The following Supply Chain Matters guest commentary is contributed by Praveen Kumar Agrawal, Principal Consultant, SCM Practice, Enterprise Solutions, Infosys Technologies Ltd.

A classic but important debate concerning ERP vs. Enterprise Asset Management (EAM) systems keeps coming up in some of my client interactions within Infosys. I see this debate coming from two different types of client situations: (i) Clients currently using ERP systems but not as yet implementing any asset management functions who are now evaluating either asset management module of existing ERP or a best of breed EAM package, and (ii) Clients using a best of breed EAM package along with ERP for a considerable amount of time. Due to older versions of the technology, these clients now look for upgrading their ERP & EAM, and are considering whether to replace their EAM by ERP or upgrade EAM and ERP both.

I see this debate coming from two different functional viewpoints; IT and Business. The IT department does not want to handle multiple packages, multiple vendors, and undertake multiple system integration issues. Business, of course, needs the solution which is best suited to them in terms of meeting their business needs, usability, adaptability etc without caring much about ERP, EAM of any other jargon.

A couple of years ago, regarding this same subject, I made a presentation to a group of maintenance and IT managers from some renowned Indian government organizations and here is the gist of the articulated needs:

• Managing financials, supply chain and physical assets is a high priority for most organizations
• ERP systems were originally built to manage all of these but now have enterprise class asset management tools also built-in
• For a CIO: Single system is a tempting prospect which leads to financial savings and operational efficiencies
• For a CEO: Assets equate to a whole range of the organization’s assets; IT Assets, Fleet Assets, Building and of course production machineries

Businesses always complain about delays in getting the desired results from their ERP implementation considering the huge scope and multiple departments involved. This can often lead to a long implementation cycle. By the time that internal ERP consultants finish financials, manufacturing, inventory & procurement system functions it is time to upgrade. This leaves little time to think about overall asset management in the context of its dependencies upon inventory, manufacturing and financial modules in ERP. Then another long upgrade cycle begins and the asset management business benefits would still lag behind.

For ERP systems, asset management is just one module of very larger business problem which does get implemented only during end of ERP implementation; while for best of breed EAMs it is the area of business they are designed to address. Also, different industries have different asset management priorities and requirements:

• Oil & Gas industry has an emphasis on safety & regulatory compliance
• The Energy and Utilities industry would need GIS, Compatible Unit estimation etc
• Pharmaceutical industry has an emphasis on regulatory compliance and  auditing
• Fleet Management will emphasize mobile and quick solutions
• Governmental agencies emphasize regulations, property management and service desk

But at the same time, EAMs would not have solutions to cover all the business processes of financials, manufacturing, budgeting. Hence EAM alone is not the solution for the bigger problem.

In the end, the recommendations I provide clients would include:

• Go ahead with ERP. Take the advantage of its long implementation time by installing a best-of-breed EAM solution. This best of breed solution would give you instant benefits.
• Reap the benefits of best-of-breed Asset Management solution while your ERP is getting implemented and matured.
• Then either integrate to ERP or change over to full ERP solution.

The discussion often moves into the next mode – how to decide on the integration vs. the changeover. The most important points to consider should be:

• Business Process fit – Select the product which is best fit for the requirements.
• Usability – Should be easy to use considering not much IT savvy maintenance users.
• Product Roadmap – Product should have a long history in the market and in the domain. It should be compatible with organization’s other software solutions. The software vendor should have a clear vision on future releases/upgrades.
• Wider Scope –Managing assets simply does not mean managing some heavy production machines. An asset management solution should be able to manage all types of organizational assets like buildings, machines, IT assets, fleets etc.

If you have positive considerations about all of these above four points, then consider integrating EAM with ERP otherwise replace.

Earlier, on the Infosys SCM blog, I have written another blog on a very similar topic Will best of breed EAM packages be taken over by ERPs? Please read that as well for more insight.

About the Author: Praveen Kumar Agrawal is an Infosys SCM consultant with 13 years of experience in the IT industry. Praveen was part of the initial team which started the Maximo implementation practice within the Supply Chain Management (SCM). He is associated with Enterprise Asset Management (EAM) domain for the last decade, and has played key roles in product development and implementation for multiple EAM packages. Praveen shares his insights and viewpoints on current and future trends in asset management at www.infosysblogs.com/supply-chain

Further Disclosure: Infosys Technologies is one of other noted sponsors of the Supply Chain Matters blog.

We came across an interesting example of how historic and now changing  joint-partnership arrangements within China, coupled with the power of consumer preferences, drive rather interesting  global supply and value-chain requirements.

Wahaha is reported to be China’s third-largest and most innovative soft drinks and beverages provider. The company name represents the sound of a laughing child, and its founder and current chairmen, Zong Qinghou, is noted as one of China’s wealthiest entrepreneurs.

