The 6 Biggest ERP Trends for Manufacturing This Year
By Erin Koss, CPA is an Andersen Business Consulting Alumni (1993-1999), and CEO of Syte Consulting Group, Inc.
As family-owned manufacturing companies increasingly rely on ERP as the backbone of their organizational processes, these systems continue to evolve.
Every year, ERP solution providers incorporate new technologies and support a wider range of functionality to help manufacturing companies cut costs, reduce redundant processes, automate manual tasks and give leaders the information they need to make better, faster decisions.
In this report, we’ll look at the six most important ERP trends your company needs to be aware of in 2023.Transitioning to the Cloud
In 2023, we’ll see more manufacturers upgrading their systems and moving to cloud ERP.
In the past, many organizations that used on-premises ERP applications were reluctant to move core business applications to the cloud — but that's changing rapidly.
According to an informal survey by CIO, perceptions of SaaS and the cloud have shifted in recent days. CIOs and other executive leaders now see the benefits of cloud ERP solutions, including:
● Simplicity of deployment
● Lower costs
● Elasticity (only using resources that are required at a given time)
● Lower dependency on internal IT resources
● Easily adding users and functions as the business grows
● Improved security and reduced liability
● Faster updates
● Better support for remote workers
● Integration with other systems
Additionally, manufacturing leaders are more willing to try new things as the hyperscale cloud has matured, including using SaaS solutions for their complex applications.
Statista projects that the global cloud ERP market will reach $40.5 billion by 2025, growing 13.6% annually.
Moving to Mobile
The shift to mobile is a natural next step as many ERP solutions move to the cloud. Companies need to meet the needs of their diversified and remote workforces, so more features of ERP solutions are now available on mobile devices.
ERP systems with mobile capabilities extend powerful functionality beyond factories, offices and warehouses — and with the availability of lightning-fast mobile data speeds, team members now have access to critical real-time data through mobile ERP applications. For example, sales reps in the field can access to real-time inventory updates and minimize customer wait times by offering products that are readily available.
Leveraging Data to Improve Processes and Make Better Decisions
With better access to data, ERP systems can now deliver better models and statistical patterns. Companies can leverage that information to identify future business opportunities, optimize processes, anticipate trends and make data-driven decisions.
Combining ERP analytics with companies’ existing supply chain management workflows delivers benefits like:
● Monitoring sales, inventory, financing and manufacturing in real time
● Increasing cross-departmental efficiency
● Proactively predicting customer behavior and preferences
● Improving retention by providing a better customer experience
● Automating processes and reducing management costs
● Reducing IT-related issues
● Modifying supply chains to make them stronger and more flexible
More and more ERP vendors are offering solutions with built-in artificial intelligence (AI) functionality. AI and predictive analytics deliver significant benefits for manufacturing businesses.
Organizations can harness AI to deliver valuable business insights based on customer data, because AI technologies can scan huge amounts of structured and unstructured information to spot patterns and predict trends.
AI can also help automate and improve processes. For example, manufacturers that have adopted just-in-time inventory strategies can minimize carrying costs by delivering components at the last possible moment. AI and machine learning can also optimize labor schedules and delivery schedules to lower costs and increase productivity.
With predictive analytics, companies can also minimize demand forecasting errors that lead to inventory problems, like having too much or not enough product in stock.
Maintenance companies are also using machine learning to predict when manufacturing equipment breakdowns are most likely to occur, so they can service critical machines in advance.
Increased Focus on ERP Security
ERP security challenges are at the forefront of manufacturing leaders’ minds as cybercriminals continue to exploit tech vulnerabilities and human mistakes.
Research from IBM reveals the per-incident cost of a data breach has reached $4.24 million. More companies have shifted to all-remote or hybrid operations due to the pandemic, increasing the number and cost of data breaches. When cybersecurity attacks involve remote labor, they typically cost over $1 million more than other issues.
Companies that are working on securing their ERP applications are concerned with challenges including:
● Customization: As companies extend their core ERP capabilities — whether their ERP resides on-premises or in the cloud — it introduces new vulnerabilities.
● Poor governance: If security and data access policies aren’t well documented and enforced, it can leave ERP systems vulnerable.
● Fast-changing threats: Cybercriminals are constantly evolving and honing their techniques, but many manufacturing organizations maintain static defenses.
● Ongoing software updates: On-premises systems can be difficult to keep up to date, leaving ERP systems vulnerable to attacks.
As a result of these challenges, companies are taking steps to secure their ERP applications. Manufacturing companies are prioritizing enterprise security at a higher level as employees shift to remote, distributed or hybrid working arrangements.
The Fourth Era of ERP
We’ve now entered the “Fourth Era of Enterprise Resource Planning,” also known as the era of intelligent ERP. This new era is a radical shift for ERP, into an ecosystem that encompasses not just suppliers and customers, but also competitors, stakeholders and partners.
Gartner predicts that by 2023, 65% of organizations will be using ERP applications that have at least one of the fourth-era hallmarks.
Here are the six attributes of the fourth era of ERP:
● AI-driven: Artificial intelligence in the fourth era of ERP will enable manufacturing companies to manage and integrate diverse applications. AI and predictive analytics will also support complex decision making.
● Data-centric: Companies are using data from multiple applications, services and sources to improve strategic planning, identify risks and accomplish important business initiatives.
● Consumable: ERP solutions are already highly commoditized, and organizations don’t care as much as they used to about the vendors behind the scenes of the software — as long as the product works.
● People-augmented: AI augmentation is making humans more efficient. Fourth-era ERP can help workers increase productivity and perform better and faster, so they can focus on higher-value work.
● Customer-facing: Fourth-era ERP should help organizations understand and meet the needs of their customers. Every department — front or back office — can leverage ERP to drive customer value, including faster delivery or easier ordering. This is a big change from historical ERP functions, which focused on delivering internal value.
● Enabling: Agile implementation and software support are turning ERP into an enabling technology that helps businesses realize the benefits of the software more quickly and easily.
Experts see the fourth era of ERP as a major step forward in the evolution of these systems, offering organizations a more advanced and sophisticated tool for managing operations and driving growth.
The New World of ERP
The enterprise resource planning landscape is continuously evolving. Cloud-based ERP solutions have become the norm and the widespread adoption of mobile technology has transformed the way businesses operate, providing employees with the flexibility to work from anywhere and at any time. ERP solutions are also increasingly integrating AI, and organizations now have a wealth of data insights that enable them to make more informed decisions.
With the increasing threat of cyberattacks, organizations are also placing a greater emphasis on security, ensuring that their ERP systems are protected and secure. We’re also entering the fourth era of ERP, where the emphasis is on creating more intelligent and agile systems that can help businesses stay ahead of the competition.
Manufacturing companies can harness these ERP trends to stay ahead of their competition and face the shifts of the ever-changing marketplace.
Questions about the trends in this report? Ready to talk about how it may impact your manufacturing organization in the near future? Schedule a complimentary consultation.
Erin Koss, CPA is an Andersen Business Consulting Alumni (1993-1999), and CEO of Syte Consulting Group, Inc. She is known for helping family-owned manufacturing companies scale with vision and integrity. Taking a people-first, process and technology readiness approach, Erin and the team at Syte ensure companies are ready to take on big change initiatives like ERP before diving in headfirst. A native to the Pacific Northwest, she enjoys traveling, being outdoors, hiking, biking, rowing, and supporting local culinary scene.