The number of organizations switching to Enterprise Resource Planning software is increasing at warp speed. 81% of organizations are either in the process of getting ERP implemented or have completed implementation.
ERP connects your finances, accounts, HR, sales, CRM, inventory, business intelligence, and other operational data and makes visibility easy. It’s a business management suite that allows organizations to manage day-to-day activities, plan, budget, forecast, and create reports on the company’s financial results. ERP software can promote employee efficiency and expedites operations to meet strict deadlines.
Selecting an ERP solution requires a great deal of time and a big effort. There are so many factors to consider before embarking on the selection journey:
Know your business requirements
Is integration possible with third-party software
Budget and resources
Adaptability and future scalability
Total cost of ownership (TCO) and ROI
Let’s talk about types of ERP deployments, focusing on cloud and on-premise ERP.
Cloud-based computing enables businesses to access Enterprise Resource Planning software over the internet. Computing resources are stored remotely in datacenters.
What is the strength of cloud? How does cloud ERP help your company?
Eliminates the upfront cost on hardware and servers
Offers IT support remotely. Your in-house IT professionals can work on major parts of the business instead of service and support
Covers your business with data backup and disaster recovery plans
Data in cloud is easier to use with BI tools
Cloud ERP package can be scaled as the number of users increase in your company
Data accessibility is quick. It is stored in multiple places to ensure that nothing gets lost in an unfortunate situation
On-premise ERP is implemented on your office hardware and maintained by in-house IT employees. Like cloud, it cannot be used remotely on different devices via the internet.
On-premise ERP software has more upfront cost
You can have access to data even if the internet goes down
Data is stored in-house. Its security is the responsibility of IT team
Scalability is not easy in case of on-premise deployment
In addition to on-premise and cloud, here are a few other ERP deployment options on cloud: Infrastructure as a service, Platform as a service and Software as a service.
Infrastructure as a service – Is a type of deployment model in which the cloud vendor offers computing resources to their customers or users. Resources include servers, storage, and networking.
Platform as a service – You get access to a cloud-based environment where users can develop, run and manage without the complexity of maintaining or building the infrastructure. The service provider offers an intuitive cloud environment.
Software as a service – In this deployment model, the cloud service provider offers cloud-based software applications. Users can subscribe and access it online or via vendor APIs.
Cloud ERP and on-premise ERP come with their own set of gains.
Benefits of Cloud-based ERP
1. Cloud ERP helps you save money
Cloud ERP is a great choice for small and mid-sized businesses as it reduces unnecessary expenses. You can invest the saved amount in the activities that add value instead of mundane and futile tasks.
Reduced overhead cost – When you choose cloud ERP, you save a huge amount of money on building, maintaining, and securing your data center. The cloud providers managed servicing of software, ensuring that firewalls and security measures are in place, repairing outdated hardware, etc. In addition to this, with cloud ERPs, your company saves costs spent on physical space for datacenter, electricity bills, security and cooling.
No cost on updates – No additional cost for maintenance with a cloud ERP solution. Your cloud provider offers you timely automatic updates that don’t stop you from growing and performing well. Update costs are always included in the monthly cost. Pay it and get instant access to latest technologies.
Save on upfront cost – Cloud ERPs can save you from heavy investment costs. You just need to pay a monthly subscription amount. There’s no money required for setting up machines, devices, servers and expensive IT personnel.
Quick integration – Company’s crucial data can be quickly and easily synced with the cloud platform. HR, CRM or marketing automation integrations can be done precisely. This can help you save a great deal of time and money.
2. Cloud promotes flexibility
Cloud ERP vendors understand that flexibility is a must for employees. It boosts employee satisfaction and enables better decision-making.
With a cloud environment, employees are free to work from any device, share data across locations and departments and collaborate easily for better planning, budgeting and execution of tasks.
A centralized cloud ERP platform allows users to break the data silos by creating a collaborative workflow in an organization. Cloud-based ERPs can also be easily used with many BI tools.
3. Easily scalable
Will your ERP software expand globally while remaining on a single database? Or will you have to break it into separate parts?
Cloud-based ERP grows with your business. For example, if a new employee enters your company, you can scale your ERP package to X number of employees and you are good to go. It saves you from the hassles of investing in new hardware, getting the software installed, adding additional software seats etc.
4. Fast and secure
Designed for easy and quick accomplishment of tasks, cloud ERP providers walk the extra mile to ensure enterprise-level security, compliance and privacy with their systems.
As it manages updates with ease, businesses can take advantage of rapidly evolving technologies like IoT, Blockchain, AI, etc.
Hexa Research Cloud vendors ensure every piece of data is stored in their state-of-the-art data centers that are well-equipped. There is no way that you can lose your data because of high-quality back-up plans.
Data in on-premise ERP deployment is stored in-house.You have complete control over the volume, location and accessibility of data. You can deploy upgrades and updates at your discretion as it minimizes the risk of unexpected downtime.
Confidential information about customers, employees and business plans is restricted to the stakeholders only. There is no involvement of a third-party.
2. Less vendor dependency
You are your own boss with on-premise ERP. With cloud deployments the control of business decisions around ERP implementation, deployment time, etc. are made by the cloud provider or vendor. On the other hand, with on-premise ERP, you have the flexibility and control to implement new technologies on your own.
3. Limited on-going cost
It’s true that the upfront cost of on premise ERP is more, but in the near future, you may find it a cheaper option. On-premise ERP comes with ongoing expenses like energy, IT maintenance, etc.
Upfront cost is more but Total Cost of Ownership may be less.
62% of IT decision makers in large enterprises said that their on-premises security is stronger than cloud security. — Dimensional Research, 2018
When data is locally installed, it is closely monitored and controlled in a better manner. The Data Center is easily accessible and the appropriate person can set the responsibilities about who should maintain the security. On-premise ERP gives more control to the organization.
On-premise ERP software is preferable for larger organizations as its existing infrastructure can be customized easily.
So, here we talked about the basics of cloud and on-premise ERP. Let us now see, what are the factors to consider before deployment that you should consider while weighing these two options.
The upfront cost of on-premise ERP is more – that’s affordable for bigger organizations, but might not be for smaller ones. Cost includes purchasing and managing software, servers and the capabilities to run it. This requires a good IT team that can manage upgrades, redeploy the system across different systems and manage customizations and integrations of software. It is an additional cost when you choose on-premise ERP deployment.
Talking about cloud ERP, the initial cost is much less as most of the organizations prefer to pay a monthly or annual subscription amount. You can access the ERP through your computer’s internet connection once implemented. It is the duty of the cloud provider to host and maintain the infrastructure for the company and ensure that every system is up and running.
It goes without saying that every deployment model takes time to complete the process. Cloud deployment usually takes 3-6 months, while On-premise deployments may be done in 1 year.
When you choose cloud, there are no pains for additional hardware or procuring and installing IT infrastructure. On-premise software is more time-consuming and expensive.
Cloud-based ERP ensures utmost security by providing standard data security certifications to its customers. Based on the volume of data, customers can choose the best suitable data recovery and back up plans, which are better and more cost-effective than on-premise software.
Cloud ERP is already at parity with on-premises ERP solutions.
— Eric Vanderburg (@evanderburg), vice president of Cybersecurity at TCDI.
“Cloud ERP offers many advantages over on-premises. Upgrades and maintenance to ERP systems can require significant resources and sometimes system disruption, but these activities are performed by cloud providers. Despite these advantages, on-premises ERP will still be around for many years, albeit at an ever-decreasing proportion.”
Performance and accessibility
Cloud is known for collaborating the workplace and for its real-time working nature. When employees work together in the cloud, management of documents and visibility of tasks are streamlined. When employees are efficient, and tasks are automated, performance will improve.
On-premise ERP assures uptime but, when it comes to performance and accessibility – Cloud is better.
Tech writer Will Kelly (@willkelly) says, it depends on the company:
“Cloud ERP will find a home (or not) in SMBs where ERP was formerly out of reach due to lack of budget and in-house technology expertise,” he notes. “Cloud ERP will also grow in the federal sector because of a recent executive order for agencies to move to shared services. The hybrid ERP model will continue to dominate in larger companies for reasons of security, performance, IT staffing constraints, and ‘Hey, if it’s not broke, why fix it?’”
Multi-layered security and predictive deterrence are going to be the norms in the near future. Cloud providers assure 24/7 support to organizations which means you get high-quality services round the clock. With On premise ERP, in-house IT professionals ensure 24/7 support.
Cloud vs. On-premise ERP: Choose the Right ERP for Your Business
One of the biggest differences between cloud and on-premise ERP is the way it is implemented by the vendors.
