Four ways ERP is enabling Industry 4.0

A robust ERP system is an absolute necessity for manufacturing companies in the era of Industry 4.0 and digitization. 

Veera Swamy Arava Nov 23rd 2018 A-A+

Manufacturing industry is witnessing a radical change. 

Imagine this: Today, Harley Davidson can make 1700 bike variations in one production line and send out a customized bike in every 90 seconds, from its Industry 4.0-enabled smart factories. While doing this, the company reduced its operating cost by 7 percent and improved its speed of order fulfilment from 21 days to just 6 hours. And it’s not just the bike maker, the whole world of manufacturing is ready for a quantum leap—thanks to Industry 4.0. 

The demand for faster business cycles and mass customization to cater to the wider needs of customers are encouraging manufactures to adopt digital technologies and industry 4.0. It essentially redefines the relationships between manufacturing, customers, and suppliers.

Companies are now striving to develop intelligent, connected and self-aware products that communicate.

“Only 16 percent of IoT decision makers in the industrial companies consume IoT data in ERP software. This is a big barrier for realizing the digital transformation potential.”

Industry 4.0 is fundamentally a confluence of multiple technologies like IoT, AI, advanced robotics, 3D printing, augmented reality and analytics. It is predicted to increase revenues of production companies by 23 percent and productivity by 26 percent, according to a McKinsey report. 

Experts argue that ERP systems will play a key role in enabling this transformation. Manufacturers need a shift from the traditional and sluggish ERP systems, designed for the pre-digital era. Here is how a modernized ERP software can be the key enabler of Industry 4.0 

Making better use of data

With IoT becoming an integral part of today’s smart factories, manufacturing companies will need a core system that enable them to gain insight from the massive amounts of data to drive better business outcomes.

A robust ERP will be critical in realizing the benefits of Industry 4.0, especially the features like predictive maintenance of machinery, advanced levels of automation to optimize shop floor operations and better customer service. 

However, only 16 percent of IoT decision makers in the industrial companies consume IoT data in ERP software. This is a big barrier for realizing the digital transformation potential. The increased adoption of intelligent ERP systems indicates how critical the role of ERP is going to be. 

A modernized ERP is going to be an absolute necessity for manufacturers in analysing the data and enabling real-time decision making. 

Enhancing customer experience 

In the modern manufacturing world, the customer is an integral part of the product value chain and holds a greater say in how products should be designed, manufactured and delivered. Digitization of the whole value chain is thus a critical necessity for manufacturers.

ERP will be a key enabler for data sharing between the manufacturing floor and business systems. Nevertheless, legacy ERP systems often hinder this process as they are not built to enable deep integration.
For many manufacturing organizations, ERP systems are still driven by manual and error-prone transactions. Modern manufactures are waking up to the reality and are now moving towards intelligent ERP systems that can effectively boost productivity, efficiency and data integration. 

Enabling Flexibility 

Manufacturers today have to provide highly individualized products, rather than mass producing items. They also need to keep the production cost under control while facilitating this mass customization. It means that the production processes need to be a lot more flexible. Companies will need to adjust production dynamically, depending on the changing market needs. 

Studies show that the dependence on outdated ERP systems acts as one of the biggest barriers to achieve this flexibility, making it harder to scale production up or down. A cutting-edge ERP is thus the need of the hour to rapidly respond to the dynamic market needs and customer expectations. It also improves resource management to control spending and reduce waste. 

Managing Change

Business process transformation is inevitable for manufactures to adopt the Industry 4.0.

But the bigger challenge for them, especially the Indian manufacturing companies, is how prepared they can be to unexpected changes in the market. This could be in terms of customer demands or new regulatory reforms or new compliance/policy requirements. This was evident during the introductions of VAT and GST in the country. It’s important that the ERP system is well equipped to manage such changes, while the manufacturer can focus on their core business. 

Veera Swamy Arava is CEO and Director at SAT Infotech.

Disclaimer: This article is published as part of the IDG Contributor Network. The views expressed in this article are solely those of the contributing authors and not of IDG Media and its editor(s).