SMALL & MEDIUM INDUSTRIES DEVELOPMENT CORPORATION

This link which provides some info on grants available for sme's in Malaysia.

True Story: Missing Assets Equal to A Year's Sales

from Planning, Startups, Stories by Tim Berry

You don't think finance and accounting matter in small business? Here's a true story, and it's about a small business like the ones I write about, in fact one I was involved in, not a large publicly traded company. $3 million worth of assets went missing, but nobody took them. Where do you think they went?

It is sparked, I admit, by news of Dell, Inc. Last week the New York Times reported Dell to Restate More Than Four Years of Earnings. Here's a quick summary of that story:

Dell said that it would restate its financial statements for 2003 through the first quarter of 2007, concluding an internal investigation into accounting errors.

Dell said that the restatements would shave off between $50 million and $150 million in cumulative net income.

I know, that seems like standard large-company stock market stuff, but here's a true story of Creative Strategies International, which was then a medium-sized high-tech research and consulting company owned by Business International and based in San Jose, CA. Call it CSI. I should add that this story preceded the change in ownership to the Creative Strategies that is now the brainchild of Tim Bajarin, still exists, and is still in San Jose, CA.

I need to emphasize this, because I like Tim Bajarin and he's done a great job with the company since he took it over. I'm pretty sure the corporate entity even changed, I know the ownership changed, so I assume there's no harm in telling an old story. And I think there might be a lesson here.

Shortly after I started to work there, there was an audit called by the parent company in New York. And, as you suspect from reading the title of this post, assets were missing. In fact, quite a sizable chunk of assets. In a company of 20 or so employees, selling $4 million or so per year, roughly $3 million worth of assets had disappeared.

Needless to say, the parent company was not amused. But there was no theft, no embezzlement, just bad accounting.

What do you think happened? Of course you have no idea, but let me give you a hint first, then think about it. The assets were accumulated research, not chairs or tables or computers or gold bullion, but research. Does that tell you the answer?

It turned out that CSI created what we called group studies, research studies that we'd design to cover some interesting new market in high tech, develop, finish, and then sell to multiple buyers. For example, a study in telecommunications would be created and developed and sold to 10 or 20 or more companies in the telecommunications markets. If you could sell a study that cost $25,000 to 20 companies for $5,000 each, they got a good study -- market forecasts, competitive analysis, etc. -- at a great price, and CSI made a healthy profit.

So have you figured this out? As the studies were created and developed, consultants were paid real money to research markets. They took real checks home and cashed them and paid mortgages and things. They also took planes to places and interviewed people, and purchased some secondary research, sometimes developed primary research, all of which cost money.

All of this spending should have been expensed as product development expense. It was just like computer programming in terms of tax treatment and standard accounting. You aren't really building an asset, you're incurring an expense. Product development is almost always an expense, even though it sometimes generates technology that goes into products that get sold for money.

Somebody doing the numbers assumed that since this would be cost of sales when the studies were finished and sold, and instead of calling this money development expense and subtracting it from profits, they'd call it assets, as if it were inventory, and subtract it from profits as direct costs.

It may have seemed logical at the time, but over time many of those group studies were started but not sold. If the sales were disappointing, instead of spending the full $25,000 and finishing the study when only two clients signed up for $5,000 each, they'd just dump the project.

And there's the rub: nobody went back to those supposed assets, the accumulated investment in product, and wrote it off. It remained on the books as assets, for several years, until the parent company audited. Nobody had purposely or intentionally done anything wrong, there was no fraud, no charges, no money recovered; just several very unhappy people.

I guess I'm some kind of weirdo, particularly as I was a literature major and journalist-writer before I got into business, but I like the business numbers and I think they're important. Maybe it's from stories like this one. No, I wasn't the accountant, I was one of the researchers, but I was also a vice president and those were bad times for all of us, not just the bookkeeper.

--Tim

You Always Fire an Executive Too Late

You Always Fire an Executive Too Late
from Planning, Startups, Stories by Tim Berry

I've posted here several times on paradox in planning. This morning I'm fascinated by what Marc Andreessen calls the paradox of deciding to fire an executive.

