Today’s manufacturers operate on an increasingly global scale. Sharing and organizing data in a complicated network of plants and warehouses is a formidable challenge, but the right technology can help. Business network integration (BNI) is a multi-tier strategy that links up ERP, business intelligence (BI) and other software systems in manufacturing organizations of all sizes. It can be used to improve communication between multiple software systems across an organization -- and around the world.
In this Q&A, SearchManufacturingERP.com Associate Editor Brenda Cole spoke with Sheila Zelinger, vice president of portfolio solutions at SAP, about how BNI can be leveraged in manufacturing.
What is business network integration, and how is it achieved through ERP systems?
Sheila Zelinger: As companies expand their operations to penetrate new markets and grow their revenue, they find themselves faced with managing a tangled web of disparate, non-connected IT systems. This lack of integration between headquarters and subsidiary or partner operations creates a number of issues, such as difficult-to-manage operations, high IT costs, compliance problems and reduced flexibility.
Business network integration enables companies to seamlessly connect headquarters, subsidiary and partner operations using a multi-tier solution strategy. The multi-tier approach enables companies to deploy a best-fit ERP solution designed to meet the requirements of each operation -- ERP for the larger operations and a different ERP system designed for smaller subsidiary and partner operations that have lower transaction volumes, different functionality requirements or different business models.
In addition to the ERP solution, companies typically integrate business analytics applications, including BI, budgeting and consolidation and performance management applications to gain insight and provide visibility across the entire network. Finally, a technology platform is needed to accomplish the integration between headquarters, subsidiaries and partners. The more advanced solutions will also provide preconfigured or out-of-the box integration scenarios that reduce the cost and time required to harmonize and integrate the ERP processes.
How can business network integration improve manufacturing environments?
Zelinger: Integrating business processes and operations across an entire network can provide some significant benefits. Orders can be delivered to end customers faster; we’ve seen around 30% reduction in the order-to-fulfillment cycle. Productivity across sales operations, manufacturing planning and logistics increases; we’ve seen increases of around 10% by having all order-to-cash processes automated between headquarters, sales subsidiaries and manufacturing/distribution sites.
Stock-outs can be reduced, with collaborative demand forecasting and visibility to supply chain data across the network being key factors. Product quality can be improved by having visibility to key data on the manufacturing floor prior to shipping a product. We’ve also seen Days Sales Outstanding reduced by around 10% and significant reductions in the average cash conversion cycle. Finally, accurate and end-to-end profit center accounting can provide 360-degree visibility into product and customer profitability.
What factors should manufacturers look at before deciding to implement business network integration software using a multi-tier ERP system?
Zelinger: A company’s global BNI strategy depends on two factors: their global versus local business requirements and their IT capabilities. Companies with diverse business requirements often select a multi-tier solution. This is particularly true with multinational companies or holding companies, where products and supply chains are very different from subsidiary to subsidiary. It is also the case if there are unique or complex local, financial or regulatory requirements, or where flexibility is required to better compete with strong local competition.
IT capabilities also are an important factor in deciding whether a multi-tier ERP solution is better than a single-tier solution. If headquarters has a large, highly sophisticated IT staff that can support global, multinational operations, then a single-tier solution is often preferred. Otherwise, we have seen companies choose a multi-tier solution. Also, if third-party partners are involved -- either suppliers, outsourcing manufacturers, distributors or franchisees -- then a multi-tier solution is typically the preferred way to go.
Can you offer any best practices for selecting and implementing business network integration software?
Zelinger: Take a strategic view towards deploying BNI solutions. This will provide more business value in the end versus taking a more tactical approach, such as through consolidated reports, and the overall solution is likely to be more cost-effective. Look for a solution that is best fit for your business requirements. Focus on the requirements of the subsidiaries and partners, not just the headquarters. Determine how your subsidiaries cluster -- essentially, how they inter-relate with each other and headquarters -- as this can affect how you architect an overall solution as well as roll it out.
Consider all aspects of the solution, not just the ERP system, including BI tools and applications. Look at preconfigured integration scenarios to accelerate time to value and look for a vendor that has already done some of the heavy lifting. Evaluate the vendor’s partner ecosystem and determine if the vendor provided them the necessary tools, methods and training to be successful in implementing BNI and multi-tier ERP solutions in the countries you are interested in. Assess the vendor itself and don’t be afraid to ask for references.
Has interest in business network integration changed in recent years, and if so, how? What industries seem to show the most interest?
Zelinger: We are definitely seeing an uptick in interest in multi-tier BNI solutions. The economic downturn has had a lasting effect on purchase patterns. Companies are evaluating the business case for their smaller operations, and in cases where subsidiaries or partners are relatively small, or where they have low-cost operations, there’s definitely a case to be made for a multi-tier solution. A continued desire to expand into emerging countries is also resulting in heightened interest for BNI.
There have been more mergers and acquisitions in recent years, and companies typically want to quickly get these operations on a system that can be easily integrated back to headquarters; a multi-tier BNI solution is well suited for this. In addition, risk mitigation is becoming a more important driver.
We’ve seen interest in BNI increasing across a number of industries, including consumer, retail, automotive, life sciences, wholesale, oil and gas, high tech and professional services.
What are your predictions for the future of business network integration?
Zelinger: Companies will begin to view business network integration as a strategic initiative, largely driven by the accelerated pace of globalization, continued consolidation driving more mergers and acquisitions, and the increasing complexity of the global supply chain. Solutions will extend beyond the traditional ERP applications and into mobile applications, particularly in industries where mobile platforms play an important role, such as consumer, retail and distribution. More companies will explore hybrid solutions, using on-premise, on-demand and hosted solutions where it makes sense based on business requirements, IT capabilities and IT infrastructure reliability.