ERP

ERP modernization - now!

Michael Hering08/29/2019

Why manufacturing companies should start thinking about IT modernization today

Why is ERP system modernization so important for discrete manufacture in particular? One answer comes from a recently released long-term study by Trovarit, demonstrating that over half of all ERP systems are at least ten years old. At the same time, nearly two thirds of all those surveyed admitted that their business solution was no longer keeping up with current demands.

New challenges in the digital age

In recent years, the machinery and plant construction industry has focused primarily on optimizing products and product-related processes. Digital software technologies have already found their way into this area to some extent. Examples include intelligent picking systems that pick goods from warehouses independently and bring them to the production workstation using optimized routes. Intelligent technologies are also used to determine servicing intervals based on factors like temperature and humidity.

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The rest of the company, meanwhile, tends to lag behind. According to the latest VDMA IT Report, 60% of businesses still don’t have an overall strategy for digitalization. One thing is for certain. Small and medium-sized companies in particular need to act fast, because the forces driving the digital transformation affect them the most:

Keeping up with customers and partners

One good example is the issue of E-invoicing, which is frequently on the agenda these days, particularly in machinery and plant construction. Many businesses (above all, corporate suppliers) are being pushed to process invoices electronically. Customer service is also becoming more important, and software solutions for this sector are coming to the fore. ECM (Enterprise Content Management) systems, for example, are simplifying service work by automatically providing service staff with all the right documents – at the office or on the road. Of course, this also improves the quality of service.

“We’re not there, yet”

Many of these topics are currently associated with cloud technology, which is still being met with hesitation. The general skepticism about cloud systems is abating. Unfortunately, the infrastructure has not caught up, yet. What’s more, practical examples of application are still in short supply. The VDMA IT Report offers some insight into this question, too: The topic of artificial intelligence (AI) or machine learning, for example, is still rated as having little or no importance by a whopping 55% of businesses. The results paint a similar picture for cloud technology, big data and IoT.

So it looks like there’s still a lot of convincing to do. Most of all, system providers will need to demonstrate the advantages of holistic approaches and their superiority over conventional ERP systems.

So everything’s going to stay the way it is?

No! New technologies are not a “nice to have” – they’re a “must have,” not least because business owners are feeling the pressure from partners and customers to switch to E-invoicing. Outdated systems are also not able to meet current business standards. To remain competitive, companies need to modernize their systems, harmonize their infrastructure and start thinking about future cloud strategies. That said, it’s not a good idea to try to do too much all at once. Small-scale solutions can actually deliver massive benefits if they can be easily integrated into an overall concept.

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One good example is the use of artificial intelligence. Using small and lean solutions, you can already analyze product delivery periods in a variety of ways. AI detects deviations from the norm, factors in various influences and makes recommendations for optimum replenishment lead times. Doing this periodically automatically improves data quality and delivery reliability.

Another possibility is expanding E-invoicing to other areas: The same technology can be used in procurement for order confirmations or in servicing for electronic work slips.

Incidentally, both of these examples are hybrid approaches. While they do both utilize the cloud, they do not require the ERP system itself to be run in the cloud. Current ERP solutions, such as Microsoft Dynamics 365 products can implement this with no problem. At the same time, you also get a range of functions wide enough to handle the special requirements of the machinery and plant construction industry.

Conclusion

Manufacturing companies cannot afford to put off upgrading their IT systems. Customers and partners aren’t waiting around, and neither is the competition. There’s also no reason to keep cloud technologies off the table. Used the right way, cloud services are an expedient way to add new functions to your system. And there’s no need to put all your eggs in one basket. You can still run your company systems on-premises and simply add cloud functions on to them as needed. In any case, large, rigid, monolithic systems are on their way out. A modern business solution needs to be flexible, as well as open to new technologies, new concepts and new ideas.

Have you already heard of the COSMO CONSULT Digital Maturity-Check? If you would like to know where you currently stand in terms of digitization and how you can get ahead quickly, then simply click here!

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Author:
Michael Hering
Industry Manager Discrete | COSMO CONSULT