Integrated. Intelligent. Autonomous. Informed by a constant flow of data and driven by real-time demand. The factory of the future is coming into focus. Sometimes referred to as “smart manufacturing”, “Industry 4.0”, or the “Fourth Industrial Revolution”, the ongoing shift in industrial paradigms is being driven by disruptive advances in technology, and by the ever-increasing need for sustainability, optimization, and business agility. By modernizing their modes of production, Canadian manufacturers are increasing their competitiveness and positioning themselves to face future challenges.
A 2017 Capgemini survey found that 76% of larger manufacturers already have a smart manufacturing initiative in place, and that 56% have invested $100 million or more in smart manufacturing over the last five years. The same report notes that:
“…manufacturers across segments have already started realizing potential of smart factories, with industrial manufacturing seeing the biggest gains in productivity and quality of output.”
Of course, no two manufacturers are exactly alike, and smart factories must be created to support and strengthen strategic objectives. The same mix of technologies that make an automaker profitable may be unsuitable for a company stamping widgets out of sheet metal.
There is, however, one technology that all smart manufacturers require, and that’s an enterprise resource planning (ERP) solution. ERP is the glue that binds Industry 4.0 technologies together. There is, unfortunately, a bump on the road to the future factory that many manufacturers have yet to contend with.
The Capability Gap
The last generation of ERP was designed for a different economy, with different market demands and different technologies. Repetitive, high-volume manufacturing processes used to be the norm, a fact reflected in the design of older ERP software. With the advent of Industry 4.0, demand-driven factories and much shorter product cycles have called for a new approach to business systems. In response, ERP has transformed itself into an agile, modularized, flexible business solution, designed to meet the requirements of the ongoing digital transformation. For manufacturers who still cling to legacy systems and older ERP, a significant gap has opened up between the capabilities of older business solutions and the demands of the future factory.
The capability gap poses significant limitations. Big Data, for example, driven by the Internet of Things (IoT), becomes impossible to capture and make sense of without up-to-date business solutions. For properly equipped manufacturers, data from the IoT can lead to measurable efficiencies in speed, scale and resource requirements. IoT applications can predict the need for machine maintenance, gather market information, manage inventory, increase visibility along the value chain, improve trackability and traceability, and ensure on-time delivery. Driven by the accessibility of cheaper, increasingly informative sensors, the IoT will grow in importance as more manufacturers come to realize its competitive potential. According to a 2017 study by MPI-Group:
- 69% of manufacturers improved profitability over the last year by leveraging the IoT within their plants and offices
- 65% of manufacturers improved profitability over the last year by selling smart/intelligent products (i.e., IoT-enabled products)
Along with Big Data and the IoT comes data analytics. Analytics makes predictions based on enormous data sets, enabling deeper insights and better decision making. Without Big Data and data analytics, it is unlikely that a future factory will be agile enough to compete. Without a modern ERP, built to the requirements of the future factory, the promise of improved competitiveness will never be realized.
The Costs of Modernization
The cost of factory conversion is always an issue, especially when the changes required are profound. Fortunately for manufacturers, Software as a Service (SaaS), implemented on the Cloud brings a measure of fiscal relief. ERP on the Cloud is a cost-effective way to reduce capital expenditures, while creating a scalable IT infrastructure that allows a business to store, organize, integrate and analyze data – all with iron-clad security.
At ESS, we routinely talk to executives who are ready to commit to the future factory, but whose business systems are insufficient or outdated. As Deloitte noted in 2013, the standardized business processes of yesterday have given way to the flexible, agile, event-driven enterprise. As Canadian industry continues to expand its reach around the world, it will need to update its essential business systems, and especially out-of-date ERP software, or our factories will lack the IT infrastructure required to embrace this exciting and powerful array of disruptive technologies.
 Tech Trends 2013: Elements of Post-Digital: Reinventing the ERP Engine, Deloitte, June 2013