Manufacturers Must Move to the Cloud to Stay Competitive

May 15, 2017
Cloud-based businesses and apps are changing industries that have been around for decades, even centuries. One example is manufacturing, which is perhaps the one industry that’s been impacted the most by the shift to the cloud, the rise of automation, and an aging workforce being rapidly replaced by a younger generation.

By Leyla Seka
EVP, Salesforce AppExchange

As the head of Salesforce AppExchange, both when it launched in 2006 and today, I’m no stranger to technological change. Cloud-based businesses and apps are changing industries that have been around for decades, even centuries. One example is manufacturing, which is perhaps the one industry that’s been impacted the most by the shift to the cloud, the rise of automation, and an aging workforce being rapidly replaced by a younger generation.

Last year, Salesforce sent out a survey (in partnership with Propel, Rootstock, ICIX, and Tavant Technologies) at the Salesforce Manufacturing Summit in Chicago, and I was blown away by some of the results. For instance, only 25% of respondents said that their engineering departments were currently using enterprise cloud apps. But that number is expected to expand to 70% this year.

And it’s clear that moving toward cloud-based apps improves a host of business processes. In the survey, 69% of respondents mentioned process automation as a benefit derived from moving to the cloud. Other benefits mentioned by a majority of respondents include data visibility, lower IT costs, and increased productivity.

Salesforce has helped foster an ecosystem of cloud-based apps that help manufacturers increase efficiency, stay competitive, and improve the customer experience through Enterprise Resource Planning (ERP), Product Lifecycle Management (PLM), Configure Price Quote (CPQ), and Finance apps available on Salesforce AppExchange. I recently spoke to CEOs from Kenandy, Propel, and Rootstock to better understand the challenges and solutions currently facing manufacturers.

Manufacturers worry about serving customers and their employees

At Salesforce, our mission is to help our customers connect to their customers in a whole new way. With our customer success platform, in combination with the help of our Independent Software Vendor (ISV) partners, we are working together to improve the lives of our customers and our employees. Manufacturing companies have many stakeholders, but the two groups who came up frequently in my conversations were customers and employees, both of whom have much to gain from manufacturers moving to the cloud.

Pat Garrehy, CEO of Rootstock, a cloud ERP solution, said among the issues facing manufacturers are “delayed responses on requests for quotes to customers because manufacturers don’t have accurate costs, nor the appreciation of what the lead time is to produce the item they are quoting. So manufacturers can’t give accurate shipment dates and end up with past due orders and backlogs. In part, it’s because they don’t have an ERP that can solve these problems.”

And Ray Hein, CEO at Propel, which has built a cloud Product Lifecycle Management (PLM) solution on the Salesforce platform, noted that manufacturers need to look inward at a workforce that has grown up with a new set of technological expectations in their jobs. “There's a new millennial workforce that is coming to play,” Hein said. “And their expectations are very different than what the manufacturing workforce was 20 years ago, when they used older, more rigid legacy systems like Oracle and SAP.”

Cloud-based apps come to the rescue

Fortunately, the CEOs I spoke with run companies whose technology helps manufacturers meet these challenges, and many more, head on. Chuck Berger, CEO of Kenandy, a Cloud ERP solution, touted the benefits of the Kenandy ERP versus an on-premise legacy solution.

“If you're a manufacturer, you want to be able to drill down to specific details at any given time. If there is a failure in the field, you can quickly find the serial number and determine what caused the failure, and go seamlessly through an end-to-end application to understand who provided all of the components, what their costs were, and where the actual product is today,” Berger said. “It becomes very burdensome for the customer to have to go from an AR app, to an AP app, to a supply chain management app. In Kenandy, all of that is a single, seamless application.”

One story I love comes from Merrow Sewing Company, a 180-year-old sewing company that reinvented itself by switching from a legacy ERP system to Salesforce and Kenandy. In three years, Merrow doubled its top-line revenue, with 25% coming from new business lines they started with nearly the same employee headcount. Merrow recently added e-commerce capabilities with another Salesforce AppExchange partner and is seeing increased customer engagement and conversions, all of which are possible by having their major business processes on the same platform.

Hein mentioned the benefits of a cloud-based, modern PLM system in a fast-changing economy. “Manufacturing companies are now dealing with the participation economy, a shift where customers are much more engaged with businesses and participating in every aspect of the product lifecycle - from the early definition of the product all the way through its launch into the market,” he said. “Cloud-based PLM is reducing time to market because customers can now work in parallel with engineers, operations, and partners to get products done right the first time.”

AMS Technologies, a leading solution provider of high-tech solutions, is a Propel customer that has seen incredible benefits for both customers and employees. Moving from a lack of a common, engineering-friendly application, AMS Technologies deployed Propel in just six weeks. By having the latest product information in the cloud, the company saw a 500% increase in engineering throughput and 100% transparency for their customers.

And Garrehy said that the right ERP solution can make the entire manufacturing process work more efficiently. You can eliminate job starts and stops in production and their associated direct and indirect labor costs, as well as reduce overtime,” he said. “You'll have better visibility of demands, allowing you to purchase at a better price with the right suppliers, and therefore reduce the cost of materials that you use in your production.

“If the customers are receiving their orders complete and on time, sales will increase because of the improved customer experience,” Garrehy added.

Last year, we featured Rootstock customer Direct Energy Solar on an AppExchange Connected Leaders webinar. The company wanted to create a single source of truth that integrated with Salesforce. Prior to implementing Rootstock, they saw variances of over $100,000 on $4 million worth of inventory, and couldn’t find and track inventory. After implementation, that variance was cut by at least 90% each month, as Direct Energy Solar did not see inventory variances greater than $10,000 in any given month.

Advice for manufacturers looking to move to the cloud

Businesses in the Salesforce ecosystem are playing to win, but one of my favorite things about our partners is their willingness to share advice and best practices with each other, helping learn from one another’s mistakes and grow together to best serve our joint customers. So, I asked each of the three CEOs what advice they would give to manufacturers looking to make the move to the cloud but who may be overwhelmed or unclear of where to start. Here’s what they said:

Chuck Berger: “Don’t try to just upgrade your current software, you will experience considerable cost in reprogramming the software, operating systems, and databases that you use. Moving to an application that runs on the cloud, where you're kept current to the latest software revisions, and adapts to your business processes quickly and cost effectively, is a huge benefit.  A one platform view with an end-to-end solution, fundamentally changes the pace of your business.”

Pat Garrehy: “Make sure all of your executives are on board. Your C-level executives may buy into the idea of the cloud, but you will need them to make sure that staff members attend the pilots and training meetings, and to dedicate the proper amount of time to make it work.”

Ray Hein: “Look for an all-in-one growth platform in the cloud. It should be flexible so that you can pick and choose the best applications that plug and play well, integrate well, and grow as your businesses grows. With AppExchange, you can find multiple solutions and the best system for your needs today. And as your needs change, you can simply update your apps or install additional ones that just work with your current architecture.”

You can find many of the apps built for manufacturers in one place on AppExchange. And if you’ll be in Chicago in June, register for the 2017 Salesforce Manufacturing Summit on June 14.

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