Once you make a decision to choose a specific ERP software, you are half way through the implementation in a cloud environment.
Cloud-based models have taken a leap in the SME segment. It is more affordable, convenient to use and less time-consuming. Take time to understand your future business endeavors and make a decision.
How OptiProERP helps you succeed and outclass the competition
Built on the world-class and trusted platform SAP Business One, OptiProERP is end-to-end manufacturing software that gives you the foundation to succeed. With modules such as financial management, CRM, supply chain and other industry-specific solutions, it gives you access to business-critical data in real-time.
Futureproof your ERP with a secure and nimble ERP software that can handle all the business functions. OptiProERP Cloud offers advanced infrastructure for reliable and quick performance. It assures – no downtime for upgrades, rapid deployment, and scalability.
When we talk about OptiProERP On-premise deployment, the software runs on in-house servers, at locations preferred by you. An on-premise solution offers the security and control of maintaining your own IT infrastructure for streamlined operations and enhanced business.
Deployed on-premise, ERP can run on virtualized servers for easy configuration and to support extensive customization, if required.
Designed by a team of SAP certified professionals, OptiProERP:
Complies with changing government regulations
Lets you view and update information anytime, anywhere
Makes more accurate predictions regarding supply chain, product demand, etc.
Inventory visibility is one of the critical aspects of any manufacturing business.
It helps organizations understand how much inventory is available, at what location, and at any given point of time. To ensure inventory visibility, you should have access to view, manage, and update your inventory status from trusted software.
What Improved Inventory Visibility does
Whether it is about inventory in transit, in a warehouse or in distribution centers, visibility is a must. Why? Let’s check that out here.
1. More accurate forecasting
When stock is optimized in the right manner, routine inventory audits are done on time, inbound, outbound, warehousing, and in-transit movements are tracked meticulously. Forecasting will then be sharper and distribution will be planned better.
2. Smarter resource allocation
Inventory ties up money. Being a current asset in the business, it reflects an amount of money in a physical form. It is always suggested to keep your inventory at the lowest possible levels.
Inventory visibility ensures that your capital is not sitting on warehouse shelves instead of being used in your operations.
3. Increased efficiency and better use of time
Manual inventory tracking takes multiple resources and plenty of time. To ensure increased efficiency and better use of time, it is better to invest in reliable software that automates tracking and adjusts inventory levels as transactions occur.
This will help businesses save time and perform diligently. Inventory visibility then reflects the current stock ledger and ensures the elimination of wasted man-hours.
4. Reduced stock levels
A higher likelihood of stock-out and overstock can lead to dissatisfied customers or tied up capital. Putting all your cash flow in inventory is not a sensible decision.
The major objective of inventory visibility is to keep the stock level optimum to meet the demands of customers while being cost-effective. Inventory visibility ensures warehouse maintenance so that you know the minimum requirement of each item in stock and manage it well.
5. Greater supply chain transparency and increased demand fulfillment
Companies should understand that inventory visibility is one of the most critical management tools of the manufacturing business as it boosts profitability. In some organizations, inventory is located in distribution centers, warehouses, store shelves, backrooms, etc., so it is better to have clarity about what quantity is available at each location. From procurement to shipment, every process of supply chain planning becomes streamlined by improving inventory visibility.
Inventory visibility reconciles current inventory levels to fulfill expected demand. In this way, organizations can improve customer satisfaction.
Inventory visibility is also about swift monitoring of orders by constantly managing the supply chain to meet promised deadlines.
How ERP Improves Inventory Visibility
Enterprise Resource Planning software makes Purchase, Sales, Accounting, Production, Supply Chain Planning, Inventory and all other business operations easy and hassle-free.
Let’s understand how an ERP solution helps you improve inventory visibility.
5 ways ERP improves inventory visibility in your supply chain
1. Resolve unpredictable scenarios
ERP promotes automated processes and integrated production functionality. It synchronizes production, sales, financial management, and warehouse management and automatically tracks the movement of every inventory item.
Reporting functions yield accurate insights and data is updated in real-time. As per SAP Performance Benchmarking, manufacturing organizations that use SAP Business One experience an 8% increase in plan adherence.
ERP integrates material availability data with delivery dates and real-time manufacturing conditions. This can significantly enhance customer satisfaction and cost-efficiency.
2. Enhanced just-in-time inventory strategies
ERP eliminates the need for manual scheduling. ERP promotes a just-in-time inventory strategy. Materials are ordered and received to meet production requirements. It saves overhead inventory expenses and manages time.
Enterprise Resource Planning software enables real time inventory visibility, tracking and data management. A JIT strategy increases efficiency, cuts cost by receiving goods only when required.
3. Better inventory levels and improved customer relationships
Get insight of point-of-sale online transactions, shipment data, procurement and production data on a single screen. This enables data-led decision making which nurtures relationships with customers and vendors.
With real-time dashboards, businesses can view the inventory status at different plant locations, warehouses, stores etc.
ERP provides you the functionality to monitor trends to ensure you meet customer demand on time. This develops a loyal client base which increases rapport and profitability.
4. Drive omni-channel growth
Manage inventory across multiple locations and channels
Receive Sales Orders from multiple sources and automate the process
Promotes cross-channel inventory movements
5. Provide actionable insight
User-configurable reports and dashboards helps businesses analyze global finances and rolled-up data.
Material requirement planning functionality ensures optimum stock levels
With data at your finger-tips, you can make better business decisions
SAP Business One, one of the renowned ERP software systems for small and mid-sized businesses, effectively balances inventory management and sales orders for better business growth. SAP Business One is the platform upon which OptiProERP is built.
SAP Business One’s capabilities that help improve inventory visibility in your supply chain are:–
Automated sales order entry – Ensures that sales orders are linked to real-time inventory data
Enhanced inventory tracking – SAP B1 lets you track when inventory is procured, moved or sent out of the warehouse
Courier/freight automation – Integrates your technology with courier companies or freight specialists
Better integration – Every department is integrated smoothly. Inventory, Finance, Sales, Procurement, Accounts – every department is interdependent. This gives you better insights.
MRP automation – Order recommendations are designed for timely delivery. It gives you detailed information about the requirement for products.
Predictive forecasting – it lets you manage and predict stock levels to meet customer demand.
Predicting future demand contributes to making well-informed organizational decisions.
Forecasting helps businesses plan for future endeavors by evaluating historical data and analyzing trend patterns. It is the process of extracting information from past and present data to make diligent decisions regarding purchase, sale, inventory and other departments.
Before planning the production process, it is critical to estimate future business conditions. Organizations should anticipate future demand for enhanced business management.
Many factors influence demand. Often, it is not possible to identify all of them or the effects they have. Some of the major demand influences include:
Business and economic conditions
Company plans for products, pricing, and promotion
Other sources of demand include:
Forecasting helps you create projections of expected demand. The projections can include estimates for one or more products.
Traditional forecasting, never delivers precision which ultimately leads to shortfalls and gives rise to new business challenges. Past records alone can never predict and represent the future of any organization.
Without the ‘smart technologies’ found in modern, intelligent ERP systems, aging equipment, changing technologies, maintenance practices and other modifications in the manufacturing sector cannot be predicted beforehand. These are some of the reasons for the shortfalls of traditional forecasting. The traditional forecast does not accurately represent and measure future metrics in detail.
Every modern manufacturer, seeks better operating capacity, reduced costs, and increased profits. Compared to historical forecasting methods like traditional time-series forecasting, innovative methods like trend models, segmentation, regression, exponential smoothing, moving average offer more accuracy making it sensible to replace traditional forecasting with smart, precise and mature predictive models based on sophisticated technology. It encourages smart and diligent decision-making for the future.
Difference between intelligent forecasting and traditional forecasting is explained below.
Traditional or Non-intelligent Forecasting
Generates detailed future metrics that state possible outcomes to plan new strategies, encounter past challenges and enable businesses to make well-informed decisions.
Limited to evaluating the history of data. The result may create a gap between forecast and actuality. Future is not always equal to the past so it’s difficult to predict it manually.
Includes complex, probabilistic age modeling offers graphical user interface to users. It does not require over-simplifying assumptions.
Requires over-simplifying assumptions for inputting of data. With static time models, it is difficult to predict the future accurately.
Supports sophisticated analysis with statistical calculations – in real-time. Calculation methods are automatic.
With manual methods of forecasting, chances of errors and redundancy are greater.
Built-in models based on statistical calculations allow the organization to predict seasonal demand and future trends.
Traditional forecasting depends entirely on the analysis of past events. It cannot help businesses predict the future accurately.
