Many manufacturing businesses worldwide find themselves operating on either outdated legacy software or more recent on-premise Enterprise Resource Planning (ERP) Systems.
However, the rising prominence and growing necessity of Cloud ERP have compelled many to transition to cloud-based ERP software.
Given that ERP represents a significant investment for any organization, making such a pivotal shift in business infrastructure can understandably evoke anxiety and caution among those considering the switch to a modern Cloud solution.
But fret not, for these Clouds bring forth only digital transformation.
Embracing the Cloud can profoundly benefit process manufacturers by fostering an efficient business framework.
Despite lingering uncertainties among businesses regarding the concept of Cloud computing and the associated risks, this blog serves as a comprehensive resource, aiming to address all aspects of this transformative technology.
Continue reading to embark on your journey towards Cloud-based ERP enlightenment.
What is Cloud ERP Software?
In the 1990s, “Enterprise Resource Planning” (ERP) emerged as software designed to streamline and automate a wide range of corporate activities, spanning from finance to sales and manufacturing.
Originally, these systems operated on-premise, residing on clients’ own servers and within their data centers. However, the introduction of Cloud ERP in the 2000s revolutionized the industry.
Delivered as a service and hosted on the ERP vendor’s servers, cloud-based ERP systems seamlessly integrate and automate essential operational functions, offering a centralized source of data to manage critical supply chain components.
In the case of Cloud ERP, both the software and its data are centrally managed by the vendor at a remote data center, where updates and upgrades are routinely performed.
Given the intricate nature, widespread reach, and global scale of modern businesses, having a highly available ERP accessible across all business units is imperative, providing a unified, real-time view of data.
Cloud ERP systems fulfill this need by enabling employees to access the software via the Internet, requiring only an Internet connection and a web browser.
With Cloud ERP software, the need for on-premise maintenance and support costs is eliminated, as support is provided from the remote data center.
This not only reduces costs but also ensures secure data storage with backups, as data is not stored locally on organization servers. Additionally, organizations benefit from the ability to access and analyze vast amounts of data in real-time.
Different Types of Cloud-based ERP Systems
Multi-tenant SaaS:
A true ERP on Cloud is typically a multi-tenant SaaS. This means a single version of the ERP and its associated infrastructure serves multiple organizations. While each organization uses the same software hosted on the same servers, the data of one company is inaccessible to others.
Single-tenant SaaS:
A single-tenant SaaS ERP software differs from the multi-tenant version, as it serves just one organization. Here, an organization’s data is hosted on private servers running a unique software instance, providing enhanced data isolation.
Public Cloud:
In a public cloud, many organizations share cloud computing services. However, each firm’s data and applications are secure and inaccessible to others. Examples of public cloud providers include Amazon Web Services (AWS), Google Cloud, and Oracle Cloud.
Private Cloud:
A private cloud is a cloud computing service dedicated to a single organization. This setup provides greater control over data and infrastructure, ensuring exclusive use by the organization.
Hybrid ERP:
A hybrid ERP approach combines on-premise software with a private or public cloud for computing, storage, and services. This offers the flexibility to adopt cloud applications while retaining on-site ERP resources, allowing businesses to enjoy the benefits of both environments.
Components of a Cloud-based ERP Software
Cloud-based ERP solutions encompass a comprehensive suite of core business functionalities tailored to meet the diverse needs of different industries and businesses.
The selection of specific modules or applications within a Cloud ERP system depends entirely on the industry and unique requirements of the organization. For process manufacturing organizations, typical modules implemented in a Cloud ERP solution include:
1. Formulation, BOM, and R&D:
Facilitating formulation management, bill of materials (BOM) creation, and research and development processes.
2. Financials and Costing:
Managing financial operations, budgeting, accounting, and cost analysis.
3. Inventory Management:
Tracking and optimizing inventory levels, warehouse management, and stock control.
