Digitalization brings about a whole new range of possibilities which allows you to master current and future challenges in the industry. In this regard, the manufacturing industry is no different. In spite of the challenges faced by the industry at large, the disruption that is brought about by digitalization can bring about revolutionary changes to the industry. A digital transformation in the manufacturing industry reduces time to market, increases flexibility and improves the quality of production, all leading to increased efficiency and profitability.
The Manufacturing Landscape
Manufacturing today is global because both supply and demand work on a global scale. Therefore, it is highly reliable on the global supply chain which makes it important to do demand forecasting and supply planning well because any disruption in the supply chain can cause material loss to organizations. Being an asset heavy industry, it is very important for manufacturing organizations to ensure that the management of asset lifecycle – from procurement to decommissioning and disposal is managed well. Equally important is asset maintenance to ensure their upkeep and maintaining operating conditions. Manufacturing organizations have complex accounting and costing requirements that need to accurately account for costing methods used for inventory, work-in-progress, and labor and machine times. Additionally, they need to ensure appropriate production scheduling and execution to ensure their operations run as efficiently as possible.
Optimizing the Value Chain
To achieve the full benefits of a digital transformation in the manufacturing industry, organizations must modernize and optimize their IT practices and portfolios. Whether it’s product design, production engineering, production planning or production execution, digitalization allows manufacturers to extend and integrate the benefits of digitalization not only internally, but to external business partners as well. Streamlining the flow of orders, tracking the transformation of goods, from raw materials to semi-finished and, eventually, to finished goods and evaluating product quality, plant utilization and resources all require a system that integrates different aspects of the manufacturing industry.
ERP and the Digital Transformation of the Manufacturing Industry
In our blog article ‘The Role of ERP in the Manufacturing Industry‘ we delve into the details of the importance of having a robust ERP system at the core of every Manufacturing organization. The manufacturing industry is vulnerable to global economic and geopolitical shocks and it is increasingly imperative for organizations to devise a digital strategy to ensure resilience.
This is where a reliable ERP system, often regarded as the technical backbone of the enterprise, can be immensely useful. CIOs looking for a digital transformation in the manufacturing sector, should start with the ERP system. Let us delve into how an ERP enables digital transformation in the manufacturing industry.
For a manufacturing centric organization, whether in a make-to-stock or a make-to-order situation, the critical balance that affects operations is that between supply and demand. The supply elements usually comprise of inventory and confirmed receipts from vendors, whereas demand elements could comprise sales orders and forecasts. Organizations typically use systems to manage the individual parts of the supply and demand equation, but the real value that can be derived from this data can only be provided by planning functions such as MRP, which are usually in the scope of an ERP application. Eliminating spreadsheet-based activities in the planning department can provide the maximum efficiency leverage to manufacturing organizations and this is where an ERP can be a game changer.
If we talk about manufacturing operations – from scheduling complex operations to ensuring the staging of raw material and semi-finished goods on the shop floor, an integrated system such as an ERP is essential. Not only would organizations get a unified view of the entire production value chain, but this would also ensure consistency in valuation of inventory at different stages of manufacturing and provide granular visibility on various processes and inventory situations. Factoring rework and quality problems during production cycles can become significantly easier and provide the data stream that can drive insightful analytics to the executive leadership. For manufacturing companies, these can be crucial wins in their path to digital transformation and an ERP becomes an invaluable ally.
The last topic that we will analyze is the aspect of asset maintenance and its automation using an ERP system. With companies running complex manufacturing operations on several machines, each of which having its own maintenance schedule, it becomes increasingly crucial for the operations team to manage scheduled and unplanned maintenance. Minimizing operational downtime is a key metric and for any CIO looking to add value to the organization’s manufacturing operations, this is an area that can yield immediate results. An ERP that caters to the manufacturing sector has a robust Plant Maintenance module that can help the management of asset maintenance. While progressive technologies such as IoT can provide real-time data streams from these machinery, only an ERP system can ingest this data and provide actionable insights and activities to both the operations and the planning departments. Moreover, with an integrated ERP, the MRP process can plan for procurement of spares and consumables depending on the current inventory situation and provide that bridge between the maintenance and procurement departments to seamlessly collaborate.
Case for an ERP in the Manufacturing Digital Transformation Story
It is no secret that the COVID-19 pandemic has posed a great challenge for every industry. These challenges have usually acted as accelerators in the adoption of smart technology. The changed global landscape in the manufacturing industry specifically, is pushing companies to rethink their processes and products. Many manufacturers have accelerated their digital transformation journey during this time. Organizations have come to realize the trends that have presented themselves during the pandemic are likely to continue even once it is all over. Focusing on automation and targeting areas of the economy with a potential to grow will bring about success.
An ERP is essential in any digital transformation initiative in a manufacturing organization and would add resilience to the organization’s operations.
Act While There’s Still Time
Embarking on a digital transformation is always a challenging journey for organizations. It is an expensive, time consuming and labor intensive process. However, once you make the transition to a modern, robust, flexible and efficient ERP system, you will realize the benefits are far higher than the ones provided by age-old manual processes followed in manufacturing plants. The transition helps organizations achieve operational efficiency and enhances their financial performance enabled by a strong ERP system at the core, like the one offered by VIENNA Advantage.