IFS
KEY QUESTIONS:
What are the most important questions
you should ask when selecting business
software?
P7
What are the key business challenges for
manufacturers today?
P4
How does the right software address the
challenges of your industry?
P6
ERP SOFTWARE THAT PREPARES
MANUFACTURING AND HIGH-TECH
ORGANIZATIONS FOR WHAT’S NEXT
IFS WHITE PAPER
Antony Bourne, Vice President, Global Industry Solutions, IFS, May 2017
CONTENT
PREPARING MANUFACTURING AND HIGH-TECH ORGANIZATIONS
FOR WHAT’S NEXT ......................................................................... 3
COMMON BUSINESS CHALLENGES ................................................ 4
COMPLIANCE ISSUES .................................................................... 4
RISING MARGIN PRESSURES ......................................................... 4
CONSUMER DEMAND .................................................................... 5
STANDARDIZATION ....................................................................... 5
DISRUPTIVE INNOVATIONS ............................................................. 5
HOW THE RIGHT SOFTWARE ADDRESSES BUSINESS
CHALLENGES ............................................................................... 7
10 KEY QUESTIONS TO ASK WHEN SELECTING ENTERPRISE
SOFTWARE .................................................................................... 8
WHAT ARE PEERS SAYING? .......................................................... 10
READY FOR SERVITIZATION AND WHAT’S NEXT? ........................... 11
ABOUT IFS .................................................................................. 13
3 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
ERP SOFTWARE THAT PREPARES
MANUFACTURING AND HIGH-
TECH ORGANIZATIONS FOR
WHAT’S NEXT
BY ANTONY BOURNE, VICE PRESIDENT, GLOBAL INDUSTRY SOLUTIONS, IFS
PREPARING MANUFACTURING AND HIGH-TECH
ORGANIZATIONS FOR WHAT’S NEXT
In today’s accelerating and volatile global marketplace, manufacturers and
high-tech companies understand that change is constant—and a constant
challenge.
The nature of technological innovation and prevalence of economic
uncertainty have transformed the environment for manufacturers from one that
was rather slow-moving and monolithic to today’s fast-paced, hypercompetitive,
time-sensitive, customer-demanding, increasingly nuanced global commercial
ecosystem. Competition can come from anywhere on the globe at breathtaking
speed, and risk and opportunity are usually, if not always, closely coupled.
(It’s always interesting to note that the Chinese word for crisis contains the
characters for both risk and opportunity).
Keeping risk at bay, and identifying and seizing opportunity are traits of
companies that thrive in this difficult environment and steer a steady course
in seas where potential crisis lurks. In our digital, data-driven world, software
—particularly enterprise resource planning (ERP) software—is one of the
principal tools organizations leverage to keep the enterprise ship sailing
boldly forward.
ERP systems are one of the core business applications used by almost all
companies that operate above a minimum complexity. The basic concepts and
functionalities have been developed and implemented for more than 30 years,
but the term ERP was coined by Gartner in 1990. In the original definition,
which came from manufacturing resource planning (MRP II), ERP systems’
functionality normally covered finance and accounting (general ledger,
accounts payable and accounts receivable), purchasing, HR management,
sales or customer order management, and operations management. Gartner
now speaks of postmodern ERP, which it describes as “a technology strategy
that automates and links administrative and operational business capabilities
(such as finance, HR, purchasing, manufacturing and distribution) with appro-
priate levels of integration that balance the benefits of vendor-delivered inte-
gration against business flexibility and agility. This definition highlights that
there are two categories of ERP strategy: administrative and operational.”1
1 www.gartner.com/it-glossary/postmodern-erp
a technology strategy that
automates and links
administrative and operational
business capabilities (such
as finance, HR, purchasing,
manufacturing and distribution)
with appropriate levels of
integration that balance the
benefits of vendor-delivered
integration against business
flexibility and agility. This
definition highlights that
there are two categories of
ERP strategy: administrative
and operational.
