The use of Enterprise Resource Planning (ERP) systems is rapidly changing to reflect the changing requirements of manufacturers’ business models in general and their specific needs for better aligning manufacturing and service to customer needs.
ERP systems in the past focused on achieving high levels of internal production efficiency, and the balancing of customer demand with available product supply was left to Marketing, Sales and the distribution channels to contend with and solve. Today however the best performing manufacturing companies are making the entire process from initially sourcing products to taking both off-the-shelf and highly customized product orders as efficient as possible from the customers’ perspective.
In the companies I’ve worked for and with, the ability to take orders for customized products and fulfill them through manufacturing centers originally designed to be as efficient as possible at make-to-stock production symbolizes the change in ERP systems today. These systems are being forced into being much more agile, much more aligned to the needs of customers and the ability to respond quickly to demand in the form of quotes and orders. The ability of ERP systems to be agile in both collaboration with suppliers on the one hand, scheduling production to fulfill customers demands on the other, while planning production based on the customer demands is the evolving best practices in ERP implementation today (AMR Research 2005). There is also the role of ERP as the foundation for integration across all customer-facing strategies and the need to have a single version of the truth overall (Jutras, 2006).
ERP Systems and Multi-Channel Management
Of the ERP systems’ major challenges, one of the most challenging is supporting both multi-channel management and product configuration strategies. First, multi-channel management, or the selling of products through websites, direct sales forces, indirect selling channels, telemarketing and others, requires ERP systems to have real-time integration with pricing, inventory, and production status (Askegar and Columbus, 2002). Many manufacturers also include channel management with product configuration strategies, which include the ability to customize product configurations based on customers’ requirements. This is called the quote-to-order process and is often found in many electronics companies. ERP systems’ integration is critical for these processes to be supported (Columbus 2003) as is the ability to coordinate suppliers of specifically developed components on the one hand, and the ability to tailor a product to the specific needs of customers through the production process on the other.
In summary, ERP systems have become much more agile, market-driven and centered on the customer. The days of ERP systems being inward and myopic in focus are gone, and there is a definite prioritization of using integration across all customer-facing processes and supplier enablement integration points to be more responsive to customer needs.
AMR Research (2003) – Configuration is the Heart of Customer Fulfillment for Complex Product Manufacturers. AMR Research Report. Monday March 31, 2003.
AMR Research (2005) – The Handbook of Becoming Demand Driven. AMR Research Report October 6, 2006. Kevin O’Mara. Boston, MA
Askegar and Columbus (2002) – Channel Management Best Practices: It’s All About Orders. AMR Research Report. Monday September 9, 2002.
Jutras, Julie (2006) – The Proliferation of Enterprise Applications: The Question of Consolidation. Report published in July, 2006. Julie Jutras, VP Manufacturing Strategies. Aberdeen Group. Boston, MA