It takes time to gather data to evaluate an executive's performance. You can't evaluate an executive based on her own output, like a normal employee -- you have to evaluate her based on the output of her organization. It takes time for her to build and manage her organization to generate output. Therefore, it takes longer to evaluate the performance of an executive than a normal employee.

But, an executive can cause far more damage than a normal employee. A normal employee doesn't work out, fine, replace him. An executive doesn't work out, it can -- worst case -- permanently cripple her function and sometimes the entire company. Therefore, it is far more important to fire a bad executive as fast as possible, versus a normal employee.

Solution? There isn't one. It's a permanent problem.

He continues with a quote from Andy Grove, co-founder of Intel, who noted that you always fire an executive too late. "If you did it fast enough that it wasn't too late, you wouldn't have enough data, and you'd risk being viewed as arbitrary and capricious by the rest of the organization."

I've cited Marc Andreessen's posts on startups several times in recent months, cataloging it in my mind, and somewhat on this blog, as an excellent take on the high-end elite startup that is a prime candidate for venture capital. His latest in that series, however, part eight on Hiring, managing, promoting, and firing executives, applies quite well to all business, across the range. It applies equally to the growing and healthy established small business, and, for that matter, the larger enterprise as well.

While you can find a lot of good advice on how to find an executive, how to recruit, and how to select, there's not so much on how to fire an executive. I had an attorney who used to say that the time to fire a person was "as soon as you start asking yourself that question." Andreessen's is better: when you start asking the question, start gathering data.

In this post he also talks about how to manage an executive. It certainly hits home for me when he points out that you don't just build the team, you also have to manage.

"While respecting someone's experience and skills, you should nevertheless manage every executive as if she were a normal employee. This means weekly 1:1's, performance reviews, written objectives, career development plans, the whole nine yards. Skimp on this and it is very easy for both your relationship with her and her effectiveness in the company to skew sideways.

"This even holds if you're 22 and she's 40, or 50, or 60! Don't be shy, that will just scare her -- and justifiably so."

This is the eighth in Marc's series on start-ups -- perhaps the best yet.

--Tim

Analyzing ERP's success in organizations.

ERP success stories will reveal that they were made possible through deliberate and hard work. The assessment of enterprise planning resource and defense enterprise planning resource are important tasks in this context.

ERP success stories need not necessarily mean that an organization needs to be contended with what they have achieved. They must think of extending the scope of enterprise operations so that many and thereby be a role model for more ERP success stories.

Some of them requiring attention are as follows:

Jada precisions Plastics co INC and IQMS ERP software

The manufacturing Company Jada Precisions Plastics INC was not happy within the initial ERP systems that were established to help them in raising the competence levels. The software definitely helped them to reduce the complexity of the labor but it was not the ultimate answer.

They finally got the much desired results from IQMS ERP software. The software was instrumental in giving the results. Upon analysis it was found that the former ERP systems tried to give ready made solutions to their problems in the form of packaged solutions while the later facilitated tin creating an automatic system for data transfer. This resulted in ERP success.

The point to be learned from this issue is that the ERP vendor should provide appropriate solutions based on the requirements of the client and not on the basis of his services. They are meant to make one understand the critical success factor for ERP implementation.

Eiffel ERP software's implementation in U.S. based chemical company.

In this situation their main challenges of the software lay in facilitating communication between the corporate office and the manufacturing unit that uses very old systems on one hand and managing a new chemical plant. Both these process had to be done simultaneously with the second process coming under the control of the first one after the intervention of ERRP software. Deciding this is like squaring upon critical success factor for ERP systems.

The main challenge with the first issue was that the data processed by the corporate office was to be reverted and resend by the manufacturing setup which was using primitive systems that were not capable of processing large information. The manufacturing unit neither required the whole information nor had the ability to process the same. This was the critical success factor for ERP implementation.

Eiefeel ERP system was designed to filter the required information and storing the rest till the retrieval. In the meanwhile ERP also processed the complex information in order to suit the capability of manufacturing unit.

The issue with the second process was that the newly setup unit had to become a part of the manufacturing unit. The problem was that the new process could work on the latest software whereas it had to be coordinated with the old manufacturing unit. The new software was designed to do the very old process but by making use of the latest equipments and thus ERP success followed. This again points the facts that ERP has to be designed based on the systems in the organization.