POSTMODERN ERP IS…
RISK
OPPORTUNITY
4 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
Because these systems are central to today’s enterprise operations, their
selection must confirm that the features and functionality they provide take
into account the rapidly changing nature of global manufacturing and help
address the challenges that poses. As Gartner notes, companies “need ERP
systems that support flexibility rather than inhibit it.”2 They need software
that enables business agility.
This paper explores some of the common business challenges faced by
today’s manufacturing and high-tech organizations, how the right software
addresses these challenges, and posits a number of key selection factors
that will optimize ROI on software investment for those in the sector.
COMMON BUSINESS CHALLENGES
While each manufacturer has its specific needs and requirements, the nature
of today’s competition presents a number of challenges that tend to be common
across manufacturing organizations. Here are a few of the most prominent:
COMPLIANCE ISSUES
Regulations and regulatory compliance are particularly important in the manu-
facturing sector. For example, according to the National Association of
Manufacturers, the average manufacturing firm in the United States pays
nearly twice the compliance costs of the average U.S. firm; small manufactur-
ers pay nearly three times as much as the average.3 Additionally, as global
trade increases, international standards take on greater importance. These
can range from multiple ISO standards to directives that have been intro-
duced by the European Union (EU) that are moving toward global recognition
as de facto or de jure international standards. In certain vertical sectors such
as medical device manufacturing, validation processes are critical. Keeping
compliance with such regulations is an ongoing concern for manufacturers,
not only from an adherence perspective, but also from a cost of documenta-
tion perspective.
RISING MARGIN PRESSURES
Regardless of the specific sector, margins for manufacturers are being
squeezed from multiple directions. In developed markets, top-line growth has
slowed or declined, whereas in emerging markets, margins are threatened by
rising labor costs, more expensive commodities, and cost of distribution.4
As such, manufacturers need more granular information on what margins are
being made when they’re taking or closing orders. If margins change based
on a supplier’s increasing costs, the manufacturer needs to be made aware
of that proactively, as it happens, so that action can be taken in response.
2 “Magic Quadrant for Single-Instance ERP for Product-Centric Midmarket Companies,” Gartner
(Christian Hestermann, Nigel Montgomery, Chris Pang, Michael Guay, analysts), November 24, 2014.
3 “Regulatory Reform,” National Association of Manufacturers, www.nam.org/Issues/Regulatory-Reform
4 Margin Unlocked, EY, 2013.
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5 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
GREATER VISIBILITY AND MORE GRANULAR INFORMATION
A more project-based approach is rapidly emerging in manufacturing. Years
ago, designers and engineers were just treated as overheads within the
business. Today’s manufacturers want to know how much time and effort
—specifically and from where—have gone into designing a new product.
How much time (and money) was spent with a customer working on a product
design? How much did we budget? What resources have been used so far?
How many can we expect to use? This process can entail anything from
finance doing credit checks to engineers doing drawings to prototype production
to manufacturing set-up. Visibility of the time/expense plan is increasingly
crucial for many manufacturers, and granular detail is key.
CONSUMER DEMAND
Many manufacturers must now account for individual consumers as well as
traditional industrial customers. This trend is particularly growing in the
environmental arena (perhaps to a greater degree in Europe than America),
where consumers are demanding verification that what they are purchasing
has been manufactured in a sustainable way. Increasingly, it’s important for
manufacturers to have eco-footprint information within their systems to report
their carbon footprint, recyclable packaging used, etc. And products down to
component level need to be completely traceable. Further, they need to comply
—and demonstrate compliance—with standards like REACH and RoHS, and
EU directives like those on energy labeling, ecodesign and energy-related
products (ErP). This information needs to be reportable internally, to share-
holders, and increasingly to the public at large.
STANDARDIZATION
Particularly as operations extend across disparate locations or geographical
borders, manufacturers and high-tech organizations are looking for ways to
standardize their business processes across multiple sites for consistency
and cost reduction factors. This need extends from design to production to
service, and applies to smaller manufacturers (e.g., a company building a
product at two different local sites) as well as to global enterprises that may
manufacture in one country and assemble in another.
