TORNIEL News and Events
ERP Systems History and Background of Enterprise Resource Planning
"From the Core..."May Edition of “From the Core…”
By Paul Nielsen 5/19/03
Vice President, TORNIEL Technologies International, Inc.
Internet Protocal (IP) Version 4 versus IP v6
Through your involvement with IT consulting, you're no doubt familiar with the TCP/IP protocol. What you may not realize is that the current implementation, IPv4, has been around since 1981. IPv4 is quite an engineering achievement to have remained in use for so long. Unfortunately though, IPv4 has become a victim of its own success. The initial design of IPv4 never took into account that the Internet would become so popular. Let's examine why IPv6 will soon overtake IPv4 for Internet supremacy.
IPv4's drawbacks
IPv4 is becoming quickly outdated because of the way that it designates network IDs. Internet backbone routers contain routing tables with over 85,000 routes. These routes are combinations of flat and hierarchical routes. While the current Internet backbone routing tables are getting the job done, they're inefficient, to say the least.
Another reason for moving past IPv4 is that TCP/IP can be tough to configure. Before you e-mail me over that statement, let me clarify. Certainly, most network professionals can configure TCP/IP with their eyes closed. However, the first time you manually configure TCP/IP, it can be a little intimidating. A lot of people want an IP protocol that doesn't rely on a DHCP server or complex manual configurations.
Security has also become a big problem for IPv4. Everyone is concerned about the encryption of data flowing across the Internet. There are lots of ways of encrypting IPv4 traffic, such as using the IPSec protocol. Unfortunately, all of the IPv4 encryption methods are proprietary. No real standard encryption method exists for IPv4, although some encryption techniques are more widely used than others.
A final challenge has been the real-time delivery of multimedia content and the necessary bandwidth allocation that goes along with it. A bandwidth allocation method called Quality of Service (QoS) has been used with IPv4. While QoS does work with IPv4, there are a number of different interpretations of the IPv4 QoS standards. This means that not all QoS-compliant devices are compatible with one another.
The IPv6 protocol
While IPv4 has held up remarkably well, it's nearing the end of its useful lifespan. As IPv4 is gradually phased out, the new standard will be IPv6, which has a number of new features designed to address the shortcomings of IPv4, including a new IP header format, a larger address space, a more efficient routing infrastructure, stateless and stateful address configurations, enhanced security, and standardized QoS support.
The new header format
The first notable feature of the IPv6 protocol is a newly designed IP header. It's designed to make the protocol more efficient by keeping overhead to a minimum. An IP packet header is made up of required components and optional components; in IPv6, the required components are moved to the front of the header. Optional components are moved to an extension header. This means that if optional components aren't used, the extension headers aren't necessary, reducing the packet size.
The downside to the new header is that it isn't compatible with IPv4. If a router is to handle both IPv4 and IPv6, it must be configured to recognize both protocols. You can't just set up a router to recognize IPv6 and expect it to be backward-compatible with IPv4.
Larger address space
Perhaps the most compelling reason for moving to IPv6 is the current shortage of IP addresses. IPv6 uses 128-bit source and destination addresses. There are theoretically over 3.4x10^38 possible addresses that can be addressed by the IPv6 protocol. Furthermore, this new structure allows for more levels of subnetting than are available with IPv4. Some people speculate that because of the large number of addresses that IPv6 allows, NAT technology may soon become a thing of the past.
More efficient routing
The Internet is hierarchical in nature, and the IPv6 protocol is designed with this in mind. Think about it. The computer you're using right now doesn't have a direct connection to an Internet backbone. Instead, you're probably behind a NAT firewall, which is connected to an ISP. That ISP may be connected to another ISP or to a backbone router. Either way, a packet must make quite a few hops to go from an Internet backbone router to you.
The IPv6 protocol is designed so that Internet backbone routers will have much smaller routing tables than they have now. Instead of knowing every possible route, the routing tables will include routes to only those routers connected directly to them. The IPv6 protocol will contain the rest of the information necessary for a packet to reach its destination.
New configuration options
One of the coolest things about IPv6 is the way it's configured. While you can still manually configure IPv6, or lease an address from a DHCP server, there is a new automatic configuration option available. If an unconfigured PC tries to connect to a network that doesn't offer a DHCP server, the PC can look at either the network's router or the other PCs on the network and determine an address that would be appropriate for it to use. This technique is referred to as link local addressing.
Integrated security
IPSec is available in some implementations of IPv4, but it's completely integrated into IPv6. Any computer that's running IPv6 will support IPSec encryption, regardless of the computer's operating system.
