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The hub and spoke concept
refers to a parent or holding company that uses one business software
system (the hub), which is integrated with the systems used by its
individual subsidiaries or divisions (the spokes).
This concept is a metaphor,
which uses the image of a wheel with a core component (the hub) and many
sub-components (the spokes). Together, the hub and spokes form a whole
that can progress forward as one unit.
Similarly, in the world of
business management software, the IT system of the parent company (hub),
must work together with the systems of its subsidiaries (spokes) in
order to reach its destination, or business goals. (See Figure 1, page
4.)
The next section will explain
why Microsoft Business Solutions–Navision 4.0 could be the ideal
solution to use in your subsidiaries or divisions. In particular, the
next section focuses on how it offers standard functionality while still
meeting local needs.
Why the Hub and Spoke Concept Is Relevant for Your Company
The idea of one standard
system that requires no integration of data between corporate
headquarters and its subsidiaries certainly has its appeal. In the real
world, however, companies must deal with integration between corporate
and subsidiary systems, and there are a number of good reasons for this.
Subsidiaries or divisions tend to have very different needs than the
parent company, and therefore need a different system. The next session
will look at some of the reasons subsidiaries needs tend to be
different, and at the same time, see why Microsoft Navision may be the
ideal solution to meet those needs.
Microsoft Navision is a
standard solution that still has enough flexibility to meet the varied
needs of local subsidiaries or divisions, regardless to their
size, location or type of business.
It has a low total cost of ownership because it is relatively
inexpensive to acquire, and easy to use and maintain.
How Microsoft Navision Meets Different Needs
Size:
Subsidiaries typically do not need the same level of complexity in their
system as the parent company. Furthermore, they may not have the
resources necessary to acquire and maintain a system that was designed
for a larger company. Microsoft Navision is an excellent choice for
subsidiaries because it was designed for small to mid-sized businesses.
For example, Microsoft
Navision helped American logistical services company, New Age
Electronics, to maintain their system more efficiently. They now use
outside IT consultants only on a limited basis. According to Min Kim,
Programming Manager, "Microsoft Navision provides a simple [Integrated
Development Environment] IDE to connect data to users." New Age
Electronics reduced consulting costs by 50 percent compared to their
last year using their previous solution.
Location:
Subsidiaries located in different countries will need a business system
that reflects their local legal requirements as well as the business
practices dictated by their location. Microsoft Navision is a business
software solution with 40 localized country versions around the world,
and with multilanguage capabilities. Thus, it is a standard solution,
but one that still meets varying local needs.
In addition to getting a
solution that meets local requirements, subsidiaries can count on
finding expert local help because of Microsoft's extensive network of
qualified partners.
Dutch food company, Coroos,
for example, worked with one local Microsoft partner to plan their
solution and document their requirements, and another one for the actual
implementation.
"[Microsoft] Navision
partners gave us a software demonstration, and the functionality it
provides fitted perfectly with the culture and processes of our
business," said Andries van Iwaarden, Information Technology Manager at
Coroos. Van Iwaarden also described the implementation as smooth:
"Within 36 hours, our two factories were running one database on a
single hardware platform."
Type of business:
Subsidiaries may have specialized functions that they perform because of
the nature of their industry, their way of doing business, or the way
that they do business together with their parent company.
Microsoft Navision is flexible
by nature. It is straightforward to adapt the standard functionality in
Microsoft Navision to meet the specific requirements of subsidiaries or
divisions.
Figure 1: The figure shows a corporate headquarters, which is using a
given business management system that is integrated with Microsoft
Navision solutions at its various subsidiaries
There are several tools that
make this possible without disrupting daily business:
-
Minor adaptations save time
in daily work
-
Industry-specific templates
and vertical solutions reduce service costs
-
The upgrade tool and
methodology make it easier to move to a new version
Minor adaptations
like changing forms are easy to carry out in Microsoft Navision.
Swedish-based
EuroFlorist, for example, used the built-in tools in
Microsoft Navision to add shortcuts that helped cut order-entry time by
30 to 40 percent.
“They’re small details, but
they all add up, especially when every minute counts,” says Daniel
Ekwall, Systems Manager at EuroFlorist.
In addition to the inherent
adaptability of Microsoft Navision, there are also Microsoft
Business Solutions Industry Specific Solutions Tools – Navision.
You can useindustry templates for divisions with similar functions, and
you can find vertical-industry solutions for more specific business
needs from the extensive network of Microsoft partners.
So, for example, if you have a
number of divisional sales offices with similar functions, you might
want to apply one industry-specific template to all your spokes. If,
however, you need a solution for, say, the shoe manufacturing industry,
then you might want to implement an industry-specific solution based on
the Microsoft Navision platform. The extensive catalog of
industry-specific solutions and the industry templates can help reduce
service costs and make it faster and more efficient to implement the
solutions at your divisions or subsidiaries.
Finally, the upgrade
tool and complete upgrade methodology in Microsoft Navision
help give you a smooth transition to new versions of your solution,
without losing any specific modifications made for your business. It
provides a tool and a framework to help you make sure you can continue
to work with the solution with which you are already familiar, while
still benefiting from new releases.
