What to Do? Digital Innovations versus Highly Integrated ERP's for...
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What to Do? Digital Innovations versus Highly Integrated ERP's for Supply Chain Management

By Fabian Gasczak, Head of Supply Chain Management, Lanxess

Fabian Gasczak, Head of Supply Chain Management, Lanxess

We have the privilege to live in exciting times since the fourth industrial revolution has begun. Disruptive technologies and concepts like IoT, AI, Blockchain and RPA are evolving, leading us to the question: “How can we significantly improve our supply chains with these digital innovations?” The answer is: focus on the basics and apply common sense. What do I mean by that?

Make use of your resources and create a highly integrated ERP. It is and will be the backbone of your supply chain to plan, control and execute all business relevant information and material flows. There are four parts which play a vital role on this journey. Everything starts with master data, followed by processes, organization and it ends with digital innovations.

Master Data

The importance of master data cannot be highlighted enough. The level of quality for the big three, namely material, customer and supplier plus all associated data, needs to be on a superior level of maintenance. Use of information workflows and well-trained people are imperative to achieve this. Special attention deserves MRP master data. Here, the difficulty is to transfer the strategic supply chain planning approach into qualitative numbers, like safety stock, lot sizes, reorder points, etc. Advanced knowledge and hands-on mentality is needed to get the job done.

Processes

What do we need to achieve a highly integrated ERP? The answer is simple—fully utilize standard processes until they are not harming your business. Of course, in reality this is a very complex discussion with many parties, e.g. procurement, production, planning, sales and logistics, involved. Key point is to have people with business and ERP-experience on-board who can translate processes into system language (and vice versa) to explain the impact to their peers. These people are rare, but very much needed today.

Organization

The theory says structure follows processes and this is right. Nevertheless, is it realistic to implement new structures in a company with many formal and informal rituals and a history of more than 20 years? I guess it is not. The advice is to choose your fights and start with the core function of supply chain management first—the Planning. This includes demand planning, network planning and detailed scheduling. Once this is correctly implemented, the level of integration is already high.

Digital Innovations

Every company has processes which cannot be adequately executed by standard processes. Here, digital innovations can turn into real digital options by becoming bolt-on systems for either advanced planning purposes, like transport planning, or special requirements, like trade compliance. In aforementioned cases, we are not talking about highly integrated ERP’s but highly integrated processes. Furthermore I would like to share my thoughts about common sense linked to digital innovation.

First, we should not mistake selection criteria and results. Meaning, highly integrated companies can apply digital innovations more easily and are able to create significant returns out of that. They are not highly integrated due to digital innovation. Second, in many cases digital innovations are not the solution, but the enabler. Have a look at Blockchain, it enables trust from a technical point of view, but forget about it if companies do not trust each other. The technique simply does not work in this case.

The foundation of every supply chain is a highly integrated ERP combined with digital innovations where standard functionalities do not fully support business activities.

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