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Manufacturers must organise and aggregate their data usefully to stay ahead of the competition. However, a recent study by The Manufacturer revealed that while almost nine in ten (86%) of UK manufacturers consider themselves data-driven, 72% use outdated manufacturing technology, relying on legacy systems and inefficient spreadsheets.
Vast amounts of data are involved in a manufacturing operation, not just in the operations department. Every business function produces data that needs to be transformed into information and spread throughout the organisation so that effective decisions can be made.
Modernising outdated legacy systems by adopting cloud technology and automation can help manufacturers leverage AI-driven data insights, historical data reports and purchasing forecasts to help them be more productive and remain competitive.
At Essenkay, we know that adopting a new cloud system can be daunting for manufacturers, especially those requiring employee training. So, we have created this guide to highlight why it is essential and how we can support you.
Legacy systems are defined as outdated technology, software, or processes that are still in use despite the availability of newer alternatives. For example, a manufacturing company may have machinery that relies on manual testing and monitoring rather than implementing a cloud-based ERP (Enterprise Resource Planning) system to automate these tasks and provide a real-time overview of the factory floor output for management teams.
Data integrity in a manufacturing business can be defined as accurate, consistent, reliable, and accessible information for all business areas. This is crucial for making more effective business decisions and creating routes to sustainable growth.
In legacy systems, data is often stored in inaccessible formats, which require manual intervention, and this can lead to data silos, errors and inaccuracies. Datasets stored in systems that are difficult to access are often forgotten, and manufacturers miss out on key insights they could uncover from this information.
In addition, well-established manufacturers have often used multiple methods of collecting data over time. For example, older finance systems may have multiple systems feeding into them, may be incompatible with modern technology, and may process data into disparate spreadsheets for different business areas.
On the other hand, modern cloud systems store company data on remote servers, so information is available from multiple touchpoints within the business in real-time, and teams can see the data arranged in a way that suits them best. A cloud-based ERP system will integrate core business processes, making sure that all parts of the organisation can see accurate information and how it reflects on plans for other areas.
For example, Microsoft Dynamics 365 Supply Chain Management offers role-based access to data, which helps display information for different employees, and customisable data models, which can help organise data based on specific manufacturing processes.
Legacy systems, which require in-house servers and physical data storage, are often hard to scale up or down based on the demands of the business. These systems are rigid and inflexible and may struggle to handle increased data volume and complexity, leading to bottlenecks in operations as the business grows.
Essentially, legacy systems were designed and implemented to suit historic business requirements. They might not have been designed to integrate with other software packages, so businesses have struggled to adapt when new technology has been developed to improve processes.
Upgrading manufacturing legacy systems for an ERP-based cloud solution allows for continuous improvement to meet future demands. Cloud technology providers, such as Microsoft, offer a pay-as-you-go model where users only invest in the features and storage they need. In addition, Microsoft offers additional features as add-ons, allowing manufacturers to invest in a bigger technology stack in the long term if their business enters a strategic period of growth.
Legacy systems are sometimes no longer supported by their original software provider or are based on on-premise servers, which are struggling to upkeep under the amount of data they hold.
Manufacturing legacy systems are often not optimised to cope with increasing cyber threats, leaving companies vulnerable. This is a huge risk when it comes to security, as the software will not be receiving updates to optimise current security processes. To stay alert for data leaks or malicious activity, manufacturers should streamline systems with built-in security monitoring and automated alerts for suspicious activity.
Cloud systems can help strengthen a business’ cybersecurity policies and ensure compliance with evolving industry standards and regulations, such as GDPR. For example, Microsoft Dynamics 365 can be combined with Microsoft Copilot, allowing developers to create bespoke cybersecurity solutions with minimal errors.
Manufacturing businesses still using outdated legacy systems are likely to be experiencing inefficiencies across the team, whether from a lack of communication across departments or struggles to accommodate production demands.
The 2024 Make UK and PWC Executive survey reveals that 52.2% of manufacturers recognise the potential of generative AI in increasing workforce productivity, and almost half (44%) plan to invest in new digital technologies this year, including cloud computing.
ERP systems can reduce manual work and increase overall operational efficiency, which is key for small and medium manufacturing businesses. By implementing cloud technology, manufacturing businesses would find they have greater capacity to take on new projects or explore new product lines.
Another benefit of an integrated ERP system is greater visibility of day-to-day operations across all parts of the business. This makes it easier to spot potential process improvements, which can enhance efficiency across all facets of the business and improve customer output.
For example, Microsoft Dynamics 365 systems can automate key tasks such as analysing, reporting, and financial planning while simultaneously reducing manual errors. These time-saving benefits allow employees to focus on more profitable tasks, such as product development or sales pipeline management, which could boost overall sales.
Outdated manufacturing systems can create barriers to business growth, whereas modern ERP solutions provide intelligent analytics to improve operations, react to upcoming customer trends and coordinate with the whole supply chain.