DISRUPTIVE INNOVATIONS
Disruptive innovations are those that help create new markets and value
networks, eventually disrupting an existing market and value network (over a
few years or decades), and displacing earlier technologies. When new tech-
nologies emerge, the decline of industries is neither rapid nor immediate; but
successful manufacturers understand that growth demands innovation, and
innovation in the sector cannot occur without embracing technologically-
advanced manufacturing capabilities.5
Perhaps the most visible of today’s disruptive technologies is additive
manufacturing, also known as 3-D printing. In the future, smaller, highly
specialized 3-D printing companies will emerge to serve a local area on
demand.
5 Disruptive Manufacturing, Deloitte LLP, https://www2.deloitte.com/content/dam/Deloitte/ca/
Documents/insights-and-issues/ca-en-insights-issues-disruptive-manufacturing.pdf.
6 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
So instead of manufacturers buying components such as spare parts and
having them shipped from afar, or buying a machine and putting it into the
warehouse and taking up stock and cost from a financial point of view, they
could wait until a part failed, send a command, and have it printed on
demand within hours.
At the moment, quality issues are the principal impediment to broad
adoption of 3-D printing, but these issues will abate over time. Yet, while the
technology has significant and transformative advantages (e.g., rapid proto-
typing, reduced lead times, rapid innovation, rapid manufacturing, mass
customization, use of unique materials), it also brings new risk: according to
studies, by 2018, 3-D printing will result in the loss of $100 billion due to
counterfeiting of parts.6 This in turn will lead to more innovation to counter
that risk, as manufacturers look to embed “plant DNA” in products to check
for validity and contract adherence.
The Internet of Things (IoT) is another development moving rapidly from
the consumer marketplace to manufacturing. Sensors are being embedded to
provide machine-to-machine communications for applications such as remote
monitoring and control, enabling manufacturers to get information and act
upon it remotely. This is speeding maintenance while driving down costs
(e.g., no longer having to send engineers into the field for maintenance on
remote installations) through preventive maintenance and improved asset
management (i.e., asset self-management).
Other examples of disruptive innovation range from those becoming more
established (e.g., cloud computing) to nascent but potentially revolutionary
developments such as nanotechnology. As with 3-D printing, nanotechnology
has the potential to localize global supply chains with very direct paths from
raw materials through to finished products.7
Into our era of Industry 4.0 and the smart factory comes Blockchain, a
secure distributed electronic ledger that connects parties in a network of
trust and integrity to facilitate the transfer of assets and the information
pertaining to those assets. Blockchain is already beginning to alter the way
transactions are carried out by bringing parties together in a trusted network
without a third party and by recording each transaction sequentially and
securely. Usually associated with Bitcoin, a range of industries are now see-
ing the business benefits it can bring. These include:
Efficiency: As transactions are completed directly between the relevant
parties with no intermediary and with digitized information, settling the
transaction can be quick. Added to this is the ability to operate ‘smart
contracts’ which automatically trigger commercial actions based on satisfying
the criteria laid out in the contract. This can dramatically streamline processes
and in doing so, remove time and cost from transacting.
Auditability: As each transaction is recorded sequentially and indefinitely, it
provides an indelible audit trail for the life of an asset even between parties.
This is especially important if source data is essential in verifying an assets
authenticity.
6 “Gartner Says Use of 3D Printing Will Ignite Major Debate on Ethics and Regulation,”
Gartner press release, January 29, 2014.
7 “Manufacturing’s three biggest disruptive technologies,” The Manufacturer, November 6, 2014.
LO
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MEDIUM HIGH
7 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
Traceability: Tracking goods in a supply chain can be advantageous when
seeking to trace where components are currently residing. Information
relating to the component can then be relayed to or from the new owner for
possible action.
Transparency: Lack of commercial transparency can sometimes lead to delays
in commerce and a breakdown in relations. By providing details of transactions
against the commercial construct, further trust can be enlisted within the
process and so provide a more stable relationship based on transparency
rather than negotiation.
