Originally published - September 27, 2006
The face of today's manufacturing industry is no longer what it was five or 10 years ago. Consumer demand has driven change in the industry as well as to the technology used when producing goods. Enterprise resource planning (ERP) systems have matched these trends, and as a result, compliance, lean manufacturing methods, and supply chain concepts have been incorporated into the manufacturing environment.
Discrete ERP manages all aspects of production, procurement, inventory, and so on within a manufacturing environment. This includes manufacturing products via repetitive processes. Theoretically, products, once assembled, can be disassembled into separate (discrete) parts, unlike products derived from process manufacturing. Discrete ERP applications, like all ERP software, aim at full integration of management, staff, and equipment.
The three main trends affecting discrete manufacturers today are 1) technology, 2) changing business models, and 3) compliance.
ERP software has changed dramatically since its earlier days of material requirements planning (MRP) and MRP II. Among other changes, it has integrated with the complex networks of supply chain management (SCM) software. Because the manufacturing environment has become so complex, and because many new types of software have been developed to meet the growing needs of manufacturers, Internet technology has been incorporated into these stand-alone software solutions in an attempt to integrate all of them together.
What Is Service-oriented Architecture?
Service-oriented architecture (SOA) is a way to seamlessly integrate multiple enterprise software applications together on top of one integration platform, merging different IT infrastructures with the enterprise applications. It enables all systems to seamlessly interact and integrate with each other in a way that allows the user to have a singular view of what is happening in the organization. SOA allows users to extract data from multiple enterprise systems, which can often be a very challenging and complex procedure.
The service aspect of SOA reflects the fact that ERP vendors are now able to "speak" to a manufacturer’s niche needs. This is what is known as manufacturing analytics. Manufacturing analytics represents a business intelligence (BI) solution layer on top of traditional manufacturing technologies, enabling users to extract data.
ERP vendors have developed expertise in particular areas of discrete manufacturing. With this expertise, they have developed ERP systems with advanced BI functionality. The BI component to such ERP systems can perform several functions:
allow the user to mine data in terms of sourcing, assembling, and delivering goods or components
increase tracking visibility for goods via the bill of materials (BOM), automation of purchasing, sourcing, and order entry
synchronize quote processing and reporting
reduce assembly line downtime, inventory carrying costs, production costs, and record-keeping errors
optimize resources used for production.
Manufacturing analytics can also help users to
distinguish between suppliers that deliver components on time and those that do not, thus helping with the selection of a supplier
decide if any manufacturing processes can be performed before components arrive so as not to waste time
Data mining through an ERP system can help to lower overall manufacturing costs, as well as enable human resources (HR) managers to extract important information about employees in the organization. For example, if a particular skill is needed for a particular manufacturing task, the HR manager can quickly pull up this information and make an informed decision on which employee’s skills would be best suited for that particular task.
Collaboration among Manufacturers, Distributors, and Suppliers
Layered on top of the SOA platform that ERP vendors are offering discrete manufacturers is Web-based BI, which is now integrating with ERP systems and Web portal technology to allow collaboration among manufacturers, distributors, and suppliers.
Web portals help to integrate multiple parties together. If a manufacturer is dealing with international suppliers, collaboration can be achieved through such portals, facilitating communication between international parties. Furthermore, the Web-based BI component helps manufacturers to identify suppliers that could affect lead times by not delivering components on time. In addition, if a problem occurs within the manufacturing environment, the BI component will notify the managers responsible, and appropriate action can be taken.
Manufacturing Business Environment
Because manufacturing has become global, SCM has made it possible for discrete manufacturers to source parts with the lowest cost and to incorporate lean manufacturing methods into their production environments. (For more information on SCM, please see Supply Chain 101: The Basics You Need to Know).
In the past, manufacturers were responsible for managing their inventory and for shipping goods to their final destination. Today however, parts, manufacturing processes, and distribution of components or final goods can flow through multiple "links" within the supply chain. This means that many firms are involved in producing the goods as opposed to a single manufacturer and supplier.
In such an environment, manufacturers integrate their ERP systems with SCM software. A discrete ERP application aims at full integration of management, staff, and equipment. It also offers broad functional coverage; vertical industry extensions; a robust technical architecture; training, documentation, implementation, and process design tools; and so on.
