What you need to know about Cloud ERP

A migration is taking place in the manufacturing industry, one that’s changing the way growing numbers of manufacturers manage the most important tool in their business – their enterprise resources planning (ERP) system. The migration involves a shift from managing ERP on-site to the cloud.

Cloud ERP involves accessing data management and other computing services over the internet rather than using on-site servers and other hardware. These services can include data storage, databases, networking, software, analytics, business intelligence, security and more. Cloud ERP allows management to stabilize and lower operating costs, run their infrastructure more efficiently, and scale the business as customer or industry needs change.

Why manufacturers are moving

The reasons for moving to the cloud vary depending on the size of the business and the markets served.

Smaller manufacturers often don’t have the budget or resources to manage the IT function in-house. Cloud ERP avoids the expense of buying and maintaining hardware and software and the costs of IT staff or outsourced IT consultants. It also eliminates the need to update the hardware as technology advances, or to install new versions of the software because the cloud service provider handles those and other system maintenance tasks.

Cloud ERP provides a high degree of flexibility – a real advantage in today’s rapidly evolving manufacturing industry. When the COVID-19 pandemic caused employees to work remotely, businesses scrambled to adjust their computing infrastructures so people could do their jobs at home. Cloud ERP provides access to the company’s data anywhere internet access is available. It also keeps the data safe and secure because it resides in the cloud, rather than on employee computers.

Manufacturers in the defense, aerospace, and other industries involved in  government contracting are often required to maintain their ERP systems via the cloud. In many cases, they must comply with government requirements and funding programs such as the Federal Risk and Authorization Management Program (FedRAMP) and the International Traffic in Arms Regulations (ITAR).

Some manufacturers migrate to the cloud because they don’t want the hassle of managing their ERP. Running ERP on premise requires having a high level of IT expertise on staff or hiring consultants to source the hardware, maintain the network, install upgrades, integrate with third-party software applications, and more.

A cloud-based system hosts all the ERP data on the provider’s servers, including data backups, and works with the ERP vendor when installing version upgrades, new features and functionalities, and other changes to the software. Outsourcing these and other ERP management functions gives manufacturers more time to address key strategic issues involving products, customers, and growth of the business.

Advantages of Cloud ERP

Cloud ERP offers multiple benefits for today’s time-pressed manufacturers. Users pay only for the cloud services they use, which helps lower operating costs, run the company’s infrastructure more efficiently, and scale as business needs change. Other benefits include:

• Predictable costs. Cloud computing does away with common ERP management issues, such as hardware recycles and system downtime, that add cost and reduce efficiency on the shop floor. Knowing what you will pay each month for the service makes it easier to budget.
• Faster system performance. Cloud services run on very fast fiber-optic technology that delivers faster data and transaction processing for ERP users. Global Shop Solutions customers report performance increases ranging from 40 to 200 percent depending on the type of hardware and infrastructure they used before migrating to the cloud.
• When adding a new facility, Cloud ERP doesn’t require network upgrades, hardware profiling and installation, and other costly IT activities needed to get the plant up and running. Upsizing or downsizing the business is quick and easy.
• Cloud ERP creates a worry-free system by mitigating the risk of data loss, downtime from hardware failure, and malware attacks. Data is stored and accessed using the highest encryption standards in the industry.
• High availability. Cloud service providers store client data in multiple geographically distanced locations, and use redundant data backup to ensure data doesn’t get lost. Combined with highly efficient incident management and reporting mechanisms, Cloud ERP has a 99.9998% up-time rate.

By outsourcing ERP as a service, manufacturers enjoy less complexity and minuscule risk of losing their data through hardware failure, natural disaster, failure to back up their data, or getting it hacked by cybercriminals.

Transitioning to the Cloud

The amount of time required to migrate ERP management to the cloud depends on a number of factors, starting with the type of ERP system you employ and the amount of data that needs to be transferred. Some smaller ERP packages only manage a few key production activities, such as scheduling, labor time collection, costing, and inventory. Comprehensive ERP systems offer a complete package that handles everything from shop floor management to inventory, purchasing, accounting, customer relationship management, quality control, and much more.

