Trends in Enterprise Resource Planning Systems
by Daniele Fresca, IQMS
Trends Spring 2010
With a new year comes both reflection of the past and contemplation of the future. It is with these thoughts in mind that many manufacturing companies are now looking at the possibility of a new enterprise resource planning (ERP) system. Regardless of whether the ERP evaluation is to replace an existing system or to purchase a first system, knowing the trends in ERP can be a critical factor in decision making.
ERP has evolved through the years. What began as a Material Resource Planning (MRP) system has grown to include most aspects of the enterprise such as estimating, sales and distribution, quality, maintenance, and accounting. With so many ERP companies in business today, it is important to know what sets each package apart and the common trends among the ERP players.
One significant and recent trend is increased interest in Software as a Service (SaaS) applications as a solution to reduce workload for network administrators. Whether it is an online option (data hosted offsite) or a Managed Service (on-premise solution where the data resides locally), the ability to have an ERP system that doesnt require any system administration has quickly gained momentum in the manufacturing ERP segment. Each option may have both advantages and disadvantages over the other and those may vary greatly by sales person or User Company. For instance, Saas and Managed Service solutions are much costlier in the long run because you pay forever, but appear cheaper up-front because of lower start-up costs. Additionally, some might find the automatic updates of SaaS versions a plus but others, like medical device manufacturers that require validation prior to software updates, may want to control their update frequency and therefore have a vastly different take.
Another trend that has gained momentum is mobility because people need to stay connected to their companies. As computers become smaller, manufacturing company employees are becoming more mobile and therefore ERP systems themselves are pushing to keep up. From laptops to smart phones, Blackberries to iPhones, people have never been more in touch technologically speaking. With mobility on the rise, many ERP companies have found the need to create applications that focus solely on the need to have information on the go, even while away from a facility. A smart phone, Blackberry, or iPhone application will be a must for an ERP company to stay viable and relevant.
Shop floor integration and automation continue to gain traction in a growing number of ERP systems. From true, real-time shop floor-to-ERP compatibility to extremely basic batch data transfers, ERP system companies understand that packages that can reach down into the plant floor are more valuable than packages that do not place as much emphasis on this. The challenge for the manufacturing company is to understand the vital difference between a simple claim of shop floor automation and integration and the actual reality of execution. Some ERP systems today are capable of updating schedules in real-time based on machine output, providing two-way communication with shop floor equipment, automating shop floor equipment based on preset indicators (such as box count, etc.), and providing alerts via facility PA systems. It is important to keep in mind that while some ERP companies can do this, others just make claims. Due diligence will be key for manufacturing companies to weed out the who can and the who cannot when it comes to shop floor integration and automation.
Trends in manufacturing are like trends in everything else everything old is new again. Some might say this idea can be attributed to Service Oriented Architecture (SOA). While losing some of its steam over the last few months, this catchphrase for how disparate systems will now communicate is reminiscent of the old best of breed idea that interfaces between systems would make seamless transitions. Many ERP companies claim their SOA system can create better communication from totally unrelated software packages Quality from ERP Company X can talk to Payroll from ERP Company K. But, like the old best of breed interface talk, what happens when upgrade paths are not the same? No one can pinpoint or explain exactly how it works. For every ERP company that claims SOA, there is an article, blog, or comment from a reporter or analyst that counters with a SOA what?
In the last few years, the consolidation of ERP companies has subsided. Gone are the times when a new buy-out was announced almost every week. The ERP graveyard websites (i.e., http://www.erpgraveyard.com/tombs.html) are updated less regularly and it is easier to remember who owns which package and who bought what. With that in mind, ERP systems are being thought of as more of a commodity now. Because there are still many ERP companies in the manufacturing segments, manufacturers arent cognizant of the variances that lie in the ERP systems and companies themselves. Yes, it is true that all ERP systems have bills of material, inventory management, scheduling and shipping functions, and even an AR and AP capability. But is having that module or function enough to say there is no variance between the ERP packages? Not really. It is still an apples to oranges comparison for some. On the plus side, at least for the manufacturer, ERP systems are becoming less expensive due to the commoditization. The key point to remember here is that, regardless of how low the entry cost is, if the ERP cant reach beyond the core features inherent in all packages and show true value or developmental growth potential for the future, then it really shouldnt be compared to a system that can.
The last trend is the need for scalability. Perhaps it is a by-product of one of the toughest manufacturing times in history, but people want to manage cash-flow like never before. Purchasing an ERP system is no different. It used to be that people would buy everything they needed, regardless of when they planned to implement it. The thought was, get the best deal I can now and implement when the company is ready. This is not the case anymore. If a manufacturing company makes the leap to a new ERP, the change that could doom a project is best handled in smaller doses. Therefore, the realization that companies should only pay for what they plan to use now and in the near future is a strong negotiation point. Why put out money for a quality system that will not begin implementation for another four or five months? Therefore, an ERP system that is scalable and modular has a big advantage over a system that isnt. Cash flow is handled in a smarter way, change is more manageable, and the process changes that always come with a new system are employed and more valued. Think of scalability as the small, continuous improvement steps in the ERP journey. A steadier pace is realized and is more likely to achieve a successful implementation.
There are certainly more trends in the ERP industry, including hot button topics like industry specificity and the shift in database popularity. The key point is that the manufacturing industry itself is poised for recovery. An ERP system can be a make or break factor in the success of a company. Knowing the trends, evaluating an ERP system based on all the facts, and separating the hype from the real value is essential in choosing and sustaining an ERP vendor relationship.
Daniele Fresca is director of marketing for IQMS. Since 1989, IQMS has been designing and developing ERP software for the repetitive, process, and discrete manufacturing industries. Today, IQMS provides leading real-time manufacturing, accounting, production monitoring, quality control, supply chain, CRM, and eBusiness solutions to the automotive, medical, packaging, consumer goods, and other manufacturing markets. The innovative, single-source enterprise software solution, EnterpriseIQ offers complete functionality and scalable solutions all in a single database. With offices across North America, Europe and Asia, IQMS serves manufacturers around the world. For more information, visit www.iqms.com.