Industry 4.0: Harnessing the Power of ERP and MES Integration

  • July 24, 2017
  • Yuval Lavi

By integrating ERP and manufacturing data for more accurate demand forecasts, companies can reduce inventories by avoiding overproduction.

In today’s competitive global markets, having a lean manufacturing process is more important than ever. Sharing information between the manufacturing floor and business systems can enable manufacturers to achieve new levels of efficiency. With the industrial Internet of Things (IoT) revolutionizing manufacturing by leveraging intelligent, connected devices in factories, there are even more opportunities to fine-tune operations with better data and process integration.

In a recent survey by Accenture of more than 1,400 global business leaders, 84% confidently asserted that they could create new income streams from implementing IoT solutions. BI Intelligence expects the installed base of manufacturing IoT devices to swell from 237 million in 2015 to 923 million in 2020. By that year, manufacturers will spend approximately $267 billion on the IoT.

Indeed, the anticipated efficiency returns from digitization over the next five years across all major industrial sectors are substantial: nearly 3% in additional revenue and 3.6% in reduced costs per year, according to a recent PwC survey. By proactively leading the digitization effort, industrial manufacturers can earn a growing portion of these gains.

Since enterprise resource planning (ERP) systems contain information regarding inventory and customer demand, and manufacturing execution systems (MES) control how to build it, integrating the two worlds could help increase operational efficiency and enable organizations to become more flexible and more responsive to customized and changing demands. In addition, real-time information exchange between the business layer and the production layer could help increase overall equipment efficiency (OEE), reduce cycle times, and provide management with greater visibility for improved decision-making.

Here are six ways integrating ERP with MES can help make manufacturing leaner:

1. Real-time Production Adjustments

Demand changes that are recorded in ERP systems can be fed into manufacturing schedules to ensure quantities of products manufactured are more closely aligned with demand for leaner and more efficient manufacturing. Most shop-floor machinery is now powered by embedded sensors and control mechanisms. Wireless sensor and actuator networks (WSAN) provide servo and motor control via IoT along with traditional computer numerical control (CNC) methods that allow for in-progress production adjustments on the factory floor.

RFID tags, which have been used to help connect partners and move goods from a logistics and supply chain management perspective across organizational boundaries, can also be used on the factory floor in order to track work-in-progress materials, route those materials efficiently, enable parts requirements, handle JIT replenishments, and manage the availability and utilization of assets. When coupled with other data regarding materials as they flow through the factory and eventually to customers, RFID tags and other tracking mechanisms can provide plant operators with insights that enable them to efficiently process raw materials, right through to the finished product.

2. Accurate Demand Forecasts

Underestimating demand means running out of product when customer demand is at its highest, reducing a company’s revenues while hurting customer relationships. Insufficient inventory or stockouts are detrimental to both short- and long-term revenues since delays in delivery schedules can tarnish a company’s perceived reliability and long-term customer relationships.

Overestimating demand means companies have to invest upfront in a lot of extra inventory, which then can’t be quickly turned around into a profit. Excess inventory—whether raw materials, work-in-progress, or finished goods—ties up cash in the business that can be put to better use elsewhere. With inventory typically comprising between 25% and 40% of assets, demand uncertainty is often the single largest influence on stock levels. By integrating ERP and manufacturing data for more accurate demand forecasts, companies can reduce inventories by avoiding overproduction.

3. Just-in-Time Delivery

Just-in-time (JIT) delivery and the surgical precision it requires have been around for quite some time, but now that supply chains are becoming increasingly intertwined with the Internet of Things, brands have a very large untapped opportunity to use the data. Supply chain managers can track inbound and outbound inventory with incredible detail, and that visibility allows brands to react immediately to changes. ERP schedules can be more realistic by incorporating quicker production times based on the latest improvements on the shop floor.

Wireless sensor networks provide data that impact just-in-time schedules, such as work-in-progress, parts inventory, and more. Likewise, any downtime due to damaged or defective equipment can be reported to the ERP system to push back delivery dates, if necessary. Even in transit, sensors on containers or trucks deliver real-time insights to products across the supply chain.

4. Avoid Rush Orders

By integrating ERP and MES, manufacturers are able to reorder from suppliers before inventory falls below a set level. Satisfying customers by delivering demands at an agreed time can lead to customers’ trust in a company’s competence.

Rush orders are one of the main types of supply chain risks because of their negative impact on the overall performance. Avoiding rush orders not only minimizes the possibility of production delays, it also prevents additional charges incurred by ordering materials at the last minute and by requesting expedited deliveries.

5. Seamless Change Orders

Better system integration supports more efficient execution of change orders. Any product changes requested by customers need to be transferred to production systems as soon as possible to avoid delays in fulfilling orders. Likewise, new manufacturing processes that impact production times and expenses need to be shared immediately with enterprise systems so that any pricing or product delivery information can be updated.

6. IoT Equals Quality

Manufacturing execution systems (MES) help streamline factory-floor operations by managing and monitoring all work-in-progress, including providing real-time visibility, and enabling traceability of both materials and products throughout their lifecycles, facilitating corrective actions for defective products. If there is a quality issue on the floor, real-time notification to the business systems via IoT sensor networks can be made to trigger necessary corrective actions via real-time events and scheduled tasks.

Integrating predictive maintenance data with ERP systems to optimize workflow scheduling can help manufacturers minimize the impact of equipment unavailability by dynamically adjusting the production run. If defective material is detected, it can be removed from inventory and returned to the supplier. The manufacturer can save money by eliminating scrap due to defective raw material and by reduced exposure to recalls and possible liability issues.

The integration of MES with ERP systems enables manufacturers to orchestrate work orders and other resource needs.

Integrating real-time data about the availability of materials across the entire supply chain with ERP systems can help manufacturers minimize unnecessary interruptions and delays. As manufacturing processes become more complex, having the ability to track all related product data from design to delivery is essential to maximizing manufacturing efficiency.

As manufacturers’ MES and ERP systems are often built by different software vendors and speak different languages, integrating the systems can be a challenge. With the growth in the amount of data used to improve the production processes, the cross communication and interaction between components has increased. To reduce the cost of communication and to increase the efficiency of these systems, middleware is becoming more essential. A code-free integration platform that automates the technical data transformations and provides a visual drag-and-drop interface to orchestrate the needed application programming interface (API) connectivity can greatly speed up and simplify connectivity between these systems.

Integration platforms help ensure a free flow of information to achieve leaner, more efficient and effective manufacturing.

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