Enterprise resource planning (ERP) and supply chain management (SCM) are the lifeblood of most manufacturing organizations, and yet are two very distinct systems. As the lines between the pair continue to blur, the question remains: Are manufacturers better off with a monolithic, all-in-one system, or implementing two best-of-breed packages with a focus on tight
As with most enterprise-class IT deployments, the answer depends. Smaller companies with less-sophisticated processes and limited IT bandwidth might have an easier time supporting a single solution that provides a base level of core functionality in both areas, experts said. On the other hand, larger firms with complex supplier and partner networks are more apt to benefit from separate packages that offer a deeper set of best-of-breed functionality.
While there is no universal deployment architecture, experts agreed that there is no getting around the requirement for SCM and ERP to be tightly coupled in order for manufacturers to fully realize the benefits of integrated business processes.
"Supply chain operations are the bread and butter of a manufacturing organization," explained Mark Humphlett, director of ERP for New York City-based Infor. "Production planning and scheduling and managing assets as effectively as possible are important to the bottom line profits of an organization, and that's why you need seamless integration between ERP and SCM."
Degrees of ERP-SCM integration
Of course, the definition of a seamless ERP-SCM integration will vary depending on the manufacturer's business requirements. At a base level, integration means that as new orders are entered into the ERP system, the information is handed off to the supply chain application to update forecasts, production planning and scheduling in as real time as possible, Humphlett said. Manufacturers looking to extract data from the systems to do long-term demand forecasting have far less of a requirement for real-time ERP integration than those that strive to do scenario planning to map out daily manufacturing resource planning (MRP) runs.
"It's really about what your planning and forecasting window is," explained Josh Greenbaum, principal at Enterprise Applications Consulting, an enterprise applications consulting firm. "If you want to forecast in real time and make a change based on activity, you have to have bi-directional integration. If you're looking at revising a six-month plan based on this month's sales, you really just need a good data feed."
While having a single, combined system or two systems from the same vendor certainly makes life easier, it's not a mandate today, thanks to integration technologies like service-oriented architecture (SOA) and new middleware capabilities. That's especially important in today's business climate, where both large and small manufacturers are interoperating with outside suppliers and customers, most of which are running different systems, noted Cindy Jutras, president of Mint Jutras, a research and advisory firm specializing in enterprise applications.
Jutras advised clients to search out ERP and SCM platforms that support technologies like SOA and hub, and spoke integration architectures as opposed to the traditional style of point-to-point integrations. "In addition, look for tools that let you easily define business objects because if you can map to standard business objects, you are 90% of the way there towards integration," she said.
Manufacturing tightens supply chain through system integration
For Metcam Inc. -- a fabricator of precision sheet metal components and assemblies for OEMs spanning a wide variety of industries -- including telecommunications, HVAC, and fire and security -- integration of any sort was off the table when it came time to modernize a legacy, Unix-based, green screen MRP system. One of the key reasons for upgrading to a newer system -- in this case, Infor's Syteline 8 -- was to have all the firm's financials and supply chain and materials planning activities integrated into a single database in order to streamline operations and reduce the risk of error, according to Bruce Hagenau, the company's president.
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"For us, supply chain management starts with taking orders via EDI and ends up with making sure the packing slip and invoices are properly formatted for each customer," he explained. "If you don't have all the various steps between those two endpoints in the same system, you end up double entering data, and there's a lot of room for transactional errors."
At $25 million in revenue, Metcam doesn't currently have a need for sophisticated SCM capabilities, but Hagenau anticipated that will change over time since the company is growing. That's another reason the manufacturer opted for a solution that delivers both ERP and SCM functionality as part of one integrated package working off a single database. "I think integrated makes sense regardless of the size and scale of an organization," he said. "Between Infor and its various partners, we will be able to find additional solutions to meet our needs as we continue growing."
In fact, Hagenau views the coupling of ERP and SCM as an on-going journey, building out new levels of capabilities one step at a time. "It's not the kind of thing you're ever really finished doing," he said. As Metcam moves from MRP to advanced planning and scheduling, there's a different level of discipline required with regard to the rigor of job orders, bills of materials and shop floor transactions. "It's not like you can go from the system we had to APS [advanced planning and scheduling] by flipping a switch," he said. "You can't accomplish everything right out of the gate."
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This was first published in September 2013