Change is coming whether we like it or not, and it’s usually something I welcome in manufacturing. It’s the reason our industry can transform raw materials into 30,000 different components and piece them together to make a modern vehicle. New technologies, complex processes and mankind’s incredible ability to solve problems have led to countless innovations that make our everyday lives richer, but there’s no denying that change also has a downside.
The future is infinitely difficult to plan for. We leverage the best data, scenario planning processes and other tools to be as prepared as we can, but there’s still no way to ever know with certainty what tomorrow or 10 years from now will look like. All we know is that the future will be different, and that’s why it’s important to have agile processes in place that support change.
Recently, I had the opportunity to chat with Sam Gupta, Principal Consultant at ElevatIQ and the host of “The Voice of ERP” series, to discuss this very topic and how the right ERP solution can help manufacturers prepare for tomorrow, today. The full episode is available on YouTube, but I’ll discuss some key takeaways here.
The Tipping Point for EVs is Now
The outlook for electric vehicle (EV) growth varies greatly depending on who you ask, but they’re currently on track to account for roughly 60% of all new vehicle sales by 2030. Anyone following this segment knows that analysts have a history of underestimating the market’s explosive growth, but there is one thing we know for sure: manufacturers have a very small window of opportunity to bring new EV technologies and solutions to market.
Few enterprise software solutions understand this challenge better than QAD. We were recognized by ElevatIQ as the top Automotive ERP system for 2023, and Terry Onica, QAD’s director of automotive and co-host of the Auto Supply Chain Prophets podcast, helped co-author MMOG/LE Version 6 and is heavily involved with Odette and AIAG, the institutions behind the standards.
This is very exciting for our customers because we were able to support Version 6 in our products before its official release on April 1 and have used our expertise to develop future-forward resources, such as the “The 24 Essential Supply Chain Processes” white paper. Benefits like these are part of the reason we recommend using an ERP solution tailored to your vertical, but more on that later. This video also has some great insights on the best Automotive ERPs for 2023.
As I was saying to Sam, the tipping point for EVs is here and now. EV adoption is growing exponentially and the total cost of ownership is coming down fast. Early adopters were drawn to EVs for the technology or environmental benefits, but they’ve still been a luxury product – up until now. Policies like the Inflation Reduction Act and price cuts at major OEMs like Tesla are enabling price parity with internal combustion engine (ICE) vehicles, making it likely that adoption will begin to grow at an even faster rate than current projections.
It’s also important to note that the future of automotive isn’t just EVs. Our team is looking at the bigger picture and that’s ACES, which stands for autonomous, connected, electric and ride-sharing. The automotive supply chain is undergoing a transformation the likes of which have never been seen before and many of the products used today will become obsolete in the future.
The dynamic is very interesting from a manufacturing perspective. You have new players looking to carve out a role in the EV and battery industries and established OEMs shifting gears to find out how and where they fit in the future of road transport. Competition is fierce and having a successful prototype isn’t enough. The winners will be the companies that are ready for full production volume and that’s where having the right ERP and supply chain processes are key.
Stop Taking a Reactive Approach to Problem-Solving
Many manufacturers take an ad hoc approach to problem solving and it’s easy to see why. A specific problem caught you up in the past and you think you need to fix it to move forward. The trouble is that many companies fail to plan for the pace of change. The challenges you experienced yesterday or last year aren’t going to be the same next time around and focusing too much on the past makes it difficult to see what’s right in front of you.
We find that when a manufacturer starts to think about the right ERP solution and supply chain processes, they’re already two years behind schedule. This is particularly visible right now in the EV value chain. All of a sudden the demand is there and you need to scale production volume fast, but that’s a tall order when you don’t have the underlying supportive processes in place.
Having worked on thousands of ERP implementations, our team has developed proven strategies and solutions that, when combined, help companies react to change quickly, minimize the risk of failure and bring new products to market faster. These are just a few of the reasons ElevatIQ recognized QAD among the top ERPs for large companies and mid-sized businesses in 2023. We were also #8 on ElevatIQ’s top ERP vendors list.
We’ve found that when you have an ERP system in place that was designed to change as your business needs to grow and evolve, you can start to think about challenges proactively instead of reactively and quickly make adjustments that help your business remain competitive. We also believe that successful manufacturers need to focus on three things in their supply chain: efficiency, agility and resilience.
Keep Efficiency, Agility and Resilience Close to Your E.A.R.
Sam and I agree, as you surely will, too, that one of the greatest challenges in manufacturing is delivering the right product, at the right price, at the right time. This is where optimizing efficiency, agility and resilience becomes essential. We, as an industry, need to prioritize all three simultaneously to deliver on our customers’ expectations.
As the saying goes, your supply chain is only as strong as its weakest link. It might sound cliché, but we’ve all been there. I know many of us will never forget that time in 2011 when a tsunami hit Japan and overnight the global automotive industry was thrown into disarray. Suddenly manufacturers didn’t have key pigments for black paint or computer chips for navigation components and had to scramble to come up with contingency plans.