WinMan ERP in Athena controls

Success stories usually explain how ERP facilitated organizations to reach milestones. This story has a different style. They explain the concrete steps that are to be taken in an organization in order to attain the maximum benefits from ERP. This company is a concrete example and a living proof to substantiate the fact regarding the steps that a company needs to take and in not believing that a more implementation of ERP will give the necessary impetus for success in the organization.

The basic factor for success in this company is backed by the fact that they believed software to be a tool and not the solution to the enterprise problems. This is backed up by the fact that the company successfully combined the business practices with the nuances of the software. This process took place during a crucial time for the company i/.e. when they experienced a sudden deflation of profits.

They had a successful collaboration with Winmap software to unleash the enterprise Solutions. The cordial work atmosphere among the two prevailed over any mishaps. They experienced an increase in the profits level and various aspects of business like inventory management, cost reduction and so on. The facts and figures were amazing and would not have happened if the company had not used the circumstance like a platform for doing their best and understanding the fundamental mistake of not aligning software with business process.

Intitutive ERP Software in San Antonio's Lighthouse

SanAntonio's Lighthouse is a company that provides employment opportunities to the visually challenged and others undergoing some form of physical hazards. The company's core business is to manufacture products that best suit them to carry on a trade or profession of their own choice. In addition to making them the company also sees to that it reaches the end user.

The market trend underwent a sea change. The company decided to change their strategy in order to ensure that the customers received the products in the correct time. The pressure from competitors circle also led them to think an alternative for their existing distribution system.

The company had also ventured into selling goods and services online. They went ahead with Intitutive ERP systems as it gave them advantage of services like Microsoft Environments and platforms. The implementation process and shipping time were drastically improved. The company was able to realize its full potential and sailed in tune with the market demands.

SAP ERP Solutions in TISCO (Tata Iron and steel company Limited)

The steel majors prompt response to market change and shifting to customer orientation from product coupled with the implementation of ERP will speak more than volumes of their success for the timely action. The company is now able to reap benefits in all aspect and make further progress in each and every operation of an enterprise.

The company decided to implement SAP ERP 3 after careful consideration for they matched best with their requirements. In addition the company also forecasted on what would happen to their operations in the future while making this choice .This anticipation helped them to obtain the proper solution at the right point of time. The implementation process took a long span of about a year owing to the volume of operations and the major steps to be taken.

The company never got bogged down by the reported failure rate of ERP implementations especially in bigger units and kept continuing their endeavors with vigor to get the best and make the whole process learning cum experimental one. The net result brought substantial increase in profits. The speed at which they worked (and without even the minutest error) deserves great appreciation and is accorded as one of the main contributing factors for the success.

