Manufacturers Are Going Cloud: Why It’s the Answer for ERP & More

Last month, a study released by IT analysts IDC got some headlines as it described “Worldwide Cloud Adoption in the Manufacturing Industry”. While based on some research from 2014, the study showed cloud computing growth among manufacturers will continue well into 2015 and beyond. Gartner agrees, stating that cloud-based manufacturing software will increase from 22% to 45% over the next decade.

How Many Manufacturers are Really Running Cloud Environments?

IDC found that 66% of worldwide manufacturers have at least two applications in the public cloud, while 68% have at least two apps in a private cloud. United States manufacturers are lagging behind this trend, with only 41% in the cloud. Over the next two years, these organizations expect to increase cloud IT budgets by 27%.

Manufacturers are pursuing a “cloud-also” rather than a “cloud first” strategy. That’s likely because new services and additional computing power has to play nice with older legacy systems. Most of the organizations reported that IT was the primary department benefiting from cloud strategy, while between 30 and 35% reported that operations, supply chain, logistics, sales, or engineering could benefit.

How Does the Cloud Help Manufacturing Operations?

Whether choosing a cloud service provider or virtualizing in-house, cloud technology can help manufacturers streamline their IT systems and generate value for other departments and overall operations.

ERP and SCM Systems

Enterprise Resource Planning (ERP) and Supply Chain Management systems are what manufacturers use to track components, supplies, materials, and assets from the beginning to the end of fabrication and then on through sale.

Cloud-based ERP and supply chain systems allow on-demand access to data and resources for all departments, facilitating collaboration and quick pivots as the needs of the business change. As project needs increase and decrease, the infrastructure can scale along with them, leading to reduced costs.

Internet of Things & Sensors

As more and more devices are connected to the internet, they can collect data that helps inform the manufacturing process. With the computing power and easy administration afforded by cloud computing, that means manufacturers can take that data and analyze it or even set up automatic alerts, procedures, and more based on the information delivered from sensors on connected plant equipment, assets, and inventory.

That leads to a smoother supply chain, smarter ordering of supplies and materials, or staffing up when necessary. Feedback from products already in the hands of customers can also help change the way the item is manufactured.

With near instantaneous and highly granular data delivered from connected products, teams from the design and concepting departments down to marketing and logistics can all work in concert for smarter manufacturing.

The Main Issues Facing Manufacturing Cloud Adoption

If your manufacturing organization is considering the cloud, you’ll have to think about a few things as you choose a provider and a platform.

The first is redesigning your current systems to take better advantage of cloud agility and scalability. Can your current ERP move to the cloud? Will your business processes adapt? Are you ready to train employees? Integration with existing systems also brings up the three main cloud flavors. Will you go private, hybrid, or public cloud?

Customization is also a thorny topic. Gartner has stated that “heavily customized ERP implementations will be routinely referred to as ‘legacy ERP’”, with more general, loose cloud-based systems replacing them. Can your department handle customizing a SaaS platform like Salesforce, or building on top of raw Infrastructure as a Service?

The move to cloud systems makes this an exciting time to be in manufacturing IT departments. The time is ripe to modernize and reap the benefits. With the IoT in the particular, the true gains in efficiency and data insight are yet to be seen.