TEC regularly works with companies to identify the right software vendors for their industry and particular needs. I’m going to provide you with information about ERP systems and how they relate to steel industry requirements (note: you can always consult our Vendor Showcase to find out more about specific software vendors).
An ERP system is typically considered to be a company’s IT data backbone application, and helps integrate business activities across multiple departments and sites (or across the entire enterprise). ERP modules range from product planning, parts purchasing, inventory control, and product distribution, to order tracking, and provides business application modules for finance, accounting, and human resources as well. Tier-one vendors such as SAP and Oracle provide full suites of ERP business applications.
ERP applications have evolved with new technological innovations such as client/server architecture and service oriented architecture (SOA), which provide more flexibility to configure a system for your particular requirements. With the help of SOA, for example, it’s easier to “break” an ERP application into small modular components which use industry-specific processes to communicate, interact, and operate. SOA has helped ERP vendors move away from the “one size fits all” methodology—as we all know, no two organizations have the same requirements.
In the steel manufacturing industry, the ERP application typically sits on the top levels of the business IT/manufacturing framework. See the diagram below for the different application layers within a steel manufacturing company; this diagram is very similar to a diagram contained in a document produced by IBM Global Business Services (see page 9), which I have modified slightly for the purposes of this blog post.
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Integration of ERP with other business processes is key for the success of steel manufacturing organizations.
Here’s an example of a typical process flow in a steel manufacturing plant:
A customer order is entered in the ERP module, which communicates with the supply chain management (SCM) module to figure out which orders can be met by on-hand inventory or by creating a production plan. This information is fed back and forth between levels 4 and 5 on one hand, and levels 3, 2, and 1 on the other, so that a promise date can be sent back on customer orders.
The supply chain application provides a rough-cut planning from the demand planning module, which results in the creation of a production plan. Once the production plan is in hand, the work orders are created and marked against available stock on hand.
As the work orders are created, they are communicated to the MES application for load balancing and to make sure each production line is optimized according to the order sequencing. It’s crucial to convert the planned order from the SCM application right before the production starts, as that will feed into the ERP system, which will transfer all the requirements to the MES layer. The MES layer will define what quantities of orders will be converted into pieces of slabs, coils, etc.
The steel manufacturing framework described above helps organizations identify gaps among their different departments. Information must flow from level 1 to level 5 in for successful business operations. To find the “best ERP fit” in the steel industry, it is very important to understand the multiple layers of operations in steel manufacturing, as well as to understand which system needs to communicate with which layer, and at which point of the process.
ERP solutions satisfy a broad range of requirements, from financials to the supply chain, but when it comes to manufacturing execution, most ERP solutions have gaps in fulfilling the requirements. Areas such as financials, human resources (HR), customer relationship management (CRM), forecasting, planning, order management, inventory management, asset management, distribution, and transportation can be facilitated with an ERP system. However, detailed operations of scheduling, quality, production tracking, constraints planning, capacity planning, multi-dimension, grades, etc., can only be performed efficiently by industry-specific manufacturing execution system (MES)/advanced planning and scheduling (APS) applications.
The steel industry is so competitive in nature that it’s hard to imagine a steel manufacturer doing without an ERP application to manage day-to-day processes, ensure efficiency within the production plant, and provide real-time reporting visibility into the organization’s overall performance.
As there are many ERP software vendors for the steel manufacturing industry, it’s very difficult to say which one is the “best” ERP vendor. The most effective way of knowing which ERP software will fit your needs is to compare your business requirements against the functionality of the ERP software.
However, finding the best-suited ERP application for your organization can be an overwhelming process. So now the question is this: How to find the right ERP application for your particular needs? Unhelpfully enough, every vendor solution has its own strengths and weaknesses. It’s best to evaluate a solution based on how capable it is of providing features and functions that match your business needs and internal processes out of the box. Customization of any enterprise software is always expensive, usually risky, and probably not the best path to implementation success.
What do you think? If you’re in the steel manufacturing industry, do you think you require an industry-specific solution? Leave a comment below!
Alternatively, define your needs here and see which software products match your requirements.
The Managing Director and GM of the company feels they dont need to computerize any sort of marketing, forecasting, planning, nothing… What I feel this company strongly needs ERP system. I am not sure whether end of the day I would be able to convience the management or whether it would be feasible to implement. But would like to discuss with an expert in this field in this regard.
I am engaged with (PEB) Pre-Engineered Steel Building and this is Engineered-To-Order scenario, in this scenario the integration part between CAD system and ERP is vital. Also, in this scenario every BOM (Bill Of Material) is unique and on an average one BOM comprises of 500 components. Therefore, creating item master for all components would not be the practical solution, therefore, such system is required in which BOM can be created on the-fly basis means without creating item master. These two areas are exclusively significant to find out the best ERP. After thorough studies we have finalized Epicor 9 for our integrated solution.
