ERP: not the right question, not the right answer

Posted on 7 May 2015 by Malcolm Wheatley

To a man with a hammer, every problem looks like a nail. And much the same goes for ERP systems, says Cimlogic’s Fraser Thomson. IT contributing editor Malcolm Wheatley reports.

Fraser Thomson NEW
Fraser Thomson, Cimlogic.

A report published last September reckoned that 60% of UK firms were dissatisfied with their ERP systems – a fairly damning indictment, by any standard.

Worse still, despite 80% of the 1,500 businesses surveyed reporting that their ERP systems were critical to their business performance, over half rated their current systems as either “adequate” or “basic”.

Nor are such figures a total surprise. The Manufacturer’s own annual survey of IT intentions within UK manufacturing industry, for instance, regularly highlights the fact that large numbers of manufacturers intend to upgrade or replace their ERP systems in the next year.

And clearly, such intentions are hardly indicative of manufacturers that are highly satisfied with what they have at present. But here’s a thought: suppose that an upgraded or replaced ERP system isn’t the answer?

It’s a thought thrown into sharp relief by Fraser Thomson, a manufacturing execution consultant at Cimlogic, a Yorkshire-based manufacturing execution system consultancy and implementation specialist.

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“It’s something that we hear all the time,” he explains. “Companies get sold on the idea that ERP systems are a ‘one-stop shop’, and that additional systems aren’t required. But then they find that there are issues that ERP can’t help them with.”

Such as? Thomson pauses, choosing his words with care. In essence, he sums up, it’s all to do with immediacy of information, and immediacy of action. In short, the closer you get to a requirement for real-time information or action, the less appropriate an ERP system will be.

Which is fast becoming a headache for a growing number of businesses, he stresses, as real-time information action is very much on their agenda, and for all sorts of reasons: competitive pressures; customer service and satisfaction objectives; workflow and recipe compliance requirements, and internal quality control and productivity improvement initiatives.

“Think about it,” he urges. “Your real-time quality information says that quality is trending out-of-spec, and that if something doesn’t happen, you’ll shortly be producing scrap. But what, exactly, should you do?

“Or a production line has gone down, jeopardising a customer order. It’s possible to move the order – plus its associated raw material and packaging – onto another line, but which line, precisely? You need a real-time finite scheduling solution, and your ERP system doesn’t have one.”

No quick fix

Energy usage and – in some industries – material usage are another common real-time requirement, adds Thomson. “By the time the utility bill arrives, it’s far too late: the opportunity to link real-time energy consumption to real-time production has long gone,” he stresses.

ERP PQ“What manufacturers want to know is what they can do today, right now, to improve energy efficiency. And the starting point, in many cases, is to build up a picture of how energy usage varies with order mix and environmental conditions, and so be able to make adjustments.

“ERP systems, with their standard costings and assumed bill of material inputs, simply don’t offer that capability.”

Which isn’t to say that some of them don’t try. But such attempts, through a variety of “ERP add-ons”, often leave much to be desired, observes Thomson. “Partly, the problem is the way that ERP systems plan,” he explains.

“They lump orders into ‘buckets’ of time – daily, weekly or monthly – and then lose all visibility of the actual point of manufacture until the works order is posted as complete.

“Partly, too, it’s that they make claims that fall short of what manufacturers really require: “shop floor data connectivity” often turns out to be someone on the shop floor with a terminal, typing information in – and not barcode-driven data collection, or hard-wired connections to SCADA systems and PLCs on assembly and bottling lines.

ERP PQ2And partly, it’s about the price-tag: ERP add-ons generally involve paying ERP-based prices, which are about three times what you’d pay for equivalent functionality in a purpose-built system.”

Start with the problem

So what’s the answer? A “purpose-built” system? And if so, purpose-built to do what? Again, Thomson chooses his words with care, keen to avoid any suggestion of superficial diagnosis or misleading labels.

In particular, he emphasises, labels such as “manufacturing execution system” in practice embrace an enormous breadth of functionality. Some of this functionality will be relevant for the issues faced by a given manufacturer; some will not.

“There isn’t a ‘one size fits all’ instant solution,” he stresses. “It’s really all about appropriateness, and where to draw the line between the factory floor and the enterprise.

“At the end of the day, you want manufacturing-specific people working with manufacturing systems on manufacturing-specific tasks, and enterprise-level people working with enterprise level systems on enterprise-level tasks: trying to collect PLC or SCADA data with an ERP system is using a sledgehammer to crack a nut—and a very expensive sledgehammer at that.”

Hammer and Nails
To a man with a hammer, every problem looks like a nail. And much the same goes for ERP systems.

And once manufacturers remove the blinkers that let them see the world only in terms of ERP systems, he points out, it’s surprising just how much manufacturing-specific factory-floor software is out there, under a variety of labels: manufacturing execution systems, quality systems, OEE systems and so forth.

And better still, he stresses, it’s manufacturing-specific factory-floor software that has been purpose-built to undertake specific tasks, and perform those tasks to a high standard. Put another way, trying to do the same thing with an ERP system would involve an element of reinventing the wheel – and still not yield a solution that was as good.

“Start with the problems that you’re experiencing, and look for a solution that’s appropriate as a solution to those problems – a finite scheduling solution, a quality solution, an OEE solution, or a data collection solution,” sums up Thomson.

“Don’t complicate things with an all-embracing solution that aims to do everything. Depending on the problems you’re facing, you might need a full-blown manufacturing execution system, but don’t automatically assume that you definitely will.”