Despite globalization and the recent outsourcing trend in manufacturing, some manufacturing sectors have experienced substantial growth over the past five years. Most of them (food and beverage, plastics, and chemicals) have one thing in common: they belong to the process manufacturing sphere. As the name implies, process manufacturing refers to the processing and combination of raw materials and ingredients to create finished products.
As opposed to discrete manufacturing, where distinct products are produced, process manufacturing creates batches of goods that need to be divided by units of measure, such as barrels or bottles. Another important characteristic of process manufacturing is that the ingredients and raw materials used in the manufacturing process are transformed through chemical reactions and cannot be reused, unlike the parts and components used in discrete manufacturing.
As we will describe in detail below, these unique characteristics of process manufacturing make it difficult to manage. First of all, the fact that the production process cannot be reversed forces process manufacturers to be more careful when defining product recipes and planning operations. Another important challenge comes with product delivery, as most finished products delivered by process manufacturers have the potential to have a negative impact on the health and safety of consumers, as well as employees.
Finally, process manufacturers are pressured to comply with a multitude of safety laws and regulations, and also have to adapt to new demands from consumers wanting healthier and more environmentally-friendly products.
If we add to these specific challenges all the management requirements for operating a manufacturing company (for example, accounting, customer management, and sales and purchasing), it becomes clear why process manufacturers require complex software solutions like ERP, and often need specialized ERP solutions designed to address their specific needs.
The Top 10 Reasons Companies Choose Process Manufacturing ERP
While they may vary somewhat depending on industry or company size, the following are the most common reasons process manufacturers choose ERP solutions specifically designed for their needs:
1. Quality Management
Quality management is critical for process manufacturers in order to comply with a plethora of laws and regulations, which can vary depending on where the products are made and where they are sold. An ERP solution helps process manufacturers avoid recalls or legal issues that can be caused by a lack of compliance with safety laws or industry standards.
Bad product quality can also lead to health hazards like bacterial contamination or environmental issues such as pollution caused by dangerous chemicals. Besides the impact on the revenue of the company and the fines that may be incurred, these issues also impact the brand of the manufacturer. It usually takes years and a lot of effort for companies to regain the trust of consumers, which is why manufacturers prefer to prevent these problems from happening.
2. Supply Chain Optimization
Supply chain optimization is important for process manufacturers for multiple reasons. First, in order to provide good products at reasonable prices, process manufacturers need to purchase ingredients and raw materials from reliable suppliers. They also need to create long-term relationships with these suppliers. ERP solutions help process manufacturers track performance, costs, transaction history, and other capabilities needed for effective and efficient supplier management.
In addition, process manufacturers have specific transportation needs, which can vary from one industry to another. For instance, a food manufacturer may require refrigerated trucks for delivery, while a chemicals manufacturer will need tankers. Not to mention that most countries, and sometimes even individual states or regions, have different rules regarding chemical goods transportation. Process manufacturing ERP solutions help organize all of this information so you can full optimize your supply chain processes.
3. Recipes and Formulas
Recipes and formulas in process manufacturing are not only complex, but they also usually don’t leave much room for error. A minor change in quantity for one ingredient can lead to the quality management issues mentioned above, or even compromise an entire production batch. While defective production batches may be adjusted to improve their quality, this process can be very complex, since manufacturers need to take into account all the possible chemical reactions generated by adding ingredients that were not part of the original recipe.
Another important challenge process manufacturers face is that some ingredients can only be used in very specific conditions, related to factors such as temperature, humidity, or even exposure to light. Furthermore, the same ingredient may have a completely different impact on production depending on its potency or the concentration of the substance being used. Only a process manufacturing ERP solution can help manufacturers consider all these factors when creating and adjusting recipes and formulas.
4. Tracked Costs and Profitability
The complexity of the recipes or formulas makes cost tracking a challenge for process manufacturers. Ideally, they should track the cost of every ingredient based on the quantity used and its chemical characteristics, such as potency. Furthermore, the cost of wasted raw materials and ingredients also needs to be tracked as accurately as possible. Without all these details, process manufacturers cannot estimate their total actual costs per unit or compare this with the sales price to determine profit margins.