Cloud systems, such as Dynamics 365 Project Operations, can integrate with communication channels to streamline the process of resolving customer issues. The software also has an easy-to-use sales dashboard to manage open leads and speed up the process of finalising customer orders.
In addition, ERP systems empower businesses to use up-to-date technology to predict changes in sales patterns. For example, Dynamics 365 Finance offers an automated cashflow forecast driven by historical data to help manufacturers be more knowledgeable about their current customer's desires and optimise their marketing channels to attract new customers.
Modern cloud-based ERP systems can also help manufacturers positively impact their role within the supply chain and be more likely to receive ongoing business from external stakeholders. For example, organisations can use Dynamics 365 Supply Chain Management to gain automated alerts about production delays or issues on the factory floor and quickly pass this along to distribution businesses so they are aware of potential delays. Not only will this signal that the manufacturing business is professional and organised, but it can streamline the entire supply chain, which benefits the final customer.
Therefore, manufacturers who still rely on their legacy systems will get left behind, as customers choose their competitors because of the better service and sales strategies.
Knowing when to start phasing out your legacy system can sometimes be tricky, or it could even be hard to recognise the need for change. Firstly, consider the following questions:
If your answer is yes to one or more of these questions, we strongly recommend that you consult with a digital transformation specialist who can help identify issues with your current technology stack and work with you to create an action plan moving forward.
Why procrastination is risky
Once you have determined the need for change, it is important to act quickly, as manufacturing legacy systems are outdated, inefficient and often frustrating.
Delaying the implementation of new technology could be costly to your business and prevent you from retaining your customer base if you fail to remain competitive. While the prospect of beginning a digital transformation is daunting, ignoring the need for change can lead to disaster. Francis Bacon, the philosopher, said: “Things alter for the worse spontaneously if they are not altered for the better designedly.”
Legacy system maintenance costs become increasingly expensive over time. Continuing to use outdated technology will lengthen your manufacturing business’ period of inefficiency and waste precious financial resources as you will eventually need to move away from your current system.
As discussed, modern systems can improve customer experience with faster response times and accurate order processing. Contrastingly, manufacturing legacy systems often hinder the organisation’s ability to deliver timely and satisfactory customer support, which could damage its reputation and persuade customers to look elsewhere.
Cloud systems can also help to maintain a professional brand image by ensuring compliance with data protection laws, as failure to protect confidential customer information can lead to a loss of trust with the consumer.
Updating legacy systems can also reduce employee frustration and increase retention over time. Investing in a cloud-based manufacturing system will reduce recurring product issues and positively impact production and customer service teams. In addition, implementing automation for mundane tasks can lead to greater job satisfaction as teams are engaged in impactful work, encouraging personal and professional growth.
In conclusion, your employees' time should be spent trying to be more productive, leading them to become more empowered, rather than not finding workarounds for an outdated system.
Moving to the cloud offers flexibility, accessibility, and cost savings compared to on-premise solutions. Despite the many benefits, there are some key considerations, including price, integration and employee training to consider:
Upfront cost
For each new technology venture, the price will vary however, cloud computing does require an upfront investment. Small and medium businesses may have less budget, so they should determine the most important ERP systems and buy those first, whereas larger businesses could invest in more software initially.
Working out a strict technology budget and sticking to it is key; this includes maintenance costs, ongoing licencing expenses, training courses for your team and additional add-on features. Find out more about calculating the Total Cost of Ownership (TCO) here, or contact our team for more details about the right systems for your business.
In many cases, the initial set-up costs of a new manufacturing technology system can be offset by savings and internal operational benefits. In addition, your manufacturing business is highly likely to be more competitive and efficient, which can be credited to the new system that will last for years.
Integration
Modern ERPs easily integrate with other software, enhancing overall business efficiency. This may include third-party financial or HR applications or coordination with other supply chain technology to foster collaboration between external stakeholders.
However, this means businesses may need to re-think their current integrations, as some older systems may not work alongside cloud-based solutions.
Training needs
Implementing a new system requires proper training and change management to ensure a smooth transition. Some common issues with newer technology include struggling to adapt to new functions and grasping the benefits of data insights. At Essenkay, we pride ourselves on supporting manufacturing employees' adaptation to cloud-based ERP software and offer in-person or virtual sessions to mitigate any technology-related downtime.
Disposal of old systems
Cloud systems do not require technology infrastructure on-site, so you must safely recycle or dispose of your current physical systems. Information on responsible technology recycling can be found on your local council’s website.
For more insight on choosing the right manufacturing system, check out our ten-step guide, including a downloadable PDF checklist.
As ERP implementation specialists, we have helped many manufacturing businesses move away from legacy systems and embrace modern technology to create lasting change. We will discuss your long-term technology goals and create custom cloud solutions for your team.
For more information on the best solution for you, please get in touch with our friendly team today!
