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Q&A: Challenges And Benefits To ERP Integration

Fri, 11/02/2012 - 2:24pm
Hyla Soft USA

Hyla Soft USA software consultant Erick Dudeck recently spoke with Manufacturing Business Technology about the topic of ERP integration, its challenges and benefits, as well as how it effects other aspects of a manufacturing enterprise.

MBT: What are some of the critical systems manufacturers are working to integrate with their ERP systems?

Dudeck: With the proliferation of small-label and open source ERP solutions, we’ve seen resource planning packages integrated into a more diverse range of site-level and enterprise-level software than ever before.  Value can be squeezed out of integration to any system that uses data managed by an ERP system or produces data that adds value to the ERP system.  Customers integrating to Supply Chain Management, Manufacturing Execution Systems, and Product Life Cycle Management are par for the course; these interfaces are relatively standardized and offer a clear value.  Additionally, we’ve seen a demand for ERP integration into less obvious systems, such as Customer Relationship Management, Batching (ISA-88), Scheduling, Quality, and any number of legacy systems.

MBT: What sorts of benefits are they seeing?

Dudeck: The potential returns of ERP integration can come from a wide array of process optimizations.  At the very least, it can eliminate the time cost and errors resulting from redundant data entry.  This would be the primary motivation for a batching system integration, wherein orders are pushed automatically to the shop floor and consumption data is automatically returned.  This benefit, however, is generally considered incidental when integrating ERP to SCM, MES, and PLM systems, where seamless communication between systems offers a broader spectrum of benefits.

Integrating Supply Chain Management with ERP offers the cost reductions of a truly optimized supply chain, wherein consumption data automatically generates and manages supply orders.  Warehousing costs are minimized, and logistics are much more effectively visualized.  Perhaps most importantly, the integration of ERP and SCM systems is a major step toward marginalizing the risk of downtime cause by raw material starvation.

An integration between ERP and PLM system simplifies the material definition process as well as solidifying the change control process.  The greatest benefit is seen by enterprises producing very complex or highly customized parts.  Engineers, planners, and sales are brought into tighter synchronization by an effective PLM-MES interface, minimizing the overhead of changeovers, reducing go-to-market time, and improving access it alternate parts and resources.

MES integration to ERP offers values so core to the objectives of MES systems that one rarely finds an MES system not integrated to ERP in some way.  A well integrated ERP-MES bridge improves visibility to Work in Progress, offers insight to “hidden costs” of plant processes and resources, and synchronizes detailed production data with higher-level order and cost data.  Users of such systems are minimizing their order turnaround times, eliminating unplanned costs, increasing total production  output, and improving the overall margin of their production facilities.

MBT: Is integration having an effect on how manufacturers approach the product development process?

Dudeck: As an integrated ERP system shifts industry status from nice to have to must have, the benefits of such systems are more commonly being leveraged by process engineers and plant managers.  Process engineers are spending less time procuring cost data, sourcing materials, and compiling data.  More effort is focused on continuous process improvement, quality goals, and waste elimination.  Plant managers are offered a vast array of Key Performance Indicators upon which to manage their equipment and personnel.  Workers are more effectively incentivized, and the reaction to production issues is more swift and effective than ever before.

As data integration becomes increasingly granular, the true cost of each step in the manufacturing process has become more accurate.  In plants with well-integrated MES systems, clients are frequently finding the cost of rework and line change-over is significantly higher than initially estimated.  This has led many to shift focus from output rate KPI's to quality and downtime KPI's.  In most cases, this has led to a reduction of scrapping materials, as quality data allows for process adjustment before critical characteristics drift out of specification.  In rare cases, this process has led to an increase in scrapping, as the true cost of rework occasionally exceeds the per-part cost.  In any case, it is the improved accuracy and speed with which information becomes available to ERP systems that allows for quicker analysis and reaction in modern manufacturing environments. 

MBT: How is ERP integration affecting supply chain tendencies? Has it had an effect on purchasing decisions?

Dudeck: Integration of ERP, SCM, and MES systems has served to optimize supply chain decisions in ways never before possible.  As MES systems return real-time data on materials consumed, and ERP systems push the most current data on outstanding orders, supply chains can be kept in constant motion without the risk of part shortages that once necessitated large warehousing operations.  The warehousing operations that remain have, as a result, become more localized, with higher turnover.  Cost savings are also met in other ways.  Data managed in ERP allows alternate suppliers to be more quickly tapped when scheduled deliveries are not met.  Quality data improves supplier accountability.  Execution data improves the calculation of true costs.  Since raw material supply usually accounts for the majority of manufacturing costs, it is vital for any enterprise to identify a single master repository for material data (usually ERP), and to make sure that the SCM system has a clear path to these data.

MBT: What are some of the hurdles to integration? What holds manufacturers back from integrating their systems?

Dudeck: Cost and compatibility.  Smaller enterprises operating on a shoe-string budget often implement small-box or open source ERP solutions, which rarely include a well-standardized integration interface.  This often means a customized interface must be built, or additional add-on modules must be purchased.  For a plant manager whose pen-and-paper operations have been functioning profitably for decades, it can be difficult to be convinced that the investment in such software is a sound risk.  Historically, however, integrating ERP to production and supply data offers a reliable return on investment.

Larger enterprises tend to suffer the complications of legacy systems and process limitations that can make it difficult to transport the critical data between systems in a timely manner.  In rare occasions, the modification or exclusion of certain legacy operations is simply not an option; and if this legacy software does not implement a suitable interface layer, it can be impossible to integrate ERP data without deploying additional software to parallel legacy functions.  In most of these cases, the motivation to overcome such obstacles is very high, but great care must be taken that the solution to the problem does not complicate production in such a way as to marginalize any benefit.

MBT: How are manufacturers approaching the task of ERP integration?

Dudeck: A successful integration project will not skimp on planning.  If possible, software should be selected with integration goals in mind.  Commonly, a systems integrator is called upon only after various disparate plant-level and enterprise-level software packages are already established.  Almost always, an ERP system is already well-established, and usually the systems requiring integration are already selected before intersystem integration capability is analyzed.  This can make successful and seamless interoperability quite a challenge.  Every year, however, it seems that systems integration is becoming less of an art and more of a science.

In the last decade, a major push has been made on the part of manufacturers to shift from customized, in-house, or specialized software suites to more standardized, off- the-shelf solutions.  While this has lowered the cost of deployment and support significantly, it has also increased the rigidity of available solutions.  The cheapest solutions are the ones that can be used in the most plants.  If a production process doesn't fit the paradigm to which the software was designed, some sort of workaround or process change must be implemented.  The up side to this phenomena, however, has been a more thoroughly defined standardization of data flow between layers.  Integrators generally know what data should be flowing from one system to another and which system should be the master of which data.

It is not uncommon for a quirk in a particular manufacturing process to require the violation of established standards.  When such a need arises, the most successful integration clients are reaping the benefits of investments in the planning phase.  It is woefully too common for project leaders, when faced with a seemingly nebulous and gargantuan task, to take a try-and-see approach to technical decisions.  This approach usually results in unnecessary redesign and damages prospects for future additions and improvements to the system.  A thorough analysis of system goals and requirements by an experienced eye is imperative to the decision making process, and it often makes the difference between a project that costs money and a project that saves money.

Visit www.hylasoft.com to learn more.

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