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E-Guide

ERP 101 AND TOP

MANUFACTURING

TRENDS OF 2014


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FAQ: Back to basicswith ERP 101

Experts predicttop manufacturingtrends of 2014

ERP 101 AND TOP MANUFACTURING TRENDS OF 2014

RP SOFTWARESELECTIONdoesnt have to be

difficult, but it is always an important de-

cision that will have a major impact on the

business. Companies should be sure toclearly define goals and requirements before beginning to explore

vendor options. This expert eGuide gets back to the basics with an

ERP 101 and covers the top manufacturing trends of 2014 to help

organizations considering new ERP upgrade or implementation.

E


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FAQ: BACK TO BASICS WITH ERP 101

Brenda Cole

WHAT IS ENTERPRISE RESOURCE PLANNING (ERP)?

ERP is a software system designed to help companies manage the key compo-

nents of their businesses. A shop floor manager may check into ERP to check

the status of a production order. HR managers can utilize ERP to access em-

ployee information and process payroll requests. Truck drivers even have the

ability to update their shipment status on the ERP system from the road in real

time. The potential use cases for ERPare almost limitless.

ERP systemsare usually tied to a relational database, which collects trans-

actional business information and sorts it into data tables. Having all this data

automatically organized allows users to quickly pull the desired information

from the system for faster analysis. Companies typically adopt ERP to help

them reach their performance goals, whether those goals are financial or per-

formance-based. ERP's functionality is vast, with modules available for nearly

any area of the company that creates and uses business data.
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Real-time visibility into business is perhaps the greatest benefit of ERP.By providing up-to-the-second information on available resources and the

progress of orders and initiatives, ERP allows a business to be agile and quick

to respond to any changes or requests. The visibility does not stop within the

four walls of a business. ERP can also connect and share data with outside sup-

pliers, partners, carriers and other invested parties.

WHAT ARE SOME OF THE MOST COMMON MODULES FOUND IN AN ERP SYSTEM?

ERP systems are known for harboring a very wide range of modules. In fact,

ERP modulesoften support most, if not all, functionality from one end of the

business to the other, making ERP a one-stop-shopping IT system.

Every ERP vendor -- Microsoft, SAP, Oracle, Infor, Epicor and others --

offers their own idea of a standard system, but there are some modules that

appear in nearly every suite. These include modules for customer relationship

management (CRM), human resources (HR) and human capital management

(HCM), financial management and accounts payable, product lifecycle man-

agement (PLM), project management, order management, asset management,

inventory management and, in systems that support manufacturing organiza-

tions, supply chain management (SCM) and warehouse management. Smaller
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ERP vendors usually offer more specialized systems that are targeted towardspecific industry verticals.

IS ERP ALWAYS AN IN-HOUSE SYSTEM?

No. While traditional ERP software packages are still largely in-house, more

ERP customers want to lessen the burden on their IT departments and servers.

ERP vendors are responding to these shifting market demands by expanding

their coverage options.

One of the most popular alternatives to in-house ERP is Software as a Ser-

vice, or cloud ERP, where customers make use of on-demand technology that

is hosted and maintained by an outside provider. The cloud modelis particu-

larly attractive to small and midsize companies that lack the IT funds and staff

needed to keep up with a complex internal system. Cloud also offers more flex-

ibility, as customers can often pick and choose which functionality they want,

instead of paying for modules they don't intend to use. There are, however, still

some bugs to work out before the cloud is right for everyone. Security issues

may arise when any data -- especially sensitive financial data or trade secrets --

are put into the cloud, as it is more exposed to potential hackers or viruses than

it may be within an in-house system. There's also the question of connectivity.
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If the hosted servers go down, customers are at the mercy of someone else'sIT department to fix it in a timely manner. It's up to each company to decide

whether the benefits of cloud outweigh the risks.