Let’s have a look at the limitations of non-intelligent or traditional ways of forecasting in manufacturing –
1. Estimates don’t work
Before technologies such as Blockchain, AI, Big Data, etc. evolved, forecasting was done manually by analyzing time series data (from previous years, months, quarters).
The future is unpredictable. Even if you use the best forecasting methods to predict future events, it will never be 100% correct. This is the reason why manufacturers are investing in modern algorithms which work on mathematical models. It can automate the forecasting process, save time and improve accuracy.
2. Limited access to real-time data
This is the internet-driven world where people work remotely from different corners of the world. When an organization doesn’t use cloud technology and still relies on traditional ways of working, it limits the data that can be considered for forecasting.
Imagine, your production plant is in location A and your procurement team works from location B, how will you bridge the gap between the two? When you don’t have access to remote working and analytics tools, it becomes difficult to bring your business data together. If you don’t know the status of data of different departments, how can you track work, evaluate past events and compile it? It directly affects your decision-making processes.
When you are using non-intelligent ERP software, remote tracking and real-time availability of data are not possible.
3. Increased cost and Time
Collection and tabulation of data in a manual way can take many resources and plenty of money.
What is an intelligent forecast?
With the evolution of smart technologies and new algorithms, the scenario for modern forecasting is different.
Intelligent forecasting lets organizations take business decisions with confidence. With advanced analytics capabilities and predictive services, intelligent software can help you time your purchases to fulfill your sales orders. Intelligent forecasting allows organizations to discover patterns in data. This helps them anticipate what is likely to happen in the future and make data-driven plans.
Built on a user-friendly interface, modern ERP solutions assist manufacturers to select their forecasting period and obtain the results online. Let’s look at the advantages of intelligent forecasting.
1. Explore data nuances with smart insights
With intelligent forecasting features available in modern ERP, you can use natural language and visual explanations that can simplify the most complicated set of data & nurture clarity. Machine learning and demand analytics allow financial planners to manage and compare the limitless amount of data to minimize data redundancy and promote efficiency.
2. Create an insight-driven culture
Manufacturing forecasting software systems give businesses quick access to departmental data with ‘search to insight’ features and conversational AI. It lets you generate visualizations in real-time to understand underlying business trends for the future.
3. Cross-validate forecast result
Intelligent forecasting can considerably increase forecast accuracy. Users can cross-validate forecast results and access large-scale data sets and manage them in a library of state-of-the-art models. You can use hindsight to previous actual values on the basis of algorithms.
4. Predict the future with accuracy – foster growth
When data is stored on a single platform and is organized properly, forecasting becomes hassle-free. Intelligent ERP helps the organization choose a definite course of action with the purpose of fostering growth and success.
5. Less errors and expedited operations with statistical methods
SAP Business One uses statistical methods to evaluate large chunks of business data and historical events. Embedded with Big Data technology, SAP Business One Hana empowers you to visualize the information in insightful charts for easy viewing and manage the data in real-time.
SAP Hana is in-memory relational database management system that gives you ultimate control over your organizational data. With Big Data analytics, it gives you crystal clear visibility to your departmental data.
How does Intelligent Forecasting work in OptiProERP?
In addition to planning for received orders, OptiProERP with SAP Business One allows users to foresee the future and predict demand based on the multi-level forecast.
Let’s see how it actually works in OptiProERP.
Let’s say you are a procurement manager and you want to forecast for the next season. You typically establish a forecast for the next quarter. We open the forecast screen and give it a code and name.
We select a range of items, and click forecast.
The system is looking at the history and generating the forecast. By default, we use a triple exponential smoothing. You also have Linear Regression, and others. The system generates the forecast in a graphical mode.
In the graph, you can take any graph point and drag it up or down to change the forecast, to maybe represent sales promotions in that period. Note the forecast values change automatically in the grid.
If you only want to consider inventory movements for the last year, you can drag the blue section across and the forecast is updated dynamically.
When we save and close, our forecast is created automatically and displayed. This forecast will be used by the MRP runs.
OptiProERP offers a variety of algorithms to choose from. Once you select the range of items and click the forecast icon, the intelligent system starts evaluating the historical events of data and displays the forecast in a graphical scenario.
These intelligent algorithms let you make meaningful decisions by predicting future demand and analyzing the historical values by using smart algorithms.
Intelligent Forecasting with OptiProERP offers you three primary algorithms:
Automatic forecast – Analyses trends, fluctuations and seasonality to advanced statistical analysis to predict a forecast
Linear Regression – forces the model to be a simple or multiple linear regression on time
Triple Exponential Smoothing – Advanced forecasting features make use of historical data (in which the user can add additional inputs) to predict future values
By leveraging the advanced analytic power of SAP Business One HANA, businesses get access to many enhancements. With insightful charts and easy to use functionality, you can manage big chunks of data on the fly and contribute to the organization irrespective of the time and distance. This is the reason why businesses are investing in intelligent ERP software.
OptiProERP is built on SAP Business One, a modern ERP platform which helps businesses improve the accuracy of their forecasts. You can read more about Time Series Forecasting in our blog – How does Time Series Forecasting in SAP Analytics Cloud work.
The most common concern supply chain management experts struggle with is accurately identifying the causes of inventory inconsistencies. If a discrepancy is identified when users pick an item or perform a count, an inventory correction needs to be performed.
Every inventory issue has a specific method that can be adopted to resolve it. Start by determining the most likely or easiest-to-identify possibilities and either proving them or eliminating them from the list of root causes. This part of the process first requires confirming the calculations. Perform a recount of the inventory in question, preferably by someone who was not involved in the initial count.
Categorizing your inventory
There are several cycle counting approaches available in OptiProERP, but the ABC classification method is most common. ABC analysis strategy is used to classify data into three categories based on the values of the target measured in descending order.
This strategy is used to classify products based on a particular measure (such as value or lead time). It is based on an assumption that inventories of an organization are not of equal value, and can be grouped into three categories (A, B, and C) by their estimated value/importance. “A” items are very important for an organization, “B” items are of medium importance and “C” items are of the least importance.
An example of ABC classification is as follows:
“A” items – About 20% of the items amount to approximately 70% of the value.
“B” items – About 30% of the items amount to approximately 20% of the value.
“C” items – About 50% of the items amount to approximately 10% of the value.
“A” items are also generally those with a long purchase lead time, “B” items have an average lead time, “C” items are readily available.
You are not restricted to just three groups. You can have more, but too many will complicate your analysis and cycle counting routines.
System tools to help
OptiProERP’s manufacturing ERP has a number of dashboards and tools to perform the analysis of your inventory to define the appropriate ABC classifications for you.
How often do you need to count?
Once the items are classified as “A”, “B” and “C”, the cycle counts need to be established for these groups of items. In OptiProERP, an effective cycle counting program deploying the ABC method contains two critical drivers:
Cycle Codes – separates the inventory cycle into groups based on such criteria as date, time, and recurrence.
Cycle Recurrence – is established for each inventory cycle, which could be weekly, monthly, annually or none. This determines when and how frequently the items are counted.
Now, take a step back from the most basic guidelines, and consider the following questions:
Does ABC analysis hold up at your company? How many low-dollar, high-volume items such as screws, nuts, bolts, and washers do you have?
What type of manufacturing industry do you represent? Is your company a job shop, a custom builder, or something else? At what pace are you producing? Do you deal with high or low volumes? Push systems or pull systems?
Before you can fully understand your inventory and initiate measures to optimize your business, you may have to do some digging. Only then can you implement the right cycle counting program to maximize your company’s bottom line.
What do you do when your ERP system indicates that you have less on-hand than your physical count?
If the inventory item can be sold as a finished good or serviced part; examine whether you shipped a customer the correct part, but the wrong part was on the sales order.
If the inventory item is purchased; investigate whether the parts were put in inventory, but the receipt has not been posted.
If the item is a component or subassembly; search recent pick lists that contain the item, or do a where-used inquiry on your active bills of material (BOMs).
Essentially, you are looking for a transaction in your ERP system that doesn’t belong. This is one of the easier problems to identify. A more challenging issue is identifying a transaction that was never created earlier. This is when you have more inventory in your ERP system than you physically have on-hand. There should have been a transaction, but there wasn’t.
Here are some options available to you if you have more inventory in your ERP system than you physically have on-hand:
If the inventory item can be sold (finished goods or service parts); ask whether you shipped a customer the wrong part, but the correct part was on the pick list? Is there another item where the physical stock is less than the computer inventory shows?
If the inventory item is purchased; take a look at the parts that were received in your ERP system. Have they not yet been put in inventory?
