According to Future Market Insights, the global ERP software market will grow at a CAGR of 9.1% from 2023 to 2033 and reach $139.4 billion by the end of the forecast period. The research highlights that ERP adoption continues to accelerate across multiple industries, including manufacturing.
By implementing ERP systems for manufacturing, companies automate and centralize disparate business aspects, including inventory, production, and quality management, thus improving operational efficiency and service quality. Moreover, companies can gain additional business advantages by equipping their manufacturing ERPs with artificial intelligence.
This article highlights five reasons to enhance a manufacturing ERP with AI.
1. Improved inventory management
Managing inventory, including raw materials such as chemicals or gasoline, work-in-process (WIP) items, and finished goods, is critical to any manufacturing business. Both inventory shortage and overstock can disrupt a manufacturer’s operations and reduce customer satisfaction. Integrating AI into ERP systems can help manufacturers solve these challenges promptly.
For instance, AI can help improve and automate inventory classification, which can be especially important for manufacturers who have to manage thousands (or even millions) of inventory units simultaneously. The sub-branches of AI, such as natural language processing (NLP) and computer vision, can come in handy here.
The NLP functionality built into an ERP system enables interpreting stock keeping units (SKU) text descriptions and analyzing attributes (such as color, size, or material) related to all inventory items. Then, an AI-based ERP can classify items based on these attributes automatically. In turn, computer vision allows an ERP to classify materials and final goods by analyzing their images. Such AI-powered classification enables an ERP to track various inventory across all the company’s facilities and warehouses, even in real-time.
If a particular inventory unit runs short, an ERP system can alert managers to replenish it. If needed, AI also can help a manufacturer automate inventory replenishment. With the proper functionality, an ERP system can generate requests for quotes (RFQs) and requests for proposals (RFPs) and message them to suppliers without or with little human involvement.
2. More efficient production management and planning
Production planning is one of the most essential tasks for manufacturers, as it determines order completion time and, consequently, customer satisfaction. With AI, manufacturers can improve production planning, maximize production performance, and reduce manufacturing costs.
In particular, with in-built machine learning (ML) features, an ERP can generate optimal production plans automatically. Such an ERP system can draw plans specifying each production stage based on factors such as availability of specific resources, customers’ demand for particular goods, capacity and quantity of equipment, and employee working hours.
Moreover, after such a plan is created and approved, an AI-based ERP can help a company optimize the production process further on. Suppose a company works in the additive manufacturing sphere. In such a case, AI development services can help a company optimize the layering of materials (such as photopolymers or plastic filaments), even in real-time, to reduce material consumption.
3. Streamlined supply chain management
When incorporated into an ERP, AI can help manufacturers optimize various supply chain management tasks, from supplier communication to goods delivery and shipping.
Since many companies use ERP for supplier management, they can implement AI to treat supplier risks proactively. In particular, AI can analyze supplier data, including transaction history, delivery times, and financial health, and then rank suppliers to help identify those who better align with a manufacturer’s business requirements. By selecting the best suppliers possible, a company can improve its logistics while reducing the risk of supply chain disruptions on a supplier’s side.
In addition, AI can help improve supply chain management for manufacturers operating their own fleets. For example, an ERP equipped with ML capabilities can analyze data from internal sources (number of orders, delivery addresses) and external ones (weather forecasts, traffic intensity) to recommend optimal routes for dispatchers and drivers, thereby increasing delivery efficiency and speed.
4. Enhanced quality control
A defective or low-quality product can harm a manufacturer’s reputation and, sometimes, even put its customers at risk, especially in industries such as automotive or healthcare. Being built into an ERP, AI allows manufacturers to improve quality control and thereby mitigate any product defects.
For instance, if equipped with computer vision capabilities, an ERP can identify defective parts right during the production process. This way, a manufacturer can localize and avoid defects timely and ensure that its customers receive only high-quality and safe products.
5. Optimized human resource management
Despite growing automation, employees remain essential for any manufacturing business, and an AI-based ERP functionality can help manage them more efficiently. For example, HR managers can utilize ERP to identify the best candidates for specific job openings. A built-in AI functionality can analyze resumes or LinkedIn profiles and automatically match them with job descriptions within a company.
Once a person becomes a member of a manufacturer’s team, an AI-powered ERP can evaluate their performance based on parameters such as average task execution time, the number of defective products, or feedback from other employees. If their work requires improvements, an ERP can also highlight focus areas and help supervising managers allocate employees to relevant training courses to enhance their skills.
Final thoughts
Manufacturers continue to implement ERP systems to centralize and automate various business aspects, which allows for improving manufacturing efficiency and customer satisfaction. By implementing AI into their ERPs, manufacturers can go even further and gain additional business benefits, such as improved supply chain management, enhanced production planning, and streamlined HRM.
However, implementing artificial intelligence into an ERP requires deep technological and business expertise, so it can be challenging for manufacturers’ IT teams who have not yet worked with AI. Third-party developers and experienced AI experts can help a company overcome this challenge by equipping its ERP with NLP, ML, and computer vision functionality.