Manufacturers will tackle globalization and prime themselves for economic recovery with better technology in 2011, including embedded analytics and more collaborative, cloud-based ERP, according to analysts preparing their predictions for the upcoming year. But excitement over mobile applications will bump up against the hard reality of the devices’ limitations.
“Cloud-based deployment models are gaining traction,” Paul Hamerman, vice president of enterprise applications at Forrester Research Inc. in Cambridge, Mass., wrote in a draft of a report that names innovation drivers for the coming year. “There is more interest in deployment models that stabilize costs of ownership, including SaaS [Software as a Service] and cloud-based hosting (infrastructure-as-a-service) with application managed services. Vendors in the ERP space are beginning to provide a layer of extensibility in the form of platform-as-a-service (PaaS) that will enable customization in the cloud without compromising cost of ownership.”
Meanwhile, new ERP releases will continue the technology’s evolution from transactional, data-capture systems to more interactive, customizable collaboration tools. Business process modeling (BPM) will be embedded in more ERP applications, Hamerman said, allowing users to configure them without custom coding.
But as manufacturers turn increasingly to SaaS for the near-term cost savings and ease of deployment, a new risk will arise, said Jim Shepherd, research vice president and distinguished analyst at Gartner Inc. in Stamford, Conn.
“As more and more of these SaaS applications emerge and are targeted at specific departmental buyers and functions within the business, the number of applications in your portfolio is likely to go up again,” Shepherd said. “Companies have to balance that opportunity against the danger of application proliferation -- that they begin to move backward from an integration perspective.”
To cope, manufacturers will need new strategies and governance procedures for a mix of SaaS and on-premises applications, he said.
Like Hamerman, Shepherd expects significant changes in ERP suites.
“We’ll see more and more of the analytics that used to be separate from ERP now become part of the functional ERP system,” he said. SAP’s in-memory analytics, for example, “will begin to mature, and we’ll certainly see practical applications of it.”
Supply chains will grow even longer, more complex
Complexity was also on Simon Ellis’s mind as he drafted predictions that IDC Manufacturing Insights will release in mid-January.
“Supply chain organizations operate in a pretty complex environment -- there’s no getting around that,” said Ellis, a practice director at the Framingham, Mass.-based firm. “Networks are getting more global. Companies are going to really focus on ways to simplify.” Moving away from one-size-fits-all systems to target key segments of the supply chain might be one solution, Ellis said.
Another theme that appears prominently in Ellis’s crystal ball is a sense that manufacturers have exhausted the benefits of demand-driven forecasting.
“Forecasting can be less precise in a more volatile world,” he said. “Because the demand side is becoming more difficult to predict, it may be that we ought to build in capabilities that allow you to respond more quickly. Perhaps excess capacity is not this grand evil, and it’s OK to have a lot of bandwidth in your manufacturing operations.”
As a result, Ellis said he expects visibility into inventory and supplier performance to become higher priorities for IT in the coming year.
Joe Barkai, another IDC practice director, predicts companies will expand their use of product lifecycle management (PLM) software to reduce the complexity caused by such inefficiencies as multiple, nonstandardized bills of materials. They’ll do this, in part, because ERP has become so fundamental to their businesses that they must now look elsewhere for improvements.
“Ford is embarking on an effort of complexity reduction,” Barkai said. “They have a very, very complex set of architectures, too many features in cars, too many bills of materials.”
New PLM, manufacturing and supply chain systems will help the company build a “world car” by standardizing basic features so most of the components can be built anywhere.
“It could be that cloud-based computing will support that because it allows you to connect different systems,” Barkai said.
Both he and Ellis said North American manufacturers might move some of their production back home as they gain more appreciation for the longer lead times, logistical costs and rising labor rates that come with outsourcing. IDC predicts that in 2011, manufacturers will look for “profitable proximity” -- what Barkai defines as locating production closer to the point of consumption to reduce logistical costs.
IT will have to figure out its role. “I think the next challenge facing manufacturing is how to be truly global, and not just multinational,” Barkai said. “Companies will have to start looking at this as a global footprint and, in a way, as a single, global plant floor.”
At ARC Advisory Group, Steve Banker, director of supply chain management, predicts increases in global trade, warehouse robotics and embedded analytics in logistics software, and a drop in the use of supply chain risk management as business improves. Posting his predictions on the blog, LogisticsViewpoints.com, Banker wrote the recovery will also inspire manufacturers to again invest in warehouse management systems (WMSs).
It’s a big change from less than a year ago, when Banker was widely quoted saying the recession had “clobbered” the WMS market. Asked to explain, Banker cited sales growth at the biggest WMS vendor, Manhattan Associates. ““I expect other WMS vendors will have improved as well,” he said.
Banker also noted strong user interest in business intelligence (BI) features for SaaS logistics tools, especially transportation management system (TMS) software, and predicted that by year’s end, all logistics software vendors will beef up their BI features.
Is upward mobility in the cards for smartphones and tablets?
Hamerman called mobile apps the hottest trend in business technology, and he predicted custom coding will begin to give way to more packaged software. Tablets are starting to replace laptops for field-based and traveling workers, but smartphones, though popular with business users, will continue to be constrained by their limited form factors, he said.
Ellis said interest in mobile business applications is driven, in large part, by the unprecedented reality that the technology workers use at home outstrips what they have in the workplace.
“I have a hard time, though, seeing that a smartphone is ever going to replace a purpose-built device in the warehouse, even though there may be an app for that,” he said.
The picture for tablets is only slight better. “I know a lot of people who have bought iPads, and they use them for work,” Ellis said. “It’s a way to go from that to having them be a platform to use throughout the supply chain.”