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ERP Takes On the Environment

Posted By Jeff Moad, February 24, 2011 at 6:25 AM, in Category: Enterprise Resource Planning

In many ways, the term Enterprise Resource Planning (ERP) is no longer a good fit for the enterprise software platforms on which most manufacturers rely to run major parts of their business. The ERP term, of course, derives from material requirements planning (MRP) and manufacturing resource planning (MRP II). Both of those earlier classes of applications focused on internal manufacturing processes such as material, production, inventory, and financial planning and management.

While modern ERP systems support those processes, they continue to take on a much broader range of processes, many of which extend well beyond the four walls of the enterprise. Increasingly, manufacturers use ERP and associated portal technologies to share order, production status, and quality information with customers and suppliers. ERP platforms also are increasingly subsuming supply chain and other externally facing processes that were once handled by separate best-of-breed systems.

One of the next big territories that ERP is likely to annex is the tracking, analysis, reporting, and sharing of environmental impact data. As a recent survey of 207 manufacturing managers by software vendor IFS North America makes clear, most manufacturers are getting serious about tracking, reporting, and sharing environmental impact data, and many of them are looking to their ERP systems for help with keeping tabs on environmental data.

According to the survey, asurprisingly high 77% of manufacturers said they already track and/or share environmental impact information with supply chain partners and/or customers. Many manufacturers are being pushed to do so by customers. Thirty-eight percent said they are part of a “green supply chain” led by customers who require them to provide information such as the chemical makeup of products. Only 6% said they don’t expect to be affected by such green supply chain requirements in the future.

Manufacturers say they are collecting and sharing information on their air and water discharges, the environmental impact of specific products or subassemblies, and the overall environmental impacts of the organization.

But manufacturers add that today, ERP systems don’t play much of a role in the collection, reporting, and sharing of environmental impact information. Only 12%, according to the IFS survey, said they currently open their ERP and other enterprise systems to trading partners to share this information. Most say they manage environmental impact data manually, starting with hard copies of the data and then reentering it into an ERP system, a supply chain management system, or spreadsheets.

As customer- and regulatory-generated requirements for environmental reporting become more comprehensive and widespread, it makes sense that the scope of ERP systems will, once again, expand to cover environmental-impact data collection and reporting. Many manufacturers already use ERP to record and update manufacturing bills of material. Adding information about material chemical content and other environmental characteristics seems natural.

Also, it’s only a matter of time before manufacturers want to understand the financial impact of environmentally driven decisions. Since it’s already used to manage financial data, ERP would seem a logical place for that sort of analysis.

ERP software vendors seem to be moving slowly in this direction. IFS has already integrated tools for tracking and analyzing environmental impacts into its ERP platform. And this week, competitor Oracle said it had acquired the assets of Ndevr, an Australian partner that currently provides environmental and energy reporting tools to users of Oracle’s JD Edwards Enterprise One and Oracle E-Business Suite ERP systems. Oracle is likely to integrate the Ndevr technology more broadly across its ERP product line. SAP offers its Carbon Impact environmental reporting tool, which has yet to be tightly integrated with the company’s Business Suite.

Look for more ERP providers to integrate environmental reporting capabilities directly into their core products.

What do you think? Do you see environmental reporting becoming more important over the next two years? Is ERP the right place to manage this data?

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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