3 Manufacturing Trends and What They Mean For Your ERP
By: Dan Johnson
Today’s modern discrete manufacturing is definitely not your father’s way of making things. Technological advances, business and operational process evolution, and tightening markets have all contributed to sweeping changes in the manufacturing industry and emerging manufacturing trends that can affect your organization and success.
As a result, developments in ERP software for manufacturing, supply chain management, and business processes seem to occur every day to meet rapid and ever-changing industry demands. Here are three of the biggest manufacturing trends and what they could hold in store for your business and ERP strategy:
1. Zero-based inventory
Interestingly, this is not a new trend -- it first came to light about ten or fifteen years ago. People have been talking about it for quite some time but have not been able to perfect it. Zero-based inventory means the manufacturer has zero inventory in both raw materials and finished goods. It requires meeting the service demands of customers while minimizing the manufacturer’s variable costs. This, in turn, requires a fairly trick balance of several production variables.
To efficiently manufacture finished goods you need to have raw materials, people, machining processes, and perhaps assembly processes. In order to minimize the costs of all four of these elements, it’s important to manage constraints – the things that can limit or negatively impact process performance. This is what many manufacturers have trouble with, which is why zero-based inventory has remained so elusive. How do you manage constraints in the supply chain to reduce operational costs? This is perhaps the number one trend in manufacturing – optimizing processes to minimize constraints, maximize performance, and achieve zero-based inventory.
2. Utilizing Software-as-a-Service (SaaS) to reduce operational costs
Most manufacturers will readily admit they are not IT experts. They are experts in manufacturing finished goods for customers and prefer not to get bogged down in information technology and ERP-related issues. As a result, increasing numbers of manufacturers are turning to SaaS as a way to reduce operational costs, transfer IT concerns to third-party experts, and enable the manufacturer to focus on their core business.
The reasons for offloading IT support with a SaaS strategy can be as varied as the types of manufacturers. A main reason why SaaS is one of the most popular manufacturing trends is that it enables manufacturers to make better use of internal resources. Another is to gain better control over software upgrades. This can mean taking advantage of automatic upgrades handled by third-party software experts, selectively upgrading to accommodate customized or legacy software, or not upgrading at all.
3. Utilizing best-of-breed solutions that easily integrate with today’s open-architecture ERP systems
Manufacturers are no longer satisfied with buying a single ERP solution, opting instead for an open-architecture system which enables them to take advantage of best-of-breed elements and bring them together in a common platform.
This, too, is not a new trend, but one that is still growing in popularity after gaining traction through Oracle around 2005. Within the past three years, though, we’re seeing a rapidly increasing number of manufacturers taking a best-of-breed approach, integrating, for example, Infor Manufacturing, Salesforce CRM, Workday for human resources, and Oracle’s configuration management tool into a customized, open-architecture ERP solution.
What’s really interesting is how all three of these major manufacturing trends are being affected by the Internet-of-Things (IoT) and information coming from multiple systems and devices. For better or for worse, this growing avalanche of Big Data is what’s driving business decision-making today.
To determine what information is relevant and turning all that data into usable, useful knowledge, companies are increasingly adopting sophisticated business analytics as an integral part of their ERP. IoT is really driving the consumption of business analytics, the problem is, companies are having trouble finding the significance of the data being collected because it’s growing exponentially.
As far as manufacturing trends are concerned, what this all points to is the need to ensure that robust business analytics are a major part of your ERP system. Regardless of whether you, as a manufacturer, are focused on achieving zero-based inventory, or moving to the cloud and a SaaS business model, or adopting a best-of-breed strategy, proactive analytics will be a key driver for successful business and operational decision-making.