How ERP can help manufacturers digitalize

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What anniversary of your production plant might you celebrate this year? The 5th, 10th or is it older? Most plant floors are dominated by older equipment. Manufacturers are aware they need to modernize to take advantage of what technology can offer. They saw how technology gave many businesses competitive advantage during the pandemic, and they are aware of how the Fourth Industrial Revolution (4IR) will change industries. But they can’t adjust to 4IR practices because they can’t afford to invest in new plant equipment.

However, technology options are available for manufacturers to use that can help digitalize their operations without the expense (not to mention production downtime) of plant upgrades.

What is 4IR?

4IR has evolved from the previous three stages of the Industrial Revolution, and is the stage where the physical, digital and biological worlds merge.

“When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.”

World Economic Forum – The Fourth Industrial Revolution: what it means, how to respond

It is characterized by a high degree of interconnection involving machine-to-machine (M2M) communication and the Internet of Things (IoT). This will result in increasing automation, improving communication, and much greater availability of real-time information upon which decisions can be made.

What this means for manufacturers is that businesses will need to have systems to improve the accuracy of their demand forecasts and be able to respond faster to changes. These systems will also enable more resilient supply chains brought about by better information available in near-real-time. Manufacturing processes will also need to become more agile, flexible, and allow quicker set-up times to support a business that needs to react faster when changes occur.

Becoming digital

Executives tend to associate the words “digital transformation” with the term 4IR. But instead of ignoring the 4IR because it implies radical business change, manufacturing decision-makers should start preparing their organizations for the cultural, process and business model adjustments that will be essential. Leadership with a purposeful digital strategy is the key to transformation. As the chart indicates, non-technology factors are more important for a company to be digitally competent. Manufacturers with legacy equipment but with strong digital capabilities can catch up with digital natives.

How ERP can help manufacturers digitalize - SYSPRO ERP Software

Attributes of competence – Boston Consulting Group: The Rise of the Digital Incumbents

The platform for digital capabilities

Manufacturers should ensure they have a digital platform that enables different teams to operate at speed and scale. The platform should also support access for third parties, not only suppliers but also customers, to participate in the innovation of processes and business models.

This is where an ERP system can enable manufacturers to use their current equipment and transform the business without spending a lot on new plant. An ERP system also helps executives ensure that data becomes the heart of business culture and key to decision-making. It gives everyone in the company access to the same meaningful data, helping them make better decisions. By implementing portals as part of the ERP system, relevant data can also be shared with suppliers and customers. By integrating the systems across all functions, the information that sales updates will automatically update the master production schedule for the shop floor and the material requirements plan for procurement and warehouse management. This enables the different teams in the business to work together towards the same goals.

However, the ability to make data-driven decisions depends on data literacy, and that means building a workforce that is given the training and skills to use new technology and is willing to learn new ways of working. According to a McKinsey report, it is the people and talent strategies that provide the most value in transforming business. Sadly, the report acknowledges that these are the least likely ones that companies tend to pursue.

Start small

By focusing on people, and using an ERP intelligently, there is no need to make the major change that investing in new shop-floor machinery involves at once. Through efficient, automated processes, with data as the key to decision-making, and with the commitment from the shop-floor, new production models can be implemented in smaller steps. As one business person commented:

“Think big, start small, and then scale fast.”

Future of manufacturing

With the increase of information that an ERP solution can provide, businesses can streamline operations and use the data to consider other business models. This will allow manufacturers to create smart and predictable manufacturing processes that are optimized, reliable, and agile.

The data-enabled enterprise of the future will enable smart workflows and seamless interactions among humans and machines, and most employees will use data to plan and optimize many aspects of their work.

The full digitalization of the manufacturing process, for example using IoT and M2M, is a long-term investment that will probably take years to complete, but an ERP system can help prepare the company for change in the interim, without impacting staff or productivity.  The pandemic has created an imperative for manufacturers to reconfigure their operations. A modern ERP system will open the manufacturing environment to the digital benefits of remote work through web-based and mobile applications.

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