Globalization has been a force to reckon with for many manufacturing companies, revealing both complex challenges...
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and lucrative opportunities.
That's why optimizing organizational processes for a global market continues to rank among the top priorities for senior executives in manufacturing, according Rick Veague, CTO of IFS North America, a Chicago-based software solutions consulting firm specializing in enterprise resource planning (ERP) applications. But that's a goal that can be easy to talk about and hard to accomplish. Two of the biggest challenges globalization places on manufacturers, Veague said, are effectively competing in the increasingly crowded global market and coping with a rapidly accelerating rate of change.
Manufacturing globalization challenges worth the effort
These problems are also opportunities, Veague said. Manufacturers that solve the challenges introduced by globalization may be able to get an edge -- and that's why more companies are turning to ERP software systems.
"A properly implemented ERP system helps manufacturers deal with these challenges through more efficient operations, clear understanding of cost structures, and the ability to better manage demand and supply chains," Veague said.
Industry experts say that ERP -- far from its early reputation as a monolithic data repository -- has evolved over the past decade into a strategic technology platform that centralizes business processes for manufacturers, truly helping them compete on the new global playing field.
"New generations of ERP applications help manufacturers centralize and institute a single uniform mode of information storage [and] retrieval along with the ability to integrate data seamlessly," said Jaisankar Venkat, vice president, enterprise solutions at Infosys Technologies, an IT firm based in India, with global interaction. "Technical capabilities such as single-instance rollout across multiple countries and locations, and a thin-client architecture -- which may also be Software as a Service (SaaS) ERP or on-demand to some extent -- allow for a more flexible business model to respond to globalization."
Globalization demands drive manufacturing ERP software investments
However, it's often the business pressures of globalization that drive ERP spending -- not the manufacturing organizations themselves, according to Narayan Laksham, founder and CEO of Ultriva, a consultancy focused on lean manufacturing. Different functional groups within a business entity are tied to manufacturing processes, he explained, and the efficiencies that ERP affords for this interaction often drive the ERP infrastructure investments.
"Customer orders, sales management, accounting, invoicing, [and] accounts payable/accounts receivable are the components that have been driving ERP growth," Laksham said. "These need to be in a single system for reporting purposes as well as for Sarbanes-Oxley [SOX] compliance. ERP performs this role nicely."
Manufacturing may struggle to fit into the ERP model, Laksham said. He contends that top management is driving ERP because of process improvements in accounting, invoicing, sales management and other support functions. Its presence and importance in manufacturing departments is limited to the extent that it enables these and other functional departments to gain efficiencies. This may explain why manufacturing executives don't always welcome the efforts of IT departments to extend ERP into their domain.
But the entire organization -- and the bottom line -- can ultimately benefit from ERP, according to Venkat of Infosys.
"CIOs in the manufacturing industry will continue to view leveraging enterprise application investments as a top priority over the next couple of years," Venkat said. "This is because manufacturers are focused on leveraging ERP systems as a key enabler to penetrate [and] grow in new and emerging markets, beyond just operational and cost benefits."
Venkat cites many examples of how ERP is successfully deployed and scaled within the complex businesses of today's manufacturing sector. For example, a worldwide agri-business company merged and consolidated a scalable SAP system across multiple environments with a single enterprise-wide data warehouse. A telecom giant that produces telecommunications equipment implemented a huge upgrade to its existing PeopleSoft system. That was the world's largest-ever upgrade, according to Venkat, involving 85,000 employees across 91 countries and 16 languages.
ERP implementation challenges manufacturers
However, implementation of ERP software systems and upgrades in new markets with significant language and cultural differences is not a cakewalk.
When planning global upgrades and rollouts, it's essential to find partners that know how to work with your scale of business and have an understanding of your targeted global markets, according to IFS's Veague.
"Look for vendors who can provide [ERP] implementation and support services local to the areas you have operations in, and avoid vendors who outsource global implementations to a variety of partners," Veague said. "Look for vendors who offer a modern technology platform that is suited to supporting global operations."
Jim Romeo is a SearchManufacturingERP.com contributor