At 24Flow, we meet a lot of customers that are eager to increase the efficiency of the shop floor by means of a digital transformation. They recognize the lack of visibility, the inefficiencies caused by paper-based processes, and the challenges to achieve competitive lead times and delivery reliability.
At the same time, many of these companies still rely on an old ERP system that requires an upgrade. An additional challenge is that oftentimes many customizations have been built around the ERP core which hamper an easy migration.
Discover how Altachem digitized its shop floor with 24Flow to ensure full visibility even during an ERP upgrade.
The Dilemma
So how to move forward? Should these companies first invest in an ERP upgrade and tackle the shop floor in a second phase? Or do it the other way around and start with the shop floor first.
In our experience, it makes a lot of sense to start with the shop floor because there is a compelling business case, i.e. the ROI for the shop floor transformation is high. In addition, once the shop floor has been digitized, the subsequent ERP migration becomes easier.
The ROI for the shop floor transformation is high
Even though the ERP implementation is +10 or even +20 years old, in most of these customers, it does its job in terms of managing financial, sales, procurement & warehousing tasks.
In contrast, the shop floor suffers from many problems which may not all be visible at first.
In the high-mix low-volume market segment where 24Flow is active, long lead times lead to lots of overhead in terms of WIP, inventory, management coordination, planning effort, late discovery of quality issues etc. which all cost a substantial amount of money.
Missed revenue opportunities or worsening competitive positioning also hurt the top line.
In our experience, the digitalization of the shop floor leads to up to a 20% increase in productivity, both for direct labour but even more importantly also for indirect labour such as work for team leaders, planners, quality control & overall management coordination.
So if the ROI is so obvious, why are people doubting? The main reason is not everyone is aware of the actual overhead costs associated with suboptimal shop floor operations and accounting practices do not always make them visible. If you are interested to learn more about this topic, please read our white paper on manufacturing lead time (MCT=Manufacturing Critical Path Time).
In contrast, it may be much more difficult to make a compelling business case for the ERP migration. The argument is in most cases ‘we migrate because we have to’.
Feature
Legacy ERP Upgrade
24Flow Shop floor -First
Primary Goal
Migrate to a supported release
Productivity improvement
Average ROI
Low / indirect
High (up to 20% productivity gain)
Complexity
High (due to customizations)
Manageable (low-code)
Your ERP migration will get easier after the transformation of the shop floor
Besides the business case argument described above, there are other good reasons why you should consider prioritizing the upgrade of your shop floor over the upgrade of your ERP system.
At many customers, the ERP system has been extended beyond its core duties, because of the functional limitations of the ERP. These extensions further limit the flexibility, which is not that great, even within a standard ERP environment. By digitizing the shop floor first with a dedicated solution, it will become much easier to delineate the core functionality of the ERP afterwards. The functionality that has been taken care of by the shop floor control system does no longer need to be built in the ERP system. Eventually, you will end up with an ERP system that is closer to its core, with less customization and a faster and reduced cost implementation.
The great thing about a system like 24Flow is that it can cope with the shortcomings of your current ERP setup. 24Flow can model any shop floor master data that is only partly available in your ERP system. Let’s illustrate this with 2 examples:
- This article explains how in engineer-to-order companies, 24Flow can directly interface with the CAD & PLM systems to model the BOM, rather than making a detour via ERP.
- In configure-to-order companies that work with CPQ (Configure-Price-Quote) software, the production order configuration can be directly interfaced from this CPQ software.
A nightmare of any ERP migration project is the potential impact on regular operations. A digitized shop floor can act as an effective firewall or moat that protects your shop floor from back-end disruptions during such migration process. For a practical example, read this customer case about how Altachem made an SAP upgrade while maintaining smooth operations on the shop floor thanks to 24Flow.
