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By Andy Harris • August 17, 2018

Why Manufacturers Need Cloud ERP

The value of ERP systems is widely understood in the manufacturing community. The importance of a digital system of record for tracking all aspects of production and distribution in real-time is an essential feature of modern manufacturing operations.

Sometimes less clear is why cloud-based ERP is so important today. The North American cloud ERP market will grow from $8.4 billion this year to $11.1 billion by 2022, accounting for nearly half of all ERP spending, but some manufacturers have been slow to adopt cloud ERP because implementing a new ERP solution is typically a major undertaking and their current on-premise solution seems passably sufficient.

Cloud ERP makes a significant difference for manufacturers, however, and implementing a new cloud-based solution is a lot less expensive and time-consuming than manufacturers realize.

 

The Advantages of Adopting Cloud ERP for Manufacturing

There are many reasons why manufacturers should be adopting a cloud-based ERP solution today.

  1. Real-Time Decision-Making

First, cloud-based solutions let manufacturers connect equipment and personnel regardless of their location. This opens the door for faster decision-making because information is shared and accessible in real-time from any internet-enabled device. Cloud ERP can help manufactures identify bottlenecks and managing inventory in real-time, as well as shorten the quotation cycle and time-to-market.

With a fully connected system, one that also can be connected with suppliers in real-time, manufactures also can develop and manage more complex pricing scenarios.

  1. Better Customer Service

Because cloud ERP is more connected, it also helps manufacturers interact more deeply with consumers. Cloud-based ERP helps manufactures automate some of the routine customer service components, such as the automation of reporting and replacement of defective products.

It also can easily connect with online ordering systems for faster made-to-order processing and feedback from the customer, and increased opportunities for customization.

  1. Heightened Productivity

With manufacturers able to give role-specific access to any employee with a connected device such as a tablet or smartphone, cloud ERP also can improve productivity. Both line workers and plant managers can report and access production data in real-time, improving responsiveness and driving greater efficiency.

Inventory and supplier performance can be optimized more finely with a connected system of record in the cloud, and manufacturers can set up more complex supply chains and flexible manufacturing strategies more easily that take full advantage of manufacturing capacity and current market conditions.

  1. Greater Supply Chain Connectivity

Along with better connectivity among employees, cloud-based ERP also facilitates increased connections among suppliers. Cloud-based ERP systems are always accessible, so they connect easily both with internal and external IT systems through direct integration, application programmer interface (API) or custom integration.

Cloud ERP lets manufacturers more easily connect their ERP systems to those of their suppliers, updating stock, communicating production requirements, signaling depletions and enabling manufacturers to treat suppliers more completely as part of their overall operations. Some pundits even have predicted that cloud ERP will create networks of manufacturing networks, opening the door for new profit centers.

 Increased Agility

 Since cloud-based ERP is maintained by the vendor, manufactures gain added agility by being better able to scale up or down their software systems as demand and market opportunity necessitate. They can take advantage of the latest technologies, such as Internet-of-Things (IoT), because their ERP is updated with the latest technology as it is introduced, instead of having to invest in periodic in-house system upgrades by their IT department.

Manufacturers also can integrate more easily with other systems, facilitating added flexibility and new business models.

Upgrading is Easier, Too

The cost and complexity of rolling out a cloud-based ERP system is far less than on-premise solutions as well, making the switch easier than many manufacturers think.

While the rollout of a new on-premise ERP solution typically takes between 12-36 months, Strategy& research has shown that cloud ERP implementation only takes between 4-8 months. Further, the total cost of ownership for a cloud-based ERP system can be as much as 50 to 60 percent less than on-premise solutions over a 10-year period, according to Strategy&.

So cloud-based ERP is not only faster to implement and updates itself as new technology emerges, it also saves money (and shifts the cost from a capital expense to an operating expense because it is purchased as a subscription).

All this makes cloud ERP an important system upgrade for manufacturers, one that helps firms stay competitive, opens up new market opportunities, and drives down costs at the same time.

If your business is still running an on-premise ERP solution, learn more about what cloud ERP can do for your manufacturing operation and take part in a live demo of our SAP Business ByDesign ERP solution for manufacturers. Learn more about cloud ERP for manufacturers here.