ERP Software: A Positive Leading Indicator
Industry software vendors report a flurry of activity as service centers emerge from the downturn ready to invest in systems upgrades.
By Tim Triplett, Editor-in-Chief
If interest in computer software is a leading economic indicator, then the market is definitely on the mend. Vendors of metals industry ERP systems report robust activity as service centers emerge from the downturn and look to upgrade their technology.
“We had one of the worst recessions we have ever experienced. Beginning in the fourth quarter, we began emerging from almost a paralysis state. Now we are getting a lot more inquiries and people are actually signing contracts. It has been a nice uplift for us,” says Gary Marzec, director of supply change management at Northrop Grumman Information Systems, Canonsburg, Pa.
“After coming out of the recession, it is clear there are more service centers looking at technology to give them a competitive edge,” says Paul Parsons, vice president of sales and marketing at 4GL Solutions in Markham, Ontario. “They need real-time business intelligence to make informed business decisions. The days of managing that information manually are long gone.”
“Last year, from a software investment perspective, most companies were in a wait-and-see mode. Now we are seeing a lot of companies coming to the realization that there is a risk factor in trying to make do with old systems,” says David Morgenstern, vice president of marketing and sales for Tampa, Fla.-based Verticent.
John Bilek, president of Enmark Systems Inc., Ann Arbor, Mich., notes that some service center sectors are stronger than others, so investment in new enterprise software systems is still uneven. “Customers have been battered and beaten for the last couple of years, but they are starting to climb back. Enmark’s sales levels have almost returned to normal,” he says.
Tim Holman, director of marketing at Bayern Software Inc., Phoenix, Ariz., notes that most of the inquiries are coming from midsize and larger service centers. “Many smaller service centers are still in a survival mode. As much as they would like to invest in new systems, it is not yet an option for them. Many have cut their staffs and don’t feel they have the people to dedicate to the implementation. We are seeing more activity with midsize service centers, those with 15 to 50 computer users.”
In a way, staffing cuts forced by the economic downturn represent an opportunity now as the economy improves. Rather than refilling all the prior positions, service centers can automate manual processes and increase productivity instead. “Most companies have skinnied down as much as they can. Now, going forward, they are asking themselves, ‘What can I do with the people I have?’” says Brian David, national sales manager for Compusource Corp. in La Palma, Calif.
Given today’s sky-high steel prices, service centers have a larger investment, and greater risk, in their inventories. To minimize their exposure from a sudden decline in steel prices, most are keeping their stock levels as lean as possible. “You walk into some service centers today, where the inventory used to be above your head, and now it’s at your knees,” Bilek observes.
At the same time, service centers want to have what customers’ need, when they need it. With usage reporting and reorder points managed by a modern ERP system, purchasing people can track sales and shipments, and can tell precisely when to replenish their stocks. “It allows them to react better. They are paying way more attention to the buy side,” David says.
“The system will tell you when you need to purchase different items on a real-time basis,” adds Ray Vasson, vice president of sales at Houston-based Invera. “As they say, you make your money in this business in how you buy, not necessarily in how you sell.”
Software forecast: “cloudy”
Many software vendors now offer their products on a subscription or fee basis, sometimes called software as a service, on-demand software or cloud computing. Rather than purchasing the software and installing it on their own computers, service centers access the applications via the Internet and store their data on remote servers maintained by their ERP provider or a third party. This approach offers a number of advantages, say vendors: Users no longer need large IT staffs to maintain their hardware and software. They have round-the-clock access to their data, which is stored on redundant servers so it is highly secure. As the software is upgraded, it is immediately accessible and does not have to be deployed on multiple users’ desktops.
The cloud computing concept has faced resistance from companies reluctant to relinquish control of their information—especially their IT staffers who are naturally protective of their turf. “But even the IT folks are starting to look at cloud computing and software as a service in a different light,” says Marzec.
He compares it to the corporate payroll office of the past, when each company had its own accountants and tax attorneys on staff. Today such functions are universally outsourced to payroll specialists. “In another decade, I think cloud computing and software as a service will be predominant. Today, it is probably approaching 30 percent. In the future, it will be 70 to 80 percent.”
“Everybody is going to the cloud. It’s just a matter of time,” agrees Bilek. “This is the new thing. I would be shocked if anyone has a server at their location five years from now,” says Joe Fellwock, sales and marketing manager for Enmark.
Use of electronic data interchange to streamline the transfer of documents between trading partners continues to grow, say vendors, as does the use of bar codes. “With the trend toward reducing staff and becoming more efficient, EDI is taking on a more prominent role in easing data entry and reducing errors,” says Shawne O’Connor, director of the software division at Paragon Consulting Services Inc. in York, Pa.
Warehouse automation utilizing bar codes and wireless scanning equipment on the shop floor is rapidly becoming commonplace for such functions as shipping, receiving, physical inventories and tracking processing time. Some companies are even equipping delivery drivers with handheld devices that communicate signatures back to headquarters, like UPS. “In the past, there was a fear that employees in the warehouse couldn’t handle the equipment, that everything needed to be controlled by the office. That is changing,” O’Connor says.
Working wirelessly in the warehouse also helps eliminate much of the paper pushing. “People have said they want to be paperless for a long time, but most have been unable to give up the paper. Today, they are really putting forth procedures to actually run paperless,” she adds.
Software vendors point to growing interest in the business intelligence features of ERP systems. Even companies that have experience using ERP systems sometimes use only their basic functionality, Bilek says. The next step is for them to mine their data more analytically in search of additional efficiencies and cost savings.
“Business intelligence is a buzzword in many industries, but it is more than just a reporting tool,” says Holman at Bayern. “It goes deeper into data mining, report design, dashboard development and the ability for our customers to really make their data more useful.”