If you have any further query then we can extend this discussion.
It is normal that business people do not always see the benefit of the so-called IT solutions. There is a place in business fro ERP, MES and Control Systems. I have been involved in a maufacturing company for 13 years and based on my experience the problem with the systems is that it is perceived to belong to IT. None of these systems should be owned by IT it must be owned by business. Then and only then, the business will accept and adapt to the solutions. These solutions brings alot of benefit to the business. I am available for discussion in this regard
If someone is sitting on the chair of President/CEO what he really wanted to have? Most of the time, he must be interested in trend analysis mainly sales. If you do the same while sittig on Vice President/COO he must be interested in knowing the production plan, manufacuring capacity, inventory, manning etc. They wanted to have these info in order to take correct DECISION and just think the following 2 scenarios:
a) they have wrong information
b) they have got these info late
both of the above factors contribute in making RIGHT decision and interestingly both of the above factors need BUSINESS involvement and ownership. Procedural controls sits on top of every automation.
Think if CEO/COO gets the RIGHT info at the RIGHT time then they would be able to take RIGHT decsions which eventually synchrosie with company’s objectives and growth.
Bottom line: I agree with Belinda’s comments. as all the wise companies knows the strength of IT and they really exploit this in order to achieve corporate level goals.
Hi Salman, we have successfully integrated Tekla with QAD in which the same scenario was required by a customer. After the designs have been approved the bill of material is created and items are inserted in the item master. Do let me know if you have any further queries.
The industrial revolution where a major success, Main frames where the order of the day. System Development live cycle included industrial systems
processes where decitions where made by industrial solution specialyst. Mapping where done from the industrial to the finacial side.
Then came the IT revolution, and SDLC where called Software Development Live Cycle. It replaces not only Systems Development live cycle, but also the industrial solution specialyst(s) responsible for the omptimization of the actual processses and mapping thereoff. Non industrial specialyst(s) like finacial managers wrongly took over the so called ERP wrongly called ERP sytems and then wrongly replaced by the computer systems managed by the IT manager whether he is tecnical, BI, or whatever, which, futher controlled by non tecnical people like finacial managers.
It is easy to prove that above create an domino effect. Then Goverment(s) the world over nominate the same people who creates the finacial(”industrial”) problems in the world to solve it.
In the industrial revolution the finacial managers complained that industrial specialyst was conrolling the financial side of the enterprise. Now the reverse is the order of the day.
Talk of an Dilbert reality show.(lol)
Arif Ahmed’s comments are amazing. I worked in the steel industry in the mid 1960’s when we had bespoke manufacturing systems interfaced with shop floor execution systems. This was before the days of full blown ERP and SCM systems which would have been a tremendous benefit. Does Arif’s company keep large stocks of inventory and raw materials to react to customer unforeseen demand. If so, then capital is being tied up unnecessarily. Forecasting of requirements in close co-operation with customers is essential for an efficient manufacturing operation and satisfied customers.
A number of companies sees the light of using the various business systems. I have seen were a company’s GM wants to do all their planning, inventory management, OEE calculations, etc with MS Excell. That in a company that has all these systems. It would be interesting to know the thinking process behind the issue in Arif’s company. Interesting fact is that a number of TOC experts would advise one not to use any of these systems as they feel one can go without such systems. Arif, what manufacturing philosophy is being used in the company?
Irespective of the vertical,when an organisation decides to go for an ERP,it is perceived that its only the responsibilty of implementation partner (vendor)to implement the ERP successfully. Fact is there has to be similar initiative and involvement from the customer as well. From the customer side,most of the time,initiatives are there only from top bosses and users are hardly interested. In this situation,senior people of an organisation and project manager from vendor needs to educate the users to create the interest in the mind of end users.Any ERP project can be successful only if there is initiative from both sides.
Hi, i am from a steel powder manufacturing company here in US, We have a full blown ERP system implemented and currently we are implementing across other operations too, we do maintaine all the chemistries, Costing and BoM within our ERP system. One thing i can tell you this company loves the new ERP system since we implemented and other plants are looking forward to it too. Sucess of the implementation was pure balance what absolutely needed we had to make bold decissions to not to make too many mods but thats the best thing we did during our implementation. Sucess of the ERP implementation getting the business involved with the throught the project and communication and making a good project team with team leads and super users who understands the nuts and bolts of the business.
Mr. Ahmed, I can understand your concerns about not having a appropriate applications or automation tools in place to remove inefficiencies from the processes. It’s very important to have management or c-level support in any kind of initiative. If there is little or no support from top management, it becomes very difficult to implement. Below are links to a few articles and blog posts that talk about the importance of having management support and about how to get management buy-in for IT initiatives.
