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Modernize manufacturing ERP. Think inside the box!

RFP
Man using a magnifierManufacturing is a complex, varied industry, often running processes on legacy systems that are highly customized. The industry is rather conservative when it comes to embracing change, but cloud technology has also been slow to offer solutions for manufacturing. Due to these combined factors, manufacturing has been an industry that has only recently started to consider cloud solutions with interest.

As companies begin to migrate to cloud-based applications to prepare for the future, they must adopt a more modern mindset. This includes focusing less on customizing the solutions they purchase and focusing more on adopting the leading practices of today’s cloud ERP applications. Generally, this will also trigger the need for greater change management.

Since it appears that the future of ERP solutions across all industries will be in the cloud, manufacturing companies are at a critical business junction and need to take active steps to modernize. Yet, currently, most US manufacturing companies are not ready to take a full jump to the cloud, but look to modernize their business processes gradually, at a manageable pace. This means taking intermediate steps towards the future. In this circumstance, the best course of action is to find a middle way that serves the needs of manufacturing companies today, while paving the way to a full transition to the cloud tomorrow.

The manufacturing industry has historically favored customization, making big investments in multiple systems. As a result, manufacturing companies often get lured into customizing too many of their on-premise applications. Yet, while this provides immediate gratification for users, it can also create major problems down the line when upgrades are needed, or when the application needs to be extended to other business units that are different from the first one for which the ERP implementation was performed. Too much customization can lock manufacturing companies in the past and in specific versions of their applications, which then become outdated quickly.

Instead, manufacturing companies need to keep an eye towards future ERP uses, while making strategic investments today. This means focusing on customizing only the core business processes that are critical and specific to their business. For all other non-essential processes, all manufacturing companies should consider adopting a standard, out-of-the-box blueprint that is based on leading practices that the selected ERP vendor supports. For these processes, personalization/configuration is available and they also present the advantage that they can still be updated when the ERP vendor runs general updates. The benefit is consuming updates quickly and enjoying enhanced functionality. With this strategy in place, manufacturing companies can focus their investments on customizing and designing only the top processes that are unique to their business.

Even though this is the right approach to pave the way for a cloud future, it also presents one key disadvantage, which is the necessity to adopt an extensive change management process. When manufacturing companies customize their business processes, they need less change management. When they adopt practices different from what they are used to, then they require more change management. Manufacturing companies will have to invest in training and also engage in an active process of change management.

Yet, the multiple advantages of adopting a standard ERP system approach trump this one disadvantage. To summarize, the advantages are:

  1. Future readiness. Done strategically, less customization creates ROI today and tomorrow. The reality is that manufacturing companies can often utilize out-of-the-box solutions for the majority of their business processes. This allows companies to focus their money and effort on customizing processes that make them stand out in the market place.
  2. Shorter time for ERP implementation. The follow-up benefit of out-of-the-box investments is the reduced time for implementation.
  3. Functionality. New releases to the application can be adopted easier, which makes the new functionality available faster.

In conclusion, moving to cloud-based applications represents the future for manufacturing companies. To successfully make this transition, organizations should look to alter their ‘customization’ mindset and, instead, adapt to the functionality offered by leading cloud applications. It is likely that this transition will occur over time, especially as cloud manufacturing functionality matures. In addition, coordinating a strong change management program with the ERP implementation will ease the transition and allow the industry to take the first step towards an efficient and technologically optimized future.

Contact Bob Allen Robert C. Allen
Principal, Technology Solutions
Food and Beverage Industry Sector Leader
T +1 312 602 9190