Efficiency is king in manufacturing operations. From what I see and hear on a daily basis, goliath ERPs just aren’t cutting it for most heads of manufacturing. Most of the manufacturers I talk to don’t feel like their ERP is helping them manage production more efficiently and many feel that conforming to the restrictions of the ERP actively inhibits their optimal performance. But these production managers always find a way with smart, technical workarounds or the simple pen-and-paper to make the most of their situation.
Why are manufacturers so often bound to an ERP that doesn’t help them achieve their performance indicators? Historically, monolithic ERPs were selected as the standard based on their accounting capabilities, the wide array of out-of-the-box business solutions, and perhaps most importantly allowing all areas of the business to communicate on a connected platform. Cloud computing enabled disparate software systems to seamlessly communicate with each other through APIs just as well as if they are on the same platform. Now that the integration problem has been resolved, companies don’t need to find the single software provider to satisfy all business needs, but instead find the best solution for each of their business needs – they need to unbundle their ERPs.
To put it in perspective, these are all of the areas a standard, monolithic ERP is expected to reach:
How likely is it that a single provider can best satisfy all of these business needs for a manufacturer? With the boom of new software companies, the chances are slim to none.
In my experience, it seems like the needs of upper management and the accounting team are typically prioritized when selecting an ERP, often at the expense of manufacturing. Given the ERP constraints, manufacturing resorts to workarounds to make the system work for them including disconnected digital solutions like a custom-built application or Excel, or pen and paper. They recognize this isn’t optimal, but they don’t have the time or resources to make a compelling argument so they accept it and make due. A recent PwC survey anticipates returns on digitization of nearly 3% in additional revenue and 3.6% reduced costs per year over the next five years across all major industrial sectors.
For manufacturers, the biggest opportunity for digitization is often on the floor, where it’s all pen-and-paper. According to a 2018 LNS study, the purchase of an MES is the highest-priority manufacturing investment for over 68% of the manufacturers surveyed viewing MES as a crucial part of their enterprise strategy. Our FactoryFour internal data from the last 18 months shows that number trending even higher – up over 75% for small-medium businesses and mid-market companies. The right MES would realize those returns by increasing overall equipment efficiency (OEE), reducing cycle times, and providing leadership with greater visibility for timely and informed decision-making.
The benefits of unbundling are clear once you’re up and running – tailored solutions that satisfy the needs of each business unit sound great, but implementations for big business systems have always been daunting. If you haven’t experienced a failed implementation, you’ve certainly heard the horror stories.
Another significant benefit of unbundling is the smaller scope for each individual system. The primary stakeholders for each system can select the solution that best addresses their needs and can validate that before purchase. After purchase, the modest scope and minimal stakeholders simplify the implementation and significantly shortens the timeline from years to weeks.
The rise of cloud-based, SaaS (software as a service) solutions further de-risks implementation. Implementations no longer demand the full attention of the procurement and IT teams and third-party consultants for years. Primary stakeholders work directly with the vendor’s implementation team minimizing resource requirements to only the essential. With the reduced operational complexity and shorter timelines, SaaS vendors can afford to charge much less for implementation in addition to the flexible pricing models SaaS is known for.
Read more on the reasons procurement teams are choosing SaaS from Zylo.
As you unbundle your business systems, a couple of things to consider to ensure your suite will not become obsolete:
Ready to integrate with an MES? Speak to one of our experts here and book a demo today.
VP of Sales at FactoryFour