Standardized QoS support
IPv6 also includes standardized support for QoS. The QoS implementation is set up so that routers can identify packets belonging to an individual QoS flow. This allows those routers to allocate the necessary amount of bandwidth to those packets. Furthermore, QoS instructions are included in the IPv6 packet header. This means that the packet body can be encrypted, but QoS will still function because the header portion containing the QoS instructions is not encrypted. This will make it possible to send streaming audio and video over the Internet with IPSec encryption, but in a manner that guarantees adequate bandwidth for real-time playback.
Get ready to move your clients
IPv6 is a huge improvement over IPv4. Unfortunately, the two protocols aren't compatible with each other. You can expect many ISPs to soon start supporting both IPv4 and IPv6. As more of your clients make the move to IPv6, the IPv4 protocol will be gradually phased out until no one supports it any longer.
About the Author
"From the Core..." is written by Paul Nielsen as an "Op Ed" column for TORNIEL Technologies International, Inc. This column attempts to provide insight to senior IT and business executives regarding issues, trends, and practices that currently affect the business and technology communities.
Paul Nielsen has been in the Information Technology field for more than 30 years. He provides consulting and technical services to a wide variety of organization, from Petrochemical and Computer manufactures to Rail and Truck transportation companies. He is a published Methodologist (The INSIGHT Development FrameWork) and a longtime project manager. He has started and managed three companies and is an effective business executive. Paul grew up in the Data Processing/IT arena as a programmer/analyst and has never lost the interest in programming or its relationship to successful projects. He currently functions as a high-level project manager and external CIO to many of TORNIEL's clients. He graduated from NCAS were he earned a Masters Degree in Computer Science.
Why deal with small consulting firms?
 Big vs. small: The real difference among consulting firms Mar 2, 2001
Tom Rodenhauser
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"My son, who's a lawyer, says I shouldn't put 'consultant' on my business card because people don't know what they do."
The passenger in front of me sheepishly admitted this as we swapped stories and cards on the morning train into Chicago. He was paunchy to the point of portly, a bit on the balding side, and carrying a bulging leather briefcase that caused a slight list when he walked.
In other words, he really was a consultant.
The popular belief is that 99 percent of all management consultants are freshly scrubbed 20-somethings with crisp MBAs and staggering IQs. For the 20 or so major worldwide consulting firms, such is the case. In fact, McKinsey & Company, the world's best-known firm, likes to offer up an additional array of Ph.D.s, nuclear engineers, and world-class economists.
As measured in sheer numbers, it's true that a sizable portion of the consulting world is populated by those stereotypes. Each year, roughly 30 percent of all graduating M.B.A.s at U.S. business schools are sucked into the 50 or so largest consulting firms. The math is simple: These 50 largest firms-which collectively have more than 200,000 consultants-average about 15 percent annual turnover. That amounts to about 30,000 new bodies a year needed to feed the big consulting machines.
In reality, you're more likely to run into a "single shingle" than a big firm rep. Is there a difference? Beyond the size issue, solos do provide a distinct outlook. A solo consultant's "product" is his or her expertise. There is no hiding behind the brand name of a larger firm. And unlike the perceived arrogance associated with upper-echelon consulting firms, good solos rarely confuse confidence with ego.
Let's face it: Most consultants who flee big firms to start their own practice possess an obsessive desire to serve their clients. The pressure to sell services at larger firms turns 180 degrees when these folks strike out on their own, usually to the point where solos view their involvement as partnerships rather than engagements.
The knock against solo consultants and smaller consulting firms is they lack the sophistication of big, global operations. True, they're not the first call you make when talking about a major systems implementation project. But don't automatically dismiss the little guy or lady. You might be surprised at the results.
Heard on the street
Inforte, the Chicago-based e-firm that Michael Porter has taken under his wing, was the only company amongst all the pure-plays to hit all four quarterly estimates last year. That's quite a feat, considering the poor showing from the rest of that segment.
About the author
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Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2001, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.
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Tom Rodenhauser is a leading commentator on management consulting and e-consulting services. He publishes The Rodenhauser Report, a monthly electronic briefing service that analyzes trends in e-consulting and management consulting. He also conducts custom research on topics affecting buyers and sellers of consulting services. Tom is a frequent guest speaker and presenter to professional service firms and other groups on best consulting practices. He also participates in a variety of consulting and recruiting panel discussions. His analysis and commentary on management advisory services is quoted in such major business media as The Wall Street Journal, Business Week, The New York Times, Fortune, Fast Company, Industry Week, Knight-Ridder News Services, and CNBC-TV. Tom is a graduate of Ohio State University, where he earned a B.A. in journalism.