If the inventory item is a component or subassembly; examine whether you have the wrong part on a BOM?
A good place to start looking where errors potentially could have occurred is in the inventory report. Here you can drill down to the transactions for any item. The other fields are filled with data once you expand any item in the grid.
Using ABC to analyze your inventory
After having performed the cycle count and sorting out the inventory inconsistencies, let us get to the ABC analysis. ABC analysis is not a process to maintain accuracy; it is designed to discover methods to optimize the inventory. And the best possible method to identify these inventory levels is to slice and dice the inventory data by analyzing it in different charts and views. With OptiProERP, you get to present the ABC analysis data in various chart types. This makes the analysis all the more meaningful and accurate.
You can drill down into any or all groups to obtain a clear picture of what is happening with each.
We believe, your ERP system simulates your manufacturing environment. The more accurate information you give it, the better the simulation. When the simulation is out of sync with reality, inconsistencies occur. The further you are in distance and time between something happening and recording it, the more opportunity for error you have.
Finally, whatever the cause of an inventory discrepancy, make sure to close the loop by notifying the appropriate person so the problem is corrected. Once an organization has been made aware of the issue, keep monitoring the inventory to ensure that the corrective action is effective. Over time, this will have a powerful impact on the bottom-line of your business.
Streamlined accounting and warehouse management software offer better insights from connected systems and reporting that is easy to create and analyze.
Connect with us to explore how OptiProERP can improve your business today and help you achieve your ambitions for tomorrow, contact us now!
Manufacturing companies convert raw materials into a form that is of more value and use for the consumer.
Developed in the 60s and 70s, material requirements planning (MRP) offered an important breakthrough for shop floor managers. It linked production plans for finished goods with the requirements for component parts necessary to achieve those production plans. The basic idea was to ensure that enough stock of the correct components was on hand to build assemblies.
Recognizing that labor and machines also were key requirements for achieving a plan, MRP II (manufacturing resource planning), extended the idea of production requirements to include the number of labor and machine hours needed in the factory. However, providing insights and structure to address one set of issues revealed deeper and more complex challenges.
Building on the technological foundations of MRP and MRP II, ERP systems integrated business processes including manufacturing, distribution, accounting and finance, human resource management, project management, inventory management, service & maintenance, and transportation, to provide accessibility, visibility and consistency across the entirety of the enterprise.
What is Material Requirements Planning (MRP) Software?
Material requirements planning (MRP) software plans for the production and purchase of the components used. MRP displays the quantities of components needed and when production intends to make or use them.
The material requirements plan establishes when the components / parts are needed to make each end item to be used in the final product. The planning horizon of MRP is at least as long as the combined purchase and manufacturing lead times.
MRP calculations was initially designed without any capacity checks or input from other departments. With that, the production plan was often not accurate, and few believed in this plan outside of the production function. The logic behind basic MRP software was later refined and is now knows as “Closed-loop MRP”.
These enhancements included capacity checks and incorporates programming to provide feedback on available capacity. Closed-loop MRP calculates the impact of each order on the work center that is scheduled to complete the order and if too little capacity is found at the work center it may change the order date. Other options available if this happens include sending the order to another work center or outsourcing it.
What is Manufacturing Resource Planning (MRP II) Software?
Financial managers agree that having these manufacturing plans are very desirable from a financial point of view, and production teams also see these plans are crucial in order to meet the required demand.
The completely integrated planning and control system is called manufacturing resource planning, or MRP II. The term MRP II is used to differentiate the “manufacturing resource plan” (MRP II) from the “materials requirement plan” (MRP).
MRP II software provides coordination between marketing and production. The marketing, finance, and production teams of the organization will meet and agree on a total workable overall plan expressed in this production plan. Marketing and production must work together on a weekly and daily basis to adjust the plan as changes occur. Order sizes may need to be changed, orders are canceled, and delivery dates may also be adjusted. Marketing managers and production managers can also change production schedules to meet changes in forecasted demand. Senior management may adjust the production plan to reflect overall changes in overall product demand or resources availability/scarcity.
What are the benefits of MRP and MRP II software?
The primary benefits of MRP software are:
Efficient machine utilization
The benefits of MRP II software are:
Strategic selection of carriers and routes
Better research and forecasting
Cross functional integration in planning processes
Better information flow throughout the organization
Defined functional areas of the business
The Connection Between MRP, MRP II and ERP software
The focus has shifted from internal optimization to external relationships generating the requirement for advanced ERP versions and modules. The need for efficiencies such as collaborative commerce and supply chain management has shifted the focus from cost reduction to business growth.
The below figure illustrates the number of areas in which ERP systems have expanded:
ERP’s are somewhat like the MRP II system, except ERP’s do not only focus on just manufacturing. The American Production and Inventory Control Society (APICS) defines ERP as “Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.”
As the needs of the organization grew in the direction of a truly integrated approach toward materials management, IT systems began to match those needs. As these systems became both larger in scope and integration (when compared to the existing MRP and MRP II systems), they were given a new name enterprise resource planning, or ERP.
Core functions of MRP software are designed to reduce inventory through better visibility, increased profitability, reduced cycle times and cash-to-cash cycle time, increases in the internal speed and availability of information, and reduce internal costs.
The core ERP processes focus primarily on finance, manufacturing, and distribution, enabling users to monitor and process customer transactions. ERP systems allow users to track orders, products, supplies, people and currencies. These ERP systems automate business processes increasing efficiency and reducing errors.
Simply having MRP software will not sustain any competitive advantage a manufacturing business has to offer. Most organizations are now moving to an ERP solution to enhance supply chain efficiency and the overall velocity of their business.
To learn more about how an ERP solution can drastically change the way you work, feel free to reach out to us at www.optiproerp.com
I received a bit of a shock on the September 27th , 2018. I discovered it was Google’s 20th Birthday! You see, I have been in the IT industry for more than twice as long as Google has existed, and yet I can hardly remember a time when I didn’t use it multiple times every day.
That’s the reality, isn’t it? New technologies have a habit of sneaking up on us, becoming a part of our lives without us even realizing it. It’s the same with digital transformation in the workplace, and particularly in the manufacturing environment.
Digital transformation is exactly what it says – where you start adopting the digital tools to bring your business into the 4th industrial revolution, to become flexible & agile, informed & responsive. What none of us can pretend is that this is all something “out in the future”. The future is indeed now, the business models you work within are changing, and changing rapidly. You need to be ready. The opportunities are tremendous, and if you do nothing you could find yourself not just left behind, but left out.
Sound scary? It doesn’t need to be! The tools you find in Intelligent ERP are all things you are at least somewhat familiar with. And that’s the other point to keep in mind – Intelligent ERP already has these tools, and that is exactly what they are, tools to work with. You don’t need to re-invent any wheels, you just need to learn how to use them, to understand the concepts and put them to use.
Before we look at the technologies that drive digital transformation, lets focus on an extremely important difference in the new connected world. Its all about people, not systems and processes.
Your business is no longer at the center of your universe. It is now about how you engage with your universe that is important. The world is connected as never before. The average person has around 24 different digital IDs – they could be LinkedIn, Facebook, Google, etc. In the developed world, that means there are around 55 billion of these digital IDs to engage with. This obviously creates new challenges in how you market to your target customers, how you sell to them, and how you maintain communication with them.
The implications for business, and society in general, are many and varied. Here are some of them:
The new nature of communication is about sharing experiences.
The way you generate revenue and get paid for what you do is changing. This is a reality for us too – where we used to sell software licenses up front, we now frequently charge a monthly fee for them on a subscription basis.
Marketing has moved from trade magazines to social media.
Listening to your customers is now critical – they will give you the innovation to move ahead of your competitors – and some of that may even be coming from social media feedback and comments.
An intelligent machine you sold, that tells you when it needs service or repair, is a game-changer. It gives you the ability to retain service revenue at the expense of third-party repairers, for example.
It is the same with your staff. How your staff carry out their work, and where they do it using mobile technologies, is a reality. Nearly half of all American workers now work remotely at least some of the time. As globalization accelerates, employees can be anywhere in the world and in any time zone – they need to all be connected, securely, all the time.
One of the foundations of digital transformation is the digital workplace. Put simply, it is a unified collection of solutions, apps and tools that provide an environment where your employees can be more productive and engaged. Not all these solutions and tools will be part of your ERP system, but it should probably provide a single place from which everything can be accessed. The personal cockpit for each user in the SAP Business One platform does exactly this – even other apps can be added to your cockpit.