Two-tier ERPis also an alternative to a single in-house system. Under the

two-tier model, a business will use one large ERP implementation that spans

the entire company, while also using smaller ERP implementations to serve

the needs of individual business units. This model is useful for companies with

many separate plants, divisions or branches across located across the country

or the globe. Two-tier ERP may be comprised of two in-house systems or, in-

creasingly, one in-house system and one cloud ERP service.

HOW IS ERP DIFFERENT FROM MRP?

Material requirements planning, or MRP, is the predecessor of today's ERP

systems. Developed in the 1970s, MRP was singularly focused on the inven-

tory side of manufacturing. The purpose of an MRP system was to keep track

of what parts were needed to complete certain products, when the parts should

be ordered to keep up with production and the amount of stock that always

needed to be available in the warehouse.

Eventually, manufacturers began to request that these systems expand to
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reach other key areas of business, such as payroll, capacity planning, schedul-ing, shop-floor control and supplier management. Material resource planning,

or MRP II, was created to fill these information gaps. It was from this growing

demand for more advanced business information that ERP was born. While

MRP and MRP II were manufacturing-focused systems, today's ERP supports

myriad modules, including -- but not limited to -- manufacturing. ERP is also a

standard business application in industries such as healthcare, higher educa-

tion, retail, insurance, banking and media.

IS CHOOSING AN ERP SYSTEM DIFFICULT?

ERP software selectiondoesn't have to be difficult, but it is always an impor-

tant decision that will have a major impact on the business. Companies should

be sure to clearly define goals and requirements before beginning to explore

vendor options. There are scores of ERP vendors flooding the market with new

products every year, so knowing ahead of time what the ideal ERP system must

do for the business will make ERP selectionless overwhelming.

Creating a dedicated ERP project teamof staff members from IT and from

upper management is also a must, as no purchase of this magnitude should be

left up to just one person or even just one department. Remember: The ERP
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system will likely be touching all areas of the business, and each stakeholdershould be given the chance to provide input and suggestions.

If a company has existing software systems that the new ERP system will

not replace, then the pre-selection process must also include ERP systems

integrationplanning. Finding ways to integrate these systems with ERP will

only make company data more accessible, and more useful, to all.

Finally, it's critical to understand the importance of thorough ERP training

before, during and after an implementation. A new ERP system often means

not just technological change, but cultural change as well, as employees must

alter and adjust the way their work to fit with the new software. Investing in

training is just another aspect of investing in ERP.
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EXPERTS PREDICT TOP MANUFACTURING

TRENDS OF 2014

Brenda Cole

As the holiday rush comes to a close, so does 2013. From the cloud to the shop

floor and beyond, it was a year of software innovation and expanding options

for manufacturers. What's around the bend for next year? We asked manufac-

turing IT experts to gaze into their 3-D printed crystal balls and predict what

the hot IT trends will be in 2014.

BUSINESSES TURN IT FOCUS TOWARD CUSTOMERS, THE CLOUD

Bob Parker, group vice president at Framingham, Mass.-based IDC Manufac-

turing Insights, predicts that the major focus for manufacturers in 2014 will be

building better, demand-oriented, data-driven value chains. "Lean manufac-

turing will live on," he said. "Everything will be calibrated to customer demand,

with evidence-based management and data analytics being huge investment

areas for manufacturing companies."

Advanced robotics, both on the factory floor and in the warehouse, will
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make 2014's value chain "digitally executed," according to Parker, as sensorsand wireless communications become even more common parts of the manu-

facturing process.

According to Dylan Persaud, managing director at Toronto-based Eval-

Source, cloud computing is poised to become more popular in 2014, and

manufacturers that are considering a move to the cloud will need to educate

themselves on the ever-expanding list of vendors and hosted options to ensure

that they choose providers with long-term staying power.