Security: As each transaction is verified within the network using indepen-
dently verified complex cryptography, the authenticity of the information can
be assured. Assured information is one of the fundamental keys to unlocking
the benefits of the Internet of Things (IoT), which is a closed loop cyber
autonomous process linking assets to actions.
Feedback: With full traceability throughout the lifecycle of an asset, asset
designers and manufacturers can accommodate through-life asset manage-
ment into their products to make them more effective. This can allow for
information returning from shipping, installation, maintenance and decommis-
sioning.
Blockchain is yet another ‘disruptor’ that can provide enormous opportunities
for digitally savvy companies who adopt it fast.
HOW THE RIGHT SOFTWARE ADDRESSES BUSINESS
CHALLENGES
The right business software supports manufacturing’s ability to meet emerg-
ing challenges and respond to constant change by providing the foundation
for enterprise agility. The concept of manufacturing agility involves the devel-
opment of manufacturing capabilities to achieve sustained competitive
advantage in an unpredictable environment.8 Agility is the product of three
foundational blocks—vision, knowledge, and flexibility—that effectively
designed and developed software facilitates across the business.
VISION
Vision is the ability to link business strategy and growth aspira-
tions to technology investment, and to make informed decisions
that prove effective over time. Clear vision enables a manufacturer
to correctly assess and balance the risks and opportunities of disruptive
technologies. The right business software helps focus and clarify vision.
KNOWLEDGE
Knowledge is the ability to identify, understand, and predict new
sources of threat or opportunity across daily business operations
and projects. Knowledge enables business insight, the most
valuable form of which comes from the ability to assemble a clear, compre-
hensive, and accurate view of the past, present, and future status of
8 Sud-on, P., Abareshi, A., Pittayachewan, S., and Teo, L., “Manufacturing Agility: Construct and
Instrument Development,” World Academy of Science, Engineering and Technology, 82 2013, p 755.
The right business software
supports manufacturing’s
ability to meet emerging
challenges and respond to
constant change by
providing the foundation for
enterprise agility.
8 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
assets, infrastructure, and employees, across even the most complex global
operations and projects. The right business software gathers, assembles,
and disseminates knowledge in real time, where and when it is needed.
FLEXIBILITY
Flexibility is the ability to take action rapidly when things happen,
expectedly or unexpectedly, founded on technology that makes
rapid and responsive change possible. The right software is a
critical part of this technology. Vision and knowledge are not fully empowered
unless an organization has the flexibility to rapidly change its shape or focus
to seize new opportunity or mitigate risk. Flexible business technology is
necessary for this, but so too is a business culture that embraces rather
than hinders change and rapid response.
10 KEY QUESTIONS TO ASK WHEN SELECTING
ENTERPRISE SOFTWARE
To see whether software under consideration is meeting the needs of today’s
evolving manufacturing environment, the following questions are key:
1. DOES THE SOFTWARE SUPPORT RAPID BUSINESS CHANGE?
An organization’s software should help it plan for change. Change is
constant and the most dominant characteristic of today’s business
environment, so the ability to plan for the unknown makes it possible for
agile companies to thrive. Long-term planning is not about being able to
predict every future, but being able to respond fast and smartly enough
to capitalize on change. Effective software facilitates the ability to change
—not only forecast information, but also supply and demand output,
quickly, and provide visibility into what impacts the change will make.
In today’s markets, where new product introduction is increasingly essen-
tial to growth, enterprise software should help facilitate and control new
product introduction.
2. DOES THE SOFTWARE PROVIDE ESSENTIAL ACCESS TO DATA—THE RIGHT
DATA FOR THE RIGHT PEOPLE AT THE RIGHT TIME?
Data-driven decision-making is central to enterprise operations, but the
proliferation of data can be overwhelming for users. Well-designed soft-
ware delivers data to users in ways they can use it, wherever they are,
whenever they need it, without delay or variation. Having data in a single
place, accessible from any device, is key. A company doesn’t want to
have to hold up production because it’s waiting for signoff from a
production supervisor who is traveling on another continent. If he or she
can review it on a smartphone, the company can act now. With older
software systems, this wasn’t possible.
