Role-Based ERP Systems: Impact on Manufacturing Performance

Introduction and Background

The contributions of Enterprise Resource Planning (ERP) systems continue to be problematic for many organizations globally. Continually challenged across industries to extract the greatest potential value from their significant investment in ERP systems, many organizations add incremental applications and processes. This continual addition of modules — often called ERP extensions — only serves to create a far greater level of system and integration complexity. Ironically, organizations choose to expand their use of ERP systems to reduce process, system, and integration complexity, yet the opposite often occurs.

The role of the ERP system as a central catalyst and coordination point of information throughout an organization is undergoing a fundamental change. No longer siloed and historical in its focus, ERP systems are increasingly being relied on as part of demand-driven networks. Given the severe economic conditions of recent years, organizations are relying on their ERP systems to play a greater role in supporting their business models — not merely as reporting or coordination platforms. ERP systems are being called upon to contribute to the performance of business models, not just report back information. The growth of the Demand Driven Supply Network (DDSN) and the concepts of Distributed Order Management Systems (OMS) are both cases in point. The evolution of ERP systems to encompass distributed order management (DOM)-based functionality is evaluated in this dissertation, specifically from the standpoint of how the tailoring of information to specific roles within an organization leads to greater productivity and profitability.

The critical link between ERP systems supporting greater role-based information and the resulting increase in efficiency, productivity, and profitability is the focus of the research objectives, methodology, and analysis in this dissertation. As ERP systems are more deeply integrated into the core business models of organizations that have often invested millions of dollars and thousands of man-hours to get them delivering valuable information, the need for them to become more focused on role-based contributions has emerged. The impact of role-based data and information workflows continues to be seen across manufacturing and service sectors of the global economy. This dissertation captures the key criteria that organizations use when choosing to augment and enhance the performance of their existing ERP systems to attain greater levels of performance over time.

Inherent in any ERP system redefinition is the alignment of its most critical components, systems, and reporting to the unmet needs of the organizations these systems were originally designed to serve. Over the last decade, the objectives and business models of organizations have changed significantly, with major impacts on the roles, responsibilities, and tasks of employees. ERP systems in general have not kept pace with this shift. The development of role-based ERP systems has been the primary strategy organizations have relied on to extract greater value from their investments in these systems over time. Coincident with this transition to role-based ERP systems has been an en masse adoption of analytics, business intelligence (BI), and Enterprise Performance Management (EPM). All of these areas are being integrated into role-based ERP systems so that performance can be better monitored, evaluated, and corrected over time.

Organizations taking this approach to redesigning their ERP systems are also integrating more transaction-based processes and workflows into their distributed order management (DOM) systems. This dissertation shows that those who have gone furthest in this process integration and process-centric view of their organizations are creating Service Oriented Architectures (SOA) that integrate distributed order management (DOM) systems as a key component. Early adopters are seeking to tightly integrate ordering, order management, supply chain management, pricing, and financial management into a cohesive and highly integrated SOA platform. As a result, SOA platforms and their underlying architectures are quickly becoming critically important to the future of ERP systems. This dynamic is evaluated in greater depth throughout the analysis of role-based ERP adoption, Business Process Management (BPM), Business Process Reengineering (BPR), distributed order management (DOM), and SOA platform and architecture definition. The role of Extensible Markup Language (XML) is also included in this analysis, as it is a critical integration technology for unifying disparate legacy systems into a common system of record. XML has emerged as the de facto standard and is accelerating in acceptance and use as a complementary technology in role-based ERP systems.

Enterprise Resource Planning (ERP) systems have grown in adoption and use as a result of organizations needing to realign their business models to rapidly changing and often turbulent market conditions, the rapid growth of the Internet as a viable distribution channel, and the inherent cost reductions possible from greater automation. These three factors, in addition to a myriad of company-specific forces, are in the process of redefining what an ERP system is, what its functional components are, and how its information and intelligence are used to support decision-making processes.

Organizations struggle to keep their ERP systems synchronized to their businesses. Studies indicate that organizations on average use only 30% of the functionality in their ERP systems over the long-term. As a result, the majority fail to gain the operating efficiencies necessary for ensuring the entire value chains of their corporations stay at a performance level sufficiently high enough to generate a positive Return on Investment (ROI) in the ERP system and related technologies.

