Ecosystem-wide resource planning for manufacturers

The industry transformation so far

In the 1950s, manufacturing pioneers conceptualized material requirements planning (MRP-I), an early iteration of integrated information systems, which was then followed by manufacturing resource planning (MRP-II), a more closed-loop version.

Over time, the demand for better organized coordination and integration methods gave rise to enterprise resource planning (ERP-I) systems. However, with manufacturing businesses becoming increasingly distributed, globalized, and complex, they are moving towards a synergy – coordination between various entities in a larger networked value-creation process. We believe that forward-thinking manufacturers will gradually move towards ecosystem-wide resource planning (ERP-II).

What is ERP-II?

Traditional ERP-I applications manage value-driven processes within enterprise boundaries.

However, these boundaries are blurring amongst businesses and industries as they collaborate and create new business models, making it imperative to adopt a new generation of cloud-first and data-driven solutions. Manufacturers must embrace partners beyond enterprise boundaries, including but not limited to suppliers, developers, government, the internet of things (IoT), and even customers.

ERP-II systems are not just moving from an on-premise deployment to running on cloud infrastructure, but rather will be designed and built to run on the cloud from day one. Keeping in mind that IoT doesn’t end inside an organization, but extends to every smart, connected product, ERP-II will handle large volumes of structured and unstructured data along with an analytics engine to support the manufacturing of connected products.

For instance, let’s look at automotive OEMs in the ERP-II context. If a vehicle breaks down, OEMs now have the opportunity to create purpose-driven clouds with ERP-II, wherein data is sent to notify different functions such as insurance, roadside assistance, and more outside of the OEM for a seamless customer experience. This means, instead of implementing a solution to various sites, an enterprise in the new paradigm will onboard other businesses and sites onto the cloud.

The need for a digital mindset

Adopting ERP-II doesn’t just start with transforming legacy systems; it also demands a change in the mindset.

Here are 10 factors that define the ‘digital mindset’:

Products mindset: ERP-II consists of software products and not applications, that perform specific functions. The ability to rightly identify what constitutes these products is a critical success factor.

Data monetization mindset: ERP-II is all about consuming and providing services through APIs. Traditional manufacturing companies will need an API economy mindset to monetize value of services and data.

Systems thinking: Designing and operating in the ERP-II world calls for constant monitoring of systems for failures and experiences.

Ecosystem, partnership mindset: Companies should move away from siloed thinking and embrace multiple partners, including startups. For example, an automotive OEM will need to work with 40+ different industry segments and sub-segments to provide a seamless customer experience.

Rapid innovation: Along with an approach toward minimum viable product (MVP), companies must have an agile mindset to drive incremental innovation.

Microservices mindset: Building smaller, independent, and loosely coupled services instead of a monolithic application will allow developers to become language and technology agnostic while applying a microservice that extends beyond one application.

Line of sight to value: When employees have a clear line of sight, they can articulate the relationship between what they do and what contributes to project, program, portfolio, and company success better.

Fail fast approach: With the freedom to fail, learning from each failure helps teams succeed faster in the next iteration.

User experience mindset: This mindset keeps the customer at the center of any design decision-making and all through the product creation journey.

Onboard versus implement mindset: Consultants will have to change their software approach of implementing services from a manufacturing plant to onboarding a manufacturing plant for services.

Measuring the success of ERP-II

Companies in the ERP-II world exist for two primary purposes – user experience and sustainability.

They will have access to lead indicators rather than lag indicators, such as:

• What would be the impact of ESG-based demand shift in manufacturing?

• What would be the next step in addressing semi-conductor shortage?

• How should automotive companies implement sustainable thinking through user interface and user experience trends?

The right kind of ERP-II implementation with its platform-based approach will allow any ecosystem to scale in a sustainable and agile manner while creating immense value for customers.