A typical discrete ERP system today is suited for manufacturers of products that can be disassembled into constituent components, such as tractors, computers, tables, and so on.
Because of the increase in global competition in the discrete manufacturing sector, a major concern for manufacturers (especially for manufacturers dealing with multiple countries) and consumers alike is that quality standards can be compromised if proper measures aren't put in place. Regulatory compliance—financial, technological, and health and safety—are of prime importance.
Discrete manufacturers are accountable for three main types of compliance:
International standards, such as those established by the International Standards Organization (ISO), or local standards, such as those established by the Canadian Standards Association (CSA). Such regulatory bodies conduct quality control procedures and prepare benchmarks to ensure manufacturers adhere to these standards.
Industry compliance—standards that are industry-specific. For example, in the aerospace industry, components need to be specific dimensions, and materials need to fall within particular tolerance levels. Such specifications are safety standards, which make it possible for the components manufacturers need to order to be standardized, thus ensuring adherence to industry-specific standards.
Company-wide or internal compliance—standards that dictate workflow, systematic production, etc., which lead to increases at the bottom line.
How a Discrete ERP System Can Help
Because software is heading toward an SOA platform, a well-defined software architecture will determine how these standards and policies are integrated into the overall ERP structure. This will allow the manufacturer to withstand scaling to a larger number of users, and determine whether it will be able to incorporate emerging technologies—all to accommodate increasing user and regulatory requirements.
Vendor Snapshot of the Discrete ERP Landscape
Throughout the discrete ERP landscape, merger and acquisition activities have intensified in the last two years. Five vendors now sit at the top of the market: Oracle, SAP, Infor, QAD, and Sage.
Each of these vendors offers broad functionality, but each has made so many significant acquisitions, that all five have vertical expertise in many areas as well. Since ERP software historically has focused on manufacturing, these five vendors have extremely well-developed manufacturing modules.
Other vendors known for their strong presence in the ERP market include CDC Software, IFS, Lawson, and Microsoft. Some older software vendors (those that have been in the industry for 10 to 20 years) have chosen to focus on specific verticals; they do well, but they cannot compete with such "giants" as Oracle or SAP.
Choosing a Discrete ERP Solution
Using Technology Evaluation Centers' (TEC) patented methodology, here are five points to consider when selecting a discrete ERP solution:
1. Product functionality
This is the first phase in selecting discrete ERP software. It assesses the features and functions the solution offers as is, without modification or customization—its capabilities available out of the box.
2. Product technology
This defines the product's technical architecture as well as the technological environment in which the product can run successfully. The definition of mandatory criteria within this set allows the manufacturer to shorten the list of potential vendors and applicable solutions that pass muster relative to the most basic mandatory selection criteria.
3. Corporate service and support
This set of criteria defines a vendor's capability to provide implementation services and ongoing support. Service and support includes consulting, systems integration, project management skills, geographic coverage, the vendor help desk's language and time coverage, and delivery mediums.
4. Corporate viability
Corporate viability (vendor viability) is a critical category that examines a vendor's financial and management strength. Wall Street ratio-and-metric analysis combined with qualitative management and corporate evaluations will give IT executives an accurate assessment of the risks and benefits of investing in a specific product and vendor option.
5. Corporate strategy
This evaluates a software vendor's corporate road map and strategy regarding specific timelines of how the product will be developed, sold, and supported within the discrete ERP software market. The most strategic and long-term set of evaluation criteria, it rates how effectively the vendor's three-to-five year product, support, and sales strategy maps to the overall market direction.
The Final Word
SOA is becoming an integral part of the discrete ERP landscape. Manufacturers considering an ERP software package now have more options because discrete ERP software vendors are now meeting the challenges of the changing manufacturing environment. Discrete manufacturers are also leveraging the Internet as a way of piecing together different software solutions that work best for them. Couple these trends with a software environment that can handle the challenges of increasing globalization and adherence to compliance standards, manufacturing firms can now focus more on their bottom line and their business, as opposed to worrying about the technology that is set in place to run their operation.