How ERP Systems Are Enabling New Business Models With Configuration Lifecycle Management

The hard reality facing manufacturers is that unless they’re actively reinventing themselves and making a deliberate attempt to improve how they design, sell and customize products for customers, they’ll be quickly be replaced by those that are. This is more pronounced in build-to-order, configure-to-order, and engineer-to-order manufacturing companies, as these are the most reliant on greater intelligence and knowledge. This drives real-time integration across systems, processes, and platforms as manufacturers devise new systems of record that can scale at the same speed customers are changing. The following graphic provides a maturity model of how systems of record are changing in manufacturing today. Engraining the Voice of the Customer (VoC) into every aspect of the system of record is what brings it to life, makes it vital and drives customer-driven urgency and innovation. One can see how legacy systems of record, created and fine-tuned for business models long gone, lack customer-driven intensity and focus. This is the essential catalyst, the fuel, that enables ERP systems to become engines that drive new business models.

Galvanizing Enterprise Resource Planning (ERP), Product Lifecycle Management (PLM) and Customer Relationship Management (CRM) systems together to enable greater customer collaboration is the future of manufacturing. Creating new systems of record for greater customer insight to drive more profitable product strategies is where new business models are being created today. By combining the three systems shown below, it’s possible to quickly find new business models.

Capitalizing on a customer-centric system of record requires new analytics, metrics, and KPIs. The recent study, Industrial Analytics Report 2016/17 (58 pp., PDF, free, opt-in) from the Digital Analytics Association e.V. Germany (DAAG), in collaboration with research firm IoT Analytics GmbH illustrates how important customer-driven analytics are to the future of manufacturing. Creating a new system of record increases the ability of manufacturers to gain prescriptive and predictive maintenance on machinery, better predict customer requirements, and analyze product usage in the field. A table from the study (below) quantifies the value of customer insights measured as industrial data analytics over the next 1-3 years. The more real-time the integration across ERP, SCM and CRM systems, the more accurate the predictive, prescriptive data on machinery performance, customers, product usage in the field and service levels.

Designed to support, scale and track transactions, ERP systems by themselves don’t have a system of record broad enough to flex in response to changing customer order preferences and requirements. By integrating ERP, PLM and CRM systems into a single unified system of record, the data in all three systems can be unleashed and turned into new business models and product ideas. Here are five ways ERP systems are enabling new business models with Configuration Lifecycle Management (CLM):

1. Use a single product model to launch product line extensions though existing channels. A single system of record that includes customer and product information makes it possible to create a single product model that can be the catalyst of product extensions. The transaction data from ERP systems can provide the basis for the business case with costs obtained from PLM systems and forecasts determined from CRM systems. Orchestrating all three systems together provides the necessary information to create new products that scale across all channels.
2. Creating Data-as-a-Service subscription models based on insights gained from CRM systems and turning them into products. With the rapid adoption of Internet of Things (IoT) sensors, systems, and platforms there is opportunity turn the data aggregated into service concentrated on predictive and prescriptive maintenance. It is estimated that nearly 60% of products will have an ancillary business model that is based on analyzing trends in predictive data. Only by having a product-based system of record can this be achieved; legacy ERP systems cannot scale to support this type of business model.
3. Taking high-end mass customization beyond traditional build-to-order to a more interactive, rapid delivery model that scales globally. While manufacturers are pursuing mass customization today, few are finding it as profitable as it could be. By creating a more product-centric system of record that includes the entire configuration lifecycle of products, manufacturers gain economies of scale and can improve profitability. Scaling beyond the limitations of existing systems with a more open, API-based approach to creating a system of record will drive greater revenue growth. The key is creating a system of record that includes all configuration and constraint rules, and product models that can be replicated across product lines, selling and service channels. The following graphic explains how this can be done using an open architecture to Configuration Lifecycle Management (CLM) which predicts the future of cloud-based mass customization systems.

(4 and 5 in next section)

4. Proliferating low-cost, simple build-to-order products that can be entirely designed online by customers and fulfilled in 24 hours or less. The greater the level of CRM, ERP and PLM integration, the easier it is to launch new product lines that can go directly from quote to the Bill of Materials (BOM) and production scheduling with no intervention. Today, voice-activated devices from Amazon, Google and others are following this production paradigm, creating $1B+ businesses in the next three years.
5. Searching out new product ideas using PLM and CRM systems to capture where existing products are failing to meet customers’ needs. One of the best sources of new product ideas is the Return Material Authorization (RMA), product failure and customer complaint applications in PLM and CRM systems. The area where existing products are failing holds insights into which new product generations will have the greatest upside potential for success. When a single system of record is created using CRM, ERP and PLM systems, these insights can be mined and turned into new products in new, more lucrative and growing markets than a manufacturer may be in today.