7 manufacturing problems solved thanks to ERP

The more manufacturers develop their activities, the more complex they become. These businesses face a number of manufacturing issues that did not exist when they were launched. This article discusses seven major manufacturing issues that both large and small manufacturers face and that threaten to bring their operations to a halt. It also looks at how Enterprise Resource Planning (ERP) software can help solve them and drive business growth.

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The 7 manufacturing problems and their solutions

1. Using historical management systems
2. Compliance with international laws and regulations
3. (Re)engineering business processes
4. The impact of mergers and acquisitions
5. Offshoring and repatriation initiatives
6. IT infrastructure limitations
7. Inappropriate collaborative practices

Problem No. 1: The use of legacy management systems

It goes without saying that a large number of medium-sized and large businesses already existed before the creation of complete software solutions. These organisations operated using multiple IT solutions that were not integrated, cost-effective or intuitive, and which generated large volumes of unstructured data. Today, medium-sized and large manufacturers often find that these legacy ERPs are not sufficient to meet their complex needs, and consider them obsolete.

Although many users are satisfied with these legacy systems, companies are finding them increasingly difficult to maintain. However, they want to continue to use them and add to them, as these tools are particularly stable, but outdated and relatively inflexible. What's more, there are relatively few software specialists on the market, as the younger generations don't seem inclined to get to grips with old technologies.

Two strategies are proposed to resolve this situation. The first is to revitalise existing software by updating it with new interfaces, functions and tools, and adding more modern technologies. The second is to replace all legacy systems with new software. However, in large companies, even the smallest change can have disastrous consequences for operations.

What's more, replacing a system can take time. During this time, a company's operations can undergo significant changes that affect the company's overall information technology (IT) strategies and approaches. This can significantly extend the project timescale, calling into question the viability of the new business environment. All projects need to be completed as quickly as possible, regardless of the size of the company. For larger organisations, this task becomes all the more intensive and costly.

Problem No. 2: Compliance with international laws and regulations

As manufacturers continue to develop new products and expand their activities across borders, it becomes increasingly complicated to comply with local and international laws and regulations. These standards have the potential to affect all major manufacturing activities, from procurement and production to distribution and sales, asset management and human resources (HR).

Since medium-sized and large companies are often present in several regions or countries, they have to comply with the rules of the applicable law, as well as with the various standards relating to safety, finance, employee rights, etc. at local, national and multinational level. These regulations are designed with the general aim of providing a stimulating business environment, sometimes requiring the production of quality goods and services that pose no risk to consumers, society or the environment. Of course, these different countries apply their own regulations. Even in countries with similar compliance standards, there are differences between specific regulations, for example regarding the presentation of safety documents or the information to be included in accounting reports.

Compliance rules add a new layer of complexity for large multinationals that produce a wide range of products or provide multiple services to their customers. The myriad of compliance documents required must be stored and maintained. These requirements must be enforced and complied with, and the corresponding transactions must be verifiable.

For larger organisations, it is also important that internal standards, policies and procedures are developed, in line with the compliance standards set out in the relevant legislation. Although internal rules are usually created with regulatory requirements in mind, they can be extended and modified on the basis of a company's specificities, strategies and standards, good practices and traditions. Branches and sub-divisions of the organisation can be expected to comply with these rules.

Manufacturers must comply with government rules and regulations governing the manufacture, tracking and storage of their products. Thus, business processes must be designed in accordance with applicable legislation and standards. A central repository of compliance documents and standards is highly recommended. In addition, an ERP system can be a good tool for integrating business processes and the corresponding documents. On the other hand, as compliance standards are usually divided by industry verticals, and in some cases by niche markets, it makes sense for medium and large companies to consider moving to a new ERP system, designed specifically for their industry. Such vertical software generally handles compliance issues better and more easily than general-purpose software.

Problem No. 3: (Re)engineering business processes

Medium-sized and large manufacturing companies must continually adapt to the changing environment in which they operate, by defining new workflows and procedures and restructuring existing ones. The more organisations develop, the more individuals, assets and partners will be involved in the changes imposed by the market. Not only are company resources and finances affected, but the logistical complexity associated with defining, testing and implementing new business processes across different units is also exacerbated.

In recent years, ease of change in the business environment has become one of the most important capabilities of ERP software for manufacturing companies, whatever their size or sector of activity. There are a number of reasons for this trend:

• Firstly, manufacturing companies generally need to be able to execute large-scale operations or transactions in different ways depending on geography, generally accepted business practices in certain locations, regional regulations and so on. Software must therefore be technically capable of adapting to a wide range of procedures.
• Secondly, manufacturing companies are often faced with major changes to their processes. To remain competitive, a company must be able to quickly adapt its processes to the constantly changing environment. For larger companies, this task is particularly difficult because of the scale of the organisation, the number of sites, processes and users. As a result, flexibility and versatility are essential attributes of the software used by these organisations. Other important features include ease of use and an intuitive user interface, as well as logic and the ability to modify screens, existing documents and material flows.

