As manufacturers deploy everything from artificial intelligence to robotics to the internet of things to improve insights, efficiency and customer service, they can’t afford to overlook key foundational elements of any digital transformation initiative: business applications like ERP systems. It’s easy to de-prioritize these applications. After all, they’re the systems accountants care about. And they’re certainly not driving innovation or revenue, right?
On the contrary, modern, cloud-based ERP systems, along with other advanced business applications, can be robust repositories of data that facilitate innovation and improve organization-wide operational efficiency. And because of their integral role in turning data into action, these systems are indispensable components of digital transformation.
The Risks of Outdated Systems
Outdated business applications can be like electronic concrete. It’s difficult to integrate them with modern applications for business intelligence, field service and more. These limitations put a nearly impenetrable wall in front of a manufacturer’s efforts to improve operations and customer service with advanced technology.
Let’s take ERP systems as an example. Old ERP systems are usually on-premise, instead of cloud-based, which means a company must devote valuable resources to ongoing hardware maintenance and manual software updates. But operating on an outdated ERP system is more than an inconvenience. It also can be a big business risk because the ERP vendor may eventually stop providing support for the system as it chases the annuity revenue streams that cloud solutions bring. This lack of vendor support can lead to serious security vulnerabilities for the end user.
It can also be difficult to find workers with the skills necessary to maintain these older systems. And operating with an outdated ERP system can become a serious liability when it comes to recruiting talent. After all, what young, talented technology professional wants to spend her day interacting with a dinosaur of an ERP system? By modernizing their ERP systems, companies send signals to potential employees that they’re committed to digital transformation and to providing their employees with advanced technology.
Modern Applications Mean More Power
Companies usually pursue digital transformation to gain access quicker to more information about market demand, operational effectiveness, as well as customer needs. They then aim to use this information to improve customer service, operational responsiveness, and innovation. Thus, data drives digital transformation. And business applications like ERP and CRM systems are the backbone of data management.
Today, too many manufacturers still have siloed data operations. As a result, decision-makers struggle to view their companies’ full scope of customer, market and operational knowledge. A disjointed approach to data collection and management wastes much of the efforts associated with digital transformation. With modern, cloud-based business applications, however, a company can gain a unified view of data.
These advanced systems offer wider and easier access to data, helping knock down the silos that hinder information-sharing and insight-gathering. They also offer great flexibility by allowing a company to easily scale up and down, as needed.
Additionally, modern business applications play a key role in turning data into action. Take, for example, a manufacturer that sells a machine its customers use in their manufacturing processes. While an end user expects to use the machine in 20,000 rotations before recalibrating it, the best practice is to recalibrate after every 15,000 rotations. So, if the manufacturer adds a data-collecting sensor to the machine and has advanced business applications in place, it can monitor in real-time the equipment’s usage data, which allows it to provide advice to the customer about optimal maintenance practices.
The results can then be stored on both the customer relationship record and the machine record, providing enhanced enterprise visibility. The manufacturer may also gather the proof required to justify raising its recommended recalibration point, which could provide a competitive advantage.
Innovative ideas, processes and products help manufacturers distinguish themselves to potential customers. But such innovation cannot exist unless the systems at the company’s core are strong enough to not only handle crucial back-office functions, but also facilitate advancements in customer service. Modern business application platforms are necessary to create the framework that allows innovation — such as new marketing strategies or product delivery methods — to happen.
Start at the Foundation
Pursuing digital transformation without modern business applications is like renovating a house without fixing its faulty foundation. New, exciting technologies will always grab the headlines. And rightly so. IoT, AI and blockchain are all at the heart of digital transformation in the manufacturing industry. But if manufacturers want to maximize the returns on their digital transformation investments, they need to start by focusing on their business applications.
Debbie Altham is a senior director in Sikich’s technology practice.