3. DOES THE SOFTWARE ALLOW FOR FUTURE GROWTH?
The boundaries between manufacturing and distributing organizations
have been slowly disappearing; more manufacturing companies have
been distributing and servicing their products, which has led to tighter
integration of ERP, CRM, and supply chain management (SCM) solutions.
9 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
Many companies that today are manufacturing only may be looking to
add service to their portfolios. These companies are served by software
that meets their current need but also has the capability to handle future
development in the system.
4. IS THE SOFTWARE APPEALING TO TODAY’S GENERATION OF WORKERS?
As the manufacturing workforce ages, a younger generation is coming
into the sector. The longstanding perception of manufacturing as a
smokestack environment (i.e., dirty, greasy, unhealthy) is giving way to
the reality of high-tech manufacturing, much more appealing to those
that grew up in the digital age. When younger people come into manufac-
turing, they don’t want to work with a green-screen application; they want
something that they are familiar with (i.e. graphic sophistication, touch-
screens, apps to download onto a phone). How will younger workers
—soon to be a majority in the workforce—respond to the software
presentation?
5. IS THE SOFTWARE USABLE IN TODAY’S CHANGING WORK ENVIRONMENT?
Related to the question above, usability speaks to the way work is done
differently today, which is something influenced by the younger generation,
but certainly not limited to them. Increasingly, the workplace is where we
happen to be, which may not be within the “four walls” of the organiza-
tion. This has certain implications for software. Is it mobile? Can it be
accessed and comprehended by sophisticated and casual users on
multiple devices: laptops, tablets, smartphones and, in the coming
years, wearable technology like watches? Does it provide role-based
portals and interfaces? Is it intuitive to anyone who sits in front of it?
6. IS THE SOFTWARE’S CRM DISCRETE OR EMBEDDED?
Customer relationship management is increasingly important in today’s
manufacturing market, and nearly all software providers will have CRM
as a separate but integrated package. But it’s still in a separate world.
This becomes an issue when manufacturers set up more complex
relationships (e.g., from opportunity to sales to contract delivery), which
typically requires integration work. Further, there are user experience
issues, including not being able to drill through CRM all the way to the
back office nore from the back office into CRM. When CRM is embedded
in the enterprise software, those issues are taken off the table. There is
no need for integration work. Users can now drill through in both directions,
which can be an important advantage.
7. DOES THE SOFTWARE PROVIDE DEPLOYMENT OPTIONS?
Single instance, on-premise enterprise systems are rapidly being relegated
to the past as hybrid models continue to grow toward the norm. Whereas
the majority of those hybrids are a combination of core and point solutions
(on-premise) from multiple vendors, increasingly manufacturers will use
cloud-based point solutions as an essential part of the hybrid approach.
This is inevitable, particularly as manufacturing operations take on global
scope. Does your software provide real deployment flexibility?
10 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
8. DOES THE SOFTWARE SPEED EXECUTION OF TASKS?
While provision of real-time data is increasingly a given for enterprise
software, is this translating into faster execution of essential work?
Consider financials. It’s not uncommon to find manufacturers where it
takes over a week to do month’s end financials. Frankly, it should not
take more than a day or two. When companies aren’t able to close their
books until the middle of the next month, something isn’t right with the
software system. Software should enable companies to have information
they can believe and trust, in one system, so when they print out a trial
balance they believe the numbers generated. There shouldn’t be a need
to wait for information (e.g., for production to indicate how much WIP
they have, or accounting to report accruals). Real-time data is often over-
looked these days, because companies are not used to it; but it’s still a
shock when a company tells you it takes a week to do a month’s end
report.
9. HOW BROAD AND DEEP IS THE SOFTWARE SOLUTION?
Can the software system phase out the use of multiple systems,
eliminating undue complexity and cost? Today many manufacturers are
multi-modal: some products are made to order, some made to stock,
some engineered to order, some assembled to order, and some config-
ured to order. Can your software handle all these approaches? If you set
an approach today, do you have the ability to easily change over in a
week’s, month’s, or year’s time? A broad and deep solution will provide
this capability.
