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Manufacturer finds success with cloud-based ERP system

When it came time for international expansion, Shaw Industries turned to a cloud-based ERP system. The company couldn't be happier.

Roddy McKaig isn't new to the cloud. The vice president and CIO of Shaw Industries Group, a maker of flooring materials,...

has long overseen a private cloud that lets the company manage the technology powering its numerous manufacturing facilities from its Dalton, Georgia, headquarters.

The ERP systems Shaw had long depended on were running on virtualized servers in Dalton, and they were serving the company well. But they had limits, and when Shaw announced plans to build a new plant in China in 2011 -- its first outside the U.S. -- those limits forced McKaig into action. Most importantly, with plans to expand into other countries as well, Shaw was in need of a system that supported multiple languages and currencies, which the company's legacy system was not built to do.

Years earlier, Shaw had acquired one of its customers, a reseller and installer of its products in Australia, and had learned that it was very happy with its cloud-based ERP system. Because there was no need for Shaw to integrate that system, provided by software as a service (SaaS) vendor NetSuite, the acquired company was left to operate as a subsidiary with its own technology footprint. But once Shaw's China expansion was announced and the need for a new system arose, Shaw considered NetSuite, along with a variety of other ERP providers, for the IT engine that would power the expansion.

Although the company wasn't looking specifically for a SaaS-based solution, the company chose NetSuite after comparing it with several other products. To say it was a leap of faith for McKaig would not be exaggerating.

"When we have control over our systems, we know what we need to keep them up and running," said McKaig. "When you turn them over to a third party, you're at their mercy. We did a lot of research on that before we pulled the trigger."

In other words, McKaig and his team drilled NetSuite on topics such as service levels, customizations, connectivity concerns and the like, and they liked the answers they heard.

Mike West, a research fellow at IT consulting firm Saugatuck Technology, says leaping into new cloud-based technologies isn't the no-brainer in manufacturing that it is in other industries that possess more technology expertise and better abilities to absorb such change.

"If you look at who's sitting at the front of the boat and who's at the back of the boat, manufacturing is definitely in the back," West says, arguing that many manufacturing companies lack the skill set and culture to ensure smooth adoption of cloud applications. "They're not motivated in the same way to exploit technology for competitive advantage."

Which is why West maintains that there has to be an especially compelling reason -- struggles with costs, regulatory compliance pressures or major market changes, for instance -- to spur a manufacturer to consider the kind of move Shaw has made.

The question, West said, is, "What's the bear at the door that's going to get people off the on-premises architecture and into the cloud?"

In the case of Shaw, the bear was a global expansion plan, combined with the need for an ERP system that could do things the company's legacy systems couldn't.

Once Shaw made the call in June 2012 to bring in NetSuite, it was full steam ahead. General ledger and administrative functions were live three months later, followed in short order by accounts payable, inventory and order entry modules. The last pieces of the puzzle -- the manufacturing module -- went live as the plant opened in July 2013. Now, 18 months later, the system has experienced no downtime. This is due in no small part to the company's decision to have AT&T build it a private pipeline into the Internet so that it didn't have to depend on China's suspect and heavily controlled connectivity.

Questions manufacturers should ask before migrating ERP to public cloud

No move into the public cloud should be considered without first performing due diligence, and this is especially critical in the highly specialized world of manufacturing. Mike West, a research fellow at IT consulting firm Saugatuck Technology, recommends that manufacturers ask themselves the following questions as they consider migrating their ERP systems to SaaS-based cloud platforms:

  • What are the advantages of making such a move? What is it that the company will get out of it? Will you gain a financial edge? If you're competing on price, as many manufacturers are, you had better be reducing your costs.
  • What are the implications for all the other communicating systems that are tied to the ERP system? How will they be affected by the migration? Will there be a lot of resulting integration re-works?
  • If you're competing more on quality and specialization than on price, what's the advantage the cloud brings? Are you able to gain access to more sourcing? Or lay hands on components quicker? Will you have access to a more powerful supplier interface?

What has really impressed McKaig about NetSuite is the seamless way that Shaw's customizations -- a critical component of any manufacturer's ERP systems -- have ported from version to version. The company has already gone through several updates and each time, McKaig said, Shaw's customizations have flown right through. If the company had chosen an on-premises system, it would have taken a significant investment to make that happen each time.

Meanwhile, Shaw's on-premises U.S. systems keep on ticking. Although McKaig is happy with NetSuite's ability to support Shaw's overseas expansion, he has no intention of fixing what isn't broken. NetSuite is now the company's international platform, which will eventually support expansion into India and Singapore, as well as additional Asian and South American markets. Shaw's network of U.S. manufacturing facilities will continue to run on the company's virtualized on-premises ERP system.

Still, the whole experience has emboldened McKaig when it comes to considering SaaS alternatives down the line. Well, NetSuite's brand of SaaS, anyway.

"I've gained some confidence," says McKaig, "but the confidence in the public cloud all comes back to the provider."

Next Steps

What does the future hold for ERP technology?

Manufacturers start to embrace the cloud

Taking a hybrid approach cloud-based ERP

This was last published in January 2015

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