The manufacturing sector of the economy was an early user of ERP systems when the software first emerged, but surprisingly, most manufacturers have been slow to adopt cloud ERP. By 2010, only about 5% of manufacturing companies were using cloud ERP. One reason for this slow adoption is that many ERP providers were slow at developing the solutions that manufacturers needed. Although numerous retail and wholesale companies, as well as service firms, have adopted cloud ERP, manufacturing companies have an extra layer of complexity: Myriad functionality needs and different design considerations which necessitate more specialized solutions.
Manufacturers have other concerns about moving to the cloud. Despite the fact that they are more likely to be hacked on their in-house solution, they worry about the security of their data in the cloud. Cloud providers have attempted to alleviate these concerns by offering security certifications that guarantee the privacy and security of company information. There is also concern about the performance and uptime capabilities of cloud options, but today, many providers are offering service level agreements of 99% uptime.
These concerns aside, cloud ERP offers manufacturers numerous advantages. With cloud services, manufacturers don’t have to perform their own back-ups, patches, or upgrades. Often, the total cost of ownership is lower than on-premises solutions since companies do not need to purchase and maintain complicated equipment or keep dedicated IT staff on hand. Many ERP vendors offer more reliable tech support than what companies can have in-house.
Cloud ERP also offers the flexibility that many manufacturers need, allowing sales reps to access real-time information globally and employees on the manufacturing floor to keep track of data with tablets. It offers the potential to coordinate just about every aspect of a manufacturing environment so that different departments can work together more seamlessly and effortlessly. Cloud ERP can be particularly helpful in the distribution process since it lets companies open a new distribution center and bring it online quickly. If your business has different locations, cloud ERP can help you manage your distribution resources across many locations.
Cloud ERP is particularly beneficial for small and mid-sized businesses, many of which have been relying on smaller financial packages and spreadsheets to keep track of data because the cost of an ERP system had been prohibitive. Many small businesses are discovering that ERP is affordable and they are becoming aware of the advantages it offers. A recent survey by IDC Insights discovered that 25% of small businesses are implementing cloud ERP and another 20% are considering a move to the cloud.
In the past, R&D, sales people, workers on the shop floor, accounting, and human resources were on their own little islands. Each group would have a small data set that was part of a larger picture. Since reports were run on different systems, each report would get a different result. With ERP, you can have a common language because everyone is using the same information. Cloud ERP provides visibility across all sectors of an organization, from the manufacturing floor to sales and even suppliers, which is a huge advantage. Real-time data gathering allows for more informed decision making; in an increasingly competitive global marketplace, manufacturers need every advantage they can get.
Another advantage cloud ERP offers: It can be used anywhere. Consider a company that buys smaller businesses worldwide. When they add a new company, they can simply say, “Here is our company network, just plug in.” There is no need for vendor resources to be on site. Cloud ERP makes the process much simpler and accelerates the speed to market so they can be more competitive. This business model could be used worldwide.
Cloud ERP has the potential to transform the way companies do business, from manufacturing and distribution to sales. It has the capability to level the playing field between small and midsize businesses and their larger competitors. If your company is not already part of the 45% of companies implementing or investigating cloud ERP, it may be in your best interest to check it out.
By John Schlemmer,