Why do we need it? To be productive, we all need to play well together in the same sandbox! IDC says a third of our email time is wasted – reading “reply to all”, locating attachments, searching for emails that have important information in them – that’s around two and a half hours per week. Having that information in an easily-searchable document repository instead of in multiple workstation local drives is a help. IDC also says we spend around 12.5 hours per week duplicating or re-creating work that has already been done, and a further two and a half hours searching for information and the people who have it locked away on their local drive or in their heads. That’s getting close to half a working week wasted, and the cost is more than $20,000 per employee per year! Collaboration through tools like Google Docs, Drop Box, etc. are essential to changing the culture towards productivity. So, the digital workplace is all about connecting people to processes, people to information, and people to people. It almost always needs to be in the cloud to connect all those who need to work remotely.
Putting the enablers in perspective.
Lets look at the enablers of digital business – analytics, big data, machine learning, cloud technologies, mobile technologies, and the internet of things (IoT).
If you extract data into a spreadsheet and start playing with it using pivot tables and formulas, you are analysing data. Much of the data analysis required, to find the information for decision-making, in many manufacturing companies is done this way. The problem is, it is never current, and it is usually kept on someone’s workstation.
Intelligent ERP has all the tools needed to overcome these problems. It is centrally held, so is available to all those with the authority and need to view it. Drag & drop dashboards with instant drill-down to the underlying data can be used collaboratively, even in meetings. Dashboard layouts can be saved for later recall, and the links distributed to a wider audience. This is the most basic level of analytics, it makes self-service reporting with access to current data a reality, it takes just minutes to learn how to use it, and it is something any company can start with right now.
Truly Intelligent ERP, such as OptiProERP , offers much more. Predictive analytics is a step up, but it is not something you don’t already encounter daily. Think of the digital assistants you probably use every day, like Apple’s SIRI, Microsoft’s Cortana, etc. The user experience becomes assistive. Predictive analytics assess the options and advise the best course of action. Automated Q&A systems to find what you need are advancing to conversational styles, as chat-bots and digital assistants advance to anticipating your needs and goals.
Where can you use this right now? Forecasting is traditionally a guessing game, based on past history, the optimism (or pessimism) of sales staff, a reading of market reports and economic predictors, etc. There is a very high human input that is seldom scientific in nature. Predictive analytics uses algorithms to analyse all sorts of data and look for patterns to take out the guesswork. Data scientists build these algorithms for big companies. OptiProERP already has such algorithms inherent in it, because SAP put them into the SAP Business One platform for you, the platform that OptiProERP is built on. If it is already there, and it is cost-effective, why wouldn’t you want to start using it?
Future uses of predictive analytics are as broad as your imagination. By analysing manufacturing and assembly times for existing models, you can accurately predict the costs for a new model, enabling easy costing before you start production. Mean-time-between-failure calculations can become eerily accurate. There are so many more examples.
The difference between big data and the data you are used to working with is not merely the size – although size does matter!
What makes it so big is the types of data it can accumulate for analysis. It can be any voluminous amount of data – structured (such as an SQL database), semi-structured (such as streaming data from sensors), and unstructured (such as document files) that has the potential to be mined for information. Again, Intelligent ERP has the ability to accumulate and analyse this data – you just need to work out how much you want to have, and where to store it.
Imagine being able to Locate your business information via freestyle search, and drill down to the documents and sources.
Because big data is just that – extremely big – most companies analysing it use public cloud computing for the task, where they pay only for the storage and computing time needed – which can be turned off when not being used. Most companies could not afford to own and manage the server clusters required for this level of processing.
Machine learning takes automation to a whole new level, one where tasks necessarily involve decisions to be made, and where the machine can make those decisions for you. For less routine tasks, where human intervention is required, machine learning augments the process by reporting signals that may lead to disruption.
Again, this is something you are already familiar with. Facebook looks at your likes and Google searches, and finds advertisements to annoy you with by filling up your news feed.
Applications already available in OptiProERP include: Product recommendations based on the buying histories of your customers, and similar customers, in sales documents; and Intelligent Forecasting – interacting with built-in statistical forecast algorithms to analyze inventory levels and optimize your demand.
Does the idea of putting all your applications and data on a computer other than one locked in your own premises scare you? Did you know you probably use cloud applications every single day? Gmail, Facebook, & Dropbox are all cloud applications. So are iCloud, Flickr, One Drive, Instagram, Netflix, YouTube, amazon.com, PayPal, Skype, and so many more. In fact, all social media is cloud-based. It is likely you transfer photos from your smart phone to the cloud for safe-keeping. Paying your bills online is a cloud application.
The cloud has become an integral part of our personal daily lives, in our routines of communicating, exercising, commuting and entertaining.
Many reviewers thought the iPhone was too expensive and too pretentious to survive in the market – they were measuring it against other simple mobile phones. Of course, they were wrong. Almost everyone has a smart phone on them these days, and they do so much more than merely make phone calls. We connect to the world with them, we can even do lots of tasks related to our work with them.
This is the major reason why too many companies do not consider the cloud when implementing ERP systems – they measure the TCO against a server in their own office.
What they fail to factor in is the opportunity cost of operating in the cloud. Some of these are:
Scalability: No matter what changes increase or decrease your organization’s size, be it expansion, acquisition, or reorganization, operating in the cloud removes all the upheaval such changes can entail.
Tax advantages: Cloud operations are an expense, not a capital cost.
Predictable costs: Mostly per user or per Mb costing, easy to quantify and understand.
Evergreen: Your vendor will normally keep your software updated to the latest version, and its usually done while you are asleep.
Disaster recovery: If your office burns down, you can be up and running again in minutes because your apps and data didn’t go up in flames.
Remote users: Access via browser to the cloud is a whole lot easier than maintaining your own VPN (Virtual Private Network).
Advanced features / New applications: Some advanced features can mean expanded infrastructure – with the cloud you already have it. New applications can be made available quickly, and with minimum disruption or IT input.
Flexibility: Want to try some new things related to digital transformation? Cloud gives you the flexibility to experiment, evaluate, and adapt new technology far more effectively than having to install them in-house.
Here’s another very important consideration: try purchasing a cheap, non-smart phone just to make phone calls. There are very few options, and they mostly run only on 2G networks. You might well ask, why would you want to, unless you want a burner phone for nefarious purposes? A valid question – almost everything we want to do with our devices these days requires a smart phone. It’s the same with the future of computing – Intelligent ERP, and all those apps that enable digital transformation, are being developed for the cloud only. If you are not operating in the cloud, your future choices are severely limited, or soon will be.
Many people don’t relate industrial mobile technologies to the smart phone in their pocket – or their hand – but that is exactly what it is. Whether it is a geometric 3D scanner communicating with your quality control results screen, or a machine on the other side of the world telling you it needs an urgent repair, the technology is exactly the same as you calling, or sending a text to, a colleague.
Intelligent ERP solutions operate on any device – desktop, laptop, tablet, or phone. This means you can avoid the manual processes that result in misinterpreted and duplicate entries when you have disconnected systems.
The real business opportunity lies in allowing operators and technicians to have access to data not just from control rooms, but from anywhere and at any time, using tablets, smart phones, and similar devices, enabling them to make transactions from almost every place on the earth.
Since all you need is your smartphone or a tablet computer, what would stop you empowering your staff right now?
The Internet of Things (IoT)
That 3D scanner we mentioned above, and the smart machine are “things”. This is nothing new. My daughter’s new house is a “smart home”. She has an Amazon Echo connected to the cloud-based Alexa system which also controls all the smart devices. She can walk in the door and say “Alexa, turn on the lights” and on they come. She can turn on the lights, or the oven, from her smartphone. So, the IoT is simply the connection of many smart devices via the cloud to your system.
Your staff can operate OptiProERP by voice using Alexa, a big help when you are buried in a repair or complex assembly on the shop floor.
Here’s a simple scenario:
It uses the sap.B1FactoryConnector to send orders to production and obtain results back, and the B1i-FactoryController to monitor the production process and send the feedback to the Connector, including any alerts and error handling. Both of these components are free in the Integration Framework in OptiProERP, courtesy of the SAP Business One platform.
Its quite possible you have sensors measuring important QA data, or counting finished products off the line, that you know about but haven’t connected to. Its time to start using that data, to get more accurate QA data, to update your system without having to key in that data.
OK, I’m hooked – where do I start?
So that’s the new digital world. You need to figure out your place in it.
It is important to understand that digital transformation is a process, and not a switch you turn on. It typically requires organizations to create a digital strategy that is both incremental and dynamic, allowing for the inevitable shifts along the path as advanced technology discoveries continue and the marketplace changes. So where do you start on this journey?
