ERP systems have been around for decades, and most companies of any size use one or other of them, writes André Cloete, Chief Information Technologies Officer, 4Sight Holdings. However, they’ve always suffered from a crucial disconnect between the rarefied world of financial reporting and business processes, where they began, and the real world of vehicles, stock, machines and so on. ERP systems typically relied on intermittent and inaccurate manual processes to gather the real-world data that they needed to assist managers make decisions that were based on facts rather than gut feeling.

However, the fact that the data was always outdated and often inaccurate—both inevitable by-products of manual data capture, meant that ERP systems could never reach their full potential as decision-support tools.

The emergence of the Internet of Things (IoT) potentially changed all that. In theory, at any rate, it is now possible to feed data from sensors placed anywhere in the business directly into the ERP system continuously. That last adverb is crucial – it’s the access to virtually real-time data that is the real game changer here, because it means that a manager can make decisions based on current reality, not on last month’s figures or a projection.

What might this mean in the real world?

Consider a supermarket chain, with vast amounts of stock in distribution centres and at branches. The potential for theft, wastage due to expiry or misallocation of products is vast. Now, without the disruption of a stock take, managers can see exactly what stock they have and where, as well as the expiry dates. This approach can work in any warehousing environment: gas cylinders for example, or paper in a printing works and anything else in between.

Another good use case relates to assets, whether moveable or immovable. IoT can provide information that can be used to plan proactive, preventative maintenance of machinery of all kinds, from mines to heating/ cooling systems to vehicle fleets. But it can also be used to improve financial reporting. Typically, assets have to be reflected in the ERP system to compile the financial statements, with depreciation calculated in a rather arbitrary way over a five-year period. By feeding IoT data into the ERP, the assets can be more accurately valued in terms of usage or life. This means the company’s financials will align better with the reality on the ground, giving a much more accurate picture of the true state of affairs.

The benefits extend beyond more accurate financials to include, for example, accurate return-on-investment calculations that will be extremely helpful in fine-tuning procurement strategies going forward—and assessing the success of any project.

In virtually every large commercial operation, one of the most aggravating and time-consuming things is allocating expenses to the appropriate cost centres. IOT data can be used to automate this process with regards to water and electricity.

Getting a handle on the benefits of integrating IoT and ERP

If we take a step back, let’s summarise the benefits of this linkage between IoT and ERP within the company:

  • Benchmarking. This kind of data can help an organisation benchmark performance from all sorts of angles with a great deal of accuracy.
  • Automation. Collecting and inputting IoT data would be impossible, and would in any event fail to deliver one of the key benefits which is live, actionable data (see below). The integration of IoT data into the ERP system is a relatively new concept but platforms to achieve it do exist. This platform is the vital part of the puzzle. It’s also worth noting that a narrowband network for the secure transmission of IoT data is already in existence, provided by the mobile operators. The data is encrypted and the costs are very low, which is essential given the volumes of data. The other piece of good news that this IoT network is expanding steadily across the continent.
  • Visibility and decision support. This is the key benefit. By providing the ERP with a seamless flow of accurate IoT data, it becomes a much better decision-support tool, enabling managers to respond in near real time to conditions on the ground. Once the integration is achieved, it’s relatively easy to use the ERP software’s reporting tools to create customised dashboards showing what specific managers want or need to see. The point here is that the IoT delivers a mass of information which is then “sliced and diced” to make it relevant to each user.

ERP is the backbone of the company—but when it’s integrated with data from the IoT systems, it reaches its full potential as a management tool and a growth enabler as well.

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