Should Engineers Take Care of ERP?

I’d like to discuss the relationship in the organization between two major classes of software – PLM (CAD, CAE, PDM) and ERP. I think that the integration of PLM and ERP is not a new topic. There are many blog posts, researches, products and implementations done in this space. So, before deciding to go and discuss my ideas about how we can improve this relationship, I’d like to ask a question in a slightly different way: Should Engineers take care of ERP? In my view, there are two major patterns happening today in the PLM-ERP world which I’d identify as follows:

Pattern 1: Close Space. Engineering Systems is a closed environment focused on their specific engineering tasks and limiting their communication with ERP space. These systems send/receive very essential information such as product design (CAD model, drawings) and identifications such as Part Numbers. What is typical for this pattern is that both these environments (PLM and ERP?)  seems to have a status quo (an unwritten agreement) about not crossing borders and feel very comfortable with this agreement. It looks like the people responsible for both implementations are saying “don’t touch me and I will not touch you”.  I’ve seen people defending this position by saying that enterprise organizations need to be managed by siloes.  So, Engineering and ERP are different silos and need to be managed separately.

Pattern 2: Open Space. Engineering Systems see ERP as an essential part of their business relations in a very closed manner. It means that both system classes are focused on how to leverage information and processes between these two spaces. ERP can provide the engineering environment with business insight on how they need to design products – business and manufacturing information, customer info, logistic and supply chain data. On the opposite side, if engineering processes can introduce product to manufacturing already in the early stages of development, these can be greatly appreciated by manufacturing and their ability to optimize product design using manufacturing feedback.

In my view pattern 2 is something to which the future belongs. Engineers are the most important source of IP (Intellectual Property) in the company. They design products and create IP. Companies need to focus on how to get this IP out of engineering use it downstream. In addition, engineers need to take care and find a way to deliver the right ERP/Manufacturing data for CAD/PLM. In this way  they will be able to optimize product design already in the early stages of development.  In my opinion, PLM should take a leading role and engineers need to take care of ERP. I know it sounds strange, but only engineers know how to use information they create. Therefore, PLM needs to create a language and create tools and processes about how to take PLM IP downstream and integrate it with the manufacturing environment in your organization.

I’d be interested in discussing this topic and learn from your experience.

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  • François

    Hello
    I agree, and may be we could formulate the question like: Should engineers take care about which product is sold? Should engineers take care of the prize of the products? Should engineers take care of the cost of the products? Should engineers take care of the cost of modifications of the products?
    I think we should have some yes, while not all.

  • Hello François, Great questions! My “yes” answers are for two last question.
    1. Should engineers take care of the cost of the products?
    2. Should engineers take care of the cost of modification of the product?
    This is part of PLM capabilities to decrease product and operational cost.

  • The question becomes not should but why don’t they anymore. Years ago Manufacturing Operations at Rockwell’s B1 Division was the owner of the MRP/ERP systems that I.T. organizations operated for them. The analysis, the rules and the results all were under Mfg Ops. That organization was staffed by Business Analysts and Manufacturing “Engineers”.

    M.E.s were classically trained engineers that were assigned to ensure the effective production of products the corporation designed. This could range from standard operations research activities such as EOQ, Process Planning, and even product redesign for manufacturability.

    Fast forward to today, many companies staff the ERP system with non-technical analysts that know accounting and I.T. but lack the insight in product development and production. This has caused lots of local optimizations globally across the corporation. The end results have been paper profits for a department but losses for the corporation.

    This changed occurred as engineer’s shy’ed away from the business and finance issues of product development they once included in their responsibilities leaving many important product decisions to be made purely by short term accounting and financial perspectives( i.e., the local optimization I referred to). Which can and has lead to such ideas as “Put your management hat on” –famous O-Ring Issue

    The question becomes are engineer’s perpared to take on this role again or stay comfortably as a technical contributor only.

  • David Locke

    As engineers can be outsourced at the drop of a hat, why would management allow engineers to stay in control of any part of their business. The business is no longer engineer centric. It is management centric.

    With the management effort to eliminate entitlement thinking while allowing and growing their own entitlements along with the preaching of the notion that tech innovation is too risky, and that only business innovation should be invested in, it should be clear that engineers are no longer considered members of the creative class. Only management can be in the creative class. Why under these circumstances would management let engineers run the business.

  • Brian, thank you for your thoughts. I cannot agree more. I think time today is for change and without getting engineers backs to business companies will not be able to survive this downturn time. I’m not sure can answer if engineer’s prepared to take this new role… I think companies that will make it happen will leapfrog tomorrow. -Oleg.

  • Something else to consider is the evolution in what ERP is used for. In the “old days” it was called MRP (and then the even better MRP II), and the core of it’s use and functionality was the management of BOM’s for production (BOM “explosions”, supplier data, etc.). Later it evolved into ERP to encompass more financial, customer and HR related functions. Now fast forward to an outsourced world, where the MRP functionality is become less relevant (a majority of classic MRP functions are done by the contract mfg). In this world who should manage the ERP data? The more challenging question becomes how to interface with the ERP/MRP data in someone else’s system (e.g. the CM)

  • David, Thank you for coming to discuss on plmtwine. I’m not sure I got your point with regards to engineers belonging to what you call “creative class”… how you can disconnect engineers? Let’s talk about product cost, for example. Since 70-80% of product cost defined during design time, ability to have product cost estimation on early stages of design is very important. If you will not do so, your “management effort” will be to optimize 20% of possible product cost. This is only one example. Can you explain your view on this? – Thanks, Oleg.

  • Mark, this is good observation. ERP world is changing, but still companies implement their piece (or modules of ERP). In my view ERP leading in positioning of “managing business” and my point is that business cannot be disconnected from engineers/product development. On the other side, since SaaS business is growing, I can expect more granular offering is coming to ERP space. In this case, new way to interaction between PLM/Engineering and business system need to be established. So, customers can consider SaaS offering for CRM and project management and, in the end, overall business landscape can be different.-Oleg.

  • Alec Gil

    In one of my previous responses in this space I mentioned that ERP is basically a user of the IP created by the engineering community and these days, generally speaking, this IP is created with the help of PLM systems. But the opposite may also be true. In other words, engineers should, in fact, must take into consideration the financial data traditionally managed in the ERP systems, as well as the demand patterns, resource availability, available capacity, etc, etc. Otherwise, there is a risk of designing products that are either less than optimal from the operational standpoint or, worse, ones that no one wants.

    So, while we often talk about PLM to ERP integration and the ability to deliver BOMs (product structures) from PLM to ERP on a timely basis, data flowing in the other direction and used in a meaningful fashion by the engineers in a PLM system is just as important.

    And while it is a fact of life that, in many companies, the ERP and PLM systems are often siloed and treated separately as “protected” organizational domains, I believe that these companies are missing out on the opportunity to leverage these systems as one organic whole. Such synergy may sound utopian, but I am aware of a few places where it was successfully achieved.

  • Alec, I agree with you on combined value of ERP and PLM resided information and cross usage. What are reasonable ways to break these siloes? How you can measure and present practical benefits of ERP+PLM implementation? Thanks, Oleg.