Certainly, the more the system can adapt to reflect the new business reality, the more efficient it will be. In addition, organisations that implement an ERP system, within a precisely planned business structure, facilitate the sharing of ideas and information between different business units and sub-divisions, which improves transitions.

Problem No. 4: The impact of mergers and acquisitions

Mergers and acquisitions are a way for companies to grow and expand their business activities. In the process, however, the two manufacturing groups have to integrate the operations of their different departments, plants or sites, which often operate in different languages and regions and do not use the same business processes and IT solutions. This process becomes even more complicated as the size of the company increases with the merger. Issues that remain unresolved following the merger or acquisition can get in the way of all the entities.

Mergers and acquisitions give rise to a large number of very important decisions, and those relating to ERP generally deal with the software that will be used after the transaction. The newly created company may choose to accept the existing ERP system and delete the previous ones, implement new ERP software or integrate the applications then in place. While all of these strategies are viable, they require considerable effort on the part of the IT department and other subject matter experts, and can take several months or years to deploy.

The aim of mergers and acquisitions is to achieve better financial performance, obtain synergies from business activities, develop more efficient products and better manage the company's overall costs (economies of scope and economies of scale). However, these objectives are not easy to achieve from an ERP point of view. Here too, the large size of the company poses a challenge. To optimise process efficiency and develop the full potential of the ERP system, business processes need to be studied carefully, and only the most efficient selected. Given the large number of processes to be analysed, reconfiguring the business model can take months or even years. In addition, it will take the organisation years to resolve the technical, implementation and integration issues that will inevitably arise when the system is ready for use.

To meet the merger and acquisition requirements of large groups, an ERP system must be flexible enough to be integrated with other applications, including other ERP systems. It must also be able to be easily modified to adapt to the structure and business processes that reflect business realities.

Issue 5: Offshoring and repatriation initiatives

In an effort to reduce production costs, companies continue to relocate some of their production sites to countries with lower labour costs. Manufacturers whose head offices and subsidiaries or factories are located on different continents may find it difficult to manage certain activities, particularly in terms of quality control and delivery times.

In order to reduce production costs and succeed in a highly competitive global environment, companies need to build strong transport and logistics networks that support the sourcing, manufacturing and distribution of their products. The entire logistics industry has been reshaped to meet the transport and delivery requirements of international players.

Global outsourcing has enabled manufacturers to free themselves from the 'anxiety and concern' of manufacturing products, which requires skills in manufacturing planning, shop supervision and sales staff management.

Information technology has played an important role. The explosive development and availability of information technology, in general, and specifically ERP software, supply chain management (SCM) and Internet communication tools, has made global outsourcing a reality.

However, global outsourcing has raised considerable macro-economic issues, both for developed countries, in terms of imbalances in trade budgets and loss of production skills and facilities, and for developing countries, with citizens destined to be integrated into low-cost workforces. Organisations that outsource their manufacturing face many challenges:

• unexpected increases in logistics, quality and general management costs
• a significant reduction in the quality of outsourced goods and products
• inadequate response to changes in demand and quality issues due to slow and cumbersome supply chains
• inherent difficulties in managing manufacturing sites in third countries

A large number of international and regional companies have therefore already begun to modify their manufacturing and subcontracting strategies. The obvious response to these challenges is to shorten supply chains and bring the manufacture of certain products closer to customers, while implementing modern information and management technologies. The new modern, agile and value-oriented environment for medium-sized and large companies would therefore involve :

• strengthening relations between companies within the same supply chain
• considerably shortening production and delivery times
• attracting better-trained, results-focused human resources
• greatly reducing stocks
• implement new manufacturing methods and technologies (intelligent manufacturing or manufacturing 4.0).

To achieve this, manufacturers will need to deploy processes that were previously outsourced or managed offshore. ERP and shop floor control systems will therefore need to be powerful and capable of supporting these processes and the large volumes of associated manufacturing data, and be able to integrate with ERP solutions from suppliers and partners within supply chains.

When manufacturing supply chains are simpler, shorter and generally more transparent, most of the extraneous elements can be eliminated and the software simplified. Many supply chain management systems can be replaced by a single ERP system that is powerful, agile and scalable enough to handle the large volume of data and events associated with supply chains and distribution processes. A company will perform better if it is able to react immediately to changes in demand, changing materials, adjusting manufacturing processes and delivering finished products in hours rather than weeks or months.

