BUSINESS SYSTEMS FOR GLOBAL INTEGRATION
When global hierarchies are created through mergers and acquisitions, it is highly unlikely that similar business systems will exist in the individual business units. Practitioners charged with integrating multiple operations face a variety of new challenges. How should the business systems in the various units interact? Should the organization install the same solution in all business units? What if one unit has just installed a new business system? Will the same business system accommodate all of the organization's global practices? The questions are complex, but by focusing strategic considerations, we can once again develop our integration roadmap.
We find it useful to break down the generic term "business system" into the various types of application solutions that a global enterprise might employ, as shown in Figure 3. The degree to which each of these applications is integrated across the business units of the organization will depend, in part, on the strategic focus of the organization.
For hierarchies that developed primarily because of financial or diversification strategies, business system integration may be required only at the strategic level. In such organizations, financial measurements are the lowest common denominator. This does not mean, however, that just any financial system will do. In fact, practitioners are finding that the financial functions embedded in their ERP systems may not be robust enough to handle the multiple reporting requirements of a global organization. Furthermore, with a full-blown ERP system, it may be difficult to integrate only at the financial data level, and the cost and development effort to feed legacy or disparate system data into the ERP system may be high.
For such companies, we recommend that the systems integration effort should be focused on implementing a financial reporting system that is fast-to-implement, flexible in data access and reporting, and receptive to data input from a variety of sources. We further recommend that the organization seek out a system specifically designed to handle the "many facets of multi-" required for corporate reporting on a global level. This would include functionality to translate foreign currency financial statements based on various translation formats (such as FASB 52), process corporate-level eliminations, consolidate detailed general ledger data provided in a variety of input formats, and report on rollups that cross traditional business unit boundaries.
For hierarchies created by vertical expansion, the degree ofbusiness system integration should extend through the supply chain level, since such business units effectively represent links in an internal supply chain. Such organizations can take advantage of the new breed of ERP extensions and supply chain management (SCM) software to leverage their corporate wide planning and control functions. These applications can provide real-time analytical information to manage the flow of information and product from vendor through to the customer. Typically, SCM software uses advanced algorithms (such as advanced planning and scheduling) or sophisticated data management tools (such as incorporating CAD into product data management) to create value within in the supply chain. When the supply chains are internal, these can be very powerful
tools indeed. Our customer, C-MAC Industries, for example, is currently considering several initiatives to incorporate SCM elements into their internal supply chain, including corporate-wide quoting and customer relationship management.
For hierarchies created by line ofbusiness, geographical, or international expansion, consideration should be given to integrating the business systems through to the transaction processing level. With a unified approach, the organization will be better positioned to take full advantage of being a "global" organization—by transferring among the business units those technologies, business practices, and core competencies that can be effectively leveraged with a unified business system. This is the approach taken by the Impaxx Corporation. According to Robert W. Zimmer, senior vice president and chief financial officer at Impaxx, "We chose to implement the same software solution at each of our business units in order develop and foster synergy among our acquired companies. Our strategy is to further develop
and expand the core competencies of each business through the sharing of'best practices' and 'cGMP3 disciplines in order to provide our customers with a single source of supply for all their packaging requirements, while allowing each unit to maintain an entrepreneurial approach to the marketplace."
Danka Business Systems has adopted a similar approach to the integration of its business applications. Danka chief technology officer, Gene Hatcher, has put a unified IT strategy in place that includes a single database management system, centralized IT operations, and a common suite of packaged applications. Hatcher sees centralized IT and business systems as playing a key role in the success of the company in three ways: by instituting focus and discipline in the global company, by reducing costs through centralized operations, and by providing a cost-effective, business-focused service to support Danka in the global marketplace .
For many hierarchical organizations, however, standardizing on the same business systems does not make strategic, or even practical, sense. In some cases, the cost of re-implementing a single system corporate-wide may be too high, or there may be compelling reasons
to maintain distinct ERP systems, such as organizations that have adopted a multinational strategy where the country-by-country variations are captured within the individual business unit systems. We believe that such organizations can still benefit from adopting corporate wide ERP extensions such as customer relationship management (CRM), component and vendor management (VM), and business intelligence (BI). These applications can draw information from the individual business unit databases and combine this data with external content to provide planning and strategic analysis, in essence allowing the organization to act "globally" in key business practices such as strategically sourcing parts or managing the customer life cycle. Furthermore, as discussed in the next section, there are a number of new infrastructure technologies that can help global organizations effectively integrate their business systems.
As a final note, we believe that the corporate integration of execution-level business systems will soon become key to achieving competitive advantage in the global arena. In particular, we feel that logistics systems must be elevated as a primary enabling technology. Logistics is no longer simply "scheduling the truck" but an entire business system with "the potential to guide the orderly, efficient flow of assets from worldwide materials sourcing into multinational manufacturing and assembly complex through a variety of domestic distribution systems to customers located throughout the world" . In a global environment, your logistics system can have a dramatic impact on all other elements of your business processes, including inventory levels, cycle time, productivity, and product cost and sourcing, and can be a key factor in acquiring new customer orders. We believe that, in the new millennium, the
implementation of an enterprise-wide logistics planning and management system may become a strategic differentiator.
To Be Continued
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