Much has been said about the demise of American manufacturing. There is a general sense that manufacturing jobs are being moved overseas to China, India, and other developing markets, yet from what we can tell, U.S. companies and other developed multi-nationals are still looking for ways to leverage ERP systems. In fact, a majority of our clients – most of whom are investing in some sort of new ERP software – are in the manufacturing and distribution industry or one of its many sub-verticals, so it doesn’t appear to us as though our US-based clients going out of business. So where is the disconnect?
There is truth to the fact that some manufacturing processes, supply chains and jobs are being relocated to emerging economies. Even in industries as diverse as professional services, financial services and technology, mobile workforces and business processes dispersed throughout the world is a very real trend that is showing little to no sign of changing anytime soon. Rising labor costs and an increasingly global economy are just two of the reasons why some work is being shifted overseas.
While these changes do not appear to be eliminating jobs, they do appear to be changing the nature of those jobs and are introducing additional challenges and complexities that haven’t had to be addressed until recently. For example, for each company that moves jobs from the U.S. to another part of the world, there are additional opportunities to replace these typically less-complex commodity manufacturing activities with higher-value products and services that are less likely to be handled outside developed countries such as the U.S.
There are a host of other changes to the manufacturing industry in developed parts of the world. Here are just a few ways that jobs in the developed world are changing, along with the ways that ERP software helps enable and manage those changes:
Focus on complex make-to-order and engineer-to-order manufacturing – As mentioned above, emerging markets are for the most part taking on a larger share of commodity-based manufacturing processes, while developed markets are shifting their focus to more complex make-to-order and engineer-to-order business processes within verticals such as aerospace, defense, medical device and healthcare. While more vanilla commodity processes require a focus on cost and supply chain efficiencies, which is what traditional ERP software was largely based on, the more complex business processes tend to concentrate more on planning, optimization, product configuration and overall supply chain flexibility. This requires employees – and the enterprise solutions used by these employees – to change the way they have built in the past. When utilized effectively, ERP software can help enable this shift from high-transaction, volume-based businesses to more customized, flexible processes.
Global supply chains – Regardless of the type of work being done in certain countries versus others, the fact of the matter is that supply chains are much more global now than they have been in past years. In many cases, raw materials are purchased in one country, products are manufactured in another, and final products are assembled in yet another. With these dispersed business processes and job functions comes complexity. Managing business processes and providing visibility into global supply chains can be very difficult without effective ERP software, which has become a primary focus for many ERP vendors over the last several years. Without these effective automations and tools, global companies find it much harder to compete, respond to customer demand, and have real-time visibility into their more complex global supply chains.
Globally dispersed employee workforces – As global supply chains are becoming more dispersed, so are employees. Managing 1,000 employees in a single location is much easier than managing 1,000 across several different plants, warehouses and corporate offices, so ERP software has been reengineered to address these changing needs over the last few years. Executives and management team members need to see the status of manufacturing work being done by procurement agents in one location, warehouse clerks in another, manufacturing and assembly processes in another, and sales reps in several others. This makes the automation of the related information that much more important since it is not possible to physically see the results of each step in the process from one place.
Global accounting and regulatory requirements – Finally, the globalization of manufacturing requires flexible accounting and regulatory requirements. Ten years ago, most of our clients needed to simply adhere to U.S. GAAP and other regulatory requirements. Now, our portfolio of global clients require additional regulatory compliance with countries and governments as diverse as New Zealand, China, Sweden, Mexico and Yemen. Obviously, the old and myopic ways of ERP software is no longer enough to address the increasingly complex regulatory requirements of a global marketplace.
The short answer to the question at hand is that manufacturing in developed economies such as the U.S. isn’t going away anytime soon, and neither are jobs in the industry. But they are changing. And while ERP software was largely created specifically for the manufacturing industry approximately 25 years ago, the evolving nature of the industry requires solutions that can keep up with and support the changes. If the ERP software industry can effectively do this in coming years, they may very well indeed save manufacturing jobs in the US and elsewhere.
Learn more about manufacturing software requirements and keep up with industry news by visiting our Manufacturing Software page.