SAP Business ByDesign and the Changing Manufacturing Expectations Through Digital Transformation
I spent the past 13 years selling SAP ERP, mainly SAP Business ByDesign, to small and mid-sized companies, I have talked with thousands of companies of various sizes, types and industries. Most of these conversations are usually oriented towards determining fit, requiring me to understand the prospect’s needs as best I could in the time available in order to help determine which SAP systems capabilities provided the best fit. Over the intervening years, I have noticed how some needs and expectations have changed. As an example, I rarely see Moving Average costing for Production anymore. In the past, many organizations wanted to track Moving Average costing for production. Today, the vast majority of companies are using or looking to use, Standard costing and reporting of cost variances down to the production order.
Over time, technology and the move to the cloud have quietly but steadily changed these requirements. Companies used to express concern about their employees’ ability to learn and use handheld devices. Now, during lunch breaks, their employees use their phones for personal business through tasks that are more complex than anything they would ever be asked to do for a business purpose. Few modern companies are worried about employees resisting the use of computers and handheld devices.
One of the biggest changes I have seen is how companies want to start recording production. A lot of companies still use paper in production. This means a production order is printed and a packet or clipboard holding the production order (often called a traveler) accompanies the item, batch, or run through the production process. Each person involved records materials and labor issued on the sheets of paper accompanying the production order. If there are multiple units being produced, a tally is kept upon completion. At the end of the production process, the data is manually keyed into the system by a supervisor or back-office user.
This process is seen as reliable, if not particularly efficient. Data errors typically only occur when data from the manual sheets are being entered into the system. The lag in recording labor, materials and completion varies depending on the time it takes to produce that item as well as any backlog in data entry backlog upon completion. Not surprisingly, more companies want to move to capturing that data in, at worst, near time or at best, real-time.
The next step in this evolution is having production users enter time, materials and completion into a terminal. There are many approaches to this, including paper and even bar codes on the traveler, anything to make it easier for the employee to use a handheld scanner to enter the Work order number, Operation ID, Materials, and more. Many modern ERP systems, including SAP Business ByDesign, support this approach right out-of-the-box. So, what was once considered the ‘minimal’ standard a company expected out of its new ERP has changed dramatically, with new definitions of ‘minimum’ standards emerging all the time
Over the past decade or so, many manufacturers have invested in modern equipment that features data collection sensors built into their controllers. These can count the number of units coming off a line, the processing time involved, and a host of other data elements. In times past, this data was once used by production engineers and others to fine-tune processes and schedules. Outside of certain industries like automotive components and plastics, the data wasn’t often captured for use by the ERP due to the complexity and cost of gathering all that controller data into one central source. This was compounded by the legacy ERP’s limited integration capability, which had the effect of forcing most, if not all, integrations to be created through custom development. The resulting data sets were huge- and without massive investments in data storage and processing power, they managed to grind a traditional ERP to a halt.
Now the limitations that once dictated expectations on automated recording of production have all changed or been eliminated through the use of modern web-based ERP systems. Modern ERP’s based on in-memory database technologies coupled with open API has dramatically changed this cost equation. As an example, systems based on SAP’s HANA in-memory architecture don’t slow down as more data is added. Alternatively, you can now store data in a location like AWS, making it available for analysis by both internal and external users through web services. So today, the data volume issue is no longer relevant. It really doesn’t matter how much data you gather, or where it is stored. The issue now is centered squarely on the user’s ability to make sense of all the data and use it to grow their business.
ERP systems like SAP Business ByDesign utilize Open APIs to allow companies to map multiple data streams into the system in order to record data in real-time. We all now use systems to grab key data from one spot and use it in another every day. This process is often so seamless and transparent that end-users never even notice. This capability has now flowed out to the production floor. Today’s production managers are asking why they can’t just pull data from their machines and update the ERP accordingly. Forward-thinking executives make sure this is possible by choosing ERP systems capable of enabling these and other important technologies. This requirement has become a new ‘minimum’ expectation.
Where companies once had workers recording receipts with a pencil, they now have those same workers focused on other higher value-add tasks because the machine controller counts or scans finished items and record the results in the ERP in real-time. This is working smarter- and isn’t that every manufacturer wants? Making it a reality is a direct result of choosing the right ERP system. For many in manufacturing, SAP’s Business ByDesign is not only the right choice- it’s the smart choice.
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By Richard Haugen