A fly in the ointment
As we move beyond the Information Age into the Digital Age, manufacturers are being challenged to envision and deploy new digital technologies to maintain competitiveness, improve performance and enhance relevance with their customers. A major point of resistance to achieving this digital future, is the antiquated and isolated ERP systems that are the backbone of these businesses. If your ERP system doesn’t support changing manufacturing methods, interactivity with the plethora of emerging services on the digital web, or connectivity to the assets and systems being empowered by the Internet of Things (IoT), what is a manufacturer to do? The likely answer is that your ERP system must be replaced before these other key elements of a digital transformation can be pursued.
ERP systems have become ubiquitous among manufacturers today. Can you think of a manufacturer of any size or scale that is not using an ERP system to help run their business today? In fact, many manufacturers have now deployed multiple ERP systems over their history. Either as major upgrades or outright replacements, as these systems have changed over the last several decades.
While ERP systems have become pervasive, what manufacturers are looking for in their ERP systems have changed dramatically. Where previously the focus was placed on aligning the functional features of the system to the needs of the business, manufacturers today are looking outside of that box. Examples of this change in perspective would include:
- Sharing data streams across multiple systems, platforms and web
- Data mobility everywhere at any time
- Machine-to-ERP connectivity
- Device-to-ERP data consumption and analytics (IoT)
- Support data required to enable Human-to-Device interfaces
- Embedded artificial intelligence and machine learning
- Adopting cloud-based data lake capabilities to manage Big Data repositories and analytics of that massive data set
- Conversion from products to services
- Transactional security via blockchain technologies
- Personalized experiences for customers, employees, partners, and stakeholders
ERP of the future
To reach the promised land of the digital future, manufacturers must change the way they think about their ERP systems. While the core mission of the traditional transactional ERP system remains in place, ERP systems of the future will need to extend beyond this definition to encompass a new reality – the Intelligent ERP system (or i-ERP). Many of the attributes of emerging i-ERP capabilities are captured in a recent report by IDC which outlines future trends in IT and Digital Transformation (DX):
IDC FutureScape: Worldwide IT Industry
- By 2021, at least 50% of global GDP will be digitized, with growth driven by digitally-enhanced offerings, operations and relationships; by 2020, investors will use platform/ecosystem, data value, and customer engagement metrics as valuation factors for all enterprises.
- By 2020, 60% of all enterprises will have fully articulated an organization-wide digital transformation (DX) platform strategy and will be in the process of implementing that strategy as the new IT core for competing in the digital economy.
- By 2021, spending on cloud services and cloud-enabling hardware, software and services will more than double to over $530 billion, leveraging the diversifying cloud environment that is 20% at the edge, over 15% specialized (non-x86) compute, and over 90% multicloud.
- By 2019, 40% of DX initiatives will use AI services; by 2021, 75% of commercial enterprise apps will use AI, over 90% of consumers will interact with customer support bots, and over 50% of new industrial robots will leverage AI.
- By 2021, enterprise apps will shift toward hyper-agile architectures, with 80% of application development on cloud platforms (PaaS) using microservices and cloud functions, and over 95% of new microservices deployed in containers.
- By 2020, human-digital (HD) interfaces will diversify, as 25% of field-service techs and over 25% of info workers use AR, nearly 50% of new mobile apps use voice as a primary interface and 50% of consumer-facing G2000s use biometric sensors to personalize experiences.
- By 2021, at least 25% of the G2000 will use blockchain services as a foundation for digital trust at scale; by 2020, 25% of top global transaction banks, nearly 30% of manufacturers and retailers and 20% of healthcare organizations will use blockchain networks in production.
- By 2020, 90% of large enterprises will generate revenue from data-as-a-service - from the sale of raw data, derived metrics, insights, and recommendations - up from nearly 50% in 2017.
- Improvements in simple ("low-/no-code") development tools will dramatically expand the number of non-tech developers over the next 36 months; by 2021, these nontraditional developers will build 20% of business applications and 30% of new application features (60% by 2027).
- By 2021, more than half of the G2000 will see an average of 1/3 of their digital services interactions come through their open API ecosystems, up from virtually 0% in 2017 - amplifying their digital reach far beyond their own customer interactions
Source: Frank Gens, IDC FutureScape: Worldwide IT Industry 2018 Predictions; IDC, Framingham, MA, October 2017
As the core business application for manufacturers, ERP systems will need to evolve dramatically to provide the capabilities of intelligent ERP that digital transformation journeys will require to be successful.
Microsoft Dynamics 365 for Finance and Operations
As a leader in provisioning transformative technologies for businesses, Microsoft and its flagship ERP solution—Dynamics 365 for Finance and Operations (D365FO)—is at the forefront of meeting the challenges of the coming Digital Age. Leveraging the already vast and rapidly expanding library of capabilities being developed by Microsoft in its Azure Cloud, Dynamics 365 for Finance and Operations represents the cutting edge of tomorrow’s i-ERP solutions.
As a fully web enabled and cloud-based ERP system for the modern manufacturer, much of what D365FO is today is predicated on existing Microsoft Azure technologies.
Examples of these cloud enabled capabilities noted in the graphic above include:
- Connected experience between information worker applications available in Office 365 and business workers in D365FO.
- Integration between the Azure IOT Hub and D365FO.
- Native consumption of Machine Learning and Artificial Intelligence in conjunction with Cortana Intelligence in Azure.
- Enhanced mobility and personalization with PowerApps and Power Flow running in conjunction with D365FO on Azure.
- Multiple data source consumption and advanced analytics with Power BI.
- Unified data structure for Dynamics business applications under the Common Data Model.
Combine this with native functionality in D365FO that supports Discrete, Process, Project, Lean and Mixed-Mode manufacturing and you have a very good platform to base your business on for the future. Add in that D365FO is consistently cited as a leader in the ERP space by top analysts such as Gartner1 and Nucleus Research2 and your business case for making this investment is on sound footing as a building block for your Digital Transformation journey.
- Source: Mike Guay, et. al, MAGIC QUADRANT FOR CLOUD ERP FOR PRODUCT CENTRIC MIDSIZE ENTERPRISES, Gartner, Inc., Stamford, CT, October 2018.
- Seth Lippincott, ERP TECHNOLOGY VALUE MATRIX 2018, Nucleus Research, Inc., Boston, MA, September 2018.