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"In the new
Project Economy, the ability to bring high-quality products to market
more rapidly is driving many companies to engage contract engineering firms such as Rampart Global to handle entire
engineering processes, just as they did with manufacturing processes in years past."
Source : IFS
Are You Ready for the Project Economy?
Project Economy is also known as :
Project Economy Industry,
Indicators Project Economy,
Project Economy Strategies,
Information Economy Project,
Knowledge Economy Project,
Project Management Economy Development,
Economy Industry,
Economy Report,
Economy Statistics,
Indicators Economy,
Industries Economy,
Information Economy Project,
Investment Economy,
Knowledge Economy Project,
Management Economy,
Project Development,
Project Economy,
Project Management Economy,
Project Managment Tool,
Project Planning,
Project Statistics.
Periodically throughout history, the world economy changes in drastic, revolutionary
ways. These changes are driven by technology, the spread of new ideas and ways of
thinking, cultural changes and the gradual accumulation of human experience.
Examples of these economic sea changes include the transition from hunter-gatherer
economies to agricultural economies, and then later to industrial economies. The
industrial age has given way gradually to the information economy. But at this point,
all economic sectors are feeling the rise of a new paradigm – the Project Economy.
The rise of the industrial economy allowed the mass-manufacture of mass-marketed
products. The reduced cost of commodity goods allowed an unprecedented increase
in consumption throughout the developed world. Over time, however, manufacturers
have been subject to increasing pressures to lower cost and increase efficiency on a
year-over-year basis. This has driven manufacturers to the developing world in search
of lower-cost labor and facilities. To increase efficiency through automation and
share data throughout the enterprise, manufacturers took advantage of the revolutionary
technological capabilities delivered by the Information Age.
The dawn of the 21st Century, however, marks perhaps the end of this overlap
between the Industrial Age and the Information Age. The shrinking of the world due
to the Internet and affordable global travel, and the predominance of world media,
has made the world smaller. The shrinking world has caused a corresponding consolidation
and reduction in the number of large manufacturing companies, and this
has created a buyer’s market for manufactured components provided by mid-market
companies. The multitude of messages and media in this interactive age contributes
to a more fragmented market for consumer goods. No longer will a united universe
crave identical products. We are now facing a situation not of one universe – but of
a universe of one. Each customer company or individual is a unique entity – and
expects to be treated that way. Shorter product lifecycles, product mass-customization
and increasing complexity of the supply chain are all symptoms of this new Project
Economy.
In the past, an original equipment manufacturer (OEM) might outsource of individual
components, manufacture others themselves, assemble all the components
and then market the product. Now the same OEMs might perform little or no manufacturing,
choosing instead simply to market products under their brand name and
perhaps sell aftermarket service and parts. A supplier to an OEM in the past may
have contracted for the manufacture of specific component parts on a per-mil basis.
Now that same supplier may be involved in engineering and design of component
parts and actively manage inventories of parts for their OEM customers. Since each
OEM will have different requirements and needs, the supplier needs to operate several
parallel business systems.
As the Project Economy moves forward, those who rely on the business
philosophies and business systems of the Industrial Age will experience difficulty.
If a company’s management processes or information systems are not up to the
challenge, problems will manifest themselves in various ways depending on the
individual company.
OEMs making heavy use of extended supply chains will miss critical deadlines
for product launches or see costs spiral out of control. Old systems designed for inhouse
manufacturing will not include the advanced contract management and supply
chain management tools required by the Project Economy. Companies supplying
OEMs will find themselves less prepared to compete in a market where major manufacturers
push more managerial burdens onto their suppliers.
Signs of the Arrival of the Project Economy
These are the harbingers of the Project Economy, many of which are certainly
already affecting your business.
Disconnection between how and where a product is marketing and produced
Outsourcing of components has been a growing practice in manufacturing for a long
time. However, more and more product marketers are completely outsourcing
product manufacturing—and even product development and design—hanging onto
marketing and sometimes value-added services such as maintenance and other aftermarket
revenue sources.