ERP systems are gradually losing step with the needs of the companies and organizations they were initially designed to serve. The business value of ERP systems is therefore dropping as they lack the ability to stay aligned with the revised and often expanded roles and responsibilities of those who use these systems most. The problem is one of redefining the methods, techniques, and taxonomies ERP systems use to deliver data, insights, and intelligence that is more relevant to the rapidly changing roles in organizations. Studies indicate that simply adding more components to cover a broader range of any given organization's value chain is ineffective in delivering greater value to the enterprise. While heavily promoted by ERP vendors and consultants, this "bigger is better" approach is fraught with failure. The fact that there is even more data chasing even fewer hours of those relying on the system to do their jobs significantly reduces the chances of success of this strategy. Instead, the tailoring of an ERP system to the unique and often rapidly changing needs of an organization is critical. This forces recognition of the problem that the business value of ERP systems is decelerating much more rapidly than anticipated, as enterprises seek the critical information they need through alternative processes and systems to support the roles they rely on for their strategies to be implemented and business plans realized.

ERP systems are failing to deliver on the promise of greater efficiency, cost reductions, and the ability to deliver greater customer satisfaction through more effective company-wide performance. Furthermore, ERP systems' core information processing functions are not staying consistent with the needs of changing organizational roles, which is leading to a significant level of dissatisfaction with their performance. Studies indicate that nearly 70% of ERP implementations fail to deliver on the initial objectives they are designed to accomplish, leading to widespread dissatisfaction. Studies of customer and user satisfaction indicate that 68% are dissatisfied with their ERP systems. One study of manufacturers using ERP systems indicates that 45% are reverting to manual processes to accomplish their business strategies. A study of organizations that rely heavily on channel management-centric systems to integrate their selling, pricing, sales, and product configuration strategies also found they are constrained by the lack of accurate data provided by ERP systems. The greater the complexity of the product configurations being resold through channels, the greater the need for integration at the process and system level.

User satisfaction with ERP systems is proportional to the level of continual realignment of analytics, business intelligence, financial data, and operating data to users' specific roles. In the long-term, the extent to which an ERP system aligns to the roles of the organization it serves is the extent to which it also contributes greater financial performance. Failing to plan for, implement, and stay vigilant about keeping ERP systems responsive to the role-based needs of enterprises has significant impacts on financial performance, customer satisfaction, and the long-term ability to stay competitive in new markets.

The problem of how to keep ERP systems continually aligned to the information needs of enterprises is encapsulated in the challenges of creating and sustaining role-based information systems. To keep ERP systems in a purely functional definition that perpetuates their use in a siloed architecture is to drastically reduce their effectiveness from a financial, internal efficiency, and customer satisfaction perspective. Role-based ERP systems are critical for making the siloed, highly inefficient architectures of legacy ERP systems more relevant, enabling greater financial performance, and leading to higher levels of overall customer satisfaction.

The purpose of this study is to evaluate how enterprises that adopt role-based ERP system implementations are able to attain higher levels of financial and operations-based performance compared to those that rely on silo-based, more functionally defined ERP structures. Role-based ERP systems have been proven to lead to greater order accuracy, velocity, and customer satisfaction. The ability to gain greater visibility throughout supply chains, better manage pricing and discounts, implement and maintain contract management systems, and deliver consistently high customer service have all been attributed to role-based ERP systems. Conversely, siloed ERP systems managed strictly to functional areas have been shown to severely limit the ability of enterprises to be more responsive to market demands. Originally designed to maximize the performance of functional departments, these ERP systems today restrict the ability of organizations to be more market-driven.

The transition of ERP systems from being mere systems of record to being catalysts of competitive advantage has led to role-based designs becoming prevalent. Higher satisfaction levels among users, greater efficiency in supply chain management and visibility, more effective and focused channel management strategies, and many other benefits are derived when the data in an ERP system can be more effectively used. This is the central problem this dissertation seeks to address.

The following are the key research questions of this study, later used as part of the hypothesis and in the definition of methodology:

1. Do role-based ERP systems deliver greater levels of operational performance due to minimized data latency and maximized accuracy? In other words, are role-based ERP systems more effective at delivering the right information or analysis at the right time to make decisions more effectively and therefore reduce chances for errors?

2. Are role-based ERP systems more effective at contributing to enterprise-wide strategies — including more effective channel management, supply chain management, and service lifecycle management initiatives — compared to their functional equivalents?

3. Are role-based ERP systems more agile at providing insights into the performance of individual functional and cross-functional teams and initiatives, including the capturing of more collaboratively focused Key Performance Indicators (KPIs) and metrics?

4. Do role-based ERP systems lead to greater levels of ERP adoption than their more siloed and functionally defined counterparts?

5. Is the scalability of role-based ERP systems more effective for strategies where channel management is an integral area of a company's overall business strategy?

6. Can role-based ERP systems contribute to greater levels of performance in quoting, product configuration, and mass customization strategies for manufacturers?