"Some of the smaller, local cloud providers might not be around in a year or

two," he said. "It's not only about competition, but about big players like Cisco

[Systems Inc.] now getting into the market. Even the telecom companies are

starting to support IT like those services, as well as some of the larger resell-

ers." Smaller cloud service providers -- local cable and Internet companies,

for example -- are in danger of disappearing, Persaud explained. To a degree,

so are the smaller cloud software vendors entering an already saturated SMB

cloud market where it's difficult to stand out. Larger cloud vendors with more

visibility, however, aren't going anywhere, he said.

Parker expects hybrid cloud to be the preferred cloud model of 2014, with

big guns like SAP AG moving to support a combination of on-demand and
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on-premises deployment for ERP. Functionality that needs to be upgradedquickly and must be flexible and accessible -- particularly on mobile devices

-- will most typically move to the cloud, he said.

The biggest technology shift that Parker sees in the works is the conver-

gence of the "three T's" -- information technology (IT), operational technology

(OT) and consumer technology (CT). "These are all coming together to change

the technology investment models," he said. "We're seeing IT supporting the

CFO [chief financial officer], the back office, order management, finance, ac-

counting, HR and other administrative tasks. The OT is becoming the basis

for customer experience, product management and supply chain and factory

technology."

THE SUPPLY CHAIN OF 2014

On the supply chain side, Persaud predicts thatsupply chain collaborationwill

be the area to watch in 2014. "Partners will be looking from end to end, not only

to supply what the customers need, but to build that product," he said. "They're

going to be involved with every stage of the supply chain, from raw materials

providers to the assembly people that actually put them together. [This is im-

portant], because if, say, a part isn't available, everyone will know and be able
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to reconfigure their ETA."Mobile will factor into this supply chain collaboration focus, Persaud ex-

plained, as more workers on the plant floor will have access to smartphones and

tablets and be better connected to accurate, real-time information on materials

and parts moving throughout the supply chain.

A challenge for manufacturers in 2014 may be deciding how -- and if -- an

IT-heavy supply chain would work in their current business structures. "What

organizations need to understand is that the Flintstones didn't become the

Jetsons overnight," said Simon Jacobson, a research vice president at Stam-

ford, Conn.-based Gartner Inc. "While the business may want to become more

digitized, especially dealing with customers and especially as supply chains

become more complex, creating a functional system of record still needs to be

addressed."

Paperless manufacturing has been a buzzword for the past decade, he

pointed out, but many companies are still regularly using Excel sheets. "It's not

about finding the next big things, which are already here in cloud, social and

mobile, but there is a lot of modernization that needs to happen before we can

get to the factory of the future."


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NEXT DIMENSIONS OF 3-D PRINTING3-D printing, a favorite topic of next-gen water cooler talk in 2013, will con-

tinue to dominate headlines in 2014, experts say. "When it comes to complex

projects and prototypes, or a product that needs to be constantly changed or

tweaked, that's where 3-D printing comes in," said Persaud. "We're seeing a

lot of prototyping shops popping up, and 3-D printing allows for that service,"

where customers come in with design requests and blueprints, and come out

with finished products, he explained. "It cuts your costs if you're an inventor,

for instance; you can save on costs like molding and production."

Parker compares 3-D printing today to the "home-brewed" Apple comput-

ers of the early 80s, which were very different from the IBM mainframes of

their day. "You've got vendors like Cubify and Makerbot, and you've got the

homemade 3-D printers," he said. "Over time, those differences kind of filled in

[for computers], and I see 3-D printing the same way. It's coming up from the

basement to the shop floor."

With so much promising technology to invest in, cash-strapped manufac-

turers may feel that their competitors are innovating faster than they are with

modest IT budgets. However, while spending activity may be slightly higher

in 2014, most consumers are still being conservative with their technology
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purchases, according to Jacobson."[IT spending] is like a game of dodgeball, he said. "There's one person who

runs up to the line and fakes throwing the ball, and everyone flinches. It's the

same with IT budgets for manufacturing applications -- everyone says we're

allocating and ready to spend, but for most, the ROI and business case [for

spending] is still hazy."


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