Considering that an estimated 30,000 components go into the average vehicle, it’s hard to believe that just one could break the entire supply chain yet that’s exactly what happened. This experience is one of many that taught our industry the importance of having efficiency, agility and resilience in the supply chain and why all three must be balanced.
If you’re just thinking about efficiency, it might make sense to standardize with a single vendor to get better terms. Well, what happens when you’re using most of their capacity and demand surges, creating a bullwhip effect? Or if they experience a natural disaster and operations go down?
A better approach is to use an ERP with a supplier management solution that supports strategic sourcing and scenario planning, shop around for rates and cultivate strong relationships with multiple vendors. In addition to gaining resilience and agility, you’ll also drive down costs in certain regions and gain efficiencies that lessen the impact of inflation and other challenges. Plus, there’s more of an opportunity to work with quality suppliers that help minimize the cost of quality.
In the Rush to Automate, Don’t Forget Your Greatest Asset: Your People
Manufacturing automation and digital technologies put the data-driven insights we need to respond to change with speed and agility at our fingertips, but they can’t and shouldn’t replace humans in every part of your factory floor.
Automating everything possible might sound attractive considering the US is facing a significant manufacturing skills gap that could lead to 2.1 million unfilled positions by 2030. Worker shortages are expensive and even worse when you factor in the burden of inflation and rising material costs, but our industry is partly to blame for high turnover rates because we often automate people out of their jobs without even realizing the damage it causes.
The greatest thing about people is their ability to think critically and solve problems. Nobody wants to be delegated to performing repetitive or boring tasks that have little meaning and that leads to a high level of dissatisfaction in the workplace. As a result, people stop applying themselves and eventually leave. We lose humans’ innate ability to face problems with agility and get caught in an endless cycle of recruitment, training and turnovers.
Our team recognizes the value of your people and offers a solution that unlocks the power of your frontline teams, resulting in a 29% productivity increase, on average, and a 74% increase in employee engagement. Our customers are seeing massive benefits and another opportunity to bring efficiency, agility and resilience into alignment.
The benefits of increased productivity are obvious from an efficiency perspective; you reduce your overhead costs, minimize inflation and don’t need to worry as much about worker shortages. Maximizing productivity enhances your organization’s agility and you’ve built in some leeway to lessen the impact of unforeseen issues, which bodes well for resilience. Most importantly, you have an empowered, connected workforce that’s eager to solve problems before they escalate.
Stop the Death Cycle of ERP With an Adaptive Solution
I’ve talked a little bit about how an ad-hoc approach to problem-solving makes it difficult for manufacturers to prepare for the future, but the same holds true when it comes to selecting an ERP solution.
Companies start to look for a new ERP system when their old solution isn’t working quite right and they approach the process thinking about their current business requirements, which often means addressing challenges with their old system and ultimately yesterday’s problems.
By the time the implementation process starts, their needs have changed and the solution no longer fits just right. They start to introduce costly and time-consuming customizations and the more complicated the process gets, the less agile the solution becomes. Before you know it, you’re back where you started, upgrades are incredibly difficult and a new ERP system looks attractive again. We call this the death cycle of ERP.
If you don’t know what the future is going to look like but you know it’s going to be different, the best thing you can do is build the capacity to be adaptive. It might sound counter-productive at first but, instead of looking for a solution that meets your current business requirements, I recommend looking for one that can support change. Look for an ERP that can enable your business the way enterprise software is intended to – not one that becomes an anchor on your organization.
Your Vertical is Unique, and Your ERP Should be, Too
My complete conversation with Sam is packed full of meaningful insights for selecting the right ERP solution, but another thing you should look for is a vendor that has experience supporting your unique vertical. There is no such thing as a one-size-fits-all ERP, despite what some vendors might try to tell you, and a solution that was designed with your needs in mind is going to be more flexible and adaptable than an alternative that’s a jack of all trades, but master of none.
You’ll also gain vertical-specific benefits that enhance your organization’s competitive edge. A great example of this is how we were able to support MMOG/LE Version 6 before its official release. Our expertise isn’t limited to automotive, either. QAD is also proud to serve the Consumer Products, Food & Beverage, High Tech, Industrial and Life Sciences industries and was recognized on ElevatIQ’s top ERPs medical devices, pharma and manufacturing in 2023.
The simple truth is that nobody wakes up one day excited to buy an ERP solution. You select and implement one because you need it. The most important thing at the end of the day is that at the end of the process, you have a solution that works exactly the way you want and need it to. The best way to achieve that is by seeking an ERP that will grow and change with your business, from a vendor that understands your unique challenges and is able to give you honest advice. After all, you’re an expert in your field. When you work with an industry-specific ERP, you can trust they are, too.
Change is coming whether we like it or not, but it doesn’t have to be something to fear. With an Adaptive Enterprise, your business can handle anything and everything the future brings your way. Tune into Episode #5 of “The Voice of ERP” to learn more about future-proofing your business with the right insights and ERP.