Problem No. 6. The limits of IT infrastructures

While software solutions running in the cloud can offer advantages over local systems, large companies generally face limitations due to their size, the scale of their business and the significant investments made in previously deployed solutions.

Manufacturing companies require physical infrastructures, regardless of the type of software, delivery model, technical specifications, etc. they use. Medium-sized and large companies are not prepared to abandon their IT infrastructures, as they have invested a great deal of financial resources and time in installing them. As a result, their strategy is generally to retain certain technical components and gradually replace obsolete or non-functional equipment.

Nevertheless, these manufacturers have highly sophisticated infrastructures. These companies frequently use a myriad of software solutions to meet their needs in accounting, customer relationship management (CRM), HR, business intelligence, product design and lifecycle management, and other areas. They also use network protocols, operating systems, databases, messaging and web servers, etc.

The IT services used in manufacturing are generally made up of several operations carried out by internal staff and by external suppliers. Although medium-sized and large companies have IT experts, most have chosen to outsource some of their support functions and maintenance operations.

Issue 7. Inadequate collaborative practices

Since the operations of medium and large manufacturers are generally complex and involve a large number of employees and external partners, collaboration plays a key role in simplifying their activities. Internal and external collaborative practices have a direct impact on the activities of manufacturing companies. There are also tools for obtaining feedback (both internal and external) to improve customer service, product development or other areas of business.

While improved internal communication, based on social networks, and increased collaboration with business partners can boost operational efficiency, there can be issues of confidentiality and security.

However, medium and large manufacturing companies rarely have well-defined collaboration strategies and policies. ERP software providers are becoming increasingly responsive to these requirements, but do not always offer social and collaborative tools.

Social networks are not only a popular and widely used tool, but also a source of traceable, verifiable and potentially valuable information for manufacturing companies, and a channel for direct communication with customers. From end-user communities to the unstructured data available on Twitter and Facebook, organisations can gather feedback from consumers about their products and services. This feedback can be used for a number of purposes:

• Improving product quality
• Design new products
• Improve customer experience
• Keeping abreast of changes in customer buying behaviour

Collaboration can be the differentiating factor between a successful business and its competitors. Establishing extensive collaborative networks can enable a group to produce more innovative products, operate with better processes, and have more effective employees. A culture of sharing ideas and information, with the right tools and processes in place, can boost employee productivity, with a consequent impact on business growth.

Collaboration can involve partners, or even communities of users, prospects and customers.

Medium and large manufacturing companies should take advantage of collaborative tools and social networks to improve overall business performance. They must first address the following challenges:

1. A collaborative culture is not something that companies can build quickly and effortlessly. It may require business activities to be put on hold, and it may inconvenience employees who are less inclined to adopt collaborative tools. However, recent approaches to internal collaboration, including social collaboration tools, are capable of completely replacing the conventional business interaction practices of email and phone calls, particularly if these tools are integrated with ERP and other systems used by the business.
2. Most suppliers offer services that can help customers understand how to use social networking and collaborative tools. When it comes to designing and implementing social networking and collaboration infrastructures and business processes, ERP vendors struggle to define a coherent way to support their customers with social networking. Third-party consultants often need to be involved.
3. Each vendor has its own approach to social networking and collaboration. While collaboration has always existed in the business world - usually informally - social networks are relatively new and are still seen as a tool for entertainment by professionals.
4. Integrating social networks into the software used by businesses can help manufacturers solve their problems. The direct integration of social networks and collaborative tools into sales and CRM software solutions enables companies to obtain direct feedback from their customers, which can improve or target product development, and keep them in touch with their customers throughout the product's lifecycle. In addition, direct customer communication channels affect existing supply chains, and can transform them into more agile, customer-focused chains.

See all software Enterprise Resource Planning (ERP)

Conclusion

Implementing a modern ERP system within large-scale manufacturing businesses can help medium and large manufacturing companies address many challenges, from compliance to internal communication tools. Due to ever-increasing competition, manufacturers cannot afford to use rigid, cumbersome systems that are extremely difficult and time-consuming to set up, configure and modify. There is a real demand for software that can support diverse and geographically dispersed manufacturing operations, while remaining relatively simple, agile and easy to install and transform. These systems also need to demonstrate intuitive logic, be easy to learn and adapt to users from many different countries, IT backgrounds and cultures. Using such ERP systems will also enable large and medium-sized manufacturers to continue to develop and produce quality goods and services and ensure their growth, while coping with changes to their business and IT infrastructures and adapting to the changing and complex requirements of today's dynamic and collaborative business environment.