ERP for Process Manufacturing is Rare

Process manufacturing is a relatively small market compared to markets such as discrete manufacturing, retail and professional services; the size of the market is commensurate with the few quality software solutions for process manufacturers, whereas discrete manufacturing, retail and professional services have hundreds of software solutions, from entry level through Tier One.

The process manufacturing industry has four key issues which keep ERP (enterprise resource planning) vendors away from the market:

A relatively small market compared to other industries.

It is a highly specialized industry, requiring specialized knowledge to develop adequate solutions --- a high cost of entry into the market.

The requirements of the industry are such that discrete manufacturing software will not provide an adequate solution --- tweaking an existing discrete system will not work.

Within process manufacturing there are many specialized vertical markets, so the software must be broad as well as deep.

Despite these issues, many ERP vendors cannot overlook a vertical industry with a need; the temptation for a sale is too great. As a result many ERP vendors have added process manufacturing solutions to their ERP by relying on third party solution providers to integrate with their ERP. Most of the time, the third party has at least some industry experience with process manufacturing and integration systems.

Third party Process Manufacturing ERP Integration Model Limitations and Requirements:

Understand the level of experience the third party has with both process manufacturing and developing software.

Be aware of the integration methodology used by the third party.

Understand the benefits and pitfalls of the methodology chosen by the third party.

According to Evan Garber, President of Escape Velocity Systems (www.evs-sw.com) there are three methodologies used by third party developers of process manufacturing software:

Buy and change the ERP source code and a develop process manufacturing add-on

Generic system with an interface to multiple ERP systems

Built in the framework of one ERP

Buy & Change ERP source code...develop a process manufacturing add-on

This method was used more frequently in the late 1980’s and early 1990’s and is typically not used anymore; though there are still a few systems on the market that uses this methodology. With this methodology the third party purchases the source code of an ERP and changes the source code of the entire ERP (accounting and distribution) to facilitate their process manufacturing add-on.

Benefits:
Control. The developer has complete control of how the ERP interacts with their process manufacturing add-on.

Pitfalls:

Ability to upgrade. This method takes the customer out of the ERP developers upgrade path. As technology changes with the ERP, the third party system will not follow along – over time, users will be stuck with software that uses outdated technology.

Dependence on third party. There is a reliance on the third party developer to maintain and enhance the entire system (accounting, distribution and manufacturing) instead of just the manufacturing.

Few specialize in manufacturing, accounting or distribution.

Add-on distribution modules. Since the underlying code of the ERP system has been changed, the burden will be on the third party to develop add-on’s such as warehouse management, customer/vendor web portals, as well as other applications including CRM. Few third party vendors can provide these applications for a growing company.

Garber also noted that, “Few third party vendors have financial stability and since the entire system relies on a third party developer, a user must be comfortable with the third party’s financial stability and ability to support the software and continue to evolve the software over the long run.” Garber suggested questions for third party vendors:

Who maintains the upgrade of the accounting and distribution modules?

Was the source code of the accounting or distribution modules changed and if so, would the upgrade path from the original publisher be invalidated?

Again, this method is not frequently used in the market today since many companies found themselves with software that could not be supported because the third party was no longer in business.

Generic system with an interface to multiple ERP systems

This is the most common method of process manufacturing third party solution used today. Garber explained, “With this methodology, a third party develops a process manufacturing solution then interfaces their software to one or many ERP solutions. When interfacing two systems, data from one system is translated and imported into another system, typically an un-posted transaction file. The transactions then need to be posted in the ERP; therefore interfaced systems do not provide real-time transaction processing. In contrast, integrated systems read and write directly from the native data tables and provide real-time transaction processing.”

Benefits:
Inventory Control. The ERP source code is not changed, so the user can keep the upgrade path with the ERP vendor. Many of the ERP modules will be on current technology and evolve with industry enhancements. Additionally, the third party will usually interface with many ERP systems, so if a process manufacturer changes the ERP software, there is a good chance for interfacing with the new system.

Pitfalls:

Data flow. There is no real-time transaction processing; a closed production batch will require an inventory transaction posting in the ERP system to update inventory balances and costs.

Systems Maintenance. This methodology requires maintenance of two separate systems with two separate interfaces and two different technologies.

De-normalized Data. Since the two systems save redundant information, data can easily become out of synch. For instance, both systems keep inventory SKU# and descriptions. If the description changes in one system, rarely will the other system pick up the change.

Third party dependence. Relying on the third party developer to maintain the interface to all of the ERP systems can be dangerous. Most ERP systems have monthly or quarterly releases as well as major upgrades. If the third party interfaces with five ERP systems, each with an average of four releases per year, that is twenty interfaces that need to be managed per year; over five years there are a hundred interfaces to manage. Few third party providers maintain integration to hundreds of versions of ERP systems.

Built-in the framework of one ERP

“If an ERP vendor were to write a process manufacturing system, this is the method that they would use. This method is very difficult to find in the process manufacturing arena especially in the mid-market; but they do exist. Third party solutions that have been developed in the framework of the ERP have complete or seamless integration to the rest of the ERP,” according to Garber.

In addition, the user interface is similar to the ERP system. Essentially this method includes one look and feel, one technology, one system. If the framework has tools for customization or reporting, the third party solution will be able to utilize those tools as well.

Ultimately third party developers have fewer resources than ERP vendors; the lack of resources causes third parties to skimp on the little things that make a big difference when running a manufacturing system, such as:

An instruction manual – either paper or electronic.

Online help which is screen sensitive.

Quality control methodologies for a new release and patches.

A support staff.

Web support for logging incidents and a knowledge base for self-searches.

If the third party lacks of these items process manufacturers should question their ability to provide long-term support.

Garber insists, “The process of researching software should be a risk-assessment and mitigation exercise for process manufacturers. When process manufacturing options include “bolt-on’s” from a third party, process manufacturers must understand the type of integration that the solution provider uses and the benefits and pitfalls of each method. By being fully aware of these options and risks, there is a greater chance of success with a new process manufacturing solution.”

Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based TR Cutler, Inc., the largest manufacturing marketing firm worldwide – www.trcutlerinc.com. Cutler is the founder of the Manufacturing Media Consortium of twenty seven hundred journalists and editors writing about trends in manufacturing. Cutler is also the author of the Manufacturers’ Public Relations and Media Guide. Cutler is a frequently published author within the manufacturing sector with more than 300 feature articles authored annually; he can be contacted at trcutler@trcutlerinc.com.