Why nearshoring and cloud ERP software are a match made in heaven

Why nearshoring and cloud ERP software are a match made in heaven

Published: 10/20/2014 4:56:01 PM

These days, what's old is new again: flannel shirts, skinny ties, Rayban sunglasses and manufacturing in America. That's right, some factory jobs are finally coming back to the U.S. of A after years of such work being shipped overseas to places like China. This is great for both workers and companies, in particular because it helps to simplify supply chains and ensure high-quality goods are in the hands of consumers more quickly.

But, manufacturers need more than plants and warehouses close to company headquarters to help simplify and streamline their operations. The processes involved in getting good to market are becoming more complex by the day, and organizations need a way to effectively keep tabs on everything and ensure that operations are always running smoothly. By adopting cloud ERP software solutions like Intacct, however, manufacturing firms will have the tools they need to guarantee the effectiveness of their nearshoring strategy.

Why nearshoring is now en vogue instead of outsourcing
Manufacturers, like any other business, need to keep their eye on the bottom line. If a move will help to lower expenditures while either boosting or maintaining revenue, then it's a no-brainer to do that. A few decades ago, that obvious move was to shift manufacturing overseas where wages and other associated costs were much lower.

But, this is no longer the case. Over the past five to 10 years, labor and energy costs in many parts of the world have gone up, while it has remained relatively the same or even gone down in the U.S. and other parts of the Americas. Plus, when shipping costs and time to market are factored into the equation, manufacturing in the U.S. or nearby locations like Canada all of a sudden becomes a much more economically feasible option.

"As U.S. firms are becoming increasingly concerned about protecting their intellectual property, 'nearshoring'—or bringing production closer to the point of use—becomes attractive as the risk of having important intellectual capital stolen is decreased," Rita Gunther McGrath, an author and an associate professor at Columbia Business School, wrote in The Wall Street Journal in June of this year. "Having the capability to manufacture close to where customers are located can also increase customer responsiveness and decrease turnaround times, making the supply chain more predictable."

As a result, nearshoring is here to stay. According to numbers ERP professional Pat Garrehy cited in a recent Manufacturing.Net article, at least 200 companies have shifted manufacturing operations that used to be located overseas back to places like Kentucky and Alabama. In comparison, over 51,000 plants in the U.S. were either moved or shut down between 1998 and 2008.

How ERP helps to ensure nearshoring's success
In addition to cost, one of the big reasons why nearshoring is now more popular than ever is because it can help reduce supply chain complexity and get goods to market faster than ever. For example, McGrath noted that companies with operations in Japan were forced to scramble to find new options after the devastating 2011 tsunami there. If a business has three or four plants all across the U.S. as opposed to the same number of facilities in Japan, then the odds are good that its manufacturing efforts are not going to be shut down by one major calamity. Plus, it's much easier to get goods into places like New York City or North Carolina where they were made in New Mexico or Tennessee as opposed to China or South Korea, for example.

But, just because a manufacturing plant is closer than ever to consumers does not mean that supply chain and operations complexity is a thing of the past. Any distributed architecture is going to present problems, unless a company has a way to oversee and keep constant tabs on everything. This is where enterprise resource planning comes into play. With a central software solution that can serve as the spoke for all of the hubs a business may have in place, organizational leaders can gain the central vantage point they need to ensure distributed systems operate on one streamlined timeline and methodology. With ERP in place, business leaders can rest easy knowing that their nearshoring strategy can be efficiently monitored in order to ensure its continued