It is gratifying to partner with manufacturers seeking to transform their businesses by leveraging technology. While every client engagement is unique, my experience working with them has led me to recognize forward-thinking companies also share the common goals. Here are some key takeaways to consider we’ve found can help any manufacturer make a smooth transition to a largely digital operation.
Maintaining business continuity with an aging workforce
Many companies are facing a workforce challenge as they lose human capital to retirement with the accompanying loss of institutional experience. The Manufacturing Institute reported that the U.S. manufacturing sector is disproportionately experiencing the ramifications of an aging workforce.
A metal fabricator with whom we worked saw the handwriting on the wall when baby boomers started to retire and found it difficult to attract young workers. Its ERP system was hosted on an AS-400 with green screen workstations that were antiquated reminders of another era.
Upgrading the ERP solution meant introducing modern technology that automated quality processes, inventory management, manufacturing process planning, shop floor control and other improvements. The system now utilizes a graphical touchscreen interface customized by user or role. The Cloud-based solution is remotely accessible and not only helps attract younger workers but also helps make everyone more efficient.
A plethora of processes
A common malady of organically grown manufacturing systems which are straining the demands of a growing business is the growth of one-off processes introduced to solve a problem. While conducting an assessment of the manufacturer’s “current state” we will often map 200-300 individual processes. Many enterprises handled these processes outside of the ERP with spreadsheets, customized standalone solutions and even manually inputting data into a paper-based system. This home-grown system relied on siloed solutions and complicated workarounds. There was a large chance of errors, redundant data entry and reports that were outdated as soon as they were compiled.
This type of legacy system eliminates the ability to access “one version of the truth.” Production workers estimated inventory levels and took a hunch based on existing raw materials and current work in progress. Management had no accurate way to determine when to replenish inventory. The issue became critical when the manufacturer stopped production because key ingredients were consumed and replenishments delayed.
The need for a modern ERP system that integrates data and makes processes visible throughout the enterprise was obvious. Following implementation, this food manufacturer was able to share “one version of the truth” with an instant, real-time view into inventory levels to minimize disruptions and improve business decisions.
Legacy system limitations
We recently worked with an equipment manufacturer with several facilities and warehouses in the U.S. The company was founded more than four decades ago and was experiencing robust growth for several years. It planned to scale the business and expand globally.
However, the company – even though successful domestically – was severely constrained by the legacy ERP system’s lack of integration, decentralized data management, poor reporting and other key shortcomings.
The company lacked any form of capacity planning. Consequently, it was nearly impossible to effectively plan any expansion of personnel, facilities or need for raw materials. This hampered its ability to scale up production and expand to new markets in an informed, strategically sound fashion.
We helped the company analyze its current state and jointly determined what its aspirational future state would look like after adopting a new technology solution. It was critical for this business to fully understand its future needs and expectations from internal stakeholders. The team took the following stepped approach to select the appropriate technology solution:
- Identify key issues, stakeholders and impacts throughout the enterprise
- Evaluate current processes
- Analyze “What’s working, what isn’t?”
- Structure change management through education and communication
- Define future processes
- By engaging in the business process documentation, it was easy to identify waste and redundant processes. The end result was a company better able to scale to meet increasing demand and expand production for new markets.
Look before you leap
It’s tempting for a manufacturer set up demos of available ERP solutions before determining the scope of the ERP project. A more prudent, efficient and ultimately less costly approach is to leverage proven methodologies to drive the business process transformation. This requires identifying key business functions that will be impacted by the new system.
In a best case scenario, collaborative teams from all business units combine and agree upon the desired future state. By achieving alignment with the future state vision, the team is well positioned to optimize the desired goals of streamlined current processes and scalability for growth.
Jeff Carr is the founder of Ultra Consultants, an independent research and enterprise selection consultants firm serving the manufacturing and distribution industries. Please go to www.ultraconsultants.com for more information.