It must start at the top. Any digital transformation project must start with those people who own or set the overall direction for your business.
You need to gaze into your crystal ball and determine what your future holds. Where do you want to be in 5, 10, or more, years?
Think about which of these new technologies could make a difference to your business, and what the advantages of using them might be. Be brave! Dare to dream big at this stage.
Be prepared to reach compromises – about what you can do now, how much you can cope with, remembering that you aren’t always going to get everything you want.
Where are you now? Do a survey of your current technology and automation environment to establish your starting point, and identify what systems and technologies you currently have in place that can play a role in your future.
Identify your opportunities. Where are your processes lacking? Too long to get products to market? Unable to react to demand trends? Resources over-burdened? Prioritize the biggest challenges.
Start small. Wholesale change is disruptive.
Work with your ERP vendor. You probably don’t have a clear vision of what Industry 4.0 looks like in your market, and the related technologies are still evolving. But do your best to envision how technology is changing your industry. Look at your competitors, especially the biggest companies and the most innovative ones. Research the technology suppliers, and read about their successes, particularly in your market and similar industries. Talk to the vendors, get them to explain the technologies, and help you determine where you can use.
The team from OptiProERP were by far the best communicators – they understood Discrete Manufacturing better than anyone else we spoke to
– Doug Powell, Chief Engineer, Metalcloak
Embrace the cloud. The cloud is where digital transformation happens. It is also where the majority of development for digital technologies is focused – don’t get left out!
Continuously improve. Continue to build out your digital strategy plan.
So, why do you need an Intelligent ERP solution?
In a single word, access.
How do you drive all these new technologies, and where from? The reality is, only an intelligent ERP solution can provide the platform to unify all the components of a truly digital business. You then need to ask “Can I do it with what I have now?” The likely answer is that you can’t. Most legacy ERP systems simply are not capable of handling this sort of transformation.
How does OptiProERP qualify?
The secret is the SAP Business One platform on which OptiProERP is built, and extends. The SAP Business One Platform already has all the enablers you need for digital transformation – handling of big data, predictive analytics, the algorithms required, and mobile capabilities. It has a complete integration framework to connect to smart factories and the Internet of Things. This is not something planned for a future release – the integration framework is a reality and available right now, and it is part of the standard software.
Its over to you now, you see the benefits, let us help you realize them!
The possibilities are endless with digital transformation, limited only by an ability to think about your business – what you do, how you do it, how you could do it better, quicker or smarter.
In our blog, “What is Intelligent ERP?”, we looked at the enablers of digital business: cloud, mobile technologies, analytics, the internet of things (IoT), big data, and machine learning, all leading to smart factories.
Let’s look at an example that uses all of these elements, showing what intelligent ERP can do.
Examples of What Intelligent ERP Can Do
Imagine you have 50 different products, all made on various machines, of which you have 12. Some of those products can be made on several different machines, and you have 10 employees who theoretically can work on any of those machines and make any of the products. You are aware that throughput in the plant is inconsistent, and you want to know why and how you can fix it.
There are very many factors which can affect that throughput:
Are some machines older and slower when making a particular product?
Within the time-period you are analyzing, how much downtime was there for each machine? Was there some planned maintenance during that time?
What is the ratio of setup time to operating time for each machine for each product?
Are dies getting tired, leading to quality issues?
Are materials arriving from suppliers on time?
Is the warehouse staging those materials for production in a timely manner?
Are finished goods being moved to the warehouse consistently?
Is scrap being cleared regularly to make an efficient workplace?
Do some employees have a preference for working on particular machines?
Is there some training lacking for some employee / machine combinations?
Do some processes require more movement? Are there some employees who move slower than others, whether by age, fitness or inclination?
Is there evidence of “Mondayitis”? Is there a slowdown on Friday afternoons?
Does the time of year and temperature play a part?
Possibly there are many more influences, as you think about your plant you can probably identify many more. Suffice to say, getting your head around all the combinations of the above is impossible – there are around 128 quadrillion such permutations, without taking into account the materials and calendar elements, and without multiplying by all the time points.
So, How Does Intelligent ERP Get the Answers You Need?
Step 1: Gathering The Information
Step 1 is gathering the data, and that is where the Internet of Things (IIot) comes in. Having employees clock in at the beginning of their shift, and off at the end, tells you nothing about what they did during that shift. An RFID tag on each employee reads their movements as they move between, and even around, machines, as well as through doors. Bar-code data on materials arriving can update the dataset before the purchase receipt has been processed. RFID tags on staging and scrap pallets track their movement around the plant. Count sensors on machines advise on the output on a time-basis. Sensors can also measure up and down time as well as cycle times, and even where problems occur in each machine. Each piece of data gathered has a date/time stamp on it.
All this data collection is highly dependent on a good Mobile Technologies strategy, connecting the “things” to the dataset and your ERP system. And it is almost guaranteed that productivity will improve if the production managers or forepersons are doing their work and receiving alerts on a tablet computer as they walk around the plant instead of sitting at a desktop computer in an office.
Step 2: Make Conclusions From The Data
Step 2 is what to do with the data now that you have gathered it. Basically, all the data that affects throughput is available to you in one form or another, but it isn’t together in one place. What Big Data does is aggregate that data in one giant database. Analytics now takes over, and this is where the Cloud come into play – unless you have very deep pockets and lots of room, it is highly unlikely you can afford to either store or analyse this data in-house.
What analytics does first is look for patterns, using tools like moving averages, standard deviations, distribution histograms and clustering. A degree of machine learning comes in here as the advanced analytics learns what data is significant, prioritizes data collection and performs further analysis. Machine learning really comes into play now, to model the complex processes to quantify the impact of, and optimal ranges for, the identified parameters. The result may lead you to identify additional training needs, to reallocate employees to machines and processes they are better suited to, and much more.
Other Areas Where Digital Transformation Can Help
If you are implementing a Six Sigma program, then this kind of data analysis will give greater insight into how each phase of a DMAIC framework is working, and how the efforts made impact all other areas of manufacturing performance.
Advanced analytics allow for machine learning-enabled predictive maintenance, where advanced analytics can determine the circumstances that tend to lead to machine break-downs by analyzing their historical performance data, and monitor the input parameters so you can intervene before a breakage occurs, or at least be ready to repair or replace when the breakage does occur. McKinsey suggests that predictive maintenance typically reduces machine downtime by 30-50% and increases machine life by 20-40%.
Similarly, data collected from the supply chain will improve delivery of materials, as well as predicting customer demand.
Quality is another area where advanced analytics can provide crucial information about any fluctuations in the manufacturing process. A geometric 3D scanner communicating with your quality control results screen can send an alert when the number of rejects moves outside the acceptable parameters, so you can stop the machine and address the problem immediately. Machine learning and advanced analytics, together with digital twins, can identify process improvements to reduce quality issues.
The concept of the Digital Twin has been around for a long time. The classic example is where NASA used the precursor for digital twins, mirrored systems, when things went wrong with Apollo 13, running simulations in the mirrored system to work out how to get the astronauts back safely. If you are manufacturing machinery fitted with sensors connected to the IIoT, and you have digital twins of those machines, you can run predictive maintenance for your customers. This has two benefits – drastically improving customer service, and retaining service revenue if that is included in your business model.
As we said at the beginning, the possibilities are endless with digital transformation, limited only by your ability to think about your business – what you do, how you do it, how you could do it better, quicker or smarter.
INS Research’s survey in 2014 identified the main uses of big data analysis for manufacturers:
The research said: As the largest overall function of a manufacturing company is to ultimately produce products, it’s not surprising that better production/forecasting was the top response from survey respondents, with nearly half choosing this response. Here Big Data could operate in a myriad of ways, including identifying correlations between customer data, scheduling, and maintenance, which would have the potential to identify hidden patterns that could enable greater operational efficiency, better anticipate order lead times, shorten asset/machine downtimes, and make materials purchasing and WIP decisions more effectively.
Where will digital transformation take your manufacturing business?
Did you learn what you needed to about intelligent ERP? What other questions do you have?
You may have heard about Intelligent ERP (Enterprise Resource Planning), but what is it?
In two words, CONNECTIVITY and ACCESS.
IDC defines Intelligent ERP as ERP applications or suites that use machine learning and advanced analytics built on a large, curated data set to forecast, track, learn, route, analyze, predict, report, and manage these resources and business processes.
Intelligent ERP is the new backbone of digital transformation, and it is running today’s and tomorrow’s businesses in an increasingly digital world.
Intelligent ERP is the new backbone of digital transformation
Digitalization transformation is the process whereby you become an intelligent, digital business. Existing business models are changing, and your business needs to be ready. Not just to take advantage of the benefits such transformation brings, but also because if you are not interconnected, you risk being out of the supply chain.