Plug the Inventory DrainToo much inventory. Not enough inventory. Either one can rob your business of profits because inventory is a silent, hidden drain on your bottom line.
By Rick Lavely
Inventory is money on the shelf. The typical auto repair shop carries $10,000 to $20,000 worth of inventory, and 30% of that inventory is dead. Businesses in other industries range even higher. Yet rarely do they monitor or control inventory properly.
Without proper controls, overstocking creeps up gradually. So at some point, many small businesses end up with a large inventory investment on which they pay taxes.
Inventory Calculations
Two calculations are often overlooked when determining inventory profitability. The first is cost-to-order; the second is cost-to-keep. The factors involved in cost-to-order are time and money: time to calculate order quantities, to do paperwork, to receive orders, stock them, correct errors and then track them, and money to pay someone to do it all.
If you aim for a 45% profit margin and base the selling price solely on what you paid for the product, an item costing you $100 would sell for $182. The formula is selling price equals cost of goods (in this case, $100) divided by the result of 1.00 minus the margin (.45 in this example). But when figuring your selling price, you should also consider the cost-to-order. If your cost-to-order is $10, but your selling price remains the same, you would lose $18, because on a 45% margin, a $110 product should gross $200.
Cost-to-keep covers what it costs to keep inventory as well as how much return on investment you could get on that amount if it weren't on the shelf. Also factor in cost-of-obsolescence. For example, if it costs you 10% to keep something on the shelf, taking a 5% quantity discount will actually mean a loss of 5%.
Five Steps to Improve Inventory Control
Just-in-time inventory allows you to gain control over those assets on the shelf. Order on a regular basis and purchase only when you need to replenish what has been sold since the last order. You must have short inventory order cycles and accurate tracking to determine what and how much inventory to stock.
The following five steps can help you improve your inventory control and your bottom line.
Determine what represents "dead" inventory in your business by evaluating inventory turns. Turns equal cost of goods sold (COGS) divided by inventory value. Calculate COGS on your inventory as a whole, then recalculate for specific categories. Your computer system or your bookkeeper should be able to provide accurate purchase data by line. Turn dust into dollars. Get rid of what's not moving. Do a physical inventory at least once a year, and return everything that hasn't been sold. Multiply your gross profit percent by what you can recover on returns, say 50 cents on the dollar, to determine the amount of reinvestment capital available to you. Don't get trapped by thinking about what you paid for it versus what you can get for it now.
Analyze your business profile to determine what and how much to stock. Do you consider seasonal items? Do you utilize replenishment ordering, or do you order to stock levels? If you use the latter, who determines the stock levels? Determining what to stock and how much is similar to determining your dead inventory. Your computer program should be able to tell you what is selling and which items produce the greatest gross profits.
Monitor sales for profitability. High sales volume doesn't necessarily equate to high profitability. If the gross profit percent is low on a given item, sales have to be high. But, if gross profit percent is high, you can get away with selling fewer of those items. Unload everything that isn't profitable. Gross profit per line item is one measure. How much it costs to wait for more products is another. Most of this information is available from your computer program or your bookkeeper.
Buy smart. In addition to prices and quality of the actual products, it's also important to evaluate what services you can get from your supplier. What are their return policies? What percent can be sent back "no questions asked"? Will they clean up your inventory? How often? Many of these important issues are overlooked when choosing a supplier.
View your inventory as you would a capital investment. If the return is not there, don't make the investment.
Formerly a small business owner, Rick Lavely has traveled the United States as a corporate trainer. He has presented business management workshops and seminars to small business owners for organizations such as the Automotive Service Association.
Bar Coding Technology
What's out there for our use?
Scanner Technologies
Wands - These are pen-shaped devices which the user moves across the barcode, at all times maintaining direct contact with the media, and therefore are used in low volume applications. They are exceptionally rugged and consume minimal power, which also makes them a good choice for input to portable terminals and laptops. Wands can read most every barcode, even high density ones, and are generally the lowest cost scanner.
CCD- These are gun-shaped scanners, all solid state with no moving parts, originally used for near contact reading. However, technological advances have given us CCDs that can read out to 6 inches, making them a superior choice for many retail and industrial applications, due to their ruggedness and modest cost. CCDs readily handle hi-volume-scanning applications. Generally designed as a handheld unit, they can also be used hands-free in a self-triggered mode by addition of a stand.