Complex supply chains that extend into multiple countries
Business of any size must now be multilingual as well as accommodate multiple rules
of measure and various accounting rules native to each nation and continent its
operation touches. Moreover, as relationships between supplier and customer become
more fluid – and suppliers are involved in more value-added work – business systems
must allow for a free flow of data across organizational boundaries.
Shortening product lifecycles
Global media brings new product information to market more quickly, and manufacturers
struggle to keep up. To adapt, manufacturers are “re-badging” the products
of other manufacturers, taking advantage of others’ core competencies instead of
trying to gear up for new products at the breakneck speed of 21st century business.
Or a manufacturer might outsource product development, design and other core
business functions. Other companies that operate in more of a project-centric environment
– in manufacture-to-order or engineer-to-order environments – are turning
literally into general contractors that self-perform little if any manufacturing work.
This contractor business model allows a project-based business to leverage capabilities
of a large number of suppliers – capabilities that the business could not develop
on its own quickly enough to meet changing customer demands.
Government regulation driving rapid change
As businesses operate in multiple parts of the world, more numerous and more
complex regulatory requirements are putting a heavy burden on business. After all,
dealing with regulation in a single country is difficult enough, much less facing
different regulatory and monitoring requirements in multiple countries. The growing
need to track product content, environmental impacts and labor and wage figures
will require businesses to employ flexible and easily reconfigurable business tools
to stay ahead of the regulatory onslaught. Government contractors in particular are
facing more and more scrutiny of the value they deliver to their public sector customers,
and tools like Earned Value Management will become more important to
those who deliver intangibles like research and development.
Impact on business systems
More than a trend, the Project Economy is a revolution. This revolution will affect
every business in every industry – and software vendors like IFS need to offer new,
broader and more flexible technology to help customers succeed.
Gone are the days that an applications vendor like IFS could expect their system
to operate as an island unto itself. A company today may need to extend its business
systems by opening portals or offering dynamic points of integration with its customers’
and suppliers’ systems. Not only must a business application offer rich functionality
to the company that implements it, but it must also integrate easily with third-party
systems that might be employed by businesses further up or down the supply chain.
Both within and without the enterprise, a project-centric business model places
specific demands on an enterprise application. One of the most basic elements of
project-specific enterprise applications functionality is the ability to track profit and loss, labor hours and inventory by project. This functionality is key for aerospace
and defense companies that must segregate government-owned inventory from
other inventory.
Furthermore, in a traditional manufacturing organization, there is a functional
wall between engineering, manufacturing and service management. A product is
designed, and that design is passed on to manufacturing, without much dynamic
interplay between the two departments. In a project-centric environment, changes
to design tend to take place frequently, and unless an application accounts for a free
flow of information between the design and manufacturing process, cost overruns
and delays are hard to prevent. Changes to design affect cost and possible delivery
date, and inadequate visibility of the entire supply chain – including design and
engineering – can make it difficult to manage a customer’s expectations for cost and
delivery date.
Not only does the Project Economy require greater communication between
engineering and manufacturing, but it will require engineering and project management
time to be more closely tracked. As more companies sell not just an end
product but intangibles including research and development and design of those
products, earned value management functionality will become more important so
customers can measure the return they receive on their investment with suppliers.
As manufacturers outsource work that takes place before the sale, they often
derive more of their revenue from after-sale service and maintenance fees. This means
that increasing the efficiency and effectiveness of service management and call center
operations gains new importance. Just as data needs to flow easily between engineering
and manufacturing, it must flow from manufacturing and engineering to service
management and customer relationship management systems. Accurate information
on the product as manufactured allows support and service staffs to accurately
diagnose and resolve problems with entire product lines or specific one-off pieces
of equipment. And data on recurrent problems and other issues contained in an
aftermarket service management tool needs to be easily funneled back into the
design and manufacturing systems.
Role of Ser vice Oriented Architecture (SOA)
Because of the intensified communications requirement and increased rate of change
inherent in this new Project Economy, applications are undergoing an evolution
from the monolithic blocks of code that typified 20th Century software toward
completely modular and flexible applications based on service-oriented architecture.