Cost of ERP software

Below article explains the typical cost of ERP software

ERP software provider from ERP software solution for manufacturing in Malaysia SAP , Peoplesoft , Oracle..... Navision, Skala....... Globalsoft, Karensoft...... When talking about ERP software, most Malaysian with some ERP knowledge will come across the above ERP provider. The first 3 company, we normally position them as "tier 1", then the next 2 is "tier 2" and the last 2 is "tier 3" ( of course there are many providers in market for tier 1, 2 and 3, the above named companies are just an example) What does it mean ? well , tier 1 , 2 and 3 is the service scope and different market segmentation they serve. For "tier 1" provider, they normally target on Multi Nationals Corporation (MNC) with the budget of millions dollars, and "tier 2" provider target on listed companies and large organization with the budget of less than a million, and "tier 3" provider target on Small and Medium Industries (SMI, mostly manufacuturers) with the budget of less than RM 200,000. (USD 55,555.00) Does it mean that SMI can only find "tier 3" for their ERP solution ? Wrong. If you aware of the trends in Business and I.T, This rule has been changed because some big players like SAP also starting to tap in to SMI market and introduce the ERP solution that less than RM 200,000. (USD 55,555.00) This could be a good news to SMI because with that budget they can buy a stable, proven and reputable ERP software. Then, what happen to "tier 2 " and "tier 3" providers ? I am regret to know some tier 2 providers are still unaware of the business trends, they are still concern on finding big corporation with the budget of RM 300,000 to RM 800,000. When I was talking to such providers, they normally say " SMI ? They got budget or not ? If got more that RM 300,000 (USD 83,333.00)then could be considered........" They don't know the other side is saying : " Tier 2 provider? They can lower the price or not ? If they can lower the price to below RM 200,000, (USD 55,555.00) then I will be glad to find one" - from the SMI Obviously, closing a deal with the budget of RM 300,000 to RM 800,000 is much more profitable compare to closing a deal with the budget of RM 200,000. (USD 55,555.00) Most Tier 2 providers will give many reasons why they do not go to below RM 200,000 ...... For example, company image, less profit, high overhead etc..... then , consider what SAP does, is SAP so stupid to sell its light version of ERP for less than RM 150, 000 (USD 41,660.00)? If the answer is Yes, then why SAP is still the Top ERP provider in the world and capture the most market share ? If the answer is No, then who is stupid ? The "tier 2 provider ?" We are always talking about "long-term business partnership". It sounds good. But when it come to practice, many tier 2 providers just concern on short term profit, and ignore long term benefits. Just imagine, these SMI will keep growing, one day, they may become MNC and listed companies as well, if you are smart enough, target to the right SMI with the potential to grow big , lower the ERP software price for them to use, when they grow, they will ask for more from your ERP software - and eventually, throughout the period, your ERP software price selling to those SMI will sure exceed RM 300,000 and above. and one more important reward - they trust you. For tier 3 provider, they are targeting on SMI with the budget lower than RM 200,000 - sometimes could be RM 100,000 (USD 27,777) . Anywhere , with that price, the SMI also cannot expect too much on features or customization, and could be some bugs in that system. Finding a good tier 3 provider could be a challenge, especially, if you come across the ERP failure under the SMIDEC e-manufacturing grant (now has been changed to loan) , you will know what I mean. However, there are still many good tier 3 ERP provider in the market, the only thing is the SMI need to be careful on selecting the right ERP provider. If you want to know how to wisely select ERP provider, then send me an email. see my article of how to select ERP software solution for manufacturing article.

What is ERP ?

From erp.manufacturer-supplier.com

Below article explains in brief what is ERP software.

What is ERP software ?

ERP software means Enterprise Resource Planning systems. ERP systems are large computer systems that integrate application programs in accounting (i.e., accounts receivable), sales (i.e., order booking), manufacturing (i.e., product shipping) and the other functions in the firm. This integration is accomplished with through a database shared by all the application programs.

When you first see an ERP program, the application programs are similar to those with which you are already familiar. So the production scheduling, billing a customer, processing a payroll and other tasks are done in ways that should be pretty familiar to those of you who have worked with these applications over the years. So what is the big deal? Integration! ERP systems tie these, usually separate, applications together. When a customer service representative takes a sales order it is entered in the common database and in the other applications where it is needed, for example, in the manufacturing backlog, the credit system and the shipping schedule. No more carrying little pieces of paper back and forth. Or writing translation programs to get the information from one function to another. Sounds great, right? Read on!

ERP systems work in real-time, meaning that the exact status of everything is always available. Further, many of these systems are global. Since they can be deployed at sites around the world, they can work in multiple languages and currencies. When they are, you can immediately see, for example, exactly how much of a particular part is on-hand at the warehouse in Japan and what its value is in Yen or Dollars. This is a pretty amazing accomplishment. Sound too good to be true? It is --- all this doesn't come free.

In addition to the technical details, the way the hardware and software are organized, and technically how the logic of the system functions, there is another aspect to understanding ERP. It is the management and implementation issues associated with the systems that may be the most important of all. Whether you are considering the use of ERP, are faced (forced?) with implementation, or are just generally concerned about the management issues involved in using ERP systems, you should understand some of the tradeoffs involved.

We are all concerned about keeping up with new technology and the challenge that this poses. The pervasive promotion and use of ERP systems suggest that, for this technology, we need to understand the scope of these systems and have a basic knowledge of how they work. Fortunately, learning about ERP is not so much learning all-new concepts and ideas, but rather learning about new ways to do things that we already have been doing and the ERP terminology associated with them. This means, whether you are a general manager, information system executive, an accountant, or a student, you already know more about how ERP works than you think you do, but you still need to learn the managerial issues associated with the degree of integration they support.

