While we primarily cover MCAD, CAx, and PLM technologies, we thought we’d branch out a bit this time around and discuss an area that is becoming more prominent and important in the design, engineering, manufacturing communities – enterprise resource planning (ERP). It turns out that it is not suitable just for huge, multi-national companies anymore, but also medium and even some small sized manufacturing organizations, as well, for better understanding their businesses, control, and strategizing for the future.
In its most basic form, ERP integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and support, etc. ERP systems automate all of these activities with an integrated software. ERP’s purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside parties.
The notion of enterprise resource planning goes back to around 1990 when Gartner Group first coined the acronym ERP as an extension of material requirements planning (MRP), later manufacturing resource planning (also MRP), and computer-integrated manufacturing (CIM). Supplementing these terms, ERP encompassed a bigger picture, reflecting the evolution of application integration beyond manufacturing, although not all ERP packages were developed with manufacturing strictly in mind. Based on the markets they served, vendors began with accounting, maintenance, and human resources. In a few years, by the mid–1990s ERP systems addressed virtually all core functions required to run an enterprise.
Some of the functional areas of an ERP system directly related to manufacturing include design, engineering, bill of materials, work orders, scheduling, capacity, document management, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow, activity based costing, product lifecycle management (PLM), supply chain management, and project management.
Connecting the Back Office to the Factory Floor
ERP systems connect to real–time data and transaction data in a variety of ways.
Direct integration—ERP systems connectivity (communications to plant floor equipment) as part of their product offering. This requires the vendors to offer specific support for the plant floor equipment that their customers operate.
Database integration—ERP systems connect to plant floor data sources through staging tables in a database. Plant floor systems deposit the necessary information into the database. The ERP system reads the information in the tables.
Enterprise appliance transaction modules (EATM)—These devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system. EATM can employ a staging table, Web Services, or system–specific program interfaces (APIs). The benefit of an EATM is that it is an off–the–shelf technology.
Custom integration—Many system integrators offer custom solutions. These systems tend to have the highest level of initial integration cost, and can have a higher long term maintenance and reliability costs.
Standard protocols—Communications drivers are available for plant floor equipment and separate products have the ability to log data to staging tables. Standards exist within the industry to support interoperability between software products.
ERP Advantages and Disadvantages
The fundamental advantage of ERP is that integrating the dozens of processes by which businesses employ (theoretically) save time and expense. Decisions can be made quicker and with fewer errors. Data becomes visible across the organization. Tasks that can benefit from integration include:
- Sales forecasting that allows inventory optimization.
- Order tracking, from acceptance through fulfillment.
- Revenue tracking, from invoice through cash receipt.
- Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced).
- Eliminates synchronizing changes between multiple systems—consolidation of finance, marketing and sales, human resource, and manufacturing applications
- Enables standard product naming/coding.
- Provides comprehensive enterprise view (no "islands of information"). Makes real–time information available to management anywhere, anytime for making decisions.
- Protects sensitive data and intellectual property by consolidating multiple security systems into a single structure.
Some of the possible disadvantages of ERP include:
- Customization can problematic (and expensive).
- Re–engineering business processes to fit the ERP system can negatively impact competitiveness and/or divert focus from other critical activities.
- ERP can cost more than less integrated and/or less comprehensive solutions.
- Overcoming resistance to sharing sensitive information between departments can be challenging.
- Integration of truly independent businesses can create unnecessary dependencies.
- Extensive training requirements can divert resources from daily operations.
A Conversation About Microsoft Dynamics ERP
To get a better understanding of what ERP is like in the manufacturing environment, we spoke with Rakesh Kumar, the global industry product director of manufacturing for Microsoft Dynamics ERP. In this role, he drives the execution of Microsoft Corp.’s strategy for the Microsoft Dynamics solutions in the manufacturing industry, with various internal and external stakeholders across a broad network of partners and customers.
Rakesh Kumar, Global Industry Product Director Manufacturing, Microsoft Dynamics ERP
Kumar brings more than 25 years of industry experience, including manufacturing, supply chain operations, business transformation, sales and marketing, global IT infrastructure, and product management for discrete and process manufacturing industries. Before joining Microsoft, Kumar served as vice president and chief information officer at Marvell Semiconductors Inc., a leading semiconductor manufacturing company. Before Marvell, he spent close to a decade at Oracle as a senior director of product management, overseeing manufacturing and supply chain execution applications. Kumar started his career with Unilever, where he held various roles in manufacturing, operations, logistics and modernization across multiple facilities in South Asia.
Kumar has a bachelor’s degree in mechanical engineering from the Indian Institute of Technology in New Delhi, India, and an MBA from the University of Chicago Booth School of Business.
MCADCafe (MC): Can you briefly describe the mechanics and philosophy of Microsoft Dynamics ERP.
Rakesh Kumar (RK): “We approach development and implementation of our products for automating ERP from our customers’ point of view. We have gained a lot of good experience for product development based on the Microsoft Office product line. This is especially important because our typical ERP user is not an engineer.”
MC: Please provide a little history/background on Microsoft Dynamics ERP.
RK: “Historically, ERP has been regarded as a complicated and high-cost technology that frustrated many early adopters. To address these issues, Microsoft decided to extend its positive user experience from its business software to ERP by offering simplicity through the UI, value of the software, and innovation provided by our R&D.”
MC: What makes Microsoft Dynamics ERP unique in the marketplace?
RK: “Innovation and value from our ERP products that offer customization and flexibility, continuous improvement, and our software design approach.”
MC: What types of problems are your customers (current and prospective) hoping to solve with Microsoft Dynamics ERP?
RK: “Probably the most significant problems we help our customers solve is our ability to allow them to standardize operations across large organizations by implementing ERP.”
MC: How do you view the future of ERP (generally) and Microsoft Dynamics ERP (specifically)?
RK: “We want to stay ahead of the market and continue leading best practices for the ERP market. Looking ahead to the future, we see several major trends that will benefit our customers:
- Simpler, role-based UIs that don’t burden users with information they don’t need to perform their jobs.
- Mobile architectures will evolve for ERP applications.
- An increasing social networking aspect of ERP for greater levels of collaboration.
- Artificial intelligence will be used more to aid and benefit ERP users.”
“Looking ahead to the future, our primary vision is that Microsoft wants to be THE enabler for ERP for its customers.”