Up:: Enterrpise Resource Planning (ERP) X:: Digital Transformation (DT)
Should you start with ERP?
No, ERP is part of 7 Steps to Digital Transformation
- Generally started around year 3 of Step 1
- Organizations treat it as a function of the business, not a system of ownership or a Single source of truth
Source
This section below is based on the YouTube video: “Digital Transformation does NOT start with ERP?” from the Industry 4.0 Community Podcast with Walker Reynolds.
Key Points
Walker Reynolds
“There is no relationship whatsoever between ERP upgrade and digital transformation. Let me say it again: there is no relationship between ERP upgrade and digital transformation, let alone ERP upgrade signifying digital transformation.”
ERP is Not the Starting Point
- An ERP upgrade is often the first step in a failed digital transformation initiative
- ERP is often a solution based approach, not a technology approach.
- ERP upgrades typically come around year 3 of a 3-5 year digital transformation journey
Digital Transformation Process
Also described in 7 Steps to Digital Transformation and Unified Namespace (UNS)
- Connect, collect, store, analyze, and visualize all OT and IT data
- Find patterns, report, and solve (using machine learning)
- Plug closed-loop digital operation into a digital supply chain (often after year 5)
ERP’s Role
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- ERP should be treated as a function of the business, not the system of ownership
- It’s one node in an ecosystem, not more important than SCADA, CMMS, or other systems
- The only reason you need to upgrade the ERP is because they need ==state-of-the-art API to share the models from ERP=
- You need to be able to consume Bill of materials, asset IDs, you need to Master data model and most importantly Collect Events
- ERP is NOT the Single source of truth, you need to consume the domain into your infrastructure
Industry Leaders’ Approach
- Companies like Tesla don’t use traditional ERP monoliths
- Tesla built WARP, a digital infrastructure with ERP functions, not a traditional ERP system
Walker Reynolds on Tesla's approach
“WARP is not their ERP system actually. WARP is their digital infrastructure upon which they have ERP functions.”
Problems with Traditional ERP Approach
- Creates a model that can’t be enforced on the plant floor
- Results in a disjointed ecosystem
- Goes against effective bottom-up approaches like the Toyota Production System (TPS)
- Starting with an ERP upgrade can lead to creating a model you cannot enforce on the plant floor and will have a disjointed ecosystem.