10. CUSTOMIZATION OR CONFIGURATION? IS THE SOFTWARE EASY TO MODIFY?
Because change will make it likely for a company to want to modify its
software over time, how easy and how costly will it be to make that
change? The best systems enable users to add their own fields, events,
and so on without having to go back to the software provider for custom-
ization. Configuration is part of the functionality out of the box and easy
to do, not part of an upgrade or requiring additional costs.
WHAT ARE PEERS SAYING?
Finally, companies are well served by looking to respected analysts who
assess the status of software providers. Of those who study enterprise soft-
ware and systems, the best known and perhaps most highly respected is
Stamford, Connecticut-based Gartner.
Gartner publishes Peer Insights9 that offer “impactful insights from real
IT decision makers”. The insights are described as follows: “Free of vendor
influence, Gartner Peer Insights offers detailed perspectives for every phase
of the IT lifecycle—from evaluation and implementation to service and support.”
Below are some of the things peers (Manufacturing CIOs, CFOs, CTOs) are
saying about IFS Applications and why they bought it:
9 www.gartner.com/reviews/home
11 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
What do you like most about the product or service?
• It's flexibility to make personalizations without having to customize the
product, and move those personalizations forward with each new release
(CIO, Manufacturing)
• Very stable application with all modules tightly integrated.
• The consistency of the experience over the years.
• The security and the integrity of the system are up to the mark.
What were the key factors that drove your decision?
• Product functionality and performance
• Strong customer focus
• Breadth of services
• Financial/organizational viability
• Pre-existing relationships
• Product roadmap and future vision
• Strong services expertise
• Strong user community
READY FOR SERVITIZATION AND WHAT’S NEXT?
Companies that have added service to their offerings, adapted their organiza-
tions to enable this and acquired the requisite technology (often in the form
of integrated, full-scope enterprise software) have confronted the question of
‘What’s next?—and reaped significant benefits. In fact, adding service
contributes to much of what is the very essence of good business, viz. actively
looking to the future and seeking to shape it, to create opportunities rather
than merely grasp those that arise. Benefits reported include:
Enhanced revenue—reported growth between 2x and 4x
Better margins—increases of 3–10% reported
Sustainable business growth—increases of up 5–10% reported
Greater customer satisfaction—they are getting what they want
More repeat business, greater market share, and a better reputation
Predictable income streams
12 ERP SOFTWARE THAT PREPARES MANUFACTURING AND HIGH-TECH ORGANIZATIONS FOR WHAT’S NEXT
Combining a comprehensive suite of enterprise software that covers ERP,
EAM, ESM (Enterprise Service Management), FSM (IFS Field Service
Management™), IFS Enterprise Operational Intelligence™ (IFS EOI™) and
advanced analytics, IFS enables manufacturers to actively take part in the
transformation process, giving them the capabilities and insights to make
decisions based on real-time statuses to not only meet customer needs but
also anticipate them. Being able to handle today’s business challenges is
important; shaping what’s next is crucial to growth and continued success.
ABOUT ANTONY BOURNE
As Vice President of Global Industry Solutions, Antony leads a team of global industry
experts who cover the IFS focused industries, and support sales, marketing and
partner enablement. Antony is a lead spokesperson for IFS and represents the
company in multiple internal and external events, analyst updates (including Gartner,
IDC, and ARC), publications, blogs and press articles. He also has extensive experience
of multiple industries (including Manufacturing, Construction, Life Sciences and High
Tech), having dealt with hundreds of companies that have gone through the software
selection and implementation process. This includes hosting customer advisory
councils in conjunction with R&D, which ensures the product strategy is in line with
industry expectations.
Antony has over 20 years’ experience in the IT industry, including working in the
manufacturing sector. Prior to joining IFS in 1997, he held business analyst positions
with Ford Motor Company and AlliedSignal. During this time, he implemented ERP
applications as well as business process improvements.
Antony holds a bachelor's degree in Computer Science from the University of
Glamorgan and is a member of Mensa.
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