7. Are the costs associated with redesigning a previous-generation ERP system to be more role-based earned back in operational efficiencies, higher levels of order accuracy cost savings, and increased Return on Investment (ROI) over time?

8. How do integration technologies — specifically XML — influence the design and performance of role-based ERP systems over time?

These are the most critical questions to be evaluated in the context of this dissertation. The focus on how to quantify the performance of role-based ERP systems as they relate to both individual contributor productivity and their impact on the broader financial performance of an organization requires greater assessment. Implicit in this dissertation's analysis is an evaluation of how the adoption rates of each generation of ERP systems impact the ability of enterprises that have standardized on them to respond to highly uncertain market conditions.

The highly turbulent nature of global economic conditions and the inherent risk they represent is today a very powerful catalyst driving the adoption of analytics, business intelligence, more real-time financial reporting and analysis, and in general a much higher level of reliance on KPIs. Risk reduction through more effective analysis of market uncertainties, better analysis of supply chain and sourcing dynamics, and the definition of contingency strategies all require process-based platforms capable of scaling to respond to strategic threats and opportunities. The growing adoption of Service Oriented Architectures (SOA) is primarily being driven by these needs for highly process-centric systems that can align quickly to the unique information requirements of individualized roles within an organization.

The SOA platforms early adopters are incorporating augment and strengthen their ERP systems to deliver greater data accuracy, more real-time analysis, and over time become critically important for the definition of customer-based strategies. The greatest adoption rate of SOA platforms is in fact specifically for redefining, augmenting, strengthening, and making more focused the customer-facing strategies companies have. In one sense, the SOA frameworks that early adopters are relying on are the transitory technology toward truly role-based ERP system implementations. Industry analysts and observers point to the fact that SOA frameworks may be short-term in duration given the rapidly changing ERP and enterprise systems landscape. However, initial studies of this specific area of adoption indicate that SOA frameworks are becoming so ingrained in the customer-based and customer-centric strategies of enterprises using them that it is doubtful they will be replaced — only expanded. The area of greatest expansion will be in the development of Web Services (Alonso, Kuno, Casati, Machiraju, 2004) that can integrate into SOA frameworks and replicate the functions of traditional, silo-based ERP systems.

With SOA frameworks emerging as catalysts of more customer-driven strategies and also being seen as reasonable substitutes for role-based ERP systems, this dynamic of Web Services adoption on SOA platforms needs to be taken into account in this analysis. For those enterprises not choosing to rip and replace their ERP systems or significantly modify them to support role-based data, business intelligence (BI), and EPM functions, the use of SOA frameworks with selective integration of Web Services is an interim platform approach that spares the cost and time of entirely becoming role-based (Alonso, Kuno, Casati, Machiraju, 2004) in ERP strategies.

The importance of the study is therefore multifaceted. The validating or refuting of role-based ERP systems delivering higher levels of financial and operational performance relative to more rigid, inflexible silo-based platforms needs to be assessed. This is critically important to the definition of ERP role-based systems and their ability to provide real-time, accurate, and relevant data to drive better decisions. Making these dynamics more difficult to clearly predict is the growing adoption of SOA frameworks and the flexibility these provide for selective adoption of Web Services. Web Services are often adopted as additions or extensions of ERP systems that have failed to scale to meet the needs of organizations over time (Amoako-Gyampah, 2004). SOA frameworks are thus becoming interim substitutes that forestall the painful and costly decision to rip and replace one ERP system for another, while also providing enterprises with the option of evaluating Web Services to support their more customer-centric strategies (Amoako-Gyampah, Salam, 2004).

Balancing between the traditional, highly siloed legacy ERP systems and the early adopters of SOA frameworks are those ERP systems that have been modified to provide for role-based use, including business intelligence (BI), data management, and EPM. While BPM and BPR strategies are more quickly accomplished using SOA frameworks given their process-centric structure, the value of role-based ERP systems lies in their ability to more precisely align with the engrained processes of how companies manage mission-critical strategies. Of the three options — staying with a functionally defined legacy ERP system, adopting an SOA framework with selective use of Web Services, or creating a role-based ERP system based on legacy and new components — the last has the greatest potential for the highest ROI and probability of success. It is the intent of this dissertation to explain why this is so.

Studies indicate that overcoming resistance to change in any ERP implementation begins when those using the system have a voice in how it is being defined. A secondary benefit of defining a role-based ERP system is that there is greater potential for those most impacted by it to have a say in its creation, design, and eventual launch and use enterprise-wide. The importance of this study therefore lies in defining and intermediating between these three critical alternatives that enterprises must contend with to ensure their ERP systems stay responsive and relevant to their ongoing business strategies. The connection between role-based ERP systems' performance and XML integration is also evaluated in this dissertation.

