According to research undertaken by IDC Manufacturing Insights, the average ERP system is now reaching adolescence, which can spell only one thing: trouble.
Commissioned by Infor, IDC interviewed 720 discrete manufacturers operating in eight countries across four sectors – industrial machinery, metal fabrication, hi-tech and automotive, in the largest survey of its type ever undertaken. Of the 720 manufacturers polled, 62.3% in Western Europe have ERP systems which are more than five years old, with 18.7% 10-15 years old, and a further 7% more than 15 years old. In North America most systems are 5-10 years old and even in China, more than a quarter of ERP systems are at least five years old.
The message from the sector is clear – while technology is vital, say 64% respondents in Western Europe, many of its ageing ERP systems fall short of meeting some areas of strategic importance over the next two years.
Given the pace of change over the last 10 years, it is little wonder systems are falling short of requirements. But as ERP has become increasingly important as an enabler of operational excellence, it’s important to make the right decision when implementing a new solution. So, what can be learned from past experiences, and what should manufacturers look for when evaluating a new ERP system?
Broadly speaking, requirements for a new ERP system should fall into two categories: system flexibility and system functionality.
Change and complexity in business are now treated as givens. Therefore any new software purchase must be flexible enough to accommodate substantial change, integrate easily with other applications, and provide foundations from which to adapt to new technological advancements, particularly as applications such as SaaS and Cloud are predicted to gain widespread adoption.
Few could have predicted the pace and scale of change manufacturers have faced in the last 10 years. Therefore, when looking to the future, the ability to respond and react quickly to change, has to be a prerequisite for any new ERP system.
In terms of functionality, IDC’s research highlights a number of gaps in current and desired performance over the next two years. When selecting a new ERP system, it is therefore imperative to ensure these areas are at the top of the requirement list when it comes to software capabilities.
While only 11% of manufacturers polled cite bid and project management as an area where ERP has contributed benefit, most highlight bid and project management as a priority initiative for the next two years. Similarly, cash flow management, maintenance costs and asset management all feature at the bottom of the list of areas where ERP contributes benefit. Yet manufacturing operations management is highlighted as an area where a gap for improvement exists.
New product design and introduction is also highlighted as an area for substantial improvement, particularly as this is an area where emerging markets are stealing a march, yet product design is cited by just 11% as an area which is enhanced by ERP.
In summary, new ERP systems must contain both the flexibility to meet evolving requirements, as well as strong, business specific functionality to meet the pressures and challenges which manufacturers are facing over the next two years.
ERP represents a huge strategic advantage in the quest to gain competitive differentiation against emerging markets. 43.8% of respondents in China for example, claim it is irrelevant in their organisation, so with this in mind, it’s crucial to capitalise on this advantage, and get it right second time around.