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June 15, 1998

Extending ERP

Companies that don't use enterprise resource planning software to share information may regret it

By Tom Stein

ntil recently, Bassett Furniture, a $400 million manufacturer of wood furnishings, had a communication problem. Shoppers in stores that sold Bassett furniture might ask whether an item was in stock, what patterns it came in, and when it could be delivered. Good questions, but salespeople couldn't always answer them.

"I'm sure we had customers walk out of these shops because the salesperson couldn't give them a straight answer," concedes David Bilyeu, VP of IS at Bassett.

But someone, somewhere did have the answers. Everything from manufacturing schedules to inventory levels reside inside Bassett's J.D. Edwards enterprise resource planning (ERP) suite. The company solved its problem by creating a state-of-the-art extranet, giving all its retail partners access to its internal information over browser-based PCs. Salespeople can now tap into Bassett's system to check inventory, inquire about deliveries, and, best of all, place orders directly with the company.

Bassett's experience is just one example of a major shift in the way companies do business: They are extending ERP systems to provide better business value, with tighter collaboration with customers, suppliers, and ultimately end users, both domestically and globally. Organizations that have invested in ERP software to improve business internally are now starting to use these applications in bold new ways. Some companies are engaging in cross-enterprise collaboration, connecting their ERP systems to those of their supply-chain partners. This lets the participants conduct business whenever and wherever they want, and ensures a greater return on their investment. Innovative companies are also extending their ERP applications to the Internet, making even tiny suppliers on the other side of the world integral supply-chain partners.

Colgate-Palmolive Co. is piloting a new program in which it has extended its SAP software to the Internet, opening up such essential data as manufacturing production schedules and inventory levels to its key suppliers. The goal is vendor-managed inventory, in which suppliers are responsible for monitoring inventory levels on their own. When Colgate is running low on a particular ingredient for its toothpaste, the supplier will realize it immediately and replenish the stock without having to be notified first by Colgate.

"Right now, we send faxes to most of our suppliers," explains Ed Tobin, VP of global information technology at Colgate. "That means they don't always get the information when they need it"--especially since Colgate tends to order raw materials only after they're depleted. "By using technology to share information, we're making the process more efficient, reducingour inventory and shortening our replenishment cycles."

Such uses of ERP are still far ahead of the traditional, complex, expensive, and labor-intensive system called electronic data interchange (EDI), with which large, deep-pocketed companies have historically shared information.

Like Colgate, Bassett Furniture previously communicated with suppliers by fax. Whenever a customer had a question, the salesperson would have to contact someone at Bassett and wait hours, or even days, for the answer.

Since Bassett began collaborating on pilot projects with retail stores earlier this year, the company has managed to hold on to more customers and log more sales. Because the program is still in its early stages, Bilyeu refrains from releasing hard numbers. But just by making more information available, he says, the company has managed to slash delivery dates by four days.

Focus On Customers
More than ever, ERP systems are starting to address perhaps the most critical link in the value chain--the end customer. Thanks to an ever-tightening integration between sales-force automation applications and core ERP programs, consumers and business customers can, for the first time, configure and order online what they need, when they need it.