I was once showing a prospect an ERP solution, and the business owner asked “What does this ERP system specialize in?” “Wholesale / Distribution”, I replied. “Woop-de-do,” was the response, “so do 90% of all ERP systems”.
That was back in the days when ERP Systems tried to be “all things to all people”. Specialist industries tended to have in-house systems, or systems from small local vendors, that they struggled to maintain.
Traditionally, Horizontal solutions were little more than accounting systems with inventory management added on.
These days, a Horizontal solution may be found even in a supposed Vertical market.
Let me explain.
A “Manufacturing ERP” that purports to meet the needs of all manufacturers is a horizontal.
“Wholesale Distribution” as mentioned above also does not describe a vertical solution.
How specific to your business the features of an ERP System need to be, is one of the considerations when choosing a new system.
No two business are the same, and even between two businesses seemingly in the exact same business, there are differences based on their individual business models, size, who they market to, and how they distribute their products.
Manufacturing can broadly be broken into two major segments: Discrete and Process. Discrete is concerned with the making of things, using Bills-of-Material where virtually everything can be counted, and where very many components comprise the final product. Process is where products are made by mixing wet and dry ingredients together using a recipe or formula, where the units of measure are weight or volume, and where typically a product involves the processing of one main ingredient, albeit with other additives.
Within discrete manufacturing, there are very many different segments, such as Automotive, Hi-Tech & Electronics, Telecommunications, Medical Devices, etc.
Process manufacturers also has many broad segments: Food, Beverage, Chemicals, Coatings, Pharmaceuticals, Nutraceutical.
Each of these are broadly considered “Vertical” industries, however the breadth and specialisation in manufacturing demands another layer: Micro-verticals.
The Beverage industry has many sectors: Milk, Soft drinks, Beer, Wine, Spirits, etc. Some, like Sports drinks and supplements, have a cross-over with the Nutraceutical industry.
The Hi-Tech & Electronics likewise has many sectors: Semiconductors; LED lighting; Computers; Solar panels; Telecom products; Industrial electronics; Consumer electronics; Electronic Components; Rechargeable batteries; Digital cameras/imaging; to name but a few. Even these sectors have many divisions. There is also cross-over with both the Medical Device and Pharmaceutical industries.
The Medical Device is also diverse, and can first be broken into the Regulatory Classes they fall into. They can be as simple as Disposable Gloves, Tongue Depressors and Thermometers. They can be higher-level devices like surgical instruments, insulin pumps, dental instruments, syringes, catheters, and dental implants. They can be as complex as implants like Stents and Pacemakers, Prosthetics, Diagnostic apparatus, to Robotic Surgeons. Some even have the ability to be remote controlled or send health information to professionals, opening up the whole area of security.
Even within a specific micro-vertical, there can be differences: the regulatory framework level the products fall under; distribution requirements that take into account the size of the product, whether it needs to be stored and transported in a chilled or frozen environment, whether it has a shelf-life; and more.
So, how do you evaluate an ERP solution as being suitable for your micro-vertical?
A Micro-vertical solution may be right for if:
- The solution can clearly demonstrate that it meets the requirements of the Regulatory framework you work under in areas such as electronic signatures, audit trails, etc.
- It has Quality Assurance and Quality Control functionality that meets your industry needs.
- It speaks your language. Every industry has its own glossary of terms that may or may not be unique. Your users should be able to identify their tasks and operations using their industry language. The Vendor should also speak your language and understand it!
- It has a way of restricting which components / materials can be used in a particular product BOM or formula to avoid safety violations. It should also have a way of attaching your detailed specifications to Inventory.
- The ERP solution has recognition within your Industry Associations.
- The software manages specific repeatable manufacturing processes like: managing the size, shape, thickness, color and solubility of capsules in the Pharmaceutical & Nutraceutical industry; handling mould cavity capacity, items per mould, pressure and speed in injection moulding (also relevant for capsule manufacture); handling measurements in the micron range and nanotechnology in medical devices.
Why a Vertical / Micro-vertical ERP solution?
There are some very good reasons you should seriously investigate solutions for your specific industry sector:
- Micro-verticals drastically reduce customization needs.
- Micro-vertical Vendors will not waste your time. If their solution is not a fit for you, they will tell you very early in the discussion – they do not to want to waste their own time, and they don’t want problems trying to “fit” an adequate system to your needs.
- The specific functionality found in good micro-vertical software offers excellent cost value.
- Micro-vertical software vendors spend a lot of time in and around your industry solving problems, keeping on top of new industry mandates and trends, and listening to manufacturers. You don’t just get software specific to what you do, you also get their vast experience and up-to-date knowledge.