Solve Forward

Solve Forward® is a journal of learned lessons and experiences from the digital transformation front-lines. We are here to share our experiences, and interview others who Solve Forward and learn along the way.

Published on

Industry 4.0 - The impact of IIoT on Enterprise Resource Planning (ERP) systems

Industry 4.0

In the manufacturing industry, the Industrial Internet of Things (IIoT) and Enterprise Resource Planning (ERP) systems play a vital role in collecting and analyzing data.

The combination of IIoT and ERP helps integrate resource and product management, planning, sales, marketing, and finance into a single vertical. Not only does this streamline the process, but it also helps manage daily operations efficiently. With the advent of advanced technologies like 5G and big data analytics, IIoT and ERP are changing the manufacturing industry as we know.

Let us understand these technologies briefly before we look at the role of IIoT in transforming ERP and the key benefits that the integration of IIoT and ERP offers.

What is Industrial IoT (IIoT)?

Industrial Internet of Things (IIoT) refers to a network of intelligent devices, data analytics, machine-to-machine communication mediums, and user interfaces. It eliminates the time-consuming manual processes and considerably improves the efficiency of business operations.

According to Accenture, IIoT can boost the global economy by $14 trillion by 2030. About 83% of organizations have reported improved efficiency after introducing IIoT in their system.

IIoT, also known as Industry 4.0, uses advanced infrastructure to collect, store, monitor, and analyze data. The manufacturing industry has greatly benefited from IIoT. It has helped reduce the financial losses due to manual errors, unlocked the path to higher productivity, and improved industrial safety by collecting and providing access to previously unavailable or hard to get data.

What is an ERP system?

An Enterprise Resource Planning system is a software system that manufacturing companies use to manage their day-to-day operations. ERP is a culmination of project management, customer relation management, risk management, accounting, and procurement. ERP software packages are estimated to generate revenue of USD $48.21 billion by 2025.

There are two types of ERP systems: local-based and cloud-based. Local-based ERP systems work with the help of manual computer hardware. A cloud-based ERP system or SaaS (software as a service) is a tool that fetches data from the cloud, allowing you to access your data 24x7 remotely.

How can IIoT dramatically enhance ERP systems?

Allow faster, efficient data inputs.

Although an ERP system helps in planning, strategizing, and decision-making in an industry, it has certain shortcomings. ERP systems must be fast, error-free, and integrate seamlessly with the data from a manufacturing plant.

In traditional ERP systems, data entry is not automatic. A company has to invest in labor and manually enter data. Manual labor can increase the time and cost of data input. There are high chances of error and inaccuracies in manual data entry.

If an industry lacks the infrastructure of automatic collection and storage of data, integrating IIoT can provide real-time data and reduce errors significantly. Better data helps produce more meaningful results.

Provide better traceability

An ERP system provides product-level traceability, but there is a limit to the data stored in hardware. Suppose, if a manufacturer wants to access older information about a product, they would have to initiate a mass recall.

IIoT eases the process of recalling data. You can configure an integrated IIoT system to have the product details at every stage from OEM to Tier I and Tier II.

Bridge the gap between ideal and actual

ERP systems simplify maintaining the daily record of shift-level schedules, production targets, material requirements, etc. After each production, the data has to be updated manually.

This delay can produce a hindrance between planned production and actual production schedules. Companies have to allot certain downtime bookings for planning next-day activities.

IIoT uses an edge system to connect to the ERP systems, thus automatically reducing downtime. Self-healing IIoT systems can continue operating offline as well. Reduced downtimes help improve the management and planning of future production runs.

Cut down costs

IIoT can quickly identify the failing portions in a manufacturing unit. It uses sensors for real-time management of product count and billing cycles. These factors help quickly troubleshoot pending issues and reduce the cost of maintenance and operations.

Integration of IIoT and ERP systems offers several key benefits such as:

  • Higher efficiency: Integrating IIoT with the ERP system helps achieve better operational efficiency. Since maintaining operations like inventory updates, missed deliveries, reordering, production count, etc., is fully automated, data entry is faster and easier. Since you can trace data conveniently in an IIoT-ERP system, there are lesser time delays.

  • Faster troubleshooting: IIoT-integrated ERP systems update their data in real-time. If there any changes or defects in a machine, the system can point them out to you immediately. It makes your team respond quickly, helping you achieve uninterrupted production.

  • Better decision-making and planning: When an ERP system works in conjunction with IIoT, an organization can make better decisions and create robust plans. With less paperwork, lack of human intervention, and automated analytics, you can achieve more tangible and accurate inputs for forecasting and planning.

  • Better security: The data in an IIoT-ERP system is stored automatically on the cloud. Companies can selectively provide access to this data to select personnel. Any breach of data can be easily detected using security tools in an integrated system. There is also considerable safety from theft and unauthorized packaging in an IIoT-based system.

  • Reduced resource consumption: IIoT-integrated ERP system eliminates the need for constant monitoring of data. Sensors help with information updates that boost your production. Industries can standardize the processes to maintain consistency and reduce trial-and-errors.

  • Easy integration with future technologies: IIoT sensors can work seamlessly with artificial intelligence and data analytics tools. The use of such advanced technologies can help improve your marketing strategies and create a strong brand image.

  • Improved customer relations: IIoT-integrated ERP systems provide clear, transparent means of communication between dealers and vendors. Both parties can access the necessary information about the scheduled production and sales of a product. These improved relations can foster trust between the manufacturer, vendor, and consumer.

What are the challenges in integrating IIoT with ERP systems?

Despite the numerous advantages that these systems offer, there are certain drawbacks that technologists must address to create a robust infrastructure. During system implementation, maintaining data privacy is tedious. In most modern systems, data leaks have been critical.

Erroneous budget planning is also a significant challenge in IIoT integration. Although IIoT systems provide accurate information, a lack of expertise in analyzing this data and allocating appropriate resources can make it challenging to obtain good returns.

According to Microsoft’s IoT signals report 2019, 29% of organizations couldn’t develop products for their brands due to a lack of resources. Lack of resources also hampers the transition to advanced industrial systems.

The integration between IIoT and ERP systems can have a massive impact on the growth and revenue of an organization. The hindrances to its implementation can be overcome with the right decision making and choosing the right partners for system design and planning. When IIoT and ERP systems work hand-in-hand, they can enhance product quality and quantity, allow more data-driven decisions, and help your business prosper.

If you have questions about digital transformation that you’d like for us to cover, please email or @solveforward on Twitter. We’d love to hear from you!