The company had a previous joint-partnership arrangement with French company Danone which helped to develop many of its current top brands, but that partnership has been dissolved because of previous legal disputes involving alleged copycat products under the Wahaha trademark.  The dispute was settled in an out of court settlement in 2009.

An article appearing in the print and online Financial Times (preview sign-up or paid subscription may be required) features highlights of an interview with Mr. Zong where he states that Chinese consumers, long after the previous 2008 incidents of tainted milk and milk powder, still remain highly concerned about the safety of local infant formula with ingredients sourced from Chinese farms.  That has motivated these consumers to be more attentive to non-Chinese brands or milk sources. Readers can review two of our previous commentaries concerning these changing Chinese consumer perceptions by clicking here and here.

Wahaha has introduced a new upmarket infant formula with the brand name of Edison. The company elected to source the milk powder from an unnamed Dutch provider, which packages the product in Holland within Wahaha branded tins.

Mr. Zong is now in search of a new joint-partners who can provide other input material product sourcing external to China, where consumer and brand perception is more positive for China’s consumers. In the interview, Mr. Zong notes that: ”…foreign companies need markets and we need good products.”

He further reinforces that goals for China’s resident corporate joint-partnerships with non-Chinese companies has now shifted toward mutual technology-based partnerships vs. previous market access based partnerships.  The implication is that foreign companies should be prepared to share both technology and external value-chain arrangements. Mr. Zong adds in the FT interview that while Wahaha has plans for further export product growth, it does not seek to build factories overseas. He has also not ruled out an acquisition of a foreign brand.

There has been much concern expressed from multinational companies on the new rules for market access to China, especially when it now requires technology-transfer conditions.  In the specific case of Wahaha, consumers are influencing a rather different dynamic in value-chain requirements, one that will be interesting to observe in the coming months.

Bob Ferrari

The following commentary can also be viewed and commented upon on the Supply Chain Expert Community web site.

As I pen this commentary our global community is approaching five days since the tragic earthquake and tsunami tragically occurred in Japan on Friday, March 11.  Compounding this unimaginable tragedy is widespread human tragedy and powerful images we may not soon forget. An evolving nuclear-related crisis involving four, and possibly six separate nuclear reactors located at the Fukushima power complex can add all sorts of other crisis implications. We should all take notice of the courage, resilience and resolve of the people of Japan as they deal with the aftereffects of this tragedy.  The word “resilient” is often an over used term but in the context of this ongoing tragedy, it takes on a new significance.

For expert community readers in semiconductor, high tech and consumer electronics value-chains, and perhaps others as well, the situation in Japan presents significant current and longer-term value-chain challenges as events continue to unfold.  Initial supplier assessments are still a work-in-progress, and further patience will be required, given the magnitude of this tragedy.  There are media and industry analyst reports already noting the potential implications on high-tech value-chains.

A Reuters news story notes that the prospects of prolonged supply disruptions, particularly in NAND flash memory, DRAM memory, Microcontrollers, LCD displays and other electronic components such as capacitors are already flaming spot market prices. Texas Instruments has warned that its two Japan based chip plants would be down until July, and is in the process of re-directing 60 percent of output to other sites.

Potential shortages of needed parts are a strong possibility. While value-chains generally have a few weeks of safety stock supplies, business continuity plans will need to concern themselves with different forms of scenarios, ranging from alternative suppliers, shifting production, or spot market buys. Already there is industry speculation that major supply influencers such as Apple, HP or others will fare better in this pending crisis because of inherent market buying influence among impacted suppliers.  The implication is that other buyers may be more impacted, perhaps having to tap secondary sources to make-up any future temporary supply shortages.

We at Supply Chain Matters would suggest that it is very important for planning and S&OP teams to focus on various aspects of scenario and contingency planning. Consider the following as three potential near-term assumptions:

The current situation in the impacted areas in northern Japan is described as a “logistical nightmare”.  Roads are blocked, port and air cargo facilities are severely damaged. As we observed in the earthquake that occurred in Haiti, the priority for transportation will initially focus on getting food, water, fuel to those impacted.  Concerning the evolving situation, one could further speculate that evacuation of large numbers of people may also become a transportation priority.  Thus it may be wise to assume that it may take additional time for transportation assets in northern and other parts of Japan to resume to normal status, and further transport delays should be factored into inventory and supply planning.

Due to the current loss of power generation capacity brought upon by these compounding catastrophes, most of Japan is operating under rolling blackout conditions.  The open question is how long this condition will continue, since many of the high tech production facilities need reliable and uniform power to sustain production levels. Thus, assumptions regarding normal shipping and fulfillment schedules of component or finished parts will remain uncertain, at least in the coming days. Plan accordingly, and conduct scenarios with conservative supplier output assumptions.