Mr.Moin and Ms.Pretorius,
Thanks for the interesting comments. You guys have nailed the issue right on the head. For success of any kind of implementation (be it of IT system, or re-engineering of process, or lean initiatives) everyone needs to accept the new project. To see return on investment on any ERP implementation the business processes have to be well defined and linked (or configured) in the appropriate manner to reduce waste from the process and eliminate manual interventions.
As for integration, the ERP vendor needs to be evaluated based on the responses of scalability, integration capability, and flexibility to import and export data. The selection of an ERP vendor is not based on features and functions only. The organization needs to look further than that in respect of this vendor’s strength, and weaknesses, as well as market and company positioning.
As for the IT systems being owned by business people, I would not agree there. Both parties need to work in a harmonized manner, where business people can communicate in a rational manner to IT about the needs and requirements of the business; and IT can convert these requirements into workable solutions for the business to run more efficiently. IT cannot validate the data put into the system without the help of the business individuals. Most importantly, IT and business people are both responsible for the data located in the system. As we all know, if there is garbage data in the system, the system will not provide valuable results for the organization.
I spent over 20 years supporting a wide variety of steel industry IT projects while at IBM. For the larger integrated producers - SAP seemed to be the product of choice. I have not seen any commercial application ERP or otherwise do a very good job at converting customer requirements into manufacturing orders. If you are making to stock - like a Nucor or specialty producers, then maybe you can build enough master item ID - and adjust to fit, but most are make to order. There are a few smart ERP offerings which are RULES BASED which can come closer.
We have successfully implemented ERP solutions from Sage in the steel industries with a couple of referenceable sites in SA, for both repeat production and make to order, assemble to order environments.
I have worked with Steel Industries for 11 years, where we manufacture Steel Pipes, Pumps & Irrigation System and when i joint the company was using IBM AS400 ERP System which serve the company for nearly 20 years efficiently all modules Finance, HRMS, Inventory, Procurement, MES, and Planning, Sales. Off course due to technology constraint, we have implemented Oracle Application and it was meeting our expectation with nominal customisation and working fine with all Integration modules. Right now I am working as a Consultant for Mfg Modules(Oracle Apps).
Am serving steel industries since last 12 years, and providing IT solution for steel process, there are few points I would like to highlights,
The ERP is still not mature enough to handle all the steel processes, second is boundary between level 3 to level 5 systems is not well defined all the level 3 system has capability to handle some aspects of level 4 and 5, this becomes challenge while implementing a project for Steel.
Generally the SOE as shown by IBM and which you also have presented loses its meaning when boundaries are not clearly defined,
take example of ATP or Quality management - this is best handle where the data resides may be L3 and this can also be handled by L4 and L5.
And I strongly believe this anomalies can be resolved only if there is strong integration and real time inventory information between ERP and Manufacturing System.
We have overcome these anomalies by having strong realtime interfaces and also Variant configuration
We have gone ahead with Variant Configuration implementation which handles some of the critical aspects shuch as grade derivation in ERP - this is context to what has been mentioned in your blog should be part of MES system,
Not only this by we have developed VC in ERP which also handles multiple routs and provides exact destination of the product to be process which should be typically be a part of level3.
In short for Steel Industry PP/QM and SD verticals needs to be strengthened in ERP system
And strong integration of Manufacturing system with ERP can bring real value addition to steel industry which can handle/control dynamic changes going in the shopfloors.
I concur with Prem on the ability of Sage solutions in manufacturing industries (discrete and process manufacturing). We were the installation partner at a Steel Manufacturer in South Africa – have a look the press release regarding the installation:
Customers need to make sure that the selected ERP will be able to adapt to their specific manufacturing modes (make-to-order, configure-to-order, assemble-to-order, make-to-stock and mixed-mode environments). Early adoption from the customer side is crucial and taking ownership is the only way any ERP system will be successfully implemented.
What I observed, different industries using different kinds of ERP’s and almost all having gaps and failed to fulfill requirements whether it is SAP, in-house build or any other.
I am working from last few year for large steel manufacturing industries, for software solutions like MES, Avanced Planning/scheduling system, Optimization system etc. For Steel industry MES (Manufacturing Execution System) is the best option because it is specially designed for steel industries; where as other ERP’s having many gaps and required add on solution.
For steel industries, best planning/scheduling optimization system is not available in any ERP. Considering this we developed optimization system which can be customized for any steel industry to provied best optimized planning/scheduling system. Also Slitting optimization system which save huge material cost.
We can assist you with customized ERP software for manufacturing companies. Please contact for details.
I appreciate your post, thanks for sharing the post, i would like to hear more about this in future.
As you mentioned, competition alone in the industry makes using an ERP system absolutely essential to a company’s success. The key is finding the solution that best fits your business, but there is no denying that it’s a must-have in today’s climate.
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