The top five enterprise resource planning issues in the EMS business with ERP systems defined for their needs are not unlike an OEM equipment firm’s. However, the system used and the way it is set up it is more of a point-of-contention in the EMS business than in your typical OEM business model. Why is this?
EMS businesses live and prosper by being manufacturing and procurement experts. The EMS differential simply stated is two-fold. First, a continual environment of change and migration as customers and products come and go with massive amounts of data to manage. One motherboard, from one OEM program can have 5,000+ parts on it.
Multiply this by the EMS provider serving multiple OEM customers, with each customer having multiple product families – and each family having multiple final configuration variations undergoing revision changes, not to mention product end-of-life management, and its easy to see how EMS program sourcing is a constant changing environment but with huge amounts of data in constant flux. (Read: EMS program metric – Materials work-in-progress (WIP) as a percent of raw materials)
The second influence is that EMS providers live and die by their nimbleness and reliance on data to drive decisions on components (think: EMS quote pricing, quantity, risk avoidance).
The EMS business model, right or wrong, lives on purchase price variance (PPV) creation and turning material or, inventory turns. Risk avoidance goes hand in hand to help insure the provider’s capitalizing on PPV does not overreach customer commitments.
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Ranked below in reverse order of importance are the five major ERP system challenges facing EMS providers:
5.) Third-party alliances – Many providers add third-party appliances like saleforce.com or middleware such as WebSphere Cast Iron Cloud integration to provide linkages. This can be a solution when ERP software does not have a needed function or module, the ERP system is out of date, functionality is not turned on and/or an alternate software vendor offers a slicker manner of performing a function. (Go to: Cloud ERP strategy in contract electronics industry)
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Some manufacturers will turn to SharePoint, knowing manufacturing intranets can help companies manage manufacturing content, knowledge, and applications – allowing manufacturing professionals to come together in a centralized, digital workplace destination from all corners of the world in hopes of saving manufacturing project teams and organizations valuable time and money. (Read: Cost to build a SharePoint manufacturing intranet: How much?)
Regardless, third-party systems have compatibility issues and although they may work well, they also have to be maintained. This opens the door for a third or even a fourth software vendor and often users still cannot update data or linkages. When this happens a manual work around with manual review processes are then employed as a manual update to the ERP system.
If you need to use a third-party system, use it, but use it with its fullest intent and maintain it so that system-to-system inputs and outputs are accurate.
4.) OEM customer ERP system – Electronics OEM equipment firms brought under the umbrella of a contact electronics EMS production environment typically operate their own ERP system. So, as expected, they provide their data to the EMS provider, initially.
But any data provided by another entity must be analyzed, validated and mapped. We have yet to see any one EMS provider, or OEM, utilize their system the same way. Add to this, many (most?) OEM customers just don’t understand the complexity of the issues when merging ERP systems data.
EMS providers create algorithms to auto-validate incoming OEM data to sort that customer’s data and then load it into their system(s). This applies to OEM pricing quote data. Thus, recreation of data and validation of existing data from the ground up is a typical required action expected in any data merge.
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3.) Data and data warehouse – There is usually a group of standard reports in an ERP system. Invariably, these reports are not sufficient for managing an OEM manufacturer’s business. This need is even more important in EMS industry where head count resources are minimal and muscling though data is not really an option.
In EMS industry, providers must be masters at managing data. Large EMS providers manage considerably more material — in orders-of-magnitude greater compared to OEM equipment firms.
Therefore, many EMS providers become adept at creating macros to sort and parse, allowing data into common-base data. Yet, the provider still needs to ask himself, “is this most, or all, of the customer data?”
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One OEM customer’s data is then managed separately, alongside all other individual data for each OEM customer. Then, it is also aggregated to a common database in the provider’s data warehouse.
What this means is the EMS provider must be able to sort through customer data ‘unique’ to that customer and, he must be able to get that data into useable, common-base data for components and vendor part numbers in order to manage commodities and source these items to vendors.
Additionally, in EMS industry, if providers cannot parse the data separated by customers, followed by merging this data so that they can arrive at common components to generate usage and sourcing data, providers are at an extreme disadvantage to generate PPV – resulting in an inability to compete for your business in a hyper, cost-sensitive industry where reducing time to ROI can advance careers.
2.) User training – As with any organization there are users who master the system (master user) and those that are simply users. Teaching, instruction and mentoring should become paramount across the enterprise. This is a deep issue. Yet, surprisingly, little is invested in raising educational levels of those responsible for managing ERP systems at both the master level, and below.
Frequently, when asking ERP system users (buyers) why they purchased or wanted to buy a particular part, they cannot explain why. “The system told me to”, is a common response. This is common within both EMS and OEM companies, alike.
This highlights the fundamental tenant of ERP system implementation that needs to be addressed.
1.) Data integrity – In a perfect world, data integrity should not out rank ERP system knowledge (e.g. adequate training). So, to rationalize the ranking in this article, it’s important to be reminded that even in systems managed by knowledgeable people, data integrity is still an Achilles’ heel.
Again, many EMS providers incorporate carefully scripted front-end macros, proprietary algorithms and other data-proofing tools. These systems validation efforts are constant across EMS providers.
Furthermore, ERP systems calculate actions to be executed based on data supplied from tables and data fields modified by system decision rules that were setup by systems developers and systems users. ERP systems do not “think.”
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In addition to all of this, as with any ERP implementation, to be effective it is noteworthy to emphasize all data supplied is verified, suggesting MRP actions expressed in ERP output are consistent with desired intent.
For example, in ERP systems items master, whenever a void data field (or default value) is present, it should be categorized in the same manner as an incorrect data value. To emphasize this importance, consider the high number of incidents of occurrence of late part deliveries have been traced to a zero lead-time when a part is actually 60 days.
Or, conversely, an input plug coefficient/number of 180 days is base and yet the company wonders why they have six months of stock on order for a 5-day lead time part, upon analysis.
These types of data disparities can be more complex than described in this article. Nonetheless, every improper or incorrect data issues can have major material impact to the business. No ERP system is any better than the data it manipulates and bad ERP data generates bad actions systemically, very fast.
Understanding contract electronics industry services
Every electronic OEM equipment manufacturer has needs for sourcing, product design, manufacturing and supply chain management specific to its industry. The contract electronics industry is more than just outsourcing manufacturing, it’s about finding the right suppliers and partners and building relationships that add real value and the VentureOutsource.com website can help.
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