Upgrading Enterprise Systems for Success in Process Manufacturing Aberdeen Group
The promise of ERP systems for the Process Industry Discover potential operational efficiencies As the foundation of a successful manufacturing organization, ERP helps Promote standards throughout the organization Manage front and back-end processes
The Process Industry is not without challenges • Comply with regulations • Face increased competition • Reduce operational costs
Aberdeen highlights top pressures to improve operations All Respondents Process 65% 53% 43% 35% 25% 14% Customers demand lower costs Need competitive differentiation Need to comply with current and future regulations Keeping costs low is the top pressure Competitive differentiation is important Compliance is almost double for Process Manufacturers Source: Aberdeen Group, August 2015
What are the impacts of Process Compliance? Every year, compliance regulations increase in number and complexity Maintaining compliance drives lower operational costs and enables competitive differentiation! Out of compliance means millions in lost revenue Without operational efficiencies, maintaining compliance can raise costs
What causes non-compliance for Process Manufacturers? Average Length between Upgrades to ERP 25% All Respondents 24% Process 21% 21% 15% 15% 14% 14% 12% 9% 9% 8% 8% 4% Once a year Every 2 years Every 3 years Every 4 years Every 5 years More than 5 years between upgrades We do not perform upgrades Process Manufacturers: Primary reason for out-of-compliance is outdated enterprise systems Average time between upgrades is over 3 years, longer than all others Twice more likely to not upgrade their ERP systems at all Source: Aberdeen Group, August 2015
Process ‘Leaders’ outperform ‘Followers’ This reduces impact on revenue due to out-of-compliance fines Leaders drive higher level of compliance (99%) Leaders deliver better process and operational efficiency This reduces substantial costs associated with recalls Leaders drive 9% higher Operating Margin than the Corporate Plan It increases top line Source: Aberdeen Group, August 2015
What are Process Leaders doing differently? Leaders build compliance & traceability into their production systems This in turn reduces dependence of testing to ensure higher quality They have clear understanding & control of production processes Leaders drive lower costs and stay compliant. Consequently they increase chances of success in a highly competitive industry!
Process Leader’s advantage: staying on top of technology! Leaders Followers 43% 40% 27% 18% Implemented on latest release One release behind Process Leaders understand the pitfalls of obsolete technology Over 80% of Leaders are either on latest release or one behind Leaders are 59% more likely than Followers to be on the latest ERP Why upgrade ERP? Outdated systems can’t handle new reporting & responsiveness requirements of regulations, resulting in costly non-compliance! Source: Aberdeen Group, August 2015
ERP upgrades drive Enterprise KPIs Latest Version Not on Latest Version The Benefits of Upgrading ERP 94% 94% On time & complete shipments with upgrade Vs 87% without 87% Higher operational KPI’s On Time and Complete Shipment 17% 17% Reduction in inventory with upgrade Vs 9% without Improve bottom line (KPI) 9% Reduction in Inventory +5% +5% increase in operational margin with upgrade Vs -2% without Increase top line (KPI) -2% Operating Margin Vs. Corporate Plan Source: Aberdeen Group, August 2015
Cloud can help keep your ERP up-to-date • Cloud ERPs are constantly updated, with little disruption to the organization 52% 45% 38% Lower Total Cost of Ownership Configuration Flexibility Reduced Cost and Effort of Upgrades • Cloud also lowers total cost of ownership (TCO) and scales easily 38% 31% 28% • So you can simply focus on serving your customers! Ability to Scale Solution Lower Upfront Costs Ease of Use
To summarize... • Process Manufacturers • are under pressure to maintain compliance and keep costs low, gain competitive advantage • Process Leaders drive higher levels of compliance, better operational efficiency, and higher operating margins • They do so by keeping ERP systems up-to-date! Over 80% of them are either on the latest release of ERP or only • one behind
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