An important category of costs for process manufacturing is related to the inventory of raw materials and finished products. Not only do they often require special storage conditions like temperature-controlled environments, but these products can have multiple units of measure which makes warehousing even more complicated.
For instance, a finished product like juice can be stored in barrels for one customer, bottles for another, and so on. On top of multiple units of measure, manufacturers also need to track expiration dates and lot numbers. Using a process manufacturing ERP solution, you can store and aid in the management of all this information.
5. Adaptation to Different Types of Markets
Either because of local regulations or to adapt to a local market, process manufacturers may need to create and use formulas and recipes that are specific to the markets they serve. For example, a recent trend forcing food and drinks manufacturers to adjust their recipes is increasing pressure to reduce the amount of sugar in soft drinks. Even some of the largest manufacturers like Coca-Cola are changing their products so that the amount of sugar and calories is reduced (as is described in this recent “sugar reduction report”).
Packaging and labelling is another challenge that can vary from one market to another. For instance, the information required by law to be included on labels for food or chemicals in Europe is very different than in North America. As for packaging, process manufacturers are trying to create different versions or sizes of their products in order to appeal to various markets. All these changes require an important investment that may disrupt the operations of the manufacturers. An ERP solution can greatly help companies prepare for and implement product packaging and labelling changes.
6. Reduced Waste
Since creating perfect recipes or formulas is almost impossible in process manufacturing, there will always be a percentage of the final output that is waste. Waste can also happen when manufacturers change their recipes to adapt to shifts in demand or to address shortages in ingredients or raw materials. While it’s very difficult to eliminate waste, process manufacturers can use ERP systems to calculate an estimated level of waste, track the actual waste, and compare the two in order to improve efficiency in production operations.
Waste can also occur due to bad planning. For instance, raw materials may expire before being used in production, and therefore need to be discarded. Employees and equipment can also idle for long periods of time due to unplanned changes to the production cycle and equipment downtime. Production planning is therefore one of the most important process manufacturing ERP modules that help manufacturers reduce waste.
7. Agile Production
Process manufacturers rarely focus exclusively on one or a few products. They usually manufacture multiple products, oftentimes producing multiple variations of each product. Since each product has a different recipe and may require different production operations and equipment, it can be extremely complicated to transition between production cycles. In order to increase productivity and avoid the underutilization of their equipment, manufacturers need to be able to plan ahead and adjust planning when needed.
It is not unusual that a process manufacturer decides to replace a planned production cycle for a product with another cycle for another finished product. Changes to production planning may also happen because the quality is compromised and manufacturers are trying to adjust it. In process manufacturing, these changes are the rule, not the exception. Therefore, companies need a flexible process manufacturing ERP solution that allows them to make adjustments quickly without compromising on quality.
8. Improved Product Development and Go-To-Market Strategies
While product development is mostly managed using product lifecycle management (PLM) software, ERP for process manufacturers contains valuable data that can be used to create new products and improve existing ones. One example is historical information about sales volumes, returns, and customer satisfaction. This can help manufacturers understand which products are successful and which aren’t.
Another type of information managed by ERP that can be useful for product development is the cost required to manufacture finished products and their variations on time, which allows manufacturers to deliver better products at lower costs.
Historical data can also help process manufacturers identify trends in customer behavior that may impact their bottom line. In order to adapt to their market, process manufacturers need to adjust their existing offerings, release new products, and sometimes even decide to discontinue products that aren’t profitable. Due to the competitive nature of their business, process manufacturers may choose to launch products that are not profitable in the short-term, but have the potential to become best sellers in the long-term. This is a risk that most process manufacturers have to take in order to remain competitive. But this should be a calculated risk.
9. Responsiveness to Consumer Pressure to be More Environmentally Conscious
Consumers nowadays have higher expectations than ever, and one of these expectations is for manufacturers to be more environmentally conscious. Due to the use of chemical substances, process manufacturers are more likely to pollute the environment than most other industries. Even though manufacturers cannot completely eliminate the negative effects they have on the environment, consumers expect them to make an effort to reduce emissions and produce relatively clean products.
