Putting the Parts Together

Manufacturers have traditionally spent the largest portions of their IT budgets on ERP systems. Today, VARs and systems integrators are finding other technology areas, such as IP telephony, networking and workflow, to be equally lucrative as manufacturer clients turn to them for new ways to create collaborative working environments.

According to VARBusiness' State of the Market 2002 survey, 23 percent of solution-provider respondents predict the manufacturing sector will present the greatest market opportunity for them during the next three years, second only to the health-care industry. In addition, for five consecutive years manufacturing has been cited as the top vertical from which solution providers say they've derived at least 10 percent of their revenue, our research shows.

The technology landscape is shifting, according to Boston-based AMR Research. While ERP accounts for 35 percent of manufacturers' IT budgets, its growth rate has slowed to only 5 percent annually. Meanwhile, CRM and supply-chain technologies are offering double-digit growth, and product development is growing at a rate of almost 40 percent annually, according to AMR.

"The whole infrastructure to support manufacturing software is a big area," says Mike Burqett, research director at AMR. "As manufacturers start adopting new applications, the demand rises for technology infrastructures to make it run, including network technologies and tools for integration."

Network Design And Upgrade

Given that many large manufacturers have invested heavily in monolithic ERP systems, they're now realizing they need to buy other applications, such as CRM and purchasing systems, to round out their functionality. VARs can play a role in selecting and integrating those additional applications.

"A lot of companies are looking to extend the dollars they've spent on their existing application portfolios," says Deepak Patel, integration service line director at Plano, Texas-based EDS, a global IT services company.

"I am hearing from our customers that they want integration as opposed to ERP," agrees Paul Rodwell, vice president of technology services at REH Associates, a 35-person VAR in Southfield, Mich. "These companies want to take the resources of the enterprise and directly apply them to their customers' needs."

For example, last year REH worked with FANUC Robotics, which designs, engineers and manufactures robots and robotic systems, to replace its ATM-based network with a highly integrated 1,000-node network across five regional U.S. sites and two Canadian offices. The new network, which is based on hardware from Santa Clara, Calif.-based Extreme Networks, a leader in Ethernet networking, supports a number of mission-critical applications, including a Baan ERP system and e-mail running on Microsoft Outlook.

"Having an Ethernet backbone allows us to support our network tools," says Travis Robson, manager of systems/telecommunications/network at FANUC, Rochester Hills, Mich. "We needed to improve the reliability of our network. In addition, our new [EPICenter management tool lets us keep an eye on the network and proactively manage it."

The new network will also enhance the company's customer-support efforts. "Basically, customers will be able to check order status and order robotic parts through a Web interface," Robson says.

Collaborative Design

Once a solid network is in place, manufacturers next seek out ways for its different in-house departments to work more closely together and trade information.

"The area of connecting design to manufacturing is just emerging," EDS' Patel says. "In today's modern companies, most manufacturers don't have design and manufacturing completely connected from a systems' perspective."

The heavy-duty integration work that necessitates is where a VAR's technology expertise comes into play.

"One of the issues with collaborative design%85is that data is very unstructured, so it's harder to automate," says Russ Dryden, director of manufacturing industry marketing at SeeBeyond, a software vendor in Redwood Shores, Calif. "However, it is an area of concern because the product-development life cycle has a huge impact on costs."

Seamlessly linking internal departments together promises other benefits as well. "Collaborative design and product life-cycle management are hot because they reduce the cost of both the process of procurement and the process of design," AMR's Burqett says. "They focus on how a manufacturer can best reduce the cost of the product itself."

Such integration can also reduce time to market and cut down on errors, Patel adds. "In the past, if systems were not fully integrated, the designer was focused on designing a best-in-class product, but was not paying attention to current manufacturing capabilities, relationships with the suppliers and things of that nature," he says. "These new systems bring in manufacturing and procurement concepts early in the design phase."

For example, with help from EDS, General Motors' EGM division began using an "order-to-delivery system [that provides straight-through processing," significantly reducing the cost of automating the process from the order right through the delivery, Patel says.

In the system, an "action" moves through the entire business system from one end to the other without manual interference. "It reduces overhead and makes it faster to go through an internal business process," he says. "If a customer logs onto the GM Web site, [for example, and orders a car, the system takes that order and places it into the manufacturing process or the schedule at the assembly plant. Meanwhile, if there is a custom part, it places a corresponding order with the appropriate supplier without intervention."

IP Telephony

In addition to streamlining and automating internal processes, manufacturers are also leveraging technology to improve the experience of other strategic groups. "Manufacturers are also looking for ways to streamline the flow of information to their partners," Burqett says.

One fairly inexpensive solution is IP-based telephony. "All manufacturers are trying to save money, cut costs and be more efficient. [Using telephony technologies, companies can save a lot on toll- telephone charges and appear more unified," says Michael LeBlanc, CEO at LeBlanc Communications, a VAR based in Trumbull, Conn. "They are often able to offer much better customer service."

Groton, Conn.-based Tee's Plus worked with LeBlanc Communications to put in an NBX telephony system from 3Com.

"Our company is really growing, so we have more people using phones," says Tom Craig, marketing director at Tee's Plus, a 68-person manufacturer of screen printing, embroidery and promotional items for a variety of clients, including the U.S. Open Tennis, U.S. Ski and Snowboard teams, ABC and NBC. "We would have had to get a whole new phone system, but we realized that [mostly everyone had a computer, so Internet telephony was a viable option. [And the system was less expensive than a traditional PBX."

Tee's Plus was able to offer customers much better support using the voicemail, call-transfer and conferencing capabilities of the new system. "Now, people can leave a message for anyone when no one is in the office," Craig says.

A Midwest candy manufacturer, which requested anonymity, also thought IP telephony would be a sweet solution. It turned to Communications Finance, a Chicago area VAR, to replace its existing PBX system with a 165-phone Cisco IP telephony solution.

"We implemented a total turnkey solution for them, which included redundant architecture, unified messaging, call routing and handling, and an automated attendant," says Steve Lehrky, U.S. manager of engineering for Comstor, a networking products distributor in Chantilly, Va.

At the end of the day, the manufacturing vertical offers a plethora of opportunities for VARs, both at the front end and the back end.

"The goals of these manufacturers aren't new," AMR's Burqett says. "[But now, manufacturers understand there are new technologies to help them to do it." n

Hailey Lynne McKeefry is a freelance technical writer based in Belmont, Calif. She can be reached at hailey@cyberdeacon.com.