Combining ERP and the Internet of Things to Enable the Connected Factory

Manufacturers and distributors are facing a barrage of information about how disruptive technologies such as the Internet of Things (IoT) will change the face of their industry

IoT as technology concept is exciting, but what does it mean to organizations from a practical application perspective?

As digitalization becomes defacto on the shop floor, there is great potential to improve responsiveness and agility, and adapt more quickly to customers’ changing needs. The introduction of more digitally controlled technologies gives way to more connections generating more data which can drive improved insights and actions, for better, faster decisions. Manufacturers are taking notice. According to a report in MarketsandMarkets, the market for IoT in manufacturing is growing and investment is expected to reach $45.3 billion in 2022.

Key drivers of IoT growth in manufacturing are the growing need for centralized monitoring and predictive maintenance of infrastructure for improved up-time, and the need for agile production and operational efficiency.

In the IoT era, ERP is more relevant in this equation than ever before—as the key to unlocking the value of IoT. To be able to realize the full value of IoT initiatives, manufacturers need the ability to contextualize data and integrate it into downstream process flows. To this end, manufacturers need ERP systems reimagined to meet the needs of new and emerging technologies in the business of manufacturing.

An ERP platform is now the “backbone” of operational execution, taking on a new more front-and-center role of taskmaster in the connected factory, orchestrating data and processes to keep the new manufacturing world of robots, machines, self-aware things and humans humming. What’s more, it’s providing the impetus for mid-market innovation and growth.

Take for example Jergens Industrial Supply (JIS), Ohio’s largest, most technical industrial distributor of industrial products. Like many distributors, JIS found itself needing to reinvent its value proposition in the midst of myriad disruptive forces. These included increased competition from giant industrial suppliers with large order volume and buying power, as well as the need to cater to an enlightened customer base that recognizes it has many buying options.

JIS took an innovative approach by putting its products that support manufacturing (safety goggles, gloves, wrenches, etc.) in smart vending machines on its customers’ shop floors. Employees simply scan a bar code for the project they are working on and automatically get all the tools and equipment they need, which are then seamlessly billed to the manufacturer via pre-negotiated pricing.

Since integrating the vending machines with its ERP solution, JIS has experienced 30 percent improved productivity, allowing the company to grow market share without having to grow headcount. Outfitted with an iPad interface, drivers now cover more ground in any given day when they manually restock machines on their routes, since they only need focus on fulfillment. JIS has also seen a significant reduction in customer service effort and costs because product costs are now negotiated up front, eliminating the need to quote items for replenishment, negotiate purchase orders, and manage orders.

The company recently introduced IoT-enabled “express buttons”, which are modelled after Amazon Dash buttons. Installed on racks or in another readily accessible areas of the shop floor, one push of the button dispenses inventory at a pre-negotiated designated quantity and price, which is then seamlessly billed back to the manufacturer.

The project is digital disruption in action that manifests benefits and efficiencies to the manufacturing floor and the back office simultaneously. Every time a JIS Express button is pushed, collectively, it represents hundreds and millions of dollars saved from the perspective of:

  • Manufacturing floor workers—reduced walk time and “talk time” to get the tools and materials needed. Improved safety via quick easy access to all requisite equipment and supplies (i.e. safety glasses, hard hats, etc.)
  • Manufacturing back-office personnel—reduced time and effort in contracting and purchase order processing. Improved inventory management visibility, traceability, and accountability
  • JIS customer service personnel—reduced time and effort in contracting, order entry, and fulfillment

Large multi-national manufacturers have been leveraging the IoT for competitive advantage for some time now. Today, we’ve reached a tipping point where the cost of sensors and other technologies to enable the real-time connected factory are now a reality for all manufacturers—small and large.

A small job shop in the Netherlands, Boers & Co FineMetalworking Group is a manufacturer of fine mechanical parts, high precision assembly, and sheet metal products. Boers has constructed a connected factory IoT strategy fully integrated with its ERP system that delivers tremendous benefits without large expenditures and integration headaches.

Using inexpensive commercial off-the-shelf components, the company has put in place practical real-time enhancements to improve manufacturing productivity and operational visibility. Boers has a “Google Maps” view of every machine on the shop floor with a color-coded status. This enables the company to see when a machine is showing signs of performance degradation that may indicate maintenance is needed, so it can keep lines running smoothly, avoiding major mechanical breakdowns.

Labor is one of the most valuable resources in manufacturing today, and in The Netherlands, labor rates are high. Boers’ IoT innovations provide invaluable productivity enhancements. The company utilizes smart gloves with 2D barcode technology to track and trace machine parts with a simple glove scan. Haptic feedback provides user confirmation that the right product has been scanned, providing a new level of process quality and efficiency.

A new drone-enabled inventory count process ensures more timely, cost-effective and accurate inventory counts. The drone flies inside Boers’ 1.2-acre manufacturing plant and reads data from RFID tags. Aside from leveraging automation for improved productivity, Boers now conducts inventory checks more regularly on a daily and weekly basis as opposed to its previous manual inventory-count process that was done once a month. The drone-enabled process ensures Boers has the correct amount of inventory in the shop, for more exacting inventory management.

As Industry 4.0 continues to have widespread impact in manufacturing, examples of innovative use cases such as these will go from novel to the “new normal.”

ERP gives manufacturers the ability to plan for what should happen on the shop floor, while IoT gives them the visibility and ability to understand and respond to what is actually happening on the shop floor. The result of this ERP and IoT combination is improved, more real-time, data-driven outcomes.

Savvy manufacturers will want to embrace this potent combination of technologies, recognizing the vital synergistic and reciprocal role ERP plays in the IoT-enabled manufacturing sector. By connecting people, processes, data, and things in an intelligent and strategic manner, manufacturers can harness new data streams for greater efficiency, agility, and customer-centricity.

About the Author

Himanshu Palsule has more than 30 years of diverse experience leading globally distributed product organizations, with an emphasis on customer-driven innovation and driving growth. In his role as chief product and technology officer, Palsule is responsible product design, engineering, technology and quality, as well as product management and development operations at Epicor Software. The company’s industry-specific solutions for manufacturing, distribution, retail, and service industry customers, are used by more than 20,000 businesses worldwide.