By Jaco Maritz, Chief Operating Officer, SYSPRO
As the world continues to shift, manufacturers and distributors have had to contend with new complexities of doing business. Driven by emerging customer preferences and immediate supplier needs, the industry has had to adapt quickly in order to thrive.
Customers have become increasingly drawn to eCommerce platforms as global lockdowns opened up the opportunity for new digital channels. And while supply chain disruptions impacted business operations, it also opened up the door for a new competitive market underpinned by the expansion of product ranges, and the rise of techniques such as additive manufacturing and 3D printing technologies. As a result, CEOs have had to think about new routes to market, new products and even new processes altogether.
Within this zeitgeist, manufacturing and distribution leaders still have three crucial business priorities top of mind. The business has to cut costs while remaining globally competitive, organizational efficiency needs to be improved, and ongoing risks need to be reduced.
Many businesses have looked at the benefits of digitalization in addressing these priorities. ERP in particular has been shown to improve operational efficiency, productivity, and time to value, but there ae still businesses that remain hesitant in making the investment. The key is to understand what sort of ROI ERP brings to the business.
Using ERP to gain competitive advantage
According to 2020 SYSPRO research, 29% of businesses felt that their business systems did not provide them with the availability and accessibility to manage the changes that the pandemic introduced. Many businesses still relied heavily on manual processes and spreadsheets. Those who had real time access to data could connect directly with customers and suppliers and address immediate needs and build their business.
Real-time access to data is a central factor for manufacturing and distribution businesses to remain competitive. The right information provides the ability to assess current operations, as well as the capability to make the required tactical, operational and strategic business decisions. Here the ability for an ERP system to integrate with other technologies such as IoT devices on the factory floor or within the warehouse is critical.
Ruprecht is an example of a SYSPRO customer that has been able to tackle market disruptions effectively and remain competitive by having access to a single source of data through their ERP system. The business, which focuses on ready-to-eat and ready-to-cook protein products that serve domestic and international customers in the foodservice and retail sectors in the US, was able to maintain a stable source of supply and the ability to maintain healthy inventory levels by using AI and a predictive model to guide them on the decision-making process. Ruprecht also set up a data warehouse structure with the ability to pull data from their warehouse to SYSPRO. This allowed the business to speed up the decision-making process – a critical requirement during the pandemic. Ruprecht also expects significant ROI from its ERP investment. Frank Patton, CFO of Ruprecht, spoke about the ROI that Ruprecht expects to see in coming months, “We expect the cost benefits generated by the scheduling and labor modelling components alone to realize improved operating expenditure of around $1.5 million to $2 million each year.”
In addition to real-time decision making, central access to data has also allowed the industry to take advantage of the eCommerce trend as well as explore new routes to market. To leverage digital platforms, inventory levels needs to be carefully managed and controlled and stock locations need to be available to respond quickly to customer demand, minimize transport costs and reduce warehousing and storage costs.
Leveraging ERP to improve internal organizational efficiencies
For many businesses, the pandemic saw the rise of the remote workforce. There was a sudden need to integrate systems, as well as have the ability to view stock in real-time. The transition to online was however difficult for many. The 2020 SYSPRO research study showed that 37% of companies were unable to provide the remote work capabilities to employees that were required. Many realized that the automation of processes would become a necessity. The ability to automatically generate invoices or even seamlessly move an order from the procurement department to the warehouse is of course a necessity in today’s digital world.
A good example of a company that leverages ERP to automate processes to improve operational efficiency is Moto Quip (a division of Brandcorp Pty Ltd – A proudly BIDVEST company). A South African SYSPRO customer, Moto Quip is a household name in motor vehicle accessories. The business often receives large orders from major retailers. For example, a batch order from one retailer can consist of 600 – 800 invoices. Despite its substantial turnover, Moto Quip has only two staff members in its internal sales department. ERP assisted with the automation of this process, allowing 600 – 800 invoices to be processed in three minutes. Operational efficiency has been improved and ROI is achieved through increased productivity and time savings.
Reducing operational risks with ERP
From cybercrime to global pandemics, manufacturing and distribution businesses need to be agile enough to reduce the impact of operational risk factors. The volatile nature of any supply chain requires a level of flexibility. A good example was seen within Africa, where a recent lockdown resulted in a number of organizational risks for alcoholic beverage manufacturers. An alcoholic beverage manufacturer that usually dispatched big bulk orders, suddenly only received smaller orders. The manufacturer was left with no choice but to scale down business operations until the lockdown was lifted. Here ERP assisted business to have the right level of input materials as well the ability to maintain operational efficiency on the factory floor. The business could easily scale up orders once again, once the lockdown was lifted.
Ultimately, ERP can support manufacturers and distributors to digitalize by providing the systems and platforms to resolve the biggest areas of impact, all while providing tangible ROI. When embarking on this journey, CEOs should be clear on the business objectives and shouldn’t underestimate the change management and impact of the process on the business. The CEO should also understand the change in skills required and should not run after the latest and greatest technology without understanding the true purpose and business benefits. The return on investment will be significant if the business objectives are set up front and the operationalization is reviewed against these objectives.