What are the hidden costs of ERP?

Although different companies will find different land mines in the budgeting process, those who have implemented ERP packages agree that certain costs are more commonly overlooked or underestimated than others. Armed with insights from across the business, ERP pros vote the following areas as most likely to result in budget overrun.

1. Training - Training is the near-unanimous choice of experienced ERP implementers as the most underestimated budget item. Training expenses are high because workers almost invariably have to learn a new set of processes, not just a new software interface. Worse, outside training companies may not be able to help you. They are focused on telling people how to use software, not on educating people about the particular ways you do business. Prepare to develop a curriculum yourself that identifies and explains the different business processes that will be affected by the ERP system. One enterprising CIO hired staff from a local business school to help him develop and teach the ERP business-training course to employees. Remember that with ERP, finance people will be using the same software as warehouse people and they will both be entering information that affects the other. To do this accurately, they have to have a much broader understanding of how others in the company do their jobs than they did before ERP came along. Ultimately, it will be up to your IT and businesspeople to provide that training. So take whatever you have budgeted for ERP training and double or triple it up front. It will be the best ERP investment you ever make.
   
2. Integration and testing - Testing the links between ERP packages and other corporate software links that have to be built on a case-by-case basis is another often-underestimated cost. A typical manufacturing company may have add-on applications from the major?ae-commerce and supply chain?ato the minor?asales tax computation and bar coding. All require integration links to ERP. If you can buy add-ons from the ERP vendor that are pre-integrated, you're better off. If you need to build the links yourself, expect things to get ugly. As with training, testing ERP integration has to be done from a process-oriented perspective. Veterans recommend that instead of plugging in dummy data and moving it from one application to the next, run a real purchase order through the system, from order entry through shipping and receipt of payment?athe whole order-to-cash banana?apreferably with the participation of the employees who will eventually do those jobs.
   
3. Customization - Add-ons are only the beginning of the integration costs of ERP. Much more costly, and something to be avoided if at all possible, is actual customization of the core ERP software itself. This happens when the ERP software can't handle one of your business processes and you decide to mess with the software to make it do what you want. You're playing with fire. The customizations can affect every module of the ERP system because they are all so tightly linked together. Upgrading the ERP package?ano walk in the park under the best of circumstances?abecomes a nightmare because you'll have to do the customization all over again in the new version. Maybe it will work, maybe it won't. No matter what, the vendor will not be there to support you. You will have to hire extra staffers to do the customization work, and keep them on for good to maintain it.
4. Data conversion - It costs money to move corporate information, such as customer and supplier records, product design data and the like, from old systems to new ERP homes. Although few CIOs will admit it, most data in most legacy systems is of little use. Companies often deny their data is dirty until they actually have to move it to the new client/server setups that popular ERP packages require. Consequently, those companies are more likely to underestimate the cost of the move. But even clean data may demand some overhaul to match process modifications necessitated?aor inspired?aby the ERP implementation.
   
5. Data analysis - Often, the data from the ERP system must be combined with data from external systems for analysis purposes. Users with heavy analysis needs should include the cost of a data warehouse in the ERP budget?aand they should expect to do quite a bit of work to make it run smoothly. Users are in a pickle here: Refreshing all the ERP data every day in a big corporate data warehouse is difficult, and ERP systems do a poor job of indicating which information has changed from day to day, making selective warehouse updates tough. One expensive solution is custom programming. The upshot is that the wise will check all their data analysis needs before signing off on the budget.
   
6. Consultants ad infinitum - When users fail to plan for disengagement, consulting fees run wild. To avoid this, companies should identify objectives for which its consulting partners must aim when training internal staff. Include metrics in the consultants' contract; for example, a specific number of the user company's staff should be able to pass a project-management leadership test?asimilar to what Big Five consultants have to pass to lead an ERP engagement.
   
7. Replacing your best and brightest - It is accepted wisdom that ERP success depends on staffing the project with the best and brightest from the business and IS divisions. The software is too complex and the business changes too dramatic to trust the project to just anyone. The bad news is a company must be prepared to replace many of those people when the project is over. Though the ERP market is not as hot as it once was, consultancies and other companies that have lost their best people will be hounding yours with higher salaries and bonus offers than you can afford?aor that your HR policies permit. Huddle with HR early on to develop a retention bonus program and create new salary strata for ERP veterans. If you let them go, you'll wind up hiring them?aor someone like them?aback as consultants for twice what you paid them in salaries.
   
