Getting It Right: ERP Solutions for Mixed-mode Manufacturers

Mixed-mode manufacturers operate in both discrete and process environments. In the past, these organizations have not been well served by traditional discrete or process enterprise resource planning (ERP) solutions. But a recent trend in the ERP market has been the offering of software solutions by major discrete ERP vendors to the mixed-mode manufacturing sector. However, in terms of criteria and the overall weight assigned to them in a request for proposal (RFP), these vendors must consider the industry sector the mixed-mode manufacturer's operations serve, the manufacturing processes, government regulations, and the quality standards of the particular industry.

Key Differences between Discrete and Process Manufacturing

Discrete manufacturing uses bills of materials (BOMs); process manufacturing uses formulations, also known as recipes. A discrete manufacturer assembles products along a production sequence routing, whereas a process manufacturer blends in a batch.

In discrete manufacturing, a multi-level BOM is used to produce a finished good, indicating the base unit of measure with all the lower level assemblies and subassemblies featured below. In process manufacturing, all sequential steps are held within the product formula, including all relative secondary products. Batch sizes are based on specific units of measure and vary according to the formula and product yields. Process manufacturing systems must be able to track the equipment and materials used, equipment settings, and labor.

Table 1 lists examples of discrete and process manufacturing sectors.

Table 1. Discrete and process manufacturing sectors.

The Trouble with Traditional Discrete and Process ERP Systems

Because mixed-mode manufacturers fall somewhere in between discrete and process manufacturing, ERP systems geared solely toward one type or the other often fail to support key mixed-mode manufacturing processes, resulting in decreased productivity and customer satisfaction, not to mention a lower return on investment (ROI) for the manufacturer.

For example, the challenge faced by a mixed-mode manufacturer when attempting to use an ERP package designed for the discrete manufacturer is the system's limitations in being able to account for the following process manufacturing requirements:

• yield estimation of products per job

• calculation of the available to promise (ATP) inventory allocation of finished goods

• increase or decrease in production yields based on ingredient levels or on lot or batch size limitations

• governmental and regulatory compliance related to lot control and traceability, as well as product quality—issues that the pharmaceutical and the food and beverage industries in particular must consider

• maintenance and tracking of quantities and costs of raw material process variances within the manufacturing process

Furthermore, a mixed-mode manufacturer may encounter the problems of longer implementation time and additional expense with an ERP system designed for discrete manufacturers, as modifications to the core functionality of the system may be required.

System Flexibility

Mixed-mode manufacturers need an ERP system that can handle formulations, batching, and other practices specific to process manufacturing in addition to the specific requirements of discrete manufacturing. What compounds mixed-mode manufacturers' malaise with ERP systems designed specifically for either discrete or process manufacturing is that these systems lock the mixed-mode manufacturer into a single line of business. They force companies to work around the software used for their other product lines by constructing spreadsheets or databases to compile data from various sources. When an organization's business model changes, the organization is usually forced to choose a whole new ERP system. For a mixed-mode manufacturer, the way around this scenario is to implement mixed-mode enterprise software instead. Mixed-mode software enables companies to switch manufacturing styles, and provides the flexibility needed to meet market demands.

Since implementing an ERP system is a time-consuming and costly undertaking, collaborative effort and research by all departments involved is required before a system is selected. A review of the current business processes and a documented view of the processes each department seeks to improve are essential to making the right choice. This review must be aligned with management's long-term objectives for the organization.

One way to shorten this cycle within the scoping phase is to obtain vital, up-to-date market and software solution information. Organizations can purchase relevant information on software systems from reputable software evaluation companies to save time and gain firsthand knowledge on the ERP market, as well as the proper tools to evaluate the product offerings that match their criteria. The goal of this exercise is to avoid making a costly investment in a system that is not flexible and that was not written with the mixed-mode manufacturer in mind.

Key Benefits of a Mixed-mode ERP System

Following are some of the major benefits a mixed-mode ERP system can offer:

• elimination of duplicate data entry

• a Web portal or executive dashboard that displays accurate, real-time data on key costs and trends, in a concise, graphical format

• a common user interface and a single set of processing goals to reduce training costs and to smooth IT operations

• a phased implementation rather than a single implementation, which means that not all legacy systems require implementation, thus resulting in a smoother transition

• the ability to support both discrete and process manufacturing modes

Vendor Solutions for a Mixed-mode Environment

An organization's decision-makers must be educated about the software applications and their key features in order to make the right choice. Each of the five major ERP vendors mentioned below can address the needs of both large-scale and small to medium size businesses with its software packages. Listed are the types of packages these vendors offer, including key features and functionality.

1. Lawson Process Manufacturing
Based in Saint Paul, Minnesota (US), Lawson Software has 40 offices worldwide. The vendor's software system has received broad industry acceptance, and features standard product functionality, along with a few interesting features. Lawson Process Manufacturing

• supports mixed-mode, discrete, and process manufacturing environments

• supports service-oriented architecture (SOA)

• offers a fully integrated suite of modules that can be integrated either individually or separately

2. Infor ERP XA
Infor, one of the world's largest providers of business software, is based in Atlanta, Georgia (US). The vendor has acquired and developed ERP systems to serve both discrete and process manufacturing. Infor ERP XA

• supports mixed-mode, discrete, and process manufacturing environments

• integrates with shop floor services and the supply chain to aid material supply, distribution, warehousing, and freight management

• supports SOA

• links to radio frequency identification (RFID) and transportation management systems (TMSs)

• supports lean manufacturing

3. SAP
SAP, headquartered in Walldorf (Germany), has applied a great deal of its research on process industries into its product offerings. SAP's software packages

• support mixed-mode manufacturing environments

• offer easier integration through merged companies

• receive maintenance and support directly from SAP

4. Epicor Vantage
An Irvine, California (US)-based firm established in 1984, Epicor serves the mid-market, with over 20,000 installations globally. An integrated, out-of-the-box solution, Epicor Vantage

• offers integrated workflow processes that work collaboratively across modules

• supports paperless transactions as well as SOA

• provides a built-in project management feature as part of its planning and scheduling module

• features vendor portals (from its eBusiness Suite), which enable vendors to manage issues

5. JD Edwards by Oracle
JD Edwards Enterprise One (formerly PeopleSoft) is a suite of modular, pre-integrated, industry-specific business applications designed on a pure Internet architecture. It is suited for organizations that manufacture, construct, distribute, service, or manage products or physical assets. JD Edwards Enterprise One

• offers an integrated modular approach

• provides manufacturing management dashboards with real-time metrics on key performance indicators (KPIs)

• features rapid deployment

• supports global installation based on localized versions of software available

In Closing

As a result of increasing competition and globalization, mixed-mode manufacturers are faced with constant change in their environment. No longer forced to make a less-than-satisfactory choice between process and discrete ERP solutions, the availability of a mixed-mode alternative may be the key for these organizations to meet the challenges of the changing business landscape.