A dashboard feature allows users to quickly retrieve information in a graphical way to facilitate decision-making, Holman says. For example, a sales manager may set up a dashboard so that as soon as he logs in each day he can immediately see a graph comparing the Top 10 selling items, the Top 10 customers, the Top 10 salespeople—or perhaps the Bottom 10 salespeople—and then take action.
To cite another example, 4GL Solutions’ system allows users to tag each lost sale or failed quote with a reason code so they can analyze why the company did not make the sale. “Software today should allow them to create any number of reason codes that will give them the business intelligence they need to make changes down the road,” Parsons says.
Other efficiencies offered by modern ERP software include: the automated e-mailing of invoices and other documents; electronic storage of mill test reports, which saves a lot of time in filing and retrieving paper documents; and the costing of processing services on a machine by machine basis.
Software vendors compete for service centers’ dollars vs. other capital investments, such as cutting equipment or trucks. But Holman casts that competition in a positive light. “Ultimately, that bodes well for us. It shows that people are investing and that the market is recovering.”
Recent product enhancements
Software vendors say they have been busy upgrading their products in the following areas:
• Bayern—STEEL PLUS from Bayern Software, Phoenix, Ariz., now allows users to create their own product ID look-ups, rather than using the software’s standard look-ups. To account for material lost during cutting operations, a default kerf loss can now be entered for all items, automatically adding a bill-quantity surcharge. Users also can now set up a pricing matrix that applies a price break across all line items on a sales order or quote within a specified category group. Using new export/update routines, data such as item replacement costs can be exported to an Excel spreadsheet, modified, and then used to update the STEEL PLUS data. Bayern has also created a bundle/skid tracking system for homogeneous inventory, which still allows for detailed location tracking by bundle/skid as with tagged inventory. Bayern also plans to release a new Business Intelligence program in the next few months.
• Business Automation—Metal-Pro software from Business Automation Inc., China Grove, N.C., now features a Windows-based interface and comes in a software-as-a-service version for customers who prefer cloud computing rather than maintaining their own servers. With the system, users can now accept orders via their website, scan documents for electronic management, print to pdfs for paperless processing, create and attach drawings of drops to tag records, simplify bank account reconciliation, and give employees a direct deposit option for payroll. The system also now offers a fixed assets module, predefined financial statements and positive pay A/P check protection.
• Compusource—Compusource, La Palma, Calif., offers the Metal Center Management System, designed to meet the specific needs of the metal, steel and pipe service center industries. With the system, users can offer more e-commerce features and services to their customers via the web. The company is also offering a new diagnostic system check and automated offsite backup service to make sure users’ data is secure.
• Enmark Systems—Eniteo, the Windows-based ERP solution offered by Enmark Systems Inc., Ann Arbor, Mich., is now available in a cloud version that allows customers to bypass the high cost of purchasing and maintaining their own hardware. Enmark continually upgrades the Eniteo system, so its subscribers always have the latest version. Other new functionality includes the Command Center for fast pricing and order entry. Wireless bar code scanning eliminates errors and cuts days from the time it takes to conduct a physical inventory. E-mailing of invoices and other documents saves the cost of paper forms and postage, and shortens receivable days.
• 4GL Solutions—The Steel Manager III system from 4GL Solutions, Markham, Ontario, is designed to simplify procedures for metal centers. For example, quotes can be converted to orders with little rekeying. The system automatically accounts for scrap and kerf loss from cutting in each price quote. Material ordered from an offshore supplier can be “pre-received” so it is already in the system when the physical material arrives weeks or months later. With intelligent scheduling, similar jobs can be grouped for cutting at the same time, reducing the need for multiple equipment set-ups. Steel Manager III has also been modified so it can integrate with leading nesting software.
• Invera—STRATIX from Invera, Houston, Texas, now includes more functionality for multi-branch and even multi-company organizations. Separate divisions of an organization can see the stock on hand across the entire enterprise. Companies can group domestic and foreign suppliers into their own user-defined trade zones. The software also handles differences in currencies and units of measure for companies that trade internationally. With its dynamic dimensions feature, STRATIX can help processors keep track of bar products in inventory even after their dimensions have changed as a result of turning and boring.
• Northrop Grumman—Northrop Grumman Information Systems, Canonsburg, Pa., offers the OpenTrac suite of supply chain management solutions for the metal industries. The company was an early proponent of software as a service and only offers its products on a cloud computing basis.
• Paragon Consulting—Vendor of Metalware, MetalNet and Metalware Express software, Paragon Consulting Services Inc., Baltimore, Md., offers systems that handle purchasing, order entry tracking, stock transfers for multi-site companies, sales analysis, material processing and scheduling, as well as the basic accounting functions. Most recently, it introduced its new Report Writer feature that allows users to create a report query that can “feed” data to numerous reports instead of recreating the report query numerous times. This allows the report creator to make sure data is consistent over the entire organization. It can also be used to create customized versions for specific individuals, departments or groups. Also, the program has been enhanced to pass data back and forth from third-party nesting software, which helps with billing and inventory control.
• Verticent—Verticent, Tampa, Fla., has improved the features in its software for tracking processing performed by outside processors or subcontractors. Its pick-and-ship function streamlines the steps needed to pull material straight from stock and ship it to the customer, in cases where no cutting is required. When cutting is required, the software helps calculate the cost for jobs with multiple passes and multiple cuts, as well as dimensional cutting. Inventory is tracked in multiple dimensions, and costing now factors in additional charges, such as freight. The down-costing feature gives a true value for each remnant, which otherwise might have been scrapped. Verticent’s software interfaces with retail operations, including credit card processing, batch processing and SQL reporting services in real time. n