Enterprise resource planning (ERP) is meant to be the nervous system in the digital body. It connects legacy systems so they can provide more value, and for longer.
It’s where managers get key insight. And it’s the easiest point of entry for new technologies such as the Internet of Things (IoT) which will add whole new datasets to the manufacturing operation.
It’s no surprise, then, that ERP is at the heart of agile working for post-coronavirus (COVID-19) manufacturers.
What may be a surprise, though, is how many ways ERP can contribute to the resilience and reinvention of your operation. We cover some of them in this article.
Supply chain resilience
Coronavirus has already taught most manufacturers – especially those exposed to China – that supply chains can break.
Michael Larner, principal analyst at ABI Research, says: “To mitigate supply chain risks, manufacturers should not only not source components from a single supplier but also, as COVID-19 has highlighted, shouldn’t source from suppliers in a single location.”
That complexity, and the need to orchestrate more suppliers feeding into a more unpredictable demand scenario, leads ABI Research to predict that manufacturers’ spending on ERP will increase to $14bn (€11.6bn) by 2024.
If supply networks are one half of supply chain resilience, traceability is the other.
As Cleantech reports: “Product traceability and provenance is a cornerstone of supply chain resilience. Tracking what happens to a product along each link of a supply chain is the first step to solving issues of product sustainability, non-compliance and risk.”
Despite the trend towards onshoring, few sectors will honestly be able to say that, in increasingly variable supply chains, they can trace every component of a product without digital assistance.
As ideas such as independence of food supply and food miles become political hot potatoes (as well as consumer priorities), process manufacturers in particular will need ERP to keep provenance and traceability reporting under control.
Forbes recently put ERP at the centre of workplace reinvention, saying: “It is the recent evolution of ERP that allows much of the work that previously had to be done on-site to now be performed remotely.”
ERP allows workers not on the factory floor to operate remotely, with all the information they need to make decisions in real time.
On the floor, it frees up workers to operate flexibly – and therefore distanced – for example using handheld scanners to process materials.
As the backbone of an emerging IoT environment, ERP can marshal sensors to spot production problems before they become shutdown issues and also reduce the need for on-site personnel by triaging those problems early enough (often fast enough to resolve without a service call).
Nobody would argue with the fact that we are now in a cost-cutting era. Businesses are focusing on core activities and trimming fat from operations in order to secure as long a financial runway as possible.
For manufacturers, the playbook has been written over many years. Lean processes reduce waste and minimise cost across the operation. If you’re looking to optimise:
- inventory holdings
- transport and distribution costs
- raw materials pricing and usage
- the time and motion involved in production processes
…or simply to obtain the data which will trim cost out of any number of other elements of manufacturing, ERP should be your starting point.
Intriguingly, Forbes also suggests that ERP can do the heavy-lifting of managing a depleted or variable staff – the same is true for businesses protecting their workforce by implementing quarantined shift patterns (where A and B teams never meet each other).
It says: “Manufacturers can create a grouped security persona for its plant managers that allows easy transition of different jobs and roles.
“Anyone in this grouped persona could effectively take over for another member of the group if needed.
“If one manager was out sick, another manager in the group persona could continue tasks in their absence without the need to go through role verification steps and security updates. Efficiency and security can both be maintained.”
Referring to robotics, Interact Analysis, the leading market researchers in the intelligent automation sector, reports: “Social-distancing measures are likely to fuel the demand for automation in retail warehouses.
“There is also the added factor that the use of robots and other automated equipment in these environments increases efficiency and speed of supply of goods to consumers.”
This is true across all types of automation, which may be as simple as software widgets to automate repetitive processes, through to artificial intelligence solutions that can digitise whole functions.
The assessment of value is correct, though: automations improve efficiency, productivity, flexibility, error reduction and workforce availability.
As we stand on the brink of significant advances in automation and its affordability, ERP is the backbone of deployment.
Many businesses have had to rely on government support during lockdown.
Deloitte reports: “The reality is that, since the start of this crisis, the tax function has become a cash generator for many enterprises; indeed, in some organisations, tax has been the only source of cash while operations remained closed.
“The pandemic also demonstrated the benefits of integrating the tax function into organisation-wide ERP.
“To chart a path forward, leaders have needed tax to develop and articulate the tax implications of a range of different scenarios – and many tax functions have floundered to get timely access to the enterprise and tax data necessary to run those sophisticated scenarios.”
As we move towards a more interventionist era, where tax and governmental regimes increasingly impact on business, ERP will become ever more important for CFOs.
In short, ERP is everywhere…
But don’t trust us – we’ll give the final word to economists, the Institute of Fiscal Studies:
“Enterprise resource planning software has a role to play in helping:
- Identify the slowdown as it begins, and model the impact it has on your business so we can begin to take corrective measures
- Maximise revenue where we can, while reducing cost
- Make a business case for process improvements and investments to strengthen the business for the long term
- Communicate expediently with customers and suppliers to ensure demand and supply signals are being received
- Identify the signs of impending recovery so you can begin to ramp up and get product to market faster than your competitor
“Now is the time to leverage the project management capabilities of ERP to manage as intelligently and courageously as possible.”