The time it takes to test the ERP system, which involves running the on-premise and cloud systems concurrently to ensure a successful migration, can also vary. Larger, more complex systems typically have more data that requires more time to upload and test. Using a lot of third-party software interfaces, such as CAD/CAM, EDI or Nesting, with your ERP system will also extend the time required for comprehensive testing.

It also takes time to research and create the cloud budget. Cloud ERP requires highly reliable internet access. Having redundant internet services, such as satellite, is recommended. Cloud experts also recommend having a firewall for your local network that supports IPSEC and AES encryption. Depending on the size of the budget, you may need to reallocate funds or re-negotiate contracts with external IT firms.

On average, it takes about four to six weeks to transition to the cloud. Companies with fewer modules and integrations can go live in as little as two weeks. Companies with more data and full ERP use can take up to three months. Migrating ERP to the cloud doesn’t require much of a learning curve because the system looks and works just as it does on-site. The screens look the same. Commands are the same. Menu options remain the same. For many manufacturers, the only training they need involves how to link or upload files to the cloud.

Cloud service must-haves

Cloud service providers come in many different shapes and sizes, with some offering a lot more features and functionalities than others. Before choosing a provider, make sure they offer the following capabilities:

• Integration capabilities. The ability to integrate with any local data storage you maintain, as well as work collaboration tools such as SharePoint, tooling machines, and e-commerce, is essential for an efficient cloud experience.
• Automated performance monitoring and logging. This enables you to monitor your applications, respond to system-wide performance changes, optimize resource utilization, and get a big-picture view of operational health. Programs such as Amazon’s CloudWatch identify anomalous behaviors in your system and troubleshoot issues to keep your applications operating smoothly.
• Secure access to important business management data. One of the real strengths of ERP software is the customizable dashboards that provide high-level summaries of executive, management, WIP, shipping, and other data categories for quick analysis. Access to these dashboards should be readily available and secure via your cloud connection.
• High-level security technology and practices from the cloud provider. These should include multi-factor authentication, regular traffic inspections, and ongoing scans for attempted malware attacks. Your cloud service vendor should provide tools to help you inspect your deployment into the cloud and flag any incorrect deployments.

Your ERP system should also be able to assist with security. For example, Global Shop Solutions ERP software can limit access to the cloud data only through your company’s facility. If the business has employees working at home, our system can shut down the firewall on each employee’s computer and only allow the program to run from the company’s IP.

Who should consider moving

Cloud ERP is a no-brainer for international companies with facilities around the world that struggle to manage a central system due to different time zones. With all the data in one central location via the cloud, time zones no longer matter.

The cloud also provides an effective option for companies that are expanding quickly through acquisition or building new facilities. New locations can ramp up quickly because the cloud eliminates the need to source and set up new hardware infrastructure. It also provides a cost-effective option for small manufactures who can’t afford in-house IT expertise, and for those with a quality ERP system that runs slow all the time.

Any manufacturer that needs the ultimate in data security and/or has compliance requirements can benefit from Cloud ERP. End-to-end encrypted data, multiple redundant backups, and disaster recovery all become simpler and less costly with a cloud solution. Hosting your ERP on premise can be a deal-breaker when bidding for government contracts for lack of compliance. And when it comes to reducing ERP management time and costs, cloud computing gets the job done.

The rapidly-growing Internet of Things (IoT) is changing manufacturing in ways we couldn’t imagine 10 or 15 years ago. As machines get better at talking to each other and the technology becomes more complex, the need for services like Cloud ERP to facilitate and manage machine-to-machine relationships will dramatically increase.

For many, the decision ultimately comes down to the total cost of ownership. When evaluating Cloud ERP services, don’t just compare your current IT expenditures to the costs of the service. Instead, look at your IT budget over the next 10 years. Take into account the cost of frequent hardware and software recycles, downtime from hardware failure, ongoing changes in security technologies, data loss, and other factors that can occur when managing your ERP onsite.

Cloud ERP can reduce costs, improve ERP performance, make remote work easier and safer, provide better data security, and more. It also offers a benefit that’s hard to put a price on – peace of mind.

Do you have experience and expertise with the topics mentioned in this content? You should consider contributing to our CFE Media editorial team and getting the recognition you and your company deserve. Click here to start this process.