These digital technologies and enablers are impacting all aspects of business and the workplace, society and culture, and our everyday life. They exist and are in use right now.
These technologies are also transforming ERP applications and suites – platforms that businesses run on. ERP systems have transformed from decades old, brittle, and cobbled together systems built in the pre-digital era to lighter, flexible, and smarter applications that are driving today’s digital businesses. Businesses ready for tomorrow are seeing and taking advantage of what Intelligent ERP can do.
Digital technologies and enablers of Intelligent ERP
Here’s a quick look at some of the digital technologies and enablers that are transforming and are now native to ERP solutions:
Cloud Computing: Cloud computing is a general term for the delivery of hosted services over the internet. Cloud computing enables companies to consume a computing resource, such as a virtual machine (VM), storage or an application, as a utility — just like electricity — rather than having to build and maintain computing infrastructures in-house.
Cloud computing services can be private (in-house using virtual machines, etc.), public (third-party service delivered over the internet), or hybrid (a combination of both cloud and on-premise with automation between them).
Mobile Technologies: Mobile technology is the technology used for cellular communication. It has evolved way beyond early mobile phones to smart phones and embedded devices in machinery that communicate via the cellular network to your ERP system. The real business opportunity lies in allowing operators and technicians to have access to data not just from control rooms, but from anywhere and at any time, using laptops, tablets, smart phones, and similar devices, enabling them to make transactions from almost every place on the earth. Additionally, portable terminals are easier to operate and have a shorter boot time than locally installed user interfaces due to the fact that decentralized devices normally only include the essential range of functions.
Big Data: Big data describes any voluminous amount of structured (such as a SQL database), semi-structured (such as streaming data from sensors) and unstructured (such as document files) data that has the potential to be mined for information. Big data has three main characteristics: Volume, often extreme as in terabytes, up to exabytes; Variety, as noted above; Velocity, the speed at which the data must be processed. Because Big data is just that – big – most companies analyzing it use public cloud computing for the task, where they pay only for the storage and computing time need – which can be turned off when not being used. Most companies cannot afford to own and manage the server clusters required for this level of processing.
Analytics: Data analytics (DA) is the process of examining data in order to draw conclusions about the information they contain, increasingly with the aid of software. Data analytics technologies and techniques are widely used in commercial industries to enable organizations to make better-informed business decisions.
Internet of Things (IoT): The Internet of Things is a network of physical objects – vehicles, machines, equipment, home appliances, and more – that use sensors and APIs to connect and exchange data over the internet. The IoT depends on a whole host of technologies – such as application programming interfaces (APIs) that connect devices to the internet. Other key IoT technologies are Big data management tools, predictive analytics, AI and machine learning, the cloud, and radio-frequency identification (RFID).
When it comes to manufacturing, this is expanded to Industrial Internet of Things (IIoT), which is the use of internet of things technologies to enhance manufacturing and industrial processes. IIoT harnesses the data from sensors and machine to machine (M2M) communication and automation that already exists in industrial settings – and has done for many years. The Europeans call this Industry 4.0, a nod to the “Fourth Industrial Revolution”. It uses machine learning and big data technology to create smart machines that are better than humans at accurately and consistently capturing, analyzing, and communicating real-time data. All to enable companies to pick up on inefficiencies and problems sooner, saving time and money and supporting better business decisions. In manufacturing, this means greater management of quality control, supply chain visibility and efficiency, and the potential to report on and manage green and sustainable practices. In an industrial setting, it is the key to Predictive Maintenance (PdM), better field service, energy management and asset tracking.
Machine Learning: Machine learning (ML) allows software applications to become more accurate in predicting outcomes without being explicitly programmed, by building algorithms that can receive input data and use statistical analysis to predict an output while updating outputs as new data becomes available. The process requires searching through data to look for patterns and adjusting program actions accordingly. Algorithms are built by data scientists, however a platform such as SAP Business One, on which OptiProERP is built, comes with some algorithms already built and available, and more are being built all the time.
Smart Factories: A smart factory is a highly digitized and connected production facility that relies on smart manufacturing, which is a technology-driven approach that utilizes internet-connected machinery to monitor the production process. The goal of SM is to identify opportunities for automating operations and use data analytics to improve manufacturing performance. Extensive use of industrial internet of things (IIoT) sensors and devices provide much of the enabling technology, while increasingly sophisticated analytics and smart applications based on AI and machine learning take over much of the routine management tasks, enabling workers, managers and executives to focus on handling exceptions and making sound strategic and tactical decisions.
The defining characteristics of the smart factory are visibility, connectivity and autonomy. Factories have long relied on automation, but smart factories take this concept much further and are able to run without much human intervention. Through the use of modern technologies, the smart factory systems can learn and adapt, especially using Digital Twins, in near real time or real time, enabling factories that are far more flexible than those of the past.
Digital Twin: A digital twin is a virtual representation of a product. It can be used in product design, simulation, monitoring, optimization and servicing and is an important concept in the industrial Internet of Things.
Digital twins are created in the same computer-aided design (CAD) and modelling software that designers and engineers use in the early stages of product development. The difference with a digital twin is that the model is retained for later stages of the product’s lifecycle, such as inspection and maintenance. Sensors connected to the physical product can collect data and send it back to the digital twin, and their interaction can help optimize the product’s performance.
Blockchain Technology: A blockchain is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic link to the previous block, along with a timestamp and data, which means the data in any one block cannot be changed without changing all blocks. Since these blocks are used to record transactions between multiple parties, the consent of all parties is required to authenticate a change in data, i.e. it must go back to the source to be changed. This means efficiency in making the transactions, and makes them secure and verifiable.
Other technologies: There are some other cool, connected technologies we will discuss in later blogs, such as Augmented Reality.
So how does this relate to Intelligent ERP?
Intelligent ERP or iERP is a term coined by IDC to cover ERP solutions that utilize data along with predictive analytics to help businesses compete in the digital age.
iERP differs from legacy solutions because they’re specifically designed to automate and optimize business processes through machine learning and advanced analytics.
– Mickey North Rizza, IDC
Intelligent ERP is characterized by:
Connecting to devices with data information appearing in the ERP interface
Handling analytics of big data, including in-built algorithms
Leveraging machine learning on those massive datasets
Utilizing cloud deployment to cope with the amount of data
Delivering a different, more intuitive user experience
All of these characteristics of Intelligent ERP are driven and supported by the above digital technologies and enablers.
Business are already moving towards Intelligent ERP
Intelligent ERP is not new. However, the full progress, potential, and impact of Intelligent ERP is yet to be realized from the vendor and user perspective. From the vendor perspective, very few vendors and ERP solutions out there are future-ready or intelligent. Most ERP solutions were built in the pre-digital era. The vendors that don’t adapt will continue to face a growing threat from new emerging vendors and a growing risk of becoming old and obsolete and being replaced by innovative solutions. This is already happening. From the business user perspective, the ERP marketplace is already seeing businesses move towards smarter, flexible, and future-ready ERP solutions.
Trade Arabia contributor Monzer Tohme noted that ERP vendors are moving away from pre-built interfaces to develop highly-connected systems that will fully integrate with other core systems. This compatibility will help organizations cope with managing multiple locations and better track the transformation of raw materials through to finished goods.
The ERP system will become the backbone of the network; connecting smart machines, logistics systems, production facilities, sensors and devices, as products and machines communicate with each other and exchange commands as products move through the production line.
– Monzer Tohme, Trade Arabia
Is Intelligent ERP right for you?
All of these new technologies have the potential to transform your business, however you may well ask “How will my staff access these, where will they see the information, how will they manage it all?” The obvious answer is “Right where they work now, within your ERP system.” So the big question is “Is my current ERP system capable of being a full part of my digital transformation?” Chances are, it isn’t. Few ERP systems currently in use have the ability to do this and fall short of the capabilities of what an Intelligent ERP can do. But importantly, the leading vendors and solutions have at least some of these capabilities.
Most businesses are either asking themselves if they are ready for Intelligent ERP or taking steps to readying themselves for intelligent ERP, whether actively or passively. Whether it is by adopting a cloud ERP deployment, mobility, eCommerce, or a keener focus on customer experience, these are all steps towards adopting Intelligent ERP and specialities of Intelligent ERP solutions.
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Enterprise Resource Planning (ERP) software has become an inevitable part of modern businesses. It hosts a world full of business functionalities that are designed to address inventory requirements, quality of finished products, manage production functions and oversee crucial business processes.
