Bringing Together Manufacturing: Enterprise Resource Planning

January, 2008
"ERP Plus" in Process Industries
Rigid regulations and compliance requirements are a reality for manufactur- Research Preview ers in process related sectors including chemical, pharmaceutical, and food A Research Preview provides and beverage industries. Tight control over manufacturing processes is not and advanced look at an up-optional. Aberdeen research finds Enterprise Resource Planning (ERP) ef- coming study and the research forts in these manufacturers more focused on the need to standardize and hypothesis which will be ex-accelerate back office and front office business processes that arise from plored based on prior research realities, such as the increased influence of large customers, the need to work in a multi-channel environment, and increased global competition. As a result, companies in these related industries are reaching beyond the tra-ditional boundaries of ERP to include special features and extended func-tionality.
Integrated ERP and Beyond ERP provides the necessary infrastructure, along with the transactional de-tail and system of record, which any manufacturer needs to run its business. With its roots in Material Requirements Planning (MRP), it has evolved to become ERP, potentially touching every facet of the business from the front office sales and support functions, through the manufacturing process, to shipping and logistics, as well as back office financial accounting. However, based on the findings from our July 2007 report, Benchmarking ERP in Manu-facturing, 50% of process manufacturers have yet to take a completely inte-grated approach to ERP and 38% are running significantly outdated versions. Process manufacturers face some unique challenges in their business proc-esses, potentially dealing with: . The requirement for full backward and forward lot traceability . Attribute based rules and routing . Compliance regulations specific to the process manufacturing indus-try (including the Bio Terrorism Act, HACCP, 21 CFR Part 11, and MSDS) . Formula or recipe-based management, laboratory, and samples management . Shelf life and the need for inventory optimization Sector Definition . Yield optimization Process related industries in-clude, but are not limited to In consumer-oriented segments (food and beverage, and related consumer food and beverage, chemicals, packaged goods such as health and beauty aids and nutriceuticals, for exam- pharmaceuticals, nutraceuticals, ple) pricing and promotions play a critical role in actively shaping demand and selected personal care and driving revenue. products
© 2008 Aberdeen Group, Inc. Telephone: 617 723 7890 www.aberdeen.com 091707a "ERP Plus" in Process Industries Page 2

Aberdeen's Hypothesis Aberdeen hypothesizes that profitable growth is the dominant driver behind ERP strategies for process manufacturers. Yet, in order to achieve Best-in-Class performance, process manufacturers must also pay careful attention to improving customer service and response times.
Table 1: The Best-in-Class PACE Hypothesis
Pressures Actions Capabilities Enablers ƒ Shareholder ex- ƒ Standardize and ƒ Standardized enterprise-wide ƒ Integrated ERP: integrated order entry, pro-pectations of prof- accelerate non- procedures for order manage- curement, production, and financial manage-itable growth manufacturing ment, procurement, production ment applications processes (order planning and execution, cash ƒ Industry specific ERP features including: management, fi- collection, and financial recon- Full backward and forward lot traceability and nance, administra- ciliation ·shelf life tive functions) ƒ Manufacturing operations are ƒ Provide visibility integrated and coordinated with · Attribute based rules and routing to business proc- customer service · Support for compliance regulations specific to esses across func- ƒ 100% able to comply with proc- the process manufacturing industry tions and depart- ess manufacturing industry ƒFormula or recipe-based management, labora-ments regulations tory, and samples management ƒ Able to measure both product ƒ Applications to support yield and inventory and customer profitability optimization Source: Aberdeen Group, December 2007
The performance metrics, which will be used to determine the Best-in-Class, include: . Reduced levels of inventory . "The biggest challenge we have is Inven... [download for more]