Varying Needs, One Common Purpose
Parent companies and their
subsidiaries need different solutions because they have different
business needs. Yet, they are all part of the same organization, and
still need to function as a whole unit. If the system used at the
subsidiaries is flexible enough, it can meet the needs of the individual
subsidiaries or divisions (the spokes).
In order to move forward as
one unit, however, it is not enough to meet the needs of the spokes. The
spokes must function together with the hub (the parent company). In
order to do this, the system used at the spokes must not only be a
flexible solution, but it must also have the right tools to function
together with the system used at the hub.
In the next section, you can
follow six common integration scenarios, which are dictated by the
business needs of the parent company and its subsidiaries. We will start
with the most basic and common scenario. Then, we will go on to see how
the more a parent company's business processes are intertwined with
those of their divisions or subsidiaries, the greater the level of
integration that they will need. Each scenario will explain how
integration between Microsoft Navision at subsidiaries and another
solution at the parent company can help the entire organization function
more efficiently.
Scenario 1: Consolidating Financial Data
Any office that functions as
headquarters must get a consolidated view of its finances that includes
the financial reports of local subsidiaries. You need to consolidate
finances in order to run your business, and you need to do so in order
to meet increasingly demanding international standards, such as
Sarbanes-Oxley and IAS 2005 (International Accounting Standard).
At the same time, your
subsidiaries may have to answer to local financial practices and
standards. These diverse business needs often result in a workflow that
is inefficient and prone to error. The subsidiaries must take their
financial information out of their local system, and retype it into a
spreadsheet provided by headquarters. What's more, this workflow must be
repeated for each subsidiary before headquarters can create a
consolidated financial report.
How Microsoft Navision Helps You Consolidate Financial Data
In Microsoft Navision, you can
consolidate financial statements for a series of business units from a
single database, other Microsoft Navision databases, or other programs.
You can transfer from different accounting structures to your own. You
can also ensure that financial statements in different currencies are
consolidated trouble-free using the exchanged rate functionality.
Microsoft Navision can also
help you consolidate with Extensible Business Reporting Language (XBRL),
an XML-based specification. XBRL uses accepted financial reporting
standards and practices to export financial reports across all software
and technologies, including the Internet. With XBRL, you enter
information only once, and the same information can then easily be
produced as a printed financial statement, an HTML document for a
website, a raw XML file, or in a specialized reporting format.
Scenario 2: Gaining Business Insight
In order to maintain control
over your entire organization, you need access to data located in the
systems of your subsidiaries or divisions. You may want a monthly sales
report organized by region and product. You may want to know how much
inventory of a certain item is on hand. Or, you may want to know how
much each country office is spending on advertising. The information you
may need is, in fact, unlimited.
What's more, whereas in some
cases, you may want periodic reports, at other times, you may feel you
need ad hoc answers to topical questions. Whatever type of information
you need, however, you will want to receive it in a format that is easy
to understand and to manipulate for your own purposes.
How Microsoft Navision Helps You Gain Business Insight
With the business analytics
available in Microsoft Navision, employees at your subsidiaries can
create OLAP cubes based on the data in their system. Business Analytics
is integrated into your existing Microsoft Navision system, giving you
the full benefit of access to your stored data. AData Transformation
Services (DTS)packagepulls data from Microsoft Navision into SQL
tables.From here, other DTSpackages transform and structure these tables
into multidimensional cubes processed in Microsoft ® SQL Server
®Analysis Services.
Employees at your subsidiaries
will not need extensive IT support, but rather, can quickly generate
reports based on the relevant parameters. Because of the Analysis
Services cubes, controllers at headquarters can then access the reports
in Microsoft Sharepoint, Microsoft Excel, or another program that they
use in their daily work. The result is better visibility into your
entire organization with faster and more efficient reporting tools.
Figure 2: The advanced offering of Business Analytics has an intuitive
Outlook-style interface that has a familiar feel for many users, and
thereby reduces the time needed for training.
Scenario 3: Sharing Master Data
A parent company and its
subsidiaries share certain critical business information, such as vendor
and price lists, and customer data. The data is often maintained
separately in different systems using different formats, which makes it
inconsistent. If, however, the parent company shares master data across
the entire organization, it brings with it a number of benefits:
-
Time spent sending and
re-entering data manually is reduced
-
Shared vendor data
increases opportunities for quantity discounts
-
Up-to-date and consistent
customer data at every point of contact helps increase customer
satisfaction
If the parent company wants to
share master data with subsidiaries that use different systems, then
there must be a means of connecting the systems.
How Microsoft Navision Helps You Share Master Data
Microsoft tools for electronic
exchange of data allow the entire organization to share master data. One
such tool is XMLports, which are used to create XML documents. These
documents can easily be sent to and read by another application. For
example, an XMLport can be created containing your product catalog and
price list. This data can then be exchanged between a parent company
using one system and subsidiaries using Microsoft Navision. Rather than
imposing burdensome requirements on subsidiaries, which may have limited
IT resources, both parties can rely on a straightforward and efficient
means of exchanging data.