Literature Review: MRP, MRP-II, and the Evolution to ERP

For purposes of clarity and brevity, this study is focused on manufacturers whose operations are primarily located in the U.S. Specifically focusing on manufacturers in the Standard Industrial Classification (SIC) code of 3571 (electronic computers), this study concentrates on their use of legacy ERP systems, adoption of SOA frameworks and Web Services, and performance gained as a result of role-based ERP systems.

Manufacturers have a myriad of processes they rely on for managing their supply chains, distribution channels, and selling relationships. The role of the ERP system as coordinator and consolidator of activity while also serving as a single system of record for these strategies is critical for the long-term viability of a business.

The focus of this specific study is on how role-based ERP systems contribute to greater channel management effectiveness and performance, specifically in the areas of quote-to-order, assemble-to-order, build-to-order, and engineer-to-order process workflows. These are the most complex of workflows in that they require tight process and information systems integration between sales channels, manufacturing centers, forecasting, pricing, and supply chain systems. The ability of any manufacturer to stay competitive is directly related to how well these systems, their accompanying processes, and the role-based distribution of data are managed.

Despite legacy and siloed ERP systems being oriented toward functional roles, Business Process Management (BPM) and Business Process Reengineering (BPR) techniques are being used to extend these systems into role-based use. SOA frameworks and Web Services are also being used specifically to address role-based data needs, yet are more focused on integrating critical business processes than on the specific data needs of individual employees. The scope of the study encompasses these three dominant types of systems used for managing the quote-to-order process throughout an organization: legacy ERP systems, early adoption of SOA frameworks and Web Services, and the mainstream adoption of role-based ERP systems.

APS — Automated Planning and Schedule: a type of application used for planning production.

Assemble-to-Order (ATO) — A manufacturing strategy where products are produced by assembling make-to-stock components.

ATP — Available to Promise: a measure of a supply chain's ability to report back when a product can be built.

Build-to-Order (BTO) — A product strategy aimed at creating customized products where approximately 30% of product content is custom.

Configurator — A software application typically included in more complex ordering systems that serves as a constraint engine, making it possible to create customized products automatically based on user selections.

Configure-to-Order (CTO) — A product strategy aimed at creating customized products where between 30% and 60% of product content is custom.

DOM — Distributed Order Management.

Electronic Data Interchange (EDI) — A standardized method for electronic exchange of business documents between organizations.

Enterprise Resource Planning (ERP) — An enterprise-wide system typically used for managing the production of products in factories and coordinating business operations.

Engineer-to-Order (ETO) — A product strategy aimed at creating customized products where 70% or more of product content is custom.

Manufacturing Resource Planning (MRP) System — The precursor to the ERP system, primarily focused on how to allocate raw materials, labor hours, manufacturing resources, and assets to the attainment of production schedules and broader business objectives.

MTS — Make-to-stock: products built specifically to mass customer requirements that constitute the majority of a company's inventory.

OMS — Order Management System: a critical area of any ERP system that coordinates transactions, workflows, and processes for the accurate and timely delivery of orders, financial reports, and the integration of forecasts into planning.

Quote-to-Order (Q-T-O) — The process that encompasses quoting through order fulfillment, typically combined with BTO and ETO processes to create quotes for customized products tailored to specific users' needs.

VMI — Vendor Managed Inventory: the coordination of inventory demand across a supplier and distributor, a method of ensuring lean manufacturing efficiencies.

Assemble-to-Order — A product configuration strategy focused on taking manufactured components or subassemblies and creating a finalized assembly from them. Assemble-to-order product configuration strategies are often rules-based and define the interrelationships and compatibilities between components, subassemblies, and parts of a product. Found most often in high-tech, channel assembly, and electronics industries, as well as furniture, retail, packaging, and printing.

Build-to-Order — Manufacturers using a build-to-order strategy customize smaller portions of the product for the unique requirements of customers, with the majority of product content based on made-to-stock or standardized product. Examples include auto manufacturers offering several options on engines and interiors, as well as high-tech, automotive, medical, and financial services verticals.

Configure-to-Order — Manufacturers of complex products use this strategy for customizing their products to an exacting set of specifications from their manufacturing customers. Configure-to-order products are comprised of both standardized and customized components, with the majority being customized to the customer's needs. Industries relying on configure-to-order include telecommunications, heavy industrial equipment, turbine and pump production, elevators and escalators, and complex cabling systems.

