This is Part 2 of a series of blogs about the impact of the Fourth Industrial Revolution.  Part 1 explores what Industry 4.0 is and the technologies powering it.

The question shouldn’t be “MES or ERP?” for a growing manufacturing business.  In order to become a Smart Factory and utilize Industry 4.0 technologies like Big Data and the IoT, you’ll need an integrated ERP & MES solution that allows for real-time data exchange.

While ERP systems control administrating logistics and business processes at a higher level across the company, MES systems are very closely connected to the production line and are used to continuously optimize production, while also recording information and technical parameters of the manufacturing process.  The challenge is integrating the processes at the interface between company level ERP and plant management level MES.  The boundaries between ERP and MES systems will likely become increasingly blurred in the Industry 4.0 model.  The top floor is becoming more and more integrated with the shop floor, and fulfillment of typical tasks of MES systems are being taken over by ERP systems.  Meanwhile, classic tasks performed by ERP systems are moving to MES planning.

The integration of ERP and MES starts will a cultural shift within an organization that allows them to effectively embrace emerging technologies like the IoT, Big Data, Mobile and Cloud computing.  Embracing these otherwise disruptive technologies involves adding new data and process integration capabilities to operations and improving flow/use of data throughout the organization.  ERP and MES integration span structural data, job scheduling, production reporting, machine and product availability, promise-to-order, labor and equipment utilization by creating a seamless, bi-directional information environment and improving operational effectiveness and responsiveness.

5 Ways Integrating ERP With MES Can Make Manufacturing Leaner

1. Accurate Demand Forecasts

Underestimating demand means stockouts.  Running out of product hurts customer relationships.  Yet, overestimating demand means excess inventory which ties up cash and can’t quickly be turned into profit.  Inventory typically comprises anywhere between 25% and 40% of assets, meaning demand uncertainty can be the single largest influence on stock levels.  An integrated ERP and MES system allows for more accurate demand forecasts, reducing inventories by avoiding overproduction without risking stockouts.

2. Real-Time Production Adjustments

Real-time reconciliation of demand changes recorded within the ERP software with manufacturing schedules within the MES system ensure that the quantities of products manufactured are more closely aligned with demand.  Cyber physical systems like wireless sensor and actuator networks (WSAN) provide servo and motor control via the IoT and traditional computer numerical control (CNC) methods that allow the factory floor to make in-progress production adjustments for leaner, more efficient manufacturing.

3. Just-In-Time Supply Chain And Delivery

The Just in Time or JIT method of manufacturing and inventory control reduces the amount of inventory throughout the supply chain.  It creates movement of material into a specific location at the required time.  This reduces the need to store excessive levels of inventory or safety stock, because materials will be brought into the production process, warehouse, or to the customer just in time to be used.  However, this cost saving methodology is only possible if each operation within a manufacturing or supply chain process is synchronized and customer demand in each operation is forecasted accurately.

With an integrated ERP and MES system, supply chain managers can track inbound and outbound inventory accurately, allowing them to react in real-time to demand changes.  ERP schedules can incorporate quicker production times based on latest improvements on the factory floor.  By utilizing the IoT and Big Data, organizations can create just-in-time schedules and eliminate safety stocks.  Any downtime due to damaged or defective equipment can be instantly reported to the ERP system, which can adjust delivery dates accordingly.

4. Avoid Rush Orders

An integrated ERP and MES system allows manufacturers to reorder from suppliers before inventory falls below a certain level, avoiding last minute rush orders and production delays.  Rush orders are one of the main types of supply chain issues because of their negative impact on overall performance.  In addition to production delays, rush orders also lead to additional charges for expedited deliveries and negative customer experiences.

5. Seamless Change Orders

Product changes requested by customers need to be transferred to production systems immediately to avoid delays.  Likewise, changes in manufacturing processes must be reported to enterprise systems so that pricing and delivery estimates can be adjusted accordingly.  An integrated system supports an efficient execution of change orders by sharing these types of changes between departments in real-time.

Is Your ERP System Industry 4.0 Compatible?

It’s clear that growth for manufacturers during the Fourth Industrial Revolution will be intrinsically linked to their ERP system’s capabilities.  Manufacturers need to address whether their existing ERP solution has the functionalities required to be successful in Industry 4.0.

1. Is Your ERP System Flexible?

As with any disruptive technology, embracing Industry 4.0 and becoming a smart factory is a journey without a clear destination.  This means that you’ll need a flexible system that can take advantage of new technologies as they’re developed and become available.  Manufacturers will benefit most from an ERP software with flexible deployment options that allow them to adapt to new business and service opportunities, new processes, workflows, data networks, and decentralized locations, all in real time.

2. Does Your MES Integrate Seamlessly With Your ERP?

The best way to take advantage of the IoT, Big Data, and other Industry 4.0 technologies is through real-time data exchange made possible through seamlessly integrated systems.  The best next generation ERP solutions are able to integrate with an MES (Manufacturing Execution Systems) solution effectively.  This will allow manufacturers to link their production lines to their higher-level business processes for increased visibility and decision-making.

3. Is Your ERP Software Capable Of Central Data Management?

Modern ERP solutions must offer a modular platform that can be easily customized without costly source code customizations.  This lends itself to the systems flexibility, allowing the system to quickly adapt to future technological developments.  Systems should also allow for central master data management and real-time data processing.  This enables all parties to view the same information about projects, customers, raw materials or locations, and helps manufacturers improve their customer experience and speed to market.

4. Is Your ERP System Mobile And Social?

User-friendly access to ERP information via tablets and smartphones is vital for flexible communication and data sharing across departments.  Mobile responsive, intuitive dashboards will be key to businesses embracing Industry 4.0 technologies and sharing information from the palm of their hand on the shop floor, all the way to the top floor.  Social collaboration is another feature of modern ERP solutions that is gaining ever more importance in the manufacturing space.  By integrating social capabilities, ERP solutions help external partners, suppliers, and customers become part of the business process.  Embedded in the ERP system, information from these social interactions are stored centrally in context with ERP data.

5. Can Your ERP System Handle Big Data?

Modern ERP solutions must have powerful analytics and Business Intelligence functions to make sense of the massive amounts of data being generated by the Internet of Things and other Industry 4.0 technologies.  Planning and management functions can ensure that the benefits of intelligent manufacturing are utilized by every department.

Check out Part 1 of this Industry 4.0 series to learn everything you need to know about the emerging technologies fueling the Fourth Industrial Revolution!

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