Gaining time-to-market advantages, replacing legacy systems and supporting new business models are three of the many factors motivating manufacturers to pursue two-tier ERP strategies today.
Manufacturers getting the greatest benefit of pursuing a two-tier manufacturing strategy aren’t chasing the lowest cost per labor hour around the world, from one low-cost production center to the next. Instead, they’re concentrating on making manufacturing play a strategic role in their business models. They’re using manufacturing centers as a means to connect with, understand, get immersed in and ultimately gain market share in new markets. Dell, HP, IBM, United Technologies and others use their manufacturing centers as an integral part of their customer listening systems. The many processes, systems and roles needed to create a manufacturing center get these companies tightly integrated into new markets and segments.
The reliance on a two- or multi-tier ERP systems strategy continues to gain in adoption due to the following factors:
A two-tier ERP system strategy enables greater analytics and enterprise performance management accuracy. Only 37% of companies measure business value from their ERP systems today according to a recent Gartner report. Manufacturers using a two-tier ERP strategy are better able to isolate, analyze, predict and manage to analytics and key performance indicators (KPIs). Armed with greater levels of accuracy and insight, manufacturers using this ERP strategy are more agile in responding to shifts in market trends. The greater depth of analytics and enterprise performance management makes these companies more agile than competitors as well.
Concentrate on accelerating business models and time-to-market rather than cost reductions. While it’s possible to gain up to a 33% reduction in implementation and support costs and nearly a 62% reduction in costs when pursuing multi-tier ERP strategies in highly diverse manufacturing environments, cost reduction alone is the riskiest strategy there is for this approach to managing ERP systems.
Gaining a time-to-market advantage and penetrating new markets using two-tier ERP systems reduce risks of this strategy. Duplication of effort, coordination of governance requirements, process overhead, version control and other significant risks can be minimized when two-tier ERP systems are used. From seeing the manufacturers who make time-to-market a priority, it’s apparent that governance and process overhead can be quickly reduced. It’s because the entire IT strategy of a business gets galvanized around the needs and pains of the customer. When this shift happens in any manufacturer, two-tier ERP systems deliver major value by aligning every available manufacturing operation to alleviate the pains customers have.
Relying on two-tier ERP systems to become customer-driven delivers the greatest results. Time and again, manufacturers look to two-tier manufacturing systems distributed throughout their global manufacturing network to penetrate new markets connect with new and long-time customers, staying in step with their rapidly changing expectations and pain points. Many of the highest-performing manufacturers mentioned in earlier in this blog post use two-tier ERP system strategies to stay a step ahead of their customers’ requirements, need and expectations. Using ERP systems to be customer-obsessed pays off in increased production efficiencies and more effective go-to-market strategies over the long-term as well.
Bottom line: Pursuing time-to-market advantages, replacing legacy systems now delivering only a fraction of the quality of information they once did, and supporting new business models are three core factors driving the continued adoption and growth of two-tier ERP systems. Using them to concentrate on customers first needs to be the highest priority.