Even when manufacturers comply with safety laws and quality standards, they also need to take into account challenges like the use of conflict minerals (minerals provided by countries ravaged by military conflict and sold to perpetuate the fighting). Since consumers are becoming more knowledgeable and have greater access to information than in the past, they can now boycott manufacturers who use these types of minerals. Using a process manufacturing ERP, you can find ways to reduce your reliance on these types of resources, building a reputation as a socially conscious manufacturer.
10. Increased Competitiveness
All of the reasons mentioned above help process manufacturers become more competitive in their market. Nowadays, process manufacturers need to be compliant with quality standards, capable of adapting to changing customer demand, transparent and environmentally conscious, all while keeping costs and waste low in order to be profitable.
Some of the Most Important Vendors Offering ERP for Process Manufacturing
The process manufacturing vendor landscape is a mix between providers of ERP solutions that focus exclusively on this type of manufacturing and vendors that offer ERP for both discrete and process manufacturing. Large ERP vendors with a diversified portfolio often offer separate solutions for discrete and process manufacturing, and sometimes even have several ERP solutions specifically for process manufacturing.
Aptean’s offering for process manufacturing includes two ERP solutions: Axis ERP (specialized in metals, wires, and cable manufacturers) and Ross ERP (a more generic solution). Besides ERP, Aptean also offers Factory MES for process manufacturing. The company’s flagship solution is without a doubt Ross ERP, which includes modules for back office administration, manufacturing operations and even PLM. Another benefit of Ross ERP is that it includes business process management (BPM) functionality, which manufacturers can use to improve their workflows.
While the core ERP modules are robust, functionality for PLM or BPM is quite limited. This may be enough for small manufacturers, but larger companies may want to consider standalone solutions that better cover their needs for product development or business process management.
Epicor offers Tropos ERP for process manufacturing, which focuses on industries such as food, beverage, pharmaceuticals, metals, and chemicals. Epicor Tropos includes functionality for the back office such as accounting and customer relationship management (CRM), as well as modules for inventory, supply chain, and production and quality management. Process manufacturers can also benefit from two other solutions offered by Epicor: Mattec MES (Manufacturing Execution System) and Informance EMI manufacturing intelligence.
Small and medium-sized process manufacturers may only require Epicor Tropos ERP to run their businesses, while larger companies are more likely to need Epicor Mattec and Epicor Informance EMI. The right mix of these solutions also depends on the industry of the manufacturer, which is why buyers need to make sure to select the right option for their specific needs.
Amongst Infor’s offering of multiple ERP solutions, the main products for process manufacturing are Infor CloudSuite Industrial (SyteLine) and Infor M3. Both products include functionality for both discrete and process manufacturing, as well as distribution. Infor CloudSuite Industrial can be delivered as an ERP solution for process manufacturing only, under the name Infor CloudSuite Process Manufacturing. Also, the Infor CloudSuite family includes industry-specific solutions such as Infor CloudSuite Food & Beverage.
The other two solutions mentioned above focus mostly on chemicals and food and beverage. Infor is one of the few ERP vendors to include PLM in its offering for process manufacturing. Its Optiva PLM product focuses on the food and chemicals industries, making it very valuable for process manufacturers.
As shown above, Infor’s offering for process manufacturing isn’t very easy to understand and buyers should be careful to evaluate potential overlaps between all three solutions. Process manufacturers that are not in the food or chemicals markets are less likely to find Infor’s offerings are a good fit for their business.
Process manufacturing isn’t one of Microsoft’s major strengths, but we have included Microsoft here because some of its partners have created process manufacturing solutions on top of Microsoft ERP software. Microsoft partners like Sikich and Cosmo Consult have created process manufacturing modules that are sold together with Microsoft Dynamics AX or Microsoft Dynamics GP.
