If you are already running an ERP solution that
generally meets yours needs as a process or hybrid
manufacturer, you may now be looking to extend
your solution with more robust functionality in these
outlying areas. You also should look for extensions
that meet your specialized needs, offered by a company that speaks your language and understands
the industry. Equally important, look carefully at the
solution’s integration capabilities and the methodologies used to connect it back to ERP solutions in
general and yours in particular. Perform due diligence
to determine the real effort and anticipated results of
integrating with what you already have.
That integration may be relatively simple or it
might be hard, adding redundant data and extra
effort, creating road blocks to consuming innovation
(upgrades) on both sides: innovation to your ERP
as well as these complementary solutions. If these
obstacles seem insurmountable, the problem could
be with either your ERP or those other applications.
Either one, or both, could have weak integration capabilities and other incompatibilities.
Your chances of success increase when you
purchase add-on components from your ERP vendor.
Whether you view it as “one throat to choke” or “one
back to pat,” you are dealing with a single vendor,
unable to point a finger at another. This “one vendor”
solution might come in the form of a single, extended
ERP solution, or ERP surrounded by complementary
solutions. But don’t assume ERP expertise guarantees
expertise in solutions such as MES, CRM or analytics.
Your ERP vendor may not have the specialized expertise in these (and other) areas. It
may have partnered with another company. If
so, look for tight integration and coordinated
innovation. You could back yourself into a corner if the partner lags significantly in supporting the latest innovations and releases.
Then again, your ERP vendor could have all the
expertise you need as a result of careful execution
of strategy or as a result of acquisition, or both. But
while purchasing from a single vendor has its advantages, don’t assume all complementary solutions offered by your ERP solution are seamlessly integrated.
Ask the tough questions to insure data is indeed
shared in real time and the integration is seamless.
If integration is not available, or far from seamless,
then maybe the problem is indeed with your ERP solution. If you are running an ERP based on older architectures, then it is also highly unlikely the solution will
be enhanced significantly enough to fill the functional
gaps, and integration will always be expensive and
clumsy. Legacy infrastructures are notorious for not
delivering the kind of real-time, seamless integration
that has become the new industry standard.
If you find yourself in this situation, perhaps
you are over-estimating its ability to serve your
needs. A World Class ERP implementation does
more than just meet your minimum requirements.
A World Class ERP is easily extendable in order
to continue to meet growing and evolving needs.
Having a vision of a complete end-to-end solution
is great, but plan on that vision changing over
time. Make sure you have a solution that can
grow and evolve with you.
Many treat ERP replacement like brain surgery;
they don’t do it unless the patient is dying. But if your
business is failing, do you really want to
take on the additional challenge of embarking on a new ERP implementation?
Wouldn’t it be better to plan for a future
that supports your vision and take steps
now to deliver over the long term?
JUSTIFYING THE INVESTMENT
Even when current solutions, or lack
thereof, hinder the growth and development of a process manufacturer, it is not uncommon to encounter
a natural resistance to investing in back office systems such as ERP, MES and analytics, or even front
office systems like CRM. The preference is to take
any capital budget and throw it at the processing
of product. If you are a grower of produce, you are
likely to invest in the land, seed and fertilizer. If you
are in pharmaceuticals, you invest in research of new
drugs. If you are in food and beverage, you are more
interested in adding to your processing capabilities.
But how do you know where and how to invest?
Without capturing both actual orders and forecast,
applying intelligence with analytics, you may not be
adding the right capacity for the best, fastest and
most profitable growth. Of course you need a viable
forecast, but ERP with the appropriate analytics can
take the guesswork out.
Also if you are in process manufacturing there is
a high likelihood that lot traceability is a necessity,
product recall is a very real possibility, and data
collection on the floor needs to be in real time. While
contaminated raw materials or finished product is
(hopefully) a rare occurrence, if it does happen, how
long would it take you to respond? Can you immediately determine your liability and exposure? Can you
limit a recall only to those lots, which you know are
impacted? What orders are impacted? What customers? Time is critical when safety is concerned.
Still, even though you might argue that ERP
will assist you in control, management, profits
and growth, it requires an upfront investment,
which must be cost justified. The metrics we
capture and use in identifying World Class ERP
implementations can also provide guidance in
Figure 2 compares cost-related savings measured
by both World Class and All Others, filtered by process and hybrid manufacturers, since implementing
ERP. While it would be tempting to describe these
savings “as a result of” ERP, any improvements are a
combination of people, process and technology. But
in this case, ERP is often the catalyst and definitely a
vehicle by which these savings can be realized.
Figure 2: Savings Measured Since
Implementing ERP (Process and Hybrid)
Source: Mint Jutras 2014 ERP Solution Study
Of course the actual costs included in operating
costs and administrative costs might vary from one
company to the next. Beyond the usual, the effort to
maintain lot traceability can be included in adminis-
trative costs, along with the response necessary for
a mock or real recall. Operating costs can be signifi-
cantly reduced via better planning, proper sequencing
of production, better utilization and the elimination of
waste. Knowing the true cost that goes into product
leads to better control and better decisions.
But often times it is the reduction in inventory
alone that can pay for an ERP solution. More accurate planning for materials can significantly reduce
materials kept on hand and prevent loss of opportunity if materials are not available. Although those with
World Class status achieve spectacular results, All
Other process manufacturers lag behind other types
of manufacturers in being able to reap the rewards
of inventory reduction.
Several characteristics of process manufacturers
contribute to make this not so surprising. Some food
and beverage and related industries are only able to
procure raw materials at certain times of the year
(seasonal harvests) making it impossible to achieve
the kind of “turns” the discrete industry produces.
Also this is inventory cost and many in process industries are subject to the fluctuations of commodity
pricing. Even so, a 3% reduction is still significant.
But in a process environment, particularly one
that must deal with expiration dating, potency,
special handling requirements, and more, the
elimination of “obsolete” inventory, including expired materials, is even more important than in