5 Myths Busted about ERP for Manufacturers
Manufacturing and ERP systems have had a rocky relationship, one filled with big promises, missed opportunities and lots of misinformation. Companies trying to leverage manufacturing technology for competitive gain first learned about MRP, then MRP 2, then ERP…but there isn’t even a name for what ERP has become. Today’s ERP systems have transformed in to something different altogether from the previous incarnations available in the market. Let’s look at 5 common misperceptions about ERP for Manufacturers:
Myth #1: Lean and ERP are Incompatible. Manufacturers on a Lean manufacturing journey have to ignore ERP, because ERP systems just get in the way of truly achieving a lean enterprise.
Truth #1: Lean and ERP can play well together. Microsoft Dynamics AX can get the stamp of approval from even the most ardent believers of the lean concepts, and can do so by adding no unnecessary transactional overhead to the organization. Whether it is the ability to adjust your TAKT time to speed up the line, to creating Heijunka scheduled kanbans on cells, the system both adheres to lean standards and enables continuous kaizen improvements to the system to never stop optimizing the organization.
Myth #2: Manufacturers have to decide their preferred method of manufacturing. Once they’ve made that decision, they then configure the ERP to accommodate it, and live with tradeoffs for other approaches.
Truth #2: Many manufacturers use a combination of manufacturing modes. I frequently work with mixed-mode manufacturers that use a combination of strategies within their organization. I worked with a company recently who processed steel coils, and output multiple items from one raw material, similar to the process manufacturing approach. Then further on in their manufacturing process they processed the steel in to cut parts on discrete work orders, but they also had processes that lent themselves to a lean manufacturing approach because the transactions were predictable and could be executed with minimal transactional overhead needed.
We were able to accomplish all three operations, running in the same plant at the same time, giving the company a way to transact easily, and giving management the visibility they desired by having all of these strategies peacefully coexist.
Myth #3: Insights can only be found outside of the ERP system. Manufacturing ERP systems are there to be the system of record, but reporting on trends in the business must take place in an external system, where we can aggregate, and then analyze business data from many different pieces of the business.
Truth #3: Reports can often be run natively within the ERP system. While we have worked with customers to create a data warehouse instance to tie together relevant data from disparate parts of the business, what we are seeing most times is that we can surface all of the data needed to run the business natively within the ERP system.
Myth #4: Global manufacturers have to buy multiple ERP systems. Manufacturers have to deploy separate instances of the ERP application to address the global needs of their organization, and account for things like intercompany trade, and local jurisdictional regulations.
Truth #4: Microsoft Dynamics AX can handle both local and global requirements. Microsoft has spent hundreds of man years building an application that can both handle complex multinational manufacturing needs, and stay ahead of jurisdictional changes as they occur to keep organizations in compliance in the markets they serve.
Myth #5: Manufacturing ERP systems require a big upfront investment. Manufacturers have to spend an inordinate amount of capital if they want to truly leverage technology as a competitive weapon. Because their investment is so high, seeing a return can take a long time.
Truth #5: Gone are the days of having to lay out investments, and hope to cost justify them at some distant point in the future. With the advent of the cloud, and the rapid deployment technologies Microsoft has developed, along with the technology to create solution accelerators like the AX4Discrete offering built on top of the Microsoft infrastructure, and available from systems integrators (like mcaConnect), manufacturing companies are seeing the time to value dramatically reduced. Microsoft enables you to easily adopt the technology components you need to compete in your marketplace, in a very cost effective way.
ERP systems have come a long way to meet the needs of manufacturers. From the shop floor to the sales floor, manufacturers finally can have one complete integrated system. If you are interested in learning more about Microsoft Dynamics AX, I encourage you to request an ERP readiness assessment. We’ll go through our 40-point plan to see if you’re ready for the changes an ERP system can bring.
Written By: Mike Green