Engineer-to-Order — Where the majority, if not all, product components are specifically created to a customer's unique requirements, it is referred to as an engineer-to-order (ETO) strategy. Products manufactured using an ETO process are defined with highly specific engineering documents and often require that sales configurators have the ability to generate multi-level CAD drawings and specifications. Examples include aircraft, aerospace and defense products, power generators, HVAC equipment, and specialty use engines.

A major limitation of this study is the lack of coverage of the services sector. There are many implications for role-based ERP and data management systems throughout service-based industries, as these industries are primarily focused on attaining a high level of customer satisfaction through effective interactions. A deliberate decision was made to concentrate on the more complex manufacturing processes, as they provide stronger validation of role-based ERP systems delivering significantly greater value over time.

Another limitation is the lack of analysis in the area of pricing optimization and pricing execution. This strategy is more focused on time-based services and was not included in this analysis as it is not integral to the quote-to-order and product configuration processes that are the core focus of this study. Additionally, the performance of traditional ERP systems is not included in the primary research, as the gains in productivity from role-based data are the primary focus.

Additional limitations include the stratified random sample used, based on available contacts in the high-tech industry sector. The sampling frame is not all-inclusive of the global industry and is more representative of the United States and its most frequently traded-with partners. Australian and UK-based distribution partners of high-tech manufacturers and their channel assembly programs were not specifically interviewed; however, their influence on the quote-to-order process of these manufacturers is significant and taken into account in the metrics shown. In addition, the supply chains of each of these high-tech manufacturers were not interviewed as part of the research process. While supply chain partners exert significant influence on the quote-to-order process, they are outside the scope of this study, which centers on the contributions of role-based analytics and business intelligence.

Enterprise Resource Planning (ERP) systems have for over two decades been the basis of many manufacturing companies' central database for managing operations. Despite the pervasive adoption of ERP systems throughout manufacturers globally, less than 30% of the features in any given ERP platform are consistently used. When just 16% additional functionality is used there is often a significant increase in productivity, especially in distribution-centric, time-sensitive business models. The more time-based a manufacturing operation is, the greater the reliance on ERP systems for greater levels of data synchronization and performance. ERP systems have evolved from systems of record primarily used as databases to track historical data to being used as the basis of predictive analytics, business intelligence, and enterprise performance management (EPM) strategies (Al-Mashari, Al-Mudimigh, Zairi, 2003). The incremental improvements in the use of ERP systems that revolve around roles and how those using the systems need accurate, real-time data has rejuvenated investment in this enterprise software strategy.

Determining the effects of role-based ERP systems on each aspect of a manufacturing operation — with specific emphasis on the critical links between customers and manufacturing centers — provides insights into best practices for managing role-based data effectively. The reliance on distributors, dealers, channel partners, and selling agents further complicates reliance on a single system of record for managing complex channel interrelationships. As a result of these shortcomings, manufacturers began to design their own extensions to their Manufacturing Resource Planning (MRP) systems.

MRP systems initially began as enterprise systems designed to coordinate Bill of Materials (BOM), Lead Times in the form of an Item Master File, Inventory Data, and Purchasing Data that, when combined with Master Production Schedules, create a system of record for all manufacturing activity in an organization. Initial MRP systems were highly dependent on the reporting processes and procedures within each functional area of the organizations they were initially installed in. These systems relied on periodic updates, often in batch mode, which made the task of generating reports a monthly process.

Reporting was often completed every thirty days for commonly manufactured products and every sixty to ninety days for more complex build-to-order and customization-based products. This drastically reduced inventory turns per year and led to supply chains being much slower to respond to customer requirements over time. It would therefore be common to require two to three months to get feedback on the performance of new lean manufacturing initiatives, determine if supply chain sourcing programs were leading to cost reductions, and ascertain if the Master Production Schedule reflected actual customer demand in the market. MRP systems were to a large extent extremely inflexible in forecasting demand, managing significant shifts in market requirements, and responding with agility to shifts in distribution channels. Add in the fact that MRP systems often required intensive modification to support a new product definition — first at the Bill of Materials level, then at the pricing level — and the time required to launch a new product could easily stretch into months.

As a result of the need to manage product complexity within MRP systems, the development and testing of more expanded functional components became more commonplace. The MRP systems still suffered from being exceptionally slow to respond to market conditions, yet the accuracy of product builds was significantly higher. MRP systems also proved highly effective in managing mass production-related tasks, including the consolidation of product lines into a single production set of requirements. This often led manufacturers to plan new products not for diversity or variation but for consistency and lack of variability. The less the product variability, the greater the efficiency and performance of an MRP system and the more predictable the performance of an entire manufacturing company, given steady sales rates. Throughout the 1960s through the 1980s, global manufacturing quickly integrated MRP systems into their operations specifically looking for the financial and operations-based levels of performance possible.