Moving to secondary markets as a means to buffer parts shortfalls may become a reality, especially if targeted secondary suppliers in China, Korea, and the U.S. are quickly sold-out of their available inventory or near-term capacity. If this becomes the scenario for your organization, teams should be very diligent to be on the lookout for counterfeit parts.  When markets are imbalanced, counterfeiting activities increase, especially in suspect countries.  Redouble your efforts for detecting non-conforming parts.

Community members, especially those residing in Japan and other high-tech manufacturing sectors may well have other recommendations or considerations and are welcomed to share them.

Many industry supply chains will again be challenged in the coming days and weeks.  Conducting assessments, planning for various scenarios and incorporating contingency plans for risk mitigation are important priorities at this point.

In the meantime, our hearts and sympathies continue to be focused on all the people and community members in Japan.

Bob Ferrari

The following posting can also be viewed and commented upon on the Kinaxis Supply Chain Expert Community web site.

Readers of the Supply Chain Matters blog often know how often we have been highlighting incidents of supply chain risk related to product recalls originating from contamination or bogus materials.  The incidents have been far-reaching, ranging from the ongoing massive recall incident involving multiple models of Toyota vehicles to numerous incidents of contaminated or bogus products entering various industry supply chains.  One common aspect of many of these incidents is when certain products originating from specific suppliers are the source of the contamination and the effects rapidly cascade to other multiple product-related supply chains.  Past incidents include peanut products, pistachios, drug compounds and more recently cracked pepper that coated certain salami products.

The most recent real-time incident involves the suspected contamination of hydrolyzed vegetable protein (HVP), which is an ingredient incorporated in many food products.  On March 4th, the New York Times reported that thousands of processed foods, from soups to hot dogs, contain this flavoring ingredient that is suspected of being contaminated with salmonella.  The specific supplier named was Basic Food Flavors of Las Vegas Nevada, and the original discovery was made by a customer upstream in the food processing supply chain. The U.S. Food and Drug Administration (FDA) inspected the Basic Foods plant in February and uncovered salmonella in the company’s processing equipment, which led the company to voluntarily recall all of its HVP product produced since September 17, 2009, over five months worth of production.

The article notes that most affected products are safe because cooking, either before or after sale, eliminates the risk.  But that in no way eliminates the risk if your particular product does not completely meet that cooked criteria, or erring more on the side of caution prevails in terms of risk to the consumer.  As even more real-time evidence to this situation, yesterday Procter and Gamble voluntarily recalled two specific flavors of its very popular Pringles potato chip product because they contained this same suspect HVP ingredient. I have no doubt that there may be other recall announcements coming.

Once again, the important take-away reinforced by these ongoing incidents is the critical importance that both supply chain traceability and risk mitigation have become as required process capabilities, and how important technology helps in supporting such capabilities.  An overdependence of regulatory agencies to discover and track the actual sourcing of contamination often implies that the supply chain has already been impacted by an incident.  This mandates the need to be able to quickly and efficiently trace where certain products were manufactured, and to which customers or retail outlets they were distributed.  It also implies the ability to be able to quantify the overall risk involved and the ability to quickly quantify, assess and implement risk mitigation plans.  Having a supply chain planning system that can perform what-if analysis and quickly re-plan for alternative ingredients is rather fundamental, as well.

Our community often looks to P&G as the benchmark in world class supply chain capability.  It should therefore be no surprise that within days of the original announcement, P&G was able to trace what specific end-products were or were not at risk, what lot numbers were involved, and was able to transmit important information to consumers on a dedicated web site. 

Successful risk mitigation occurs when proper planning, process, and information technology enablement are in place.  Too often, the negative effects come when they are not in place.

 Bob Ferrari

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Tiered sponsorship programs are capped to a designated number and include your firm’s involvement in sponsoring timely supply chain advisory content.  There are several cost-affordable and competitive levels of sponsorship.  The premiere single Gold sponsorship is currently available along with affordably priced Bronze and Associate level sponsorships. Gold and Silver sponsorships include my personal consulting services in reinforcing market themes, assisting in inbound marketing lead generation and supporting content for your marketing and industry influence programs.

The 2010 Supply Chain Matters Media Guide outlines in much more detail the various levels of sponsorship opportunities available in 2010. You can obtain a copy by both sending an email including your name, firm, and contact information to bferrari at blog1 dot com, or clicking on this Sponsorship Information Request Form link under the Pages Section, on the top-right hand side panel.

Take advantage of the opportunity to springboard your 2010 product marketing and brand awareness initiatives and to have your firm’s name featured with our current stellar list of sponsors.

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