The benefits of ERP systems are many but how does it benefit the accounting and financial management department in an organization?
Let’s have a quick glance at the benefits of ERP for accounting and financial management.
1. Integrate, and manage all your financial and accounting needs with ERP
The Finance and Accounting department in every business is indispensable. The way they work can be unique and different, but the objective is almost the same in every case. Every financial manager aims at:
improving the wealth, profit margin
ensuring safety on investments and optimum fund acquisition
increasing the value of the firm
There are multiple things to manage. From estimation of capital requirements to disposal of surplus to management of cash and financial control, there are many activities to look after. ERP lets you unify the data and bring it all together in one place.
An integrated ERP system improves cost accounting and allows managers to accurately define budget and allocate costs (for raw material, labor, transportation, and other overhead costs).
Whether it is about making payments to vendors, paying wages to employees or financial forecasting, all you need is an ERP system to manage it. Also, when you have a single business management system (i.e., an ERP system) to look after multiple departments, you do not need to work in multiple systems. This indeed minimizes the cost and time spent on many tools.
2. Manage billing, payment, and revenue on time with ERP
ERP acts as a financial management system to ensure customer payment schedules, revenue tracking and credit management across the business. ERP systems integrate a CRM (Customer Relationship Management) system to automate reminders and prevent customer complaints.
With increased tracking capabilities and easy to use automated payment systems, billing, payments and revenue management becomes easy. It can help manage cost analysis, profit tracking, invoice tracking, budgeting, investments and more.
3. Around the clock access to quality data and financial information
You get the data when you need it. When processes are well organized and resources are optimally used, future business ventures are promoted and the bottom-line is enhanced. ERP software allows businesses to maintain financial measures, through having in-depth information, whenever required.
Financial data is confidential and can’t be disclosed openly. ERP gives you the opportunity of safeguarding your information and co-author, edit and manage it as per the access you allow. Multiple reporting options and modules eliminate the need for maintaining spreadsheets and paper files.
4. Integrated + automated data across the organization (flexibility of generating information and creating reports)
Get real-time data synchronization, improved data quality and an updated view of the organization at the push of a button with ERP.
Generating information, consolidating it and managing the company-wide business process becomes hassle-free with an ERP system. Shared management tools and integrated financial management modules track accounting data with international standards. This means that you can select a framework in multiple languages, currencies, companies, and charts of accounts.
ERP systems let you gather financial data from different departments to generate reports such as general ledger and other financial statements. Every piece of data is seamlessly integrated within the system and this is what makes ERP an indispensable part of every modern business.
5. GAAP compliant ERP make business seamless
Generally, accounting software is often not GAAP compliant, whereas a full-fledged ERP solution typically is. Adopted by the US Securities and Exchange Commission, GAAP is the accounting standard which provides a standardized methodology for recording transactions and events.
An extensive ERP solution, which is driven by a powerful engine, encourages productive financial reporting that goes well with multiple accounting standards, including GAAP.
Benefits of using an ERP system for accounting and financial management are empirical. A finance manager can create an estimate regarding the capital requirements and manage the overall accounting activities of the organization in a mindful way. Most business owners depend on accounting software, but they don’t understand that ERP systems are an all-in-one solution which encompass modules for every department including finance, production, quality, sales, procurement and more. Also, ERP systems make things easy and ensure the utmost data security.
The global ERP marketis set to grow to $42 billion by 2020
As research indicates1, an increasingly competitive market compels organizations to adopt ERP solutions in order to keep pace with their competitors. The demand for ERP software is expected to grow rapidly. As small and midsized manufacturers (and businesses in general) grapple with out of control business processes, caused in part by the disconnect between accounting and plant floor operations, the need for a single view of organizational processes is driving the adoption of ERP solutions to manage accounting and financials, as well as other core business processes.
The difference between Accounting Software and ERP Software
As the world grows more complex with faster turn times, customer expectations for product personalization and more data to manage than ever before, software that supports the operational efficiency of core business processes is absolutely essential. Companies also require relevant features that serve the dynamics of industry-specific needs and challenges. This also applies to stand-alone accounting and financial management software as they fulfill only limited needs when compared to an end-to-end ERP solution.
People sometimes erroneously use the terms accounting software and ERP software interchangeably. In reality, accounting and financial reporting software is a subset of an ERP system. It’s important to understand the difference. Let’s take a closer look:
Accounting software, like QuickBooks, is not enough
Almost every business uses accounting and financial management software. So, how is ERP accounting software better than stand-alone accounting software?
Not that long ago, QuickBooks, Sage, and Dynamics GP were undisputed accounting software leaders for small and midsized businesses. As businesses faced stronger competition and their customers expected faster turn times and more customization, the need for ERP software became apparent.
Stand-alone accounting software can take care of the standard accounting functions, banking and limited reporting. However, the standard accounting packages that small and midsize businesses have used for years, lack the ability to forecast what’s in store for tomorrow.
On the other hand, the accounting and financial management features and capabilities that are inherent in ERP solutions deliver a single source of real-time and fully integrated information across different departments for better decision making. Real-time visibility across the enterprise provides insight into purchasing, production, and inventory movement and warehouse management.
For example, accounting software, such as QuickBooks, cannot scale with your company’s growth because it operates on a proprietary database. Such stand-alone solutions weren’t built to connect company-wide processes and deliver real-time visibility into the status of those processes. As a result, you end up with silos of information that cannot provide a transparent and complete picture of your business operations.
What is an ERP system?
An ERP system combines financial management, supply chain, CRM, and in some cases, industry-specific solutions into one broad system, helping businesses gain full visibility and control, scale and compete in an increasingly competitive environment.
ERP solutions provide a single, comprehensive information system that allows you to accurately process and analyze data across company-wide functions. ERP accounting software streamlines sales and inventory, detects process deficits and boosts productivity.
So basically, ERP software has the features of accounting software, plus more.
The key driver in selecting an ERP solution is to enhance the overall operational efficiency, scalability and transparency within the business.
Accounting Software vs. ERP Software
There are 5 things you might want to consider when comparing accounting software with ERP.
1. An ERP solution is similar to a collection of Legos
ERP software goes far beyond what accounting software can offer. The accounting and financial management capabilities within an ERP system deliver a 360-degree enterprise-wide view, including features such as: Financial Management and Reporting, Sales, Purchasing and Inventory Management, Warehouse and Quality Management, CRM, HR, Mobility and more.
2. Stand-aloneAccounting Software is not built for industry-specific needs
For example, stand-alone accounting software has a limited capability to track inventory for manufacturing and distribution businesses, relying on unwieldy third-party add-ons. While an ERP solution delivers genuine, feature-rich inventory management tools for manufacturers and distributors. With an ERP system on the other hand, you can proactively manage inventory to reduce stock carrying costs, make faster and more accurate decisions and lower labor costs. Even better, ERP solutions seamlessly manage the entire shop floor execution system. An ERP solution also lets you manage BOMs, production planning, supply chain management, production resources, supply shipments and much more. Whereas, accounting software doesn’t provide manufacturing management capabilities.
3. Accounting Software and ERP solutions are not always GAAP compliant
Many stand-alone accounting and ERP solutions, including some of the popular ones, are not GAAP compliant or make it difficult to comply with GAAP standards – a software flaw that many growing small and midsized companies can’t afford. You should always ask the vendor how their software can help you comply with GAAP standards, tax laws and financial regulations.
4. Accounting Software does not include sales or customer relationship management
An ERP solution provides sales management and order processing. ERP solutions often have a seamless CRM module that lets you access updated contact information and see the history of previous communications. Whereas, stand-alone accounting software do not have these capabilities.
5. Accounting Software is limited in providing real-time data and mobility
ERP integrates all financial information in a single database. By providing an integrated solution for a wide range of business processes, ERP systems eliminate the need for different tools to manage the requirements of different departments. Furthermore, company-wide data is available in the cloud for anywhere, anytime access to real-time information using a mobile device. ERP systems connect every part of the business so that every decision is based on real-time intelligence.
What’s in store for the future of stand-alone accounting software?
The accounting software package market has suffered some setbacks recently. Leading providers of accounting software, Sage and Iris, were criticized by the IT Usage in Accountancy Practices2 as surveyed by the ICA’s IT Faculty. The faculty found that 24% of accountants had experienced a loss in time and fees due to an accounting software failure. As more businesses demand better integration of their operations, ERP seems to be quickly co-opting the market for accounting software, particularly among growing businesses. As businesses outgrow QuickBooks, they are looking for a solution that offers accounting functionality plus operational functionality to manage diverse business processes. And that makes an ERP solution a great choice for your business.