Smart Manufacturing, the Death Knell for ERP

November 14, 2023
Thomas F. Fitzgerald, CPA 

There are many aspects of smart manufacturing and its promises of improved business performance that may lead some to the opinion that the role and contribution of ERP will progressively diminish over time as the means to apply smart manufacturing and Industry 4.0 concepts continue to become more readily available to the marketplace. The thinking is that ERP’s stranglehold as the central repository of data will be broken as data must move closer to its source activity to improve immediacy of more refined data capture, analytics and visibility, which will at a minimum greatly diminish ERP’s role, or even bring on its obsolescence, within a business’s data eco-system.

The reality is that such an Armageddon prophecy for ERP is greatly exaggerated. It is true that ERP’s role and contribution to an organization’s data eco-system must evolve, but such evolution will only solidify, if not expand ERP’s contribution and value towards driving transformational growth and improvement for business enterprises during the era of smart manufacturing.

The main reason ERP’s relevance will remain, if not grow, is because of the dominant position and reputation it has earned in the marketplace as processor of the primary business elements and transactions central to operating a manufacturing enterprise and as keeper of the data generated therefrom. ERP’s function is, and always has been, to serve as the foundational bridge between the daily execution and management of core production, supply chain, inventory and fulfillment activities and the financial application, analyzing and communication of those activities. ERP has benefited from over fifty years of development and refinement establishing it as the most reliable and comprehensive business tool available to integrate and communicate critical data, infuse business best practices and internal control into daily operating procedures, improve the overall customer experience and support strategic business planning and management. The impetus driving smart manufacturing in regards to ERP is not to supplant ERP’s firmly established primacy in these core competencies, but to foster its expansion. ERP will reach beyond merely being the initial foundational bridge to core operations to extending to the next bridges further out from it that will connect operations sub-layers and precision applications and touch points that reside deeper in the supply chain and customers’ operating environments.

ERP will grow its competencies to fulfill its critical role in support of and contributing to next generation data eco-systems in the following ways:

  1. Vertical Systems Access & Interfacing. ERP will open its data architectures and improve its interfacing compatibility with precision, micro-focused MES and PLC applications embedded up and downstream from the ERP. These systems will be dependent upon ERP to get data they need to perform their highly specialized function(s). Additionally, ERP will need to receive information back from these systems to: a) update its standard databases with information that is more precise or b) serve as a data warehouse for those specialized systems that purge its data once its function is completed.
  2. Horizontal Platforms Data Exchange. In an environment where smart manufacturing is realized, ERP’s AMP and MRP capabilities will be enhanced by expanded visibility and sharing of data with its customers and suppliers’ data platforms.  Companies will assume a greater role in helping manage their customers’ product requirements and fulfillment and will have expanded access and expediency into their supply sources; the combined effect being a substantial shortening of the order to fulfillment cycle.  
  3. Big Data Warehousing & Analytics. With robust data interfacing, exchange and warehousing capabilities, ERP will be the central hub for Big Data Analytics. Retrieving, storing and/or referencing data across systems and platforms, ERP’s analytic capabilities will mature from the mere analysis and presentation of historical activity and current status to performing predictive analysis and building relationships between data points never before possible. As a consequence, today’s manufacturers who are predominately reactive based enterprises will be empowered with proactive capabilities. Customer needs will be anticipated and addressed in an accelerated manner and bottlenecks and obstacles in production and supply chain will be foreseen and prevented to mitigate their disruption.

To enable the expansion of its competency in the aforementioned capabilities, the design structure of ERP itself will change:

  1. Data Architecture & Processing.  Innovation in data design and methodology will be employed to break down the barriers of today’s information silos and data segregation and promote more accessibility and interfacing between data systems and platforms. ERP’s compatibility will evolve with hardware technology advances that will enable robust computational power and speed across systems and platforms.
  2. Enhanced User Interfaces. Input and view interfaces will become more intuitive and role sensitive as well as embrace advances in mobile technology to widen the expanse of data capture while improving its accuracy and timeliness of impact and to facilitate the user’s ability to make and comprehend data relationships.

As Twain once stated, “…reports of my death have been greatly exaggerated,” so it will be with the era of smart manufacturing as being the death knell for ERP. To the contrary, its foundational role remaining intact, even expanded, ERP will actually promote the ushering in of smart manufacturing and the fourth industrial revolution, and support the enablement and application of all of its promised potentiality to the marketplace.

Thomas F. Fitzgerald, CPA
Thomas possesses over 40 years of experience driving proven results in corporate financial management, spanning the scope of strategic planning, merger & acquisition, market/product targeting, sales plan integration, operations control & review, cash flow management, capital acquisition, income tax planning & compliance, wealth preservation planning, and enterprise resource planning design...
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