With significant reductions in variability, manufacturers were able to isolate the causes and effects of poor quality. MRP systems led to the development of quality management strategies including Non-Compliance/Corrective Action (NC/CA), Corrective Action/Preventative Action (CAPA), Supplier Audit Management, and Document Lifecycle Management. Each of these quality management strategies was specifically designed to alleviate the risk of variability impacting overall product schedules and supplier timing.

Non-Compliance/Corrective Action (NC/CA) — This quality management strategy focuses on identifying variation in each production process that leads to variation in product quality. It is an abbreviated Six Sigma strategy that seeks to reduce variation in both product and process areas of manufacturers' operations. NC/CA systems and processes became more commonplace as MRP systems could track down to the lot and delivery level which products had arrived from which supplier. The combination of NC/CA and Supplier Audit Management led to greater control over the Master Production Schedule from the standpoint of understanding how quality was impacting production (Al-Mashari, Zairi, 2000).

Corrective Action/Preventative Action (CA/PA) — As MRP systems began to gain greater visibility into production operations and report on production yields in weekly rather than monthly increments, new insights were gained into managing supplier quality more efficiently. The introduction of scorecards populated with metrics and KPIs began to initially be used in this specific area of quality management. The progression of reporting functions within MRP systems made it possible to build out an enterprise quality management framework including quality systems, design controls, document controls, manufacturing controls, distribution controls, and post-distribution controls. This progression took decades of adoption of MRP systems throughout manufacturing organizations. The end result was a scalable, highly efficient series of quality management processes that contributed to MRP becoming an industry standard.

Supplier Audit Management — The integration of Bill of Materials, Lead Times, Inventory Data, and Purchasing Data formed the beginnings of a system of record that could also be used for Supplier Audit Management. As MRP systems began to track errors over time, the coordination of the Master Production Schedule with these data sources gave manufacturers greater visibility into how their suppliers were performing against their benchmarks. As KPIs and metrics were continually fine-tuned, MRP systems were able to create more effective reports of supplier compliance to quality initiatives. Audits were instrumental in providing the first MRP-based manufacturers with insights into which areas of their systems needed the most enhancements. The net result was that supplier quality degraded as MRP systems could not scale from a performance standpoint to keep pace with overall industry change driven by customers. This dynamic helped to transition MRP to MRP-II.

Document Lifecycle Management — The role of Document Controls plays a critically important central role in the overall quality management process being effective over time. The ability to integrate corrective action into department management, including the use of design, manufacturing, and distribution controls, is critical. Just as with Supplier Audits, Post-Distribution Controls provides the necessary feedback loop to continually improve and provide a basis for creating and maintaining consistent value throughout a manufacturing company. The fact that MRP systems were getting bogged down with the many reports needed for running a business — instead of analyzing how best to manage the future direction of the enterprise — led to the development of MRP-II extensions.

MRP systems' lack of scalability to drive greater demand-driven reporting, data analysis, and strategic direction necessitated the development of MRP-II applications and platforms. Design objectives for MRP-II systems concentrated on collaboration across core functional areas to ensure a higher level of transaction velocity and speed. For the first time, the processes were becoming customer-centric. MRP-II signaled the recognition in many manufacturers that customers, not products, were at the center of their businesses. Once this differentiation was made, the structure of MRP-II systems began to shift away from purely functional definitions and began to support components enabling greater levels of customer-driven and demand-driven strategies. The two most pressing areas of performance were specifically in channel management and supply chain management — the two most time-critical processes any manufacturer has to contend with.

The development of MRP-II extensions included engineering integration encompassing the beginnings of new product development and introduction (NPDI) (Aberdeen, 2005), Product Lifecycle Management (PLM), and the automating of the Engineering Change Order (ECO) process. In addition, more effective approaches to managing supply chains were created, specifically focusing on supply chain management and forecasting. The beginnings of the Collaborative Planning and Forecasting (CPFR) framework also began at this point in the evolution of the MRP-II application stack. Supply Chain Optimization (SCO) through the use of constraint-based configuration logic — which would later be used in product configurators for designing and producing build-to-order products — was initially introduced. The first steps towards strategic sourcing were also defined and executed with the development of collaborative platforms that could unify entire supplier networks.

MRP-II began to specifically integrate financial data directly into the production plan, capacity planning, and Master Production Schedules. The lessons learned from Supplier Audit Management workflows were included in the design of the MRP-II Functional Workflows, as can be seen from the Adjust Production Plan and Adjust Master Schedule feedback loops. The Production Plan gathers inputs from Finance, Manufacturing, and Marketing functional applications to ensure that demand is accurately captured for capacity planning to be completed. As the major lessons learned from Supplier Audit Management continued to provide corrective and preventative actions, the specific functional areas of MRP-II also increased in depth of functionality and integration.

