Enterprise Resource Planning (ERP) is an essential tool for any manufacturing business that wants to scale up its operations, keep pace with customer demands, maintain its margins and grow both regionally and internationally.
On-prem ERP applications have been helping the world’s most successful businesses optimize and grow for decades. However, many smaller and mid-sized manufacturers have historically been hesitant to adopt these kinds of solutions.
These companies recognized ERP as a powerful business tool, of course. But, rightly or wrongly, many also perceived ERP software as too complex for organizations of their size, especially those lacking dedicated IT staff to implement, maintain and update on-prem applications.
Cloud ERP for all
Today, these preconceptions have been completely upended by the cloud. With the advent of software-as-a-service ERP, manufacturing businesses of all shapes and sizes are able to gain access to market-leading ERP tools simply and cost-effectively, without any need to maintain complex applications on their own hardware.
This is allowing many more businesses across industrial supply chains to standardize and transform the way they operate. A good example are the hundreds of thousands of midsized manufacturers that supply critical components for use in industrial equipment.
These companies, which manufacture and sell large volumes of mostly standardized components — everything from ball bearings to pistons to sensors to logic controllers — are precisely the type of businesses that might once have considered themselves “too small” to run a full-scale ERP application.
But, in fact, they stand to gain as much – if not more – from Cloud ERP than anyone. In particular, the end-to-end data visibility, simplified interfaces, and preconfigured processes enabled by Cloud ERP allow these companies to address some of the longstanding inefficiencies that have been hindering their growth.
Focusing on fragmentation
Consider the fact that many of these mid-sized manufacturers currently rely on a fragmented collection of different software solutions and paper-based practices to run their businesses.
Some of those solutions may even still be running on outdated mainframe-like infrastructure. Many will be at, or beyond, their end of life. And most will require frequent manual intervention to mitigate the inefficiencies and misalignment between different systems.
The “human glue” needed to integrate and synchronize these various systems is not only an inefficient use of employees’ time, but also increases the risk of human error. It’s not uncommon, even in 2023, to see employees printing information out of one system in order to manually re-enter it into another.
In fact, this fragmentation is arguably one of the greatest barriers to growth within mid-sized manufacturers. It prevents management from getting a real-time view of what’s actually happening across the business — where money is being spent, where it’s being made, what manufacturing capacity is available, which customer orders are at risk of delays, and so on.
Manufacturers know that manual processes, combined with a lack of automated visibility and scenario planning, can make planning and replanning procurement and production within a manufacturing operation a slow and costly effort.
A fully integrated, end-to-end, digitized Cloud ERP, in contrast, allows them to gain instant real-time visibility into all aspects of their operations, from supply chain and inventory to production and logistics. It also provides a foundation for streamlining processes, eliminating pointlessly repetitive work and freeing up employees to focus on managing exceptions and adding value for customers.
Rich manufacturing functionality
It’s true that some manufacturers remain cautious about Cloud ERP, fearing that it shifts the complexity needle too far the other way — resulting in an overly simplified ERP solution that lacks enough functionality to meet their unique industry requirements.
Let’s not forget that “mid-sized” doesn’t mean these companies are small or simple to run. Some will have thousands of employees, hundreds of customers, and a significant regional or even international footprint.
Depending on the industry they operate in, they’ll also have a range of very specific and sometimes quite advanced manufacturing needs from an ERP system — whether they’re running make-to-stock, make-to-order, configure-to-order, or in some cases even lightweight forms of engineer-to-order with custom engineered project work.
The good news is that today’s mature Cloud ERP solutions now offer a rich menu of industry-specific functionality for exactly these kinds of manufacturing scenarios. This functionality can be deployed incrementally, adding value where the business sees the most benefit and least risk to operations.
A SaaS solution like SAP S/4HANA Cloud Public Edition, for example, comes with over 100 pre-configured business processes that cover a manufacturer’s end-to-end operations, and have industry best practices and predictive analytical capabilities embedded within them.
These capabilities solve problems beyond the basic ERP functionality required to run finance, accounting, human resources, and customer relationship management by supporting activities unique and critical to discrete manufacturing.
The ERP sweet spot
Solutions like these are allowing mid-sized manufacturers to achieve that critical Cloud ERP sweet spot – an ERP application that’s extremely simple to use and cost-effective to run, while also being rich in manufacturing-relevant functionality to support their operational needs day to day.
The impact on business efficiency and agility can be transformational. Seamlessly integrated with manufacturing execution and other business systems, Cloud ERP gives manufacturers a fast-track route to digital transformation, optimized operations, real-time visibility and product and process innovation.
An example? Look at the way Germany’s Konvekta was able to digitize its previously manual self-billing processes with Cloud ERP. The company, which has around 300 employees and a footprint in five different countries, manufactures air-conditioning and cooling systems for buses and other vehicles.
By adopting Cloud ERP, Konvekta was able to transform the visibility and efficiency of its self-billing, acquiring the ability to run automated simulations and get early insight into potential issues, as well as saving time and reducing the opportunity for human error.
Ultimately, these are the critical components for scaling up operations and growing the business. It’s why we believe Cloud ERP is the right choice for today’s mid-sized industrial manufacturing businesses. If you’d like to find out more, please take a look at our website
here.
