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Some industry experts joke that enterprise resource planning (ERP) is the most flexible system in the world -- until you implement it.
That's because you have many choices at the front end, but once a company makes those choices, it's stuck with them, said Robert Parker, group vice president of research at IDC Manufacturing Insights in Framingham, Mass. Therefore, manufacturing companies embarking on ERP projects must understand exactly what they do and how they do it to ensure vendors can meet their specific requirements.
For example, process manufacturers (those in the food and beverage, paints and coating, chemical, pharmaceutical, and nutriceutical industries whose goods are created by measures of units) have to deal with more stringent government regulations handed down by the U.S. Department of Agriculture (USDA) and the U.S. Food and Drug Administration (FDA), said Brad Tornberg, principal consultant at E3 Consulting LLC in Voorhees Township, N.J. "So, from a compliance point of view and a certification point of view, software vendors are being constantly challenged with these new laws," he said. For instance, vendors such as Oracle, Infor, SAP and Process Pro are incorporating into their process manufacturing software food and safety handling laws, such as the FDA's Food Safety Modernization Act, that require food and beverage manufacturers to ensure the safety of their products, said Tornberg.
Because of companies' compliance requirements, vendors have to accommodate FDA and USDA regulations, said January Paulk, director of client services at Denver-based Panorama Consulting Solutions. She noted other areas manufacturing ERP vendors are embracing:
- Expiration management, or the shelf life of different products, to ensure their process manufacturing software can handle the first-expired, first-out, or FEFO, picking method, which ensures that the inventory items that are set to expire next are picked off the shelf first. "This is also a challenge for accounting because accounting has to be able to cost the product as it is consumed and accurately reflect on-hand inventory costs," Paulk said.
- Meeting transportation management requirements for hazardous substances or very heavy cargos.
- Meeting requirements for the global harmonized system (GHS) of classification and labeling raw materials, especially in the chemical industry. GHS is designed to replace the various classification and labeling standards used by different countries to make compliance more consistent globally
Fewer ERP vendors address process manufacturing
Virtually all major manufacturing ERP vendors satisfy discrete manufacturing -- production of distinct items like toys, laptops, furniture or airplanes -- but not as many satisfy process manufacturing. Vendors that offer ERP systems for process manufacturers include Infor, SAP, Oracle, Epicor and Microsoft, according to Cindy Jutras, president of Mint Jutras LLC, in Windham, N.H.
Discrete manufacturing is not continuous in nature; for example, you can stop building an automobile midstream and continue where you left off at a later date. With process manufacturing the end product is obtained through a continuous process or a set of continuous processes.
"In a discrete manufacturing environment, you would use a bill of material; in a process manufacturing environment, you would use formulas or recipes with general ratios of the ingredients," said Bill Nickerson, senior manager of industry relations at Panorama. Consequently, manufacturing ERP software has to differ to address those distinctions. For example, ERP systems that handle process manufacturing would include lot traceability and formula modules, while those geared to discrete uses would include bill of material management modules, Nickerson said.
Additionally, process manufacturing software has to cost a product as it's consumed so it has to be done a little differently -- not based on a part but based on a certain amount being consumed, Paulk said. "Also when it's combined with another product, then what is that byproduct and how does that become a new part number and how do you cost that and how do you shelf-life that byproduct? So, process manufacturing software has to handle a lot of uniqueness from that standpoint that discrete manufacturing software wouldn't have to do," she said.
In reality, process manufacturing software just needs to do more things than discrete because a lot of process manufacturers will actually be hybrids, said Jutras. "Hybrids are like paper or some packaged chemicals that start as continuous and then can become batch or discrete manufacturing as the product evolves," said Dan Miklovic, principal analyst at Cambridge, Mass.-based LNS Research. So ERP vendors addressing process manufacturing usually have to be able to do both, a process environment and a discrete environment, Jutras said.
Data analytics becoming part of manufacturing ERP
In anticipation of customer needs, manufacturing ERP vendors also have spent a lot of money and effort in building out their business intelligence or business analytics, E3's Tornberg said. "And what it really is, is dashboards in a lot of cases, giving them a kind of a temperature in terms of how things are running, how things are doing, are we trending upwards, are we trending downwards," he said. "And then there's financial analytics, financial controls. So, did you really make money? Sure, you made money, but analytically, you could've made a lot more money if you had seen that you have an area of weakness."
The past 20 years has seen an increase in the amount of automated data collection in the process manufacturing space, driven by government regulations, particularly in the food and beverage and pharmaceuticals industries, Miklovic said. Process manufacturers are using sensors to collect data, such as how much material was actually consumed, he said. The signals usually come from process control systems that are controlling mixers and pumps and weigh scales and ovens that are sent to the ERP system. The manufacturers then use analytics to turn that data into actionable business insights.
Because companies are looking for solutions that best meet their unique industry needs, an increasing number of upstart vendors have focused on specific industry niches -- such as food and beverage -- and incumbent ERP vendors have invested heavily in their industry-configured products to tailor them for specific types of companies like process manufacturers, said Panorama CEO Eric Kimberling.
The good news is that organizations have a diverse portfolio of manufacturing ERP options to choose from. But they need to have a clear understanding of their needs and which types of ERP systems can best address those needs, he said.
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