Manufacturing & ERP – 6 areas of benefit.

Trying to convince a manufacturing company on the benefits of Social Media is really difficult – there are some basics in the factory that need fixing first.

Often, an ERP can help – here are SIX areas it could help:

  1. Use of Legacy Systems
  2. Compliance with Laws and Regulations
  3. Business Processes
  4. Impact of Mergers and Acquisitions
  5. Outsource/In-source Initiatives
  6. Limitations of IT Infrastructure

More Information is available via the Gartner Magic Quadrant – Manufacturing and Compare ERP Systems Guidebook

Use of Legacy Systems: Many medium and large companies were in existence prior to the availability of comprehensive software solutions. These companies sustained their business activities by using several small software products, which were not well integrated, cost-effective, or user friendly, and which generated large amounts of unstructured data. These relic systems, known as legacy systems, cannot meet the complex needs of today’s medium and large manufacturers and are largely obsolete. However, many companies continue to use them.

Compliance with Laws and Regulations: As companies continue to expand their businesses to new products and frontiers, the more complicated it is to comply with local and international laws and regulations. This is particularly important to the manufacturing sector, where there’s potential to affect all major activities, from procurement and production to distribution and retail, asset management, and human resources.

Business Processes: Medium and large companies must continuously adapt to the ever-changing business environment by defining new workflows and procedures and restructuring existing ones. As companies become larger, more people, assets, and partners will be involved in any change dictated by the market, not only draining the company’s resources and finances, but also exacerbating the logistical complexity of defining, testing, and implementing new business processes across multiple business units.

Impact of Mergers and Acquisitions:  Through mergers and acquisitions, companies realize growth and expand their business activities. During this process, however, companies must integrate the operations of different departments, plants, or sites, which often operate in different languages and regions, and use different business processes and software solutions. This process becomes only more complicated as the size of the companies involved in the deal increases. And any issues that remain unresolved following a merger or acquisition have the potential to derange all entities.

Outsource/In-source Initiatives: Globalisation and the need to reduce production costs have forced some companies to move some or all of their production facilities to a country with lower labor costs. Companies with headquarters and subsidiaries or plants on different continents can face difficulties in managing activities, such as quality control and delivery time.

Limitations of IT Infrastructure:  Despite the potential advantages of software-as-a-service (SaaS) solutions, such as no need for supporting hardware or IT personnel for maintenance, medium and large manufacturers often use a combination of SaaS and on-site solutions—if not only on-site. However, large businesses still face several limitations with cloud computing due to their size, scale of businesses, and previously deployed solutions.

When and Why You don’t need an ERP

An Enterprise Resource Planning System(ERP) aims to deliver in a single system the capability to manage and automate most if not all of a companies business processes. But let’s be frank – sometimes you just don’t need an ERP – it can be an overkill.

Firstly, let’s look at why ERP was initially built and why they are very useful. ERP systems are made up of a range of functions such as finance and accounting, manufacturing, supply chain, warehouse and human resources. In many businesses these were separate systems and moving information between them was difficult(if not impossible). Interestingly, some industries just didn’t buy in to ERP eg Banking was very early into CRM but quite late to ERP, only now starting to implement.

ERP systems were designed to:

Deliver a single system with all of these functions, by creating a Central Database, where information is held, integrated and shared easily.

Herein lies the great strengths and weaknesses of ERP systems:

  • Sometimes a business does not need a single system – it sometimes needs a number of systems
  • The functions of an ERP are usually described as “best in class” or bench-marked – this can mean that ‘everyone’ does things the same way, so there is no differentiation or competitive advantage
  • A central database is a great idea, until you want to add a new field ( and then see the potential impacts and costs to that small change)
  • Often the different functions only use a very specific parts of the database, and share little data.
  • Integration was strong within the ERP system but often weak when working with other systems
  • Sharing of information was rarely as good as it was marketed.
  • These systems are implemented by consultants – but many projects were just too big for mortals to manage

In recent times there have been a range of technology changes that have resulted in a different world:

  • New web-based  technologies have made integration much easier
  • Businesses have to be much more fluid than they were – being more nimble
  • Custom development is back in vogue – building the software to your business exact needs 
  • A Best of Breed strategy is also back in vogue – choosing the best solution for an area and then integrating with another system
  • End-users have become used to using Social media tools like facebook and linkedin – so want their business tools to work in the same way

ERP vendors have realised many of these are happening and now sell their solutions separately or integrate better using Business Intelligence tools and Integration platforms.

So where are the break points, when does it make sense to be running a single system and when many. I think it somewhat depends upon the size of the business but the following could be separated:

  • Accounting – can be stand-alone
  • Manufacturing, Warehousing, Logistics, Purchasing
  • Supply-Chain( only if you are big)
  • HR ( although payroll often outsourced)
  • CRM (keep Sales, Marketing and Service together if you can)
  • BI/Analytics

For more information, read our Do you need ERP Guidebook and ERP Checklist for features and functions whichever route you choose.

Microsoft Dynamics GP – Manufacturing Video

Microsoft Dynamics GP is aimed at manufacturing companies. Here is a video testimonial of one.

Discrete Manufacturing and ERP

A discrete manufacturer may need to integrate PLM software with ERP. Here is how Siemens and Microsoft Dynamics AX work together.