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Analysis

ERP - where to in 2013?
Simon Holloway By: Simon Holloway, Practice Leader - Process Management & RFID, Bloor Research
Published: 21st May 2013
Copyright Bloor Research © 2013
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The change of season and, of course, the weather from snow to sunshine here in the UK seems to have coincided with the production of 2 reports on ERP from 2 of the major Magazines aimed at the manufacturing vertical. Logistics Manager article[i] looked at whether ERP has kept time with the changes in supply chains. Manufacturing and Logistics IT article[ii] was a review of ERP with particular emphasis on the views of vendors on mobility and the cloud. Having read these articles, I thought it appropriate to pull the thoughts and views contained in these articles with my own thoughts.

What has changed in the business side of manufacturing? Logistics Manager made a very important point that supply chains depend on the IT systems that support them, in fact it is a critical dependency. Supply chain management has changed considerably over the last decade with networks replacing chains, internationalisation leading transport distance becoming an issue, particularly now in this energy aware and green conscious world. Additionally the collaboration between a company and its suppliers, customers and partners has become much tighter and closer whilst at the same time having to be agile and flexible to changes in the market. The key to supply chains is that they are process and event driven. Now if ERP packages have moved in the way I suggested in 2010 then they should be able to cope with the changed world. What has happened, mostly due to the recession, is that investment in IT has been pretty stagnant and this is particularly true in North America and Western Europe, where budget constraints and legacy systems are more expensive to maintain. However, in the areas of IT infrastructure immaturity, such as Eastern Europe, Latin America and Asia/Pacific, there is an increase in software spend. If ERP is still seen as the price of entry for companies, then this means, as I see it, that the SME market (where the future large enterprises are likely to come from) is the area where ERP vendors have to win their footholds. The other key point that comes out of this Logistics manager article is that with geographical dispersal of supply chains, executives need to be able to access information from anywhere, on lots of different devices, so mobility access is the key and that means security associated with this has to be there.

All the major ERP vendors see that it is very important to provide mobile support for the business functions of customer relationship management, call management, transport and route management and inventory management. Mobility is changing the way people work and utilise business information in the field. There is a great quote in the report from Phil Lewis, Business Consulting Director for Infor, "Today's approach to Mobility is aiming for information without boundaries. The ability to work from a mobile device, be it a laptop, tablet or even a smartphone, should not be compromised." Innovation surrounding mobility is set to continue, especially as vendors see more user interfaces converting to HTML5. However a word of warning here; standards on devices are great for application vendors but as far as device vendors are concerned, they restrict their ability to differentiate.

What about the cloud? The introduction of cloud (SaaS) ERP solutions provides a further degree of choice as to how to implement and, as well, opens up opportunities for SMEs to exploit the benefits business control given by ERP. What is interesting to note is that the view of the importance of the cloud by vendors is directly related to whether or not they have the capability! Let me say that cloud is not the right solution for everyone, you have to be able to offset its advantages against a more rigid adherence to the solution provided by the vendor (though they are getting better) as being really assured about availability and security of your data over the ether. In The Manufacturing and Logistics article, it was interesting to note that some vendors had seen a tendency for certain ERP modules to be more likely implemented over the cloud - one of those mentioned was CRM. I think this suggests that what is likely in the future is a hybrid where some modules of the ERP are run in-house whilst other are run in the cloud. An interesting dilemma then for the ERP vendors as to how to make this seamless! The statistics on adoption show that it is still slow, certainly for the manufacturing sector. One thing the cloud does do is offer a really good way to carry out a proof of concept.

The next big issue is big data (didn't really mean that as a pun!). The Manufacturing and Logistics report made a very interesting comment that big data had been heard about by IT but not by manufacturing business users. Anyone who has been involved in the implementation of sensory devices such as bar-codes or RFID knows that the data collected by these devices can be enormous and one of the issue is what do you do with it? Back in the early 2000's I presented a paper at a BI conference on the issue of RFID data positing that the value of data could increase over time rather than decrease and how is it to be handled?. So there is a large amount of data in manufacturing collected in real time coming from sensory devices on the shop floor, in the warehouses and even from customer and supplier locations so there is a need for big data technology to analyse this. I see big data becoming an important issue to manufacturers and retailers as the economy picks up. There is a need to be able to seamlessly integrate internal and external data whilst maintaining that you are comparing apples with apples. To do this requires an effective metadata repository with business rules to decide how to do the comparisons.

What then about social networking? I like this comment that I found in The Manufacturing and Logistics article that social networking is about bringing the consumer IT world into the workforce. Although I would replace the word workforce by business community, as I see it this is being driven by new entrants into the workforce of organisations, who are very computer literate and used to 'Tweeting' and 'Facebooking' information to their friends and associates. Social networking is, in my view, heavily associated with today's mobile never off-line workforce. I see the first key use of social networking in business is to enable multimedia communications within and without an organisation to get assistance on solving an issue. From a marketing viewpoint, social networking also would appear to be an effective broadcasting media for certain types of blanket marketing campaign. The big challenge that I see for ERP vendors is do they create their own social networking capability or do they create secure interfaces to work with the major social networking vendors?

So, why should an organisation consider ERP as a solution in this decade? ERP solutions still solve their original aims of providing a seamless integrated environment between application modules that support the business so that you only have to input the information once - this is particular true as they relate to finance and resource planning. So if you are thinking of purchasing for the first time, or of upgrading or switching to an alternative, the reason and rationale has to be a business one, which will solve specific measurable issues in your business, not an IT one. When you evaluate the different products what you will find is, with a few exceptions, not a lot of difference in functional support. The solutions in the marketplace support al the major functions of Finance, Human Resources, Production Planning, Product and Service management, Inventory Management, Customer and Supplier Management. In addition there is a heavy verticalisation available from all the major solutions to support verticals from machinery to mining, from oil production to aerospace. So where should you look for difference? My suggestions would be:

  1. The underling infrastructure - as this is what makes the product agile, flexible and easy to use.
  2. Business Intelligence - not just data warehousing and analytics, but also the ability to incorporate contextual information about the data in terms of the process instance that created it.
  3. Ability to build a long term relationship with the vendor - selecting an ERP is not a short term arrangement, we are talking of anything up to 20+ years of association. When I am involved in a selection process I always incorporate a chance for the selecting organisation to visit and meet the vendor people (i.e. more than just the sales team) and also to meet or talk to some current customers.
  4. My final suggestion for looking for differences is to look at how the ERP vendor supports mobility and the cloud. This is all about being not necessarily at the bleeding edge but at the forefront of the peloton.

[i] Too old to work. Logistics Manager, April 2013

[ii] ERP spreads its wings. Manufacturing and Logistics IT , March 2013

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