ERP for manufacturing companies: Where legacy systems fall short


This blog was originally published by UXC Eclipse. Since then, UXC Eclipse has become the DXC Eclipse practice at DXC Technology.

Today’s growing manufacturing firms face IT challenges that include increasing costs, evolving business requirements and aging technology. Nowhere are these challenges more apparent than with legacy enterprise resource planning (ERP) systems.

Early ERP adopters typically implemented complex and heavily customized systems. Over the years, these systems continually required additional customizations. In many cases, the ERP vendor continued to tailor the system to meet evolving requirements but didn’t always invest in re-platforming the system.

As it became cost-prohibitive and time consuming to continue customizing outdated technology, many vendors turned to more future-focused vendors that would offer third-party add-on solutions, but still ignore the re-platforming issue. As a result, manufacturers who continued to rely on legacy systems started to experience an increasing number of problems.

When it’s time to move to a next-generation ERP system

The problems that arise with legacy ERPs only compound over time and eventually the system will have to be replaced with a solution that can more easily adapt to changing business requirements.

Here are some signs that indicate it might be time to retire legacy systems:

  1. High operating costs

Over time, legacy ERP systems become very expensive to run. This is especially true if the vendor has stopped supporting the software and upgrades are no longer available. This forces the manufacturer to rely heavily on in-house expertise that was built over time. In addition, the aging hardware becomes unreliable and requires constant modification putting a major resource constraint on IT departments. Continuity becomes a major issue, because it’s difficult, if not impossible, to find new employees who are knowledgeable enough to maintain outdated software and equipment. Instead, it is often less expensive to install a new cloud-based ERP system.

The solution: Modern cloud-based ERP systems significantly reduce operating costs. In addition, the systems are easy to scale – expanding functionality and adding new users at the time when it’s needed, thereby reducing the total cost of ownership.

  1. Limited functionality

When a legacy ERP system was new, it was fast and did everything the company needed it to do. However, technology has advanced tremendously and business requirements have evolved far beyond what was conceived when the legacy system was installed.

The solution: Today’s ERP systems offer manufacturers flexible, industry-specific functionality. Manufacturers can select only those features they need. Based on cloud-technology, developing new functionality or customizations is easier and faster than ever, which significantly reduces costs.

  1. Inadequate data access

Legacy ERP systems often operate as a storehouse for different types of data related to production, finance, sales and other business processes. However, the earlier systems weren’t designed to allow company-wide access via user-friendly dashboards. Instead much of that data was compiled, stored and analyzed within disparate silos in the storehouse.

The solution: Next-generation ERP systems capture and consolidate data within a single, unified platform that provides immediate access to key information across the entire business. The manufacturer gains visibility into all areas of operations with the ability to track KPIs, identify problems quickly and improve processes and workflows – all to enable faster, better decisions.

  1. Lack of integration

Most legacy systems are incapable of integrating with new applications and supplier systems without costly customizations, therefore limiting the ability to take advantage of extended functionality and capabilities that would provide opportunities to decrease costs and increase competitiveness.

The solution: Modern ERP systems can integrate with other applications to expand the system’s capabilities without starting over. In addition, the systems can integrate with outside solutions. For example, integrating an ERP solution with a supplier’s system can automate accounts payable, ordering processes and other functions to reduce costs and improve operations.

Going beyond legacy systems

Today, cloud-based ERP solutions provide capabilities far beyond simply fixing legacy system problems. The solution offers capabilities that build a competitive advantage to enable long-term growth.

Here are just a few examples:

  • Streamlining company-wide workflows: With visibility into workflows across the company, process improvement efforts are accelerated and streamlined. It enables the ability to identify interdependencies that show how workflows in one area affect those in another. In addition, consolidated real-time financial and operational data can more easily pinpoint opportunities for productivity improvements and cost reductions.
  • Reducing time to market: A manufacturer becomes much more agile through an improved product development process that brings together all involved departments with the information needed to develop new products faster and with fewer revisions.
  • Improving supply chain management: A consolidated ERP and CRM system that integrates with supplier systems generates several benefits, including: placing orders electronically, tracking supplier performance, and getting products to the customer faster and more cost-efficiently.
  • Improving customer relationship management: Customer relationships can be strengthened with an integrated ERP and CRM system. Sales workflows can be automated, and all relevant parties can gain access to order history, sales contracts, vendor documentation and more.

Whether a manufacturer needs to replace a legacy ERP system or is just planning to implement an integrated system for the first time, finding the right partner is critical.

Matt-McNulty-headshotMatthew McNulty is Senior Director, Consumer and Industrial Products for the DXC Eclipse practice.

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