Lasers - These have been the mainstay of the hi-volume scanning industry. They are ideal choices for scanning very high-density barcodes, long barcodes, and those applications requiring reading at a distance. Laser scanners can read codes down to 3 mil barwidth. Versions to read out to 30 feet are available. They are the most versatile of scanners. Some are omnidirectional, eliminating the need for the user to orient the barcode perpendicular to the scanning beam.
What's right for you? Let us look at your needs and requirements.
ERP Systems
History and Background…
In the past decade the business environment has changed dramatically. The world has become a small and very dynamic marketplace. Organizations today confront new markets, new competition and increasing customer expectations. This has put a tremendous demand on manufacturers to;
1) Lower total costs in the complete supply chain
2) Shorten throughput times
3) Reduce stock to a minimum
4) Enlarge product assortment
5) Improve Product quality
6) Provide more reliable delivery dates and higher service to the customer
7) Efficiently coordinate global demand, supply and production.
Thus today's organization have to constantly re-engineer their business practices and procedures to be more and more responsive to customers and competition. In the 1990's Information technology and Business Process re-engineering, used in conjunction with each other, have emerged as important tools which give organizations the leading edge.
ERP Systems - Evolution
The focus of manufacturing systems in the 1960's was on Inventory control. Most of the software packages then (usually customized) were designed to handle inventory based on traditional inventory concepts. In the 1970's the focus shifted to MRP (Material Requirement Planning) systems which translated the Master Schedule built for the end items into time-phased net requirements for the sub-assemblies, components and raw materials planning and procurement.
In the 1980's the concept of MRP-II (Manufacturing Resources Planning) evolved which was an extension of MRP to shop floor and Distribution management activities. In the early 1990's, MRP-II was further extended to cover areas like Engineering, Finance, Human Resources, Projects Management etc. i.e. the complete gamut of activities within any business enterprise. Hence, the term ERP (Enterprise Resource Planning) was coined.
In addition to system requirements, ERP addresses technology aspects like client/server distributed architecture, RDBMS, object oriented programming etc. ERP Systems - Bandwidth ERP solutions address broad areas within any business like Manufacturing, Distribution, Finance, Project Management. Service and Maintenance, Transportation etc. A seamless integration is essential to provide visibility and consistency across the enterprise.
An ERP system should be sufficiently versatile to support different manufacturing environments like make-to-stock, assemble-to-order and engineer-to-order. The customer order decoupling point (CODP) should be flexible enough to allow the coexistence of these manufacturing environments within the same system. A typical example here could be Godrej & Boyce Mfg.Co., which has businesses spread over all these manufacturing environments. It is also very likely that the same product may migrate from one manufacturing environment to another during its produce life cycle.
The system should be complete enough to support both Discrete as well as Process manufacturing scenario's. The efficiency of an enterprise depends on the quick flow of information across the complete supply chain i.e. from the customer to manufacturers to supplier. This places demands on the ERP system to have rich functionality across all areas like sales, accounts receivable, engineering, planning, Inventory Management, Production, Purchase, accounts payable, quality management, production, distribution planning and external transportation. EDI (Electronic Data Interchange) is an important tool in speeding up communications with trading partners.
More and more companies are becoming global and focusing on downsizing and decentralizing their business. ABB and Northern Telecom are examples of companies which have business spread around the globe. For these companies to manage their business efficiently, ERP systems need to have extensive multi-site management capabilities. The complete financial accounting and management accounting requirements of the organization should be addressed. It is necessary to have centralized or decentralized accounting functions with complete flexibility to consolidate corporate information.
For companies undertaking large scale and complex EPC projects, tools should be available for cost-effective project management, project planning and project control. After-sales service should be streamlined and managed efficiently. A strong EIS (Enterprise Information System) with extensive drill down capabilities should be available for the top management to get a birds eye view of the health of their organization and help them to analyze performance in key areas.
ERP Systems -- Implementation
The success of an ERP solution depends on how quick the benefits can be reaped from it. This necessitates rapid implementations which lead to shortened Return on Investment (ROI) periods. Traditional approach to implementation has been to carry out a Business Process Re-engineering exercise and define a ``TO BE'' model before the ERP system implementation. This led to mismatches between the proposed model and the ERP functionality, the consequence of which is customizations, extended implementation time frames, higher costs and loss of user confidence.
Let us help you with your ERP, Supply Chain Management, Transportation Management, and Rail Management system needs!
