2020 is set to be the year in which enterprise resource planning (ERP) drives fresh advancements in technology and changes the way whole organizations interact with data—from engineering to HR and finance departments. Machine learning (ML), artificial intelligence (AI), cloud technology and open APIs (application programming interfaces) are all to be taken advantage of in the coming decade. But beyond bringing these emerging technologies to a single platform, ERP developments will not be limited to technology.
Following are five trends expected to shape the future of ERP:
1. Simplicity Before Anything Else
Simplicity—it trumps everything, even in our personal lives. The lessons learned from the business-to-consumer world can be applied to industrial production, too, in that companies that can simplify their user experience will triumph over competitors.
Similarly, manufacturers shouldn’t have to fight with disparate modules in their ERP applications that need integration, modification and extensions. They need seamless processes and reporting, and as ERP evolves, it must also keep these functions simple.
2. Complete Cloud Adoption
Cloud has been a trend for so long that it is now a basic fact of life. Yet cloud is still not universally adopted, its vast benefits notwithstanding. When organizations take their first steps toward the technology, they often start with a hybrid model to “test the waters,” then later go for a full-cloud approach so they can reap the benefits. This gives them the opportunity to scale at their own pace and still migrate to the cloud without major disruption. Expect to see more industrial organizations realize this as the 2020s progress, and for the full-cloud trend to continue.
3. AI and Machine Learning Targeting Productivity Improvement
AI and ML is a pairing of technologies whose full potential has yet to be realized. In a November 2019 IFS study 40% of manufacturers said they were planning to implement AI for inventory planning and logistics, and 36% for production scheduling and customer relationship management. Overall, 60% said they were targeting productivity improvements.
This reveals the scale of appetite for AI and ML because they can uncover fresh, innovative insights that boost the bottom line. Take the example of just-in-time manufacturing. This is designed to deliver components at the last possible moment to alleviate storage and associated costs. If an AI solution is asked to look at just-in-time scheduling it can come up with a whole new approach to the production process, creating new options that can make a real difference and generate significant productivity gain.
4. Open APIs Offering Flexibility
Open APIs are another big trend that is transformational for ERP. Based on open standards that are readily available to developers, a wide range of client-side functions will be quickly integrated into systems. They allow development to happen at pace because there are no hidden complexities, and they permit inbound and outbound connections to the digital core with the greatest possible flexibility and speed.
In addition, open APIs make it easy to connect to applications, platforms, services and databases that are external to the core. APIs are the foundation of the way IFS’s front-end works, and is expected to gain even more traction across the industry.
5. A Service-Based Approach
The traditional manufacturing practice of selling goods by intermediaries is changing as manufacturers are moving closer to their customers. There are two ways this is happening—one is via subscription-based sales, the other is through integrating services into products. As this trend continues, expect servitization to become a more widely recognized and adopted business approach.
In fact, while in 2018, 62% of manufacturers reported profitable aftermarket service operations through planned maintenance or service contracts, only 4% offered products entirely as a service.
There are many unexplored opportunities for the evolution of the business-to-business-to-customer model. For example, a filtration systems customer has transformed itself from selling air cleaners to selling clean air by helping customers set and meet their individual air quality goals. Automation is key, as sensors monitor air quality, call out technicians, order parts and monitor the equipment to action a condition-based maintenance program.
A More Customer-Centric and User-Friendly Decade for ERP
The decade ahead for ERP looks positive. There are early signs of this: AI and ML are already introducing new efficiencies to operations, open APIs are allowing for more seamless integration of applications and data, and manufacturers are moving closer to customers by directly delivering the products and services they really want—all supported by the cloud.
The primary role of ERP will be to simplify using the means at our disposal. To the end, simplicity will cut through all of these trends and will be the watchword for ERP implementations in the coming decade.
Darren Roos is CEO of IFS.