A key lesson learned from the development of MRP-II-based systems was that the greater the depth and breadth of process integration, the greater the overall performance of the entire system and its applications. MRP-II led the evolution of enterprise manufacturing systems to become more demand-driven and less focused purely on production efficiency. This also led to the development of more effective measures of product line, distribution channel, and eventually marketing strategies as well. In effect, the integration levels, greater flexibility of production processes, and more effective approaches to managing financial reporting all contributed to the development of customer-centric manufacturing organizations.

MRP-II extensions including engineering, financial planning, manufacturing applications, supply chain management, and purchasing began to develop to support forecasting-based manufacturing. Inherent in this shift to forecast-based manufacturing was the differentiation of short-term, intermediate-range, and long-range planning. The shift from mass production with little variation in product design and features to product and mass customization was enabled by MRP-II planning workflows. For the first time, manufacturers could gain greater control over the connection between sales and market forecasts on one hand and production forecasts on the other.

This shift on the part of MRP-II systems to support build-to-order selling and manufacturing strategies set the foundation for role-based ERP applications and platforms as well. Role-based ERP systems capitalized on the need for information throughout each of the planning horizons and also defined the series of functional applications by area. The development of predictive analysis of each specific manufacturing strategy was therefore more attainable. Role-based analytics and intelligence also specifically focused on how to create more insights into which specific product options and configurations would be most and least useful to customers. This need for greater insight into the use of role-based technologies also led to the development of extended ERP systems that could manage multiple manufacturing locations, keeping them all synchronized with each other throughout the production process.

Role-based analytics, data, and business intelligence served as the catalyst for integrating engineering more into the workflows of sales, product management, manufacturing, and customer service. Engineering became essential for the development of more effective mass customization and build-to-order strategies — a critical link that did not exist prior to the development of MRP-II applications and supporting platforms.

Second, the development of financial systems capable of getting beyond just reporting data and actually providing insights into how decisions would be impacted over time began to develop. The use of financial planning systems specifically for managing the response to demand manufacturers were facing as they revolutionized their business models was also strengthened by the rapid evolution of role-based reporting and information systems.

Third, manufacturing systems themselves went through a transformation from being initially designed to provide for mass production and little production variation to the adoption of lean manufacturing principles that provided flexibility in managing more customized product and design strategies. The development of demand-driven supply chains (DDSN) and production centers based on lean manufacturing concepts was nurtured by the development of more market-driven ERP-II applications. ERP-II signaled the real-time integration of marketing, manufacturing, and supply chains, leading to the development of demand-driven supply networks that revolutionized how companies designed, produced, sold, and serviced their products.

Greater data and intelligence delivered greater flexibility into the design of ERP systems. The inclusion of Invoicing, Sales Order Management (including order capture, distributed order management, and product configuration) was accomplished with greater systems and process integration. The development of more responsive and market-driven vendor communication platforms — including Electronic Data Interchange (EDI), e-commerce integration to quote-to-order systems, and the development of pricing exception reporting — were enabled due to data and intelligence being more role-based and less focused on pure production efficiency. The breadth of support for Distributed Order Management (DOM) systems also increased significantly as a result.

ERP systems that are role-based are capable of supporting demand management strategies as they provide actionable, relevant data to decision makers. The use of key performance indicators (KPIs) and metrics to keep manufacturing strategies aligned to product strategies has helped discrete and high-tech manufacturers make the transition from MRP-II functional performance to more demand-driven and market-based strategies.

Manufacturers quickly realized that by standardizing manufacturing on a common platform and then selectively adding in components and features, entirely new markets could be addressed through their build-to-order and mass customization strategies. Being able to use a common product platform and then selectively customize it for the unique needs of a given market also led to a proliferation of brands, product lines, and the reliance on product lifecycles as a means to be more competitive. These four factors — customization, addressing the unique needs of a given market, proliferation of brands, and reliance on product lifecycles as a competitive strategy — served as a catalyst for a much more varied set of ERP functionality extensions being produced.

High-tech manufacturer Dell Computer Corporation initially relied on its unique and proprietary ERP system to fuel the growth of its build-to-order business model, eventually creating a global supply chain. Dell was also one of the first companies to rely on its ERP system to create a unified supply chain that eventually became a knowledge ecosystem. Toyota has similarly seen this with their Toyota Production System (TPS) and the levels of knowledge they are gaining as a result (Dyer, Nobeoka, 2000).

