ERP: When Transparency Becomes Tunnel Vision

The idea behind an enterprise resource planning (ERP) system is to give organizations the transparency and visibility they need to have into their business activities. But what if the ERP system in fact creates a "blind spot" for the business? How could this happen, you might ask? Well, before we answer this question, a little history is needed.

In developed nations, many manufacturing activities have moved offshore. Manufacturers have done this because the cost of labor is cheaper in developing nations. But offshore manufacturing has led to some key concerns:


How do you measure quality assurance?
Is it really cheaper to outsource production, given rising energy prices?

From an economic and an IT perspective, several negative factors about moving manufacturing offshore have become apparent:

Negative economic factors:

The manufacturer is subject to the stability of the local economy where their facilities are located, meaning that labor may be tougher to acquire.

The speed at which components and parts are acquired is subject to global—and potentially faulty—supply chains.

Offshore currency instability may make components more expensive to acquire or sell.

Tracking the cost of resources and reverse logistics can prove to be difficult.

Negative IT factors:

Access to critical, real-time data may be impeded by disparate enterprise applications in different regions.

Tracking components may be more difficult due to a low-quality IT infrastructure or minimal IT resources. Or perhaps the ERP software is too inflexible to service the entire organization.

Financial tracking can be difficult to maintain, due to the factors listed above.

Traditionally, ERP systems come with financials and human resources modules to track all costs throughout the organization. The system controls these processes through a manufacturing management module. The manufacturing management module of a typical ERP solution includes multi-level bills of materials (BOMs), advanced plant scheduling, shop floor control, field service and repair, production planning, project management, product data management, inventory management, purchasing management, quality management, and sales management.

This range of traditional functionality can be sufficient for most manufacturers, giving them the ability to manage their operations very well within the four walls of the manufacturing plant. However, if a manufacturer's business is carried out in multiple locations across continents, and if its supply chain involves complex activities, then a more robust ERP system is needed. This is because such a manufacturer is faced with changing economic, quality, and logistical problems, and its traditional ERP system can actually impede its growth and flexibility by not delivering what this manufacturer needs most: transparency and visibility into all manufacturing and supply chain activities. The manufacturer can develop a sort of "tunnel vision" with respect to their operations if nothing is done.

So what can a manufacturer do if the ERP system provides faulty vision? Can an ERP system really adapt to a fluctuating manufacturing environment?