When it comes to technology and IT spending, most manufacturing leaders are rightfully and proudly pragmatic. While some industries acquiesce to a seemingly never-ending vendor hype cycle and penchant for new solutions, manufacturers are an anomaly. Walk across the factory floor of a metal stamping plant making auto parts or a facility preparing food products and you are likely to see several generations of IT systems, hardware and software supporting machines that are 30, 40, or even 50 years old.
The reason is straightforward: these legacy IT systems, purchased and paid for years ago, simply continue to work, much like the machines they support. Importantly though, several significant trends promise to upend this dynamic, facilitate the end-of-life for many aged systems, and bring manufacturing leaders face-to-face with a day we knew was coming.
The time to transition away from many legacy IT investments is here – not only because they are no longer adequate, but because they pose significant business continuity risks. Percolating for decades, these trends are not new, but they are increasingly overt. Manufacturing leaders know them well:
- The human absorption issue: Often plagued by custom software, legacy IT systems are difficult for employees to learn, requiring extensive typing and memorization – skills that radically contrast with the point-and-click or drag-and-drop functionality in the touch screens employees are accustomed to today. These systems are even more difficult to maintain, as the IT professionals capable of resolving code-related issues are reaching the end of their careers and new or prospective professionals show little interest – and in many cases an aversion – to learning the now defunct programming languages these systems rely on.
- The move to the cloud: The cloud’s magic – its immense computing power, elastic storage and ability to automate processes that once required large on-premises IT teams – enables manufacturers to focus on core infrastructure, such as on-premises systems on the shop floor that cannot risk losing connectivity, while offloading tasks like disaster recovery and database administration. However, this shift comes at a cost. No longer confined within the four walls of the business, unsupported and obsolete systems are often unable to effectively share data without relying on numerous custom applications, APIs or even connected devices – all of which create risk.
- The imperative of cybersecurity: It’s no secret that bad actors – from organized criminal syndicates to sophisticated state-sponsored groups – see the manufacturing sector as a lucrative target. Created when cybersecurity was an afterthought at best, and running on operating systems that are unsupported, legacy systems are often devoid of even the most rudimentary patches and safeguards. In many cases, they are also not compatible with today’s security tools. This singular reality is a significant concern for suppliers and customers, who increasingly depend on the efficient exchange of data with partners. Understandably, many are reticent to integrate with aged systems, where attackers may be lurking while awaiting new opportunities.
- The need for data: Manufacturers increasingly need data from the show floor to optimize their operations. Are machines performing as they should? Are the products coming off of the line high quality? Can items requiring a recall be easily identified and tracked to comply with regulators’ requirements? These are but a few of the many ways data is used and why it is needed. However, gathering such intelligence from legacy systems is difficult and at times impossible. Obtaining this data is also a building block for effectively considering AI.
- The connection between IT performance, business continuity and cash flow: Perhaps most importantly, in today’s highly connected manufacturing sector, the performance of all IT investments – new and old – directly impacts bottom and top-line results. Any disruption in IT service levels or performance, whether due to a system failure or security breach, can almost immediately impact business continuity. And any business continuity issue can quickly affect cash flow. For example, if a labeling system fails to provide a customer’s accounts receivable department with the necessary information to input a part into inventory – a step that often triggers payment to the manufacturer – cash flow is directly impacted.
Fortunately, there are proven ways for manufacturing leaders to address these issues in a measured and disciplined manner. Real-world experiences underscore the importance of five key steps.
- Engage a third-party expert: Organizations that have not selected, purchased or deployed enterprise-wide technology in years can benefit from experts who know their specific manufacturing sector and can separate the vendor hype from reality. Partnering with someone who has significant project and change management expertise is also key.
- Prioritize cybersecurity from the start: Before transitioning systems, conduct a thorough cybersecurity risk assessment to identify vulnerabilities. Implement a security-first mindset by ensuring that your new systems are protected with continuous software updates, advanced threat detection tools, and compliance with industry-specific security standards.
- Choose the right business system or ERP: Different solutions are ideal for different manufacturing environments. Make sure you choose the right system not only for your sector, but also your organization and its unique needs.
- Set aside time for a cross functional team: The implementation process must include not only those who will use the systems on the shop floor and in operations, but departments that benefit from the data provided by the company’s systems and networks. If an organization has multiple locations, this team should contain appropriate representation.
- Spend time on data: Legacy systems often contain vast amounts of data spread across disparate systems, making data discovery and deduplication essential. Be sure to account for efforts to confirm data accuracy within the implementation timeline. Automation tools are often required to help data owners review and cleanse vast amounts of data. Cleansing master files as well as historical transaction data is critical for adopting AI technologies.
By addressing these points, manufacturers can transition away from legacy systems with confidence. This approach also lays the groundwork for innovation, creates a spirit of continuous improvement, increases enterprise value, and simplifies – while securing – collaboration with suppliers and customers in today’s profitable, data-reliant relationships.
Doug Hockenbrocht is a Technology Consulting Partner in Plante Moran’s Information Technology Practice. He has more than three decades of experience helping manufacturers approach their technology and IT investments. Sean McBride is a Technology Consulting Partner in Plante Moran’s Information Technology Practice. He has more than 20 years of experience helping business owners improve the financial performance of their organizations.