If the data you need to
exchange with your subsidiaries is greater or more complex, then you can
use an electronic data-exchange solution based on Microsoft BizTalk
Server (Microsoft Business Solutions–Navision Commerce Gateway) in
combination with the XMLports. Predefined document exchange
functionality together with the XMLports allows the application to
handle XML documents faster.
What's more, the combination
of XMLports and Microsoft Navision's BizTalk Server solution allow you
to meet the unique requirements of the subsidiaries. Thus, you get a
standard method of exchanging master data with subsidiaries, yet at the
same time, retain enough flexibility to meet the individual needs of
each member of your organization.
Scenario 4: Sharing Responsibility for Services
There are a variety of reasons
why an organization might decide to share the responsibility for certain
services with their subsidiaries. The organization's customers might
deal with multiple subsidiaries but wish to receive one invoice from
corporate headquarters. Or, the organization may wish to divide tasks
based on local competencies, such as production or distribution
capabilities at the subsidiary level. An organization might also want to
centralize the payroll or procurement process at headquarters for
greater efficiency or to receive bulk discounts.
How Microsoft Navision Helps You Share Responsibility for Services
Depending on your
organization's needs, electronic exchange of data based on Microsoft
BizTalk Server or functionality for intercompany postings might be the
right solution for you. You could use Microsoft Navision's BizTalk
Server solution (Commerce Gateway) to map between the hub and spokes'
different systems taking into account any difference in currencies.
Whether a purchase order were made via headquarters or locally at one of
the subsidiaries, the experience would be the same for the user.
If, however, the parent
company and subsidiaries work on a closed network (such as a virtual
private network), are controlled by the same legal entity, and do not
need to map the data that originates in the subsidiaries' systems, then
you could use the Intercompany Postings functionality in Microsoft
Navision.Intercompany Postings can help you create all the necessary
documents (including sales and purchase documents and general ledger
entries) for the entire workflow, for more than one company at a time.
The integration between hub
and spokes for sharing services can help you achieve a more efficient
workflow that reduces costs. What's more, subsidiaries may be more
willing to adopt shared processes because you do not impose the
corporate system on them. They will have the same user experience they
are accustomed to in their Microsoft Navision system.
Scenario 5: Enabling Interdivisional Transactions
This white paper has presented
a number of scenarios where the hubs, or parent companies, interact with
their subsidiaries, or spokes. Sometimes, however, there is also a need
for the spokes to interact among themselves. For example, one subsidiary
may act as distributor of a certain item. Or, as another example,
divisions of a government agency with different competencies may need to
interact in order to complete part of their workflow.
How Microsoft Navision Helps Subsidiaries Perform Interdivisional
Transactions
Microsoft Navision can be set
up to treat interdivisional transactions as normal sales and purchase
transactions between divisions to support an integrated supply chain.
Just as with the interactions between hub and spoke, which we saw in
scenario 4 above, the spokes can interact among themselves using a
BizTalk Server solution to exchange data electronically, or Intercompany
Postings, depending on their needs.
If two subsidiaries need to
carry out transactions among themselves, you simply set up a customer
account for each of the relevant partners. Microsoft Navision then
treats them as they would any external customer and vendor. The
transactions occur within Microsoft Navision, and time is saved
throughout your organization because you eliminate multiple data entry
as well as the sending, receiving, and printing of paper documents at
the various sites.
Scenario 6: Responding Proactively to Business Events
Every organization is part of
a supply chain, and the hub and spokes that comprise part of an
organization's supply chain are as varied as the organizations
themselves. However, to one degree or another, the hub and its spokes
are always interdependent. If certain events occur at the spokes, the
hub must react. For example, if a manufacturer relies on one of its
subsidiaries to deliver raw goods, and there is a delay, it can affect
the entire supply chain. The hub must react. How much better though if
the hub were in a position not just to react after the event, but to
respond proactively before a crisis emerged.
How Microsoft® Business Solutions for Supply Chain Management – Navision
Business Notification Helps You React Proactively to Business Events
You can set up alerts in
Microsoft Business Notification that will automatically generate e-mail
messages to inform you of critical business conditions at your
subsidiaries, divisions, or partners. Microsoft Business Notification
helps you to improve management control of your business and the
effectiveness of your business processes. It helps you stay aware of
changing business conditions, and keep operations on track. You can use
templates included with Microsoft Business Notification, and you can
also set up your own alerts based on the way you like to run your
business.
Parent companies and their subsidiaries or divisions have different
business needs, and therefore they require different business systems.
The data in these different business systems must, however, be
integrated in order for the organization to function as a whole. A
system that is suited for this purpose makes it possible for the
organization to move forward efficiently as one business unit, where the
parent company is like the hub of a wheel, and the subsidiaries are like
the spokes.
Microsoft Navision may be ideal choice for your organization because it
is a standard solution, with effective integration tools, and enough
flexibility to meet the varying needs of different business units.
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