Manufacturers as diverse as General Electric — with its diverse project-based platform for creating exceptional reliability in jet engines and aerospace products — and Siemens, the global leader in build-to-order electric engines, share a common foundation. Companies including GE, Siemens, Boeing, and Northrop Grumman have been successful in aligning their go-to-market strategies to their manufacturing expertise. These manufacturers in the Aerospace and Defense (A&D) industry have well-defined processes for managing engineer-to-order production and quality management workflows. The build-out of ERP extensions in the case of A&D manufacturers supports their core business models exceptionally well as a result (Akkermans, van Helden, 2002). The ability to produce engineer-to-order products, bundle in services, and create knowledge systems across their industries takes a unique series of leadership skill sets (Dyer, Nobeoka, 2000).

Manufacturers including Dell, GE, HP, Siemens, and others that combine ERP extensions to create a scalable platform for implementing their strategies have been able to attain exceptional levels of financial performance over time. A critical prerequisite for this to occur is that an exceptionally high level of trust needs to be attained across enterprise business groups (Lee, Lee, Olson, Chung, 2010), business partners, and the broader supply chain. They are not strategic "bolt-ons"; they are integral to the development of enterprise-wide strategies that lead corporations to attain increasingly challenging objectives (Lam, 2005a; Lam, 2005b).

As manufacturers' strategies have concentrated on creating platforms to support increasingly scalable business models, the proliferation of ERP extensions has also led to the development of entire layers of functionality, spanning analytics, financials, Human Capital Management (HCM), procurement and logistics execution, product development and manufacturing, sales and service, and corporate services.

As high-tech manufacturers quickly learned to compete on time-to-market, pricing became the competitive weapon of choice to win market share. This put an entirely new set of pressures and criteria on the ERP extensions manufacturers used to compete in global markets. It forced the issue of profitability on those manufacturers who had very rapid product lifecycles and made their reliance on their core ERP functional components even greater. This competitive dynamic of focusing on price as the primary competitive strategy also stressed each area of manufacturers to such an extent that entirely new customer-centric ERP extensions were created (Larsen, 2003). Included in these customer-centric ERP extensions was a much greater focus on channel management, quoting, product configuration, pricing, service, and how to integrate role-based data and business intelligence into the daily sales prospecting and closing process. The most rigorous of these is the quote-to-order process, as it requires an intensive level of role-based intelligence to be effective.

Combining visibility into manufacturing, sales quoting workflows, and integration to supply chain systems in order to set Available-to-Promise (ATP) and Capable-to-Promise (CTP) for each quote produced and filled (Akkermans, Bogerd, Yucesan, van Wassenhove, 2003) revolutionized the entire selling practice because it established delivery dates for highly customized products designed specifically to customers' unique needs. The use of role-based data and business intelligence (BI) also set the foundation for supporting a highly integrated quote-to-order process that could have its performance evaluated in terms of financial, manufacturing, and supply chain performance parameters (Al-Mashari, 2003).

Quote-to-order strategies are delivering on the potential to increase profitability while also increasing the efficiency and use of production and manufacturing assets and centers. For these strategies to succeed, they need to have an exceptionally high level of synchronization across ERP systems and must also have very accurate, clear role-based data, BI, and accurate forecasts across their supply chains. Both B2B and B2C companies rely on quote-to-order strategies to integrate with their product configurators to accurately quote the pricing and availability for complex products.

Analysis of a typical manual quote-to-order workflow in a manufacturing company shows an elapsed time of 25 days — an entire month lost just in creating a response to a quote for a highly complex product. For Dell, HP, IBM, or other high-tech manufacturers whose product lines are extremely fast-moving by any industry's standards, 30 days spent on just fulfilling a quote is exceptionally slow. The contribution of role-based analytics, data, and BI can be found in the time savings in the quote-to-order process. It is clear that role-based intelligence is more about time consolidation — compressing and making more efficient the key processes to serve clients and customers — and less about cost reduction alone (Lea, Gupta, Yu, 2005). Role-based analytics, BI, and data analysis are strategies companies are using to attack the large inefficiencies of quoting for complex products and services, turning these processes from a liability to a competitive strength.

Conclusion and Implications for Future Research

Role-based analytics and business intelligence is increasingly being relied on by high-tech manufacturers in the areas of lean manufacturing, inventory management, quote-to-order, and project management. The primary research completed delivers insights into how high-tech manufacturers can make their quoting systems more efficient, selling more profitably and with greater accuracy than they had in the past. Consistent with the research completed on ERP adoption, there is significant resistance to change in changing or augmenting enterprise systems. The reluctance to change is seen in how high-tech companies rely intensively on pilots and limited roll-outs to gauge the impact of ERP systems with role-based analytics and business intelligence.