4. Sales:
Streamlining sales processes, managing orders, quotations, and customer accounts.
5. Purchase:
Handling procurement activities, supplier management, purchase orders, and vendor relationships.
6. Production:
Orchestrating production processes, scheduling, resource allocation, and workflow management.
7. Quality Control/Assurance:
Ensuring product quality through quality control measures, inspections, and compliance checks.
8. Regulatory Compliance:
Addressing regulatory requirements and compliance standards relevant to the industry and region.
9. Material Requirements Planning (MRP):
Planning and managing material requirements for production based on demand forecasts and inventory levels.
10. Master Production Scheduling (MPS):
Creating detailed production schedules to optimize resource utilization and meet customer demand.
11. Business Intelligence:
Providing insights through data analysis, reporting, and performance metrics to support informed decision-making.
12. Customer Relationship Management (CRM):
Managing customer interactions, sales pipelines, and marketing campaigns to enhance customer satisfaction and retention.
These modules collectively form the backbone of a Cloud-based ERP system, empowering organizations with the tools and capabilities needed to streamline operations, enhance efficiency, and drive business growth in today’s dynamic market landscape.
Business Benefits of Cloud ERP:
1. Enhanced Security
Cloud ERP solutions are equipped to handle digital data security and prevent attacks on company servers. They implement advanced firewalls that scrutinize all messages passing through the network, blocking those that don’t meet security standards, thus protecting critical data.
2. Real-Time Analytics
With Cloud ERP, businesses have access to real-time analytics, allowing for better decision-making and more efficient operations. Real-time data helps in monitoring performance and identifying trends swiftly.
3. Improved Accessibility
Cloud ERP systems can be accessed from any internet-enabled device, providing real-time data access from anywhere, anytime. This improves collaboration and productivity across various departments and locations.
4. More Support Options
Cloud ERP vendors often provide extensive support options, including 24/7 customer service, regular maintenance, and automatic updates, ensuring the system is always running smoothly.
5. Lower Operating Costs
A Cloud ERP solution eliminates the need for costly application software licenses and additional infrastructural costs such as hardware and data servers, significantly reducing maintenance and support expenses.
6. Consistent Updates
Top-notch Cloud ERP solutions provide automatic upgrade notifications, often scheduled during off-peak hours to minimize disruption. These upgrades keep the system up-to-date and are usually free of charge.
7. Simple Scalability & Performance Improvements
Cloud ERP solutions offer great flexibility and scalability, allowing businesses to increase the number of licenses as needed. They can be accessed from any internet-enabled device, providing real-time data access from anywhere, anytime.
Cloud ERP Concepts & Glossary
To better understand cloud-based ERP, it’s important to familiarize yourself with some basic concepts:
– SaaS ERP:
SaaS (software as a service) ERP is delivered and managed in the cloud. Your tools are hosted in the cloud, not on local machines, with the vendor responsible for ongoing updates, management, and upkeep.
– Deployment Options:
Refers to the choices businesses have regarding how they implement and manage ERP software. Examples include on-premise, cloud, managed hosting, SaaS single tenant, or SaaS multitenant.
– End-to-end Security:
The secure and encrypted connection between businesses and their vendor for managing and accessing business and customer information in the cloud.
– Mobility Solutions:
Tools, systems, and information that can be securely accessed by your team or customers via mobile devices such as smartphones and tablets from anywhere.
– Disaster Recovery:
A critical security feature of world-class cloud-based ERP software. It includes the policies, tools, and procedures followed by the vendor to recover data and systems in the event of a major disruption.
– The ‘True’ Cloud:
To capitalize on the growing popularity of Cloud services, many vendors claim to offer “cloud” applications. However, not all hosted software marketed as “cloud” are true cloud solutions. Many are “cloud-washed” applications that mimic the appearance of a true cloud but lack its core benefits.