Since these are the most popular Microsoft ERP solutions, companies already using them can choose to only implement the process manufacturing functionality. Even companies that require a complete ERP solution can benefit from this option, because both the core ERP and the process manufacturing modules are built on Microsoft technology, using the Microsoft database.
There are a few possible drawbacks to going with this option, however. Partners may offer limited regional support for their products, and the additional functionality may not always be tested and verified by Microsoft. Also, Microsoft doesn’t control how these custom features will be impacted by future versions of their ERP solutions.
Oracle’s flagship ERP solution JD Edwards EnterpriseOne solution can be used by both discrete and process manufacturing companies. Oracle offers a separate edition for process manufacturing only, under the name JD Edwards EnterpriseOne Solution for Process Manufacturers. Some of the industries covered by the solution are chemicals, food and beverage, and pharmaceuticals. Oracle also offers PLM for process manufacturing, but the solution focuses mainly on the pharmaceutical and biotechnology industries.
While Oracle’s portfolio includes pretty much all business software types, from ERP and PLM to human capital management (HCM) and CRM, a mix of several of these solutions can be expensive and difficult to maintain. Large process manufacturers that are more likely to benefit from such a package should be aware of the initial and ongoing costs that may be incurred. For smaller companies, Oracle is working on a cloud ERP offering, but it does not yet include functionality for process manufacturing.
ProcessPro ERP is one of the solutions specifically designed for process manufacturing. Its industry focus includes food and beverage, chemicals, nutraceuticals, and cosmetics. While it’s built on Microsoft technology, ProcessPro ERP is its own solution, not additional functionality on top of Microsoft ERP solutions. Since smaller vendors do not have the budget to develop all the features required by their customers, they tend to seek partnerships to fill this gap.
ProcessPro has certified partnerships with multiple vendors, offering various solutions such as quality management, environmental health and safety, CRM, HR, document management, and payment processing.
These partnerships can be beneficial for process manufacturers, but they can also be a challenge when companies already use other CRM or HR solutions that they don’t intend to replace. Additionally, the fact that ProcessPro doesn’t have a certified partnership with any PLM vendor may be a concern for large process manufacturers.
Ramco’s ERP suite provides editions for multiple process manufacturing industries, such as dairy, cement, chemicals, and food and beverage. Besides features for process manufacturing, Ramco ERP on Cloud includes modules for HCM, finance, supply chain, and asset management. Ramco ERP on Cloud can be a good alternative to solutions provided by large vendors like Oracle or Infor—and is usually less expensive. Another benefit of Ramco ERP on Cloud is the Ramco VirtualWorks platform, which allows customers to scale up or down based on their specific needs.
Instead of a full MES solution, Ramco offers OPTIMA, an add-on for process control management. This, and the lack of robust PLM functionality or partnerships, can be an issue for large process manufacturers. Small and medium businesses (SMBs) may benefit from the VirtualWorks platform, but they need to clearly understand how scaling up or down impacts their operations and the overall cost of the solution.
Overcoming the Challenges of Evaluating Process Manufacturing ERP Solutions
When evaluating process manufacturing ERP, buyers are facing a few major challenges that are specific to this type of software. One of them is the fact that some vendors have adapted their discrete ERP solutions for process manufacturing, which can make their offerings too generic for some industries. On the other hand, some vendors that specialize exclusively in process manufacturing may not always have the most robust back office functionality.
Process manufacturers may need to make compromises, a common option being the adoption of a two-tier ERP strategy. This means that manufacturers choose to use two ERP solutions, one offering the best features for process manufacturing and the other one being used for accounting and back office. While this is not ideal, it may be the best option, especially when both ERP solutions are delivered on the cloud, which makes integration and maintenance much easier.
Large process manufacturers also need to evaluate the integration between ERP and other solutions that are critical for their business, like PLM or MES. Even though some vendors provide their own PLM solutions for process manufacturing, such as Oracle, the functionality offered by these solutions may not be enough for some manufacturers. In this case, a tight integration between ERP and the most robust PLM solutions in the market, like PTC or Siemens PLM, may be the best alternative.