Upstream
ERP is where problems manifest, but usually, it is not the source of problems. Engineering and sales are the major upstream sources of new information for manufacturing companies. If the respective systems such as forecasting, CRM and PDM/PLM, are well-implemented, the rest of the digital transformation becomes a breeze.
Let’s acknowledge a universal fact: problems arise during execution but they originate from somewhere upstream. Another parallel fact is that it is hard to trace problems to their upstream origins, while it is easy to duck-tape problems where they are found. These universal facts alone might be wasting billions of dollars every year. The good news is that there are only a few upstream sources to be fixed, and these fixes are almost always as universal as the problems.
For most manufacturing companies, there are two types of systems: those that create information and those that execute on existing information. For example, the sales organization creates new information when onboarding new customers, bidding on new quotes, and receiving new orders. Similarly, the engineering organization creates new information when introducing new products and processes or making changes to existing ones.
Engineering is an organization. Therefore, engineering is more than engineers, prototypes, drawings, specs, standards, BoMs, etc. The primary step to obtaining the “organization” status in engineering is taken by establishing the engineering processes in a mutually exclusive and collectively exhaustive manner (a.k.a MECE). Then, the processes should be fleshed out with the necessary skills. Finally, tools make the organization more efficient. I consider tools from the broadest perspective as they comprise digital systems, digital tools, automation, instruments, devices, and the physical settings for testing & prototyping. A similar argument goes for sales as well. Sales is an organization, and it is more than salespeople, proposal decks, and rolodexes. Therefore, the formula below applies to sales as much as it applies to engineering.
(Process + Skills) x Tools
Interestingly, the intersection of sales and engineering is a magical domain for growth hacking in manufacturing. Because sales organization drives the revenue while engineering drives superiority and differentiation. To materialize the magical potential of this intersection, the C-suite must consider sales and engineering within the same formula of (Process + Skills) x Tools. For most organizations, sales and engineering do have disparate natures and are led by different SVP/VPs reporting to different CxOs. This managerial demarcation does not necessarily demarcate the continuum of “(Process + Skills) x Tools" between sales and engineering. The recipe for achieving this continuum takes leadership resolve, an enterprise architecture blueprint, and execution discipline. Leadership resolve is required to overcome the initial resistance to change and immature reactions to working within a process. The enterprise architecture streamlines the organization, facilitates the processes, and brings guardrails on information quality. Finally, everyday discipline in terms of consistency and compliance is the key to maintaining success. All in all, achieving a blend of model-based engineering and CPQ systems is neither magical nor new. Such a capability provides superb flexibility and agility while it integrates most of the information architecture.
On the other hand, some systems execute upon existing information. These are ERP, MES/MoM, APS, WMS, etc. They just run pre-determined business logic, create different kinds of orders, and expect updates to these orders. At the core, these systems are nothing but a synthesis of 3 parts: sales data, engineering data, and execution updates. From this topology, there are a few alternative starting points for digital transformation.
Start the transformation from ERP outwards: This is the most common approach since ERP is where the problems manifest. But transformation should start from where problems originate.
Start the transformation from the edges:
From Engineering: Usually the right place to start. Especially for companies that compete with a combination of a complex portfolio, flexibility, and agility with engineer-to-order / make-to-order modes. Engineering covers both the product and process worlds.
From Sales: Starting from the sales world might lead to quick wins. But this depends on the relative criticality, complexity, and maturity of customer and product domains. One common theme is to start with forecasting, order intake, and revenue planning processes.
From Execution: The digital transformation of execution requires digitalization of the orders & plans to execute. These orders and plans are a function of sales and engineering data. Therefore, the execution world is not the best place to start digital transformation. Many companies fail in their digital transformation due to starting digitalization from the shopfloor with the sensorization of machines and installing barcode scanners and antennas while lacking the necessary quality and digitalization of BoMs, routings, work centers, etc. Some companies collect part counts from machines without a work order, so they don’t know what the counter is counting.
Starting digital transformation from the source systems offers a higher payoff and faster time to value. However, extracting the potential value of the source systems requires a more nuanced and intelligent approach. Chaos, completely analog processes, passive resistance, lack of a visible foothold, lack of executive sponsorship, and impatience are almost guaranteed. So, do not try this unattended.
Please check the Winspyre page on Linkedin.
