low Cost Experience Beats Low Cost

Local in-house experts enhance your strategicadvantages while greatly reducing training,management costs and churn.

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And the winner is …Two-Tier ERP strategies are enabling manufacturers tostay in step with customers’ unique, changing andchallenging expectations and needs. They have thepotential to streamline new products and development,increase time-to-market and lead to greater cost andtime efficiencies throughout a manufacturing network.Companies that don’t have these abilities to maximizeand fine-tune their ERP system to match their businessstrategies are going to be left behind or suffer aknockout punch from companies that do.

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ReferencesNah, F. & Delgado, S. (2006). Critical Success Factorsfor Enterprise Resource Planning Implementation andUpgrade. The Journal of Computer Information Systems,46(5), 99-113.

Ugrin, J. (2009). The Effect of System Characteristics,Stage of Adoption and Experience on Institutional Explanations for ERP Systems Choice. Accounting Horizons, 23(4), 365-389.

Velcu, O. (2010). Strategic Alignment of ERP Implementation Stages: An Empirical Investigation. Information & Management, 47(3), 158.

About CincomCincom recognizes that it is your people—your customer-facing employees—who represent yourbrand. And in each interaction, it is the experiencethat they deliver to your customers that either buildsvalue for your brand or destroys it. It is a powerful role toplay. Since 1968, Cincom has helped thousands of clientsworldwide by solving complex business problems withits software and services.

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13/13ERP with a 1-2 Punch: Using a Two-Tier ERP Strategy to Compete