Industry 4.0 is heralding disruptive changes in manufacturing fueled by technology enablers such as the internet of things (IoT), cloud computing, big data, artificial intelligence (AI) and 3D printing. It focuses on driving digital transformation, innovation and growth using connected, smart autonomous systems. As customer demands rapidly evolve, manufacturers are embracing this revolution by leveraging robotics, machine learning (ML) and data analytics to produce goods with speed and flexibility.
In order to prepare for the revolution, ERP systems must adapt to the demands of modern manufacturing by enabling greater integration between manufacturing and business systems.
Traditional ERP software is typically housed on a company’s servers and maintained by its internal IT staff. Such on-premise ERP systems call for periodic software upgrades and operations that demand additional investments in time and resources, and result in increasing complexity. Cloud ERP, on the other hand, supports faster adoption of product innovation and growth in today’s ever-changing business environment by enabling the much-needed agility. It provides a flexible and predictable platform to support dynamic business models and diverse requirements in the Industry 4.0 era.
Why pivot to the cloud?
Cloud ERP supports industrial internet of things (IIoT), laying the foundation for automation, integration, efficiency, and collaboration. By connecting manufacturing processes with IoT data, it enables manufacturers to gather a holistic view of production and access data that exists in siloes – in real time.
Not only do cloud ERP platforms provide greater integration options but also optimize data using AI and ML to deliver on-demand data for business user. Take the case of Fisher Dynamics. The manufacturing company adopted Google Glass and location beacons to track materials and workers.
According to Gartner, by 2020, at least 35% of new product-centric ERP deployments in large enterprises will be software-as-a-service (SaaS) loosely integrated with on-premise manufacturing execution systems (MES). What’s driving cloud ERP’s growing popularity? Increasingly, manufacturers are viewing cloud as central to their ERP strategy due to the myriad benefits it offers:
- Lower Total Cost of Ownership (TCO): Results in lower upfront and operating costs as it does not require investments in on-premise infrastructure and enables greater transparency of TCO. Jagemann Stamping Company, a full-service metal fabricator, reduced its IT costs and improved its focus on value-added tasks by replacing its traditional ERP with cloud ERP.
- Faster time-to-value: Enables faster deployment and reduced complexity as it involves implementation of fewer equipment pieces. Cloud ERP systems also come preconfigured with best practices, leading to rapid implementation and ROI.
- Flexibility and scalability: Enables agility to respond rapidly and scale up or down according to business needs.
- Mobility: Provides access to data anytime from anywhere, allowing users to run ERP apps on a variety of smart devices.
- Analytics: Broadens scope of BI and reporting, and provides actionable insights from gathered data.
- Real-time and consistent visibility into data: Localizes global operations and enables easy integration with other cloud services.
- Security and reliability: Ensures robust data protection through layers of security using firewalls and data encryption.
Becoming future-ready with cloud ERP
Leading industry analyst firms such as Forrester predict that the ERP systems of the future must be available on the cloud, run seamlessly on mobile devices, allow for actionable analytics, foster collaboration across the organization, and span business processes across departments. However, implementing cloud ERP is not without its share of challenges which include limited integration with legacy systems, high cost of subscription, and resistance from IT department. In addition, businesses are wary of risks associated with performance, compliance, business continuity and security, further compounding the situation.
Using a hybrid solution, where critical and sensitive information is retained on-premise or hosted in a private cloud, can help enterprises of all sizes address the challenges and propel their businesses into the future.