Vendors selling these fake cloud solutions often repurpose their on-premise applications as cloud solutions. Despite their claims, these offerings lack scalability and incur higher hardware costs, failing to provide the genuine benefits of a true cloud solution.
Also read this blog to understand what fake cloud means, and how it differs from the true cloud.
Why Businesses are Migrating to Cloud-based ERP Systems?
Cost Efficiency
One of the most significant benefits of cloud ERP systems is their cost-effectiveness, typically about 30% less expensive than traditional on-premise ERP systems. There are no upfront costs for purchasing servers, creating databases, implementation, hiring consultants, IT staffing, maintenance, security, and backup.
Additional Benefits Beyond Cost
While cost savings are substantial, there are several other compelling reasons why companies are moving to the cloud market:
Agility
With Cloud-based ERP software, businesses can be operational quickly, as there is no need for hardware selection and setup or hiring and training IT staff.
Accessibility
Cloud ERP allows real-time access to business information from anywhere, anytime, and on any device. This ensures that employees across different units and locations within an organization work with the same data.
Scalability
A robust cloud-based ERP can grow with your business. It scales up or down on demand without requiring additional servers for more users, locations, or subsidiaries.
Customization & Integration
Cloud ERP can be more easily customized to fit the evolving needs of your business. They also integrate well with other cloud-based products without downtime or additional hardware.
Upgrades
With cloud ERP, updates and upgrades can take as little as 30 minutes and typically occur during off-hours to avoid business disruptions.
Security, Compliance, and Disaster Recovery
Cloud-based ERP software offers enterprise-grade security, end-to-end encryption of data, better compliance, and robust disaster recovery plans, ensuring that business data is always backed up and secure.
How Cloud-based ERP Differs from On-premise ERP Systems?
On-premise ERP:
- Location and Management: The database resides on an onsite server and hardware, managed by the company’s IT staff.
- Cost: Involves substantial investment due to hardware and data server installation, maintenance, troubleshooting, updates, and customizations.
- Maintenance: The company is responsible for all maintenance tasks, including security updates and feature upgrades.
Cloud-based ERP:
- Location and Management: Hosted by the ERP vendor and provided as a service to businesses, eliminating the need for on-premise infrastructure.
- Cost: Lower upfront costs as there is no need for extensive hardware or onsite installations. The ERP vendor handles maintenance, reducing overall expenses.
- Functionality: Offers enhanced functionality without the drawbacks of on-premise systems, such as upfront licensing fees and ongoing maintenance costs.
- Maintenance and Updates: The vendor manages application maintenance, data storage, servers, and installs security updates and feature upgrades.
- Infrastructure: Provides a secure infrastructure, including best-practice backups, disaster recovery, and guaranteed uptime, often superior to on-premise systems.
- Resilience: More resilient with a higher likelihood of continuous operation without failure.
Stats Corner:
– Cost Efficiency: Cloud ERP solutions are generally 30% more cost-effective than on-premise solutions (FinancesOnline).
– Data Security: Before migrating to the cloud, over 40% of businesses were concerned about data security. After the switch, 94% reported security benefits not achievable with their previous on-premise ERP (ComScore).
– Productivity: 93% of businesses experienced increased productivity outside the office due to cloud technology (Adynamics).
– Improvement: Cloud ERP software improved operations in 95% of businesses that implemented it (HubSpot).
– Success Rate: 67% of manufacturers and distributors described their implementations as successful or very successful (Ultra Consultant).
– Investment Priority: 53% of CIOs stated that Cloud ERP was an investment priority (ComputerWeekly).
The Future of Business Technology
Cloud ERP software is the future of business technology. As businesses continue to scale their operations, Cloud ERP will serve as a dependable tool to boost efficiency, improve accessibility, save costs, and drive overall business growth.
Formula/recipe-based manufacturing organizations can rely on BatchMaster ERP on Cloud in their journey towards achieving business objectives. Ready to learn more? See how BatchMaster can help your process manufacturing business by talking to our experts.