SOA essentially implies an application architecture made up of loosely coupled
“services,” such as the various software features used in creating and processing a customer order), and service “consumers,” such as the other services that need to
create customer orders. Most business software applications can, of course, create
customer orders. But a business application made up of services makes it easier to
rearrange the processes that create the need for a customer order and determine how
that customer order is created. This process tends to be very rigid in non-SOA
applications.
An SOA-based application architecture works in much the same way as your
Web browser in that it accesses functionality through the Internet. Regardless of
whether you are using Internet Explorer®, Netscape®, FireFox® or Opera, or what
version of those browsers you are using, you can still access information and interact
with systems on the Web. The relationship between your browser and Web sites,
databases, Java™ applets, and other executable files on the Internet is loosely defined.
Web site functionality may change without affecting the rest of the Web or your
browser.
The loose coupling of services and service consumers in SOA facilitates change,
allows disparate applications to talk to each other and allows customer and supplier
portals to be opened up to virtually any portion of an application. But SOA obviously
needs to be supported by a fine grain set of application functionality. Without
this granularity of functionality, an application will offer only a small number of
software services, and its ability to adapt to change – and reveal new services and
connections within the application as needs change – will be limited. This is where
the use of software components in application design becomes important.
In the early 1990s, while everyone else was offering monolithic, one-size-fits-all
enterprise software, IFS pioneered enterprise software based on an object-oriented,
or component-based, model. This allows for the building and deployment of applications
on a very modular level.
SOA facilitates Project Economy business models in that it enables:
- Many flexible points of integration. A true SOA will offer the ability to open
Web services – or points at which data and functionality can be made available
through an Internet protocol (IP) address – throughout the application. This
means it is easy to open the application up to companies up and down the supply
chain through direct integration or Web portals.
- Distributed systems. In an SOA-based application, functionality can be spread
across multiple geographic areas. The application consists of thousands of software
components, each with their own IP address so they can be accessed
through the Internet. Therefore, tying together processes undertaken in remote
locations becomes easier.
- Open systems. Combined with open standards, SOA enables data and business
processes to cross organizational boundaries. Standards exist already for some
business and manufacturing processes, but in the meantime, some point-to-point
integration is required to get data to flow in real time up and down the supply
chain.
- Constant change. A single enterprise might run multiple projects for multiple
customers, and those projects come and go. That means an enterprise application
must now be quickly and easily reconfigurable, easily repurposed for changing
needs on a continuous basis.
The arrival of the Project Economy must be recognized by successful business
leaders, and the systems that support business must change to accommodate these
new realities.
By Mitch Dwight
CFO, IFS North America
Mitch Dwight is the Chief Financial Officer at IFS North America. Dwight has an
in-depth understanding of the enterprise applications industry, having previously
worked as a business solutions consultant for IFS as well as Cincom Systems in both
the United States and the UK. Throughout her software career, Dwight has been
involved with companies with heavily engineered products and has been on the
front line of the Project Economy revolution. Dwight has also worked in corporate
accounting for a UK accounting firm and graduated with honors with a degree in
accounting and finance from the University of West England.
About IFS and IFS Applications
IFS (XSSE: IFS), the global enterprise applications company,
provides ERP solutions which enable organizations to respond
quickly to market changes. The solutions allow resources to be
used in a more agile way to achieve better business performance
and competitive advantage.
Founded in 1983, IFS has 2,600 employees worldwide. With
IFS Applications™, now in its seventh generation, IFS has pioneered
component-based ERP software. The component architecture
provides solutions that are easier to implement, run and upgrade.
IFS Applications is available in 54 countries in 20 languages.
IFS has over 500,000 users across seven key vertical sectors:
aerospace & defense; automotive; high-tech; industrial manufacturing;
process industries; construction, service & facilities management;
and utilities & telecom. IFS Applications provides extended
ERP functionality, including CRM, SCM, PLM, CPM, enterprise
asset management, and MRO capabilities.
If you need further information, e-mail to info@ifsworld.com,
contact your local IFS office or visit our web site: www.ifsworld.com