Mark Smith asks: Does Industry 4.0 demand the latest and greatest ERP?
There’s wide agreement that Industry 4.0, or the fourth industrial revolution, is here. But what it actually means for manufacturers still seems to be up for debate. Digital transformation, the use of sensors and IoT devices, and the creation of much more data will all undoubtedly feature, but it remains to be seen if this will be transformative enough to count as a revolution, or if this will actually be more of a gradual shift.
Manufacturers will also be pondering what this means for the software they use to run their business – will this need to be updated to meet the demands of this shift in technology? The Enterprise Resource Planning (ERP) software that is used to run most manufacturing businesses is surely going to have to become much more sophisticated, with investment needed to upgrade to the latest versions to keep up.
In fact, manufacturers are very likely to be just fine using the software they currently have. Industry 4.0 may shake up their day-to-day business, but the ERP tools they use will likely remain the same.
The rise of ERP
Why would manufacturers think twice before they upgrade their ERP software to deal with Industry 4.0? The answer lies with the recent history of this software.
While the term ERP only dates back to the 1990s, its roots go back further.The 1960s saw the introduction of Materials Requirement Planning in manufacturing.These relatively simple tools were used to manage inventories and purchasing – minimising stocks and associated tied up capital.
The 1970s saw the shift towards real-time software and the beginning of the development of financial services software, while the 1980s saw the introduction of MRP II or Manufacturing Resource Planning software, a name change made necessary by the software now doing much more than tracking inventory.
The term ERP was coined in the 1990s to describe software that dealt with a whole host of back office tasks.These software suites continued to improve as the providers innovated, and technology research from Gartner coind the term ERP II to describe a gereration of solutions that were internet-enables and gave real-time access.
The end result is businesses now have excellent suites of tools that cover finance, payroll, human resources, inventory, sales, marketing, and more.And as this technology has its roots in serving the manufacturing sector, the sector is well catered for with many bespoke modules dedicated to manufacturing.
The decline of innovation
The ERP software market has not, unfortunately, continued to innovate.This once fast-moving sector is maturing and slowing, with little changes even though version numbers of software increase.
An example of this stagnation was the launch of Oracle Fusion. Following the acquisition of PeopleSoft, JD Edwards, and Siebel in 2005, the new suite that would integrate everything together was announced – a ‘mega-ERP’ that would take the best from each of these acquisitions and create something special. In 2006, Oracle announced it was halfway through producing this software.Time passed. Nothing happened.
Finally launched in 2011, Oracle Fusion was underwhelming -not as integrated as suggested, and no great leap forward from the legacy software it was replacing.
This slowing of innovation has been the norm for around a decade – ERP tools have matured to a point where most new versions are tinkering around the edges rather than offering something completely new. However, the positives of this scenario are stable, robust platforms that organisations can rely on.
This is especially true for manufacturing ERP modules. The modules with the biggest install base and therefore the most attention from developers are finance, payroll and HR, and CRM.To keep the majority of customers happy, these will be the focus for improvements. Manufacturing is less of a priority -every business needs finance and payroll software, but only specialists need manufacturing tools.
Are manufacturers getting a good deal?
For manufacturers that are wondering what they should do about their ERP systems in the face of Industry 4.0, the answer is very likely to be:Why fix something that isn’t broken?
The creation of more data and the need to analyse it may be presented by the ERP vendors as a reason to upgrade to their latest versions, but instead, manufacturers should use this opportunity to take a close look at what they currently use and consider the upheaval to the organisation if they were to upgrade. It’s also a good time to look at what organisations pay for their ERP support. In our experience businesses can be paying up to 22 per cent of their license fees for support,and for such a robust system this doesn’t always deliver the best return on investment. There are more cost effective third-party support alternatives for ERP systems that are saving companies between 50 per cent and 90 per cent each year.
The maturity and stability of ERP systems means it’s very likely that manufacturers have no need to upgrade. They may, however, want to consider a move to the cloud to expand capacity for increased amounts of data they need to store and analyse.The option to remain on the software package they currently have, but shifting to cloud infrastructure, is one most manufacturers might like to consider for the following reasons – reducing in-house IT costs on infrastructure, increasing reliability and resilience, improving scalability of resources and there is no need to upgrade to the latest ERP version in the process.
The first, second and third industrial revolutions were all about changing systems in order to innovate and increase efficiency.The fourth is likely to be different – the innovations won’t always require a change in systems, but may instead require innovations in the way that ERP systems are hosted and supported.
Mark Smith is Founder and CEO of Support Revolution, the only independent, third party software support provider for Oracle and SAP systems headquartered in Europe. Due to an unparalleled depth of industry and local knowledge and 20 years experience, Support Revolution provides first class support and maintenance whilst saving customers between 50 per cent and 90 per cent on support bills.