8. Implementation teams can never stop - Most companies intend to treat their ERP implementation as they would any other software project. Once the software is installed, they figure the team will be scuttled and everyone will go back to his or her day job. But after ERP, you can't go home again. The implementers are too valuable. Because they have worked intimately with ERP, they know more about the sales process than the salespeople and more about the manufacturing process than the manufacturing people. Companies can't afford to send their project people back into the business because there's so much to do after the ERP software is installed. Just writing reports to pull information out of the new ERP system will keep the project team busy for a year at least. And it is in analysis?aand, one hopes, insight?athat companies make their money back on an ERP implementation. Unfortunately, few IS departments plan for the frenzy of post-ERP installation activity, and fewer still build it into their budgets when they start their ERP projects. Many are forced to beg for more money and staff immediately after the go-live date, long before the ERP project has demonstrated any benefit.
9. Waiting for ROI - One of the most misleading legacies of traditional software project management is that the company expects to gain value from the application as soon as it is installed, while the project team expects a break and maybe a pat on the back. Neither expectation applies to ERP. Most of the systems don't reveal their value until after companies have had them running for some time and can concentrate on making improvements in the business processes that are affected by the system. And the project team is not going to be rewarded until their efforts pay off.
   
10. Post-ERP depression - ERP systems often wreak cause havoc in the companies that install them. In a recent Deloitte Consulting survey of 64 Fortune 500 companies, one in four admitted that they suffered a drop in performance when their ERP system went live. The true percentage is undoubtedly much higher. The most common reason for the performance problems is that everything looks and works differently from the way it did before. When people can't do their jobs in the familiar way and haven't yet mastered the new way, they panic, and the business goes into spasms.

ERP System or an ERP Wannabe?

Are You a True ERP System or an ERP Wannabe?

Rebecca Gill
(Vice President)

I am beginning to think there is considerable confusion between true ERP systems and simple software programs. And I have to admit, I take offense when a company refers to their product as an ERP system, when in fact, it appears to be a software package with functionality focused in one or two operational areas.

I realize I'm probably overly sensitive on this subject, but ERP is my career and my livelihood. It consumes both my time and my thoughts. So yes, when I read about software suppliers I've never heard of refer to their new or improved product as the "next ERP" or the "ERP alternative", I get a bit disturbed.

Although there are certainly different tiers of ERP packages, ERP at the core is an enterprise wide system. My company, Technology Group International, is not a tier one product like SAP or Oracle, but we do offer an enterprise wide solution. We are a tier two ERP provider that offers significant functionality and quite honestly we are proud of our product. We've spent over fifteen years developing and supporting one core product - Enterprise 21. On average, my development team has well over eight years in tenure with both my product and my company. They are dedicated people. And thus, I feel compelled to be dedicated to them and defend their honor when I read of new products with limited functionality being labeled as ERP systems.

A true ERP system requires significant development time. It is not something that can emerge instantaneously. It needs to grow and be nurtured. It has millions of lines of code and thousands of screens and tables. My development staff has worked hard creating a product for which we can all be proud. It is a software package that includes functionality not just in accounting, but in all aspects of sales, manufacturing, and the entire supply chain. It reaches across the organization to provide a solution set for a company and not just a departmental fix.

Even though I know my company and my product are far from perfect, I feel confident in our product claims and the image we portray to the buyer. If I say we have ERP software, it is because I believe we have a true ERP system that offers a full solution. As fast as I am to sing our praise, I'm also quick to discuss our weaknesses in a given area or market. But as my husband states, not everyone is as vocal as I am or as open about every subject imaginable.

In response to the ongoing feed of ERP news and announcements, I say buyer beware. If you are considering the purchase of an ERP system, make sure it is a true ERP system and not just an ERP wannabe. Look deep into the functionality it offers, perform scripted demonstrations, and check references. Make sure you are buying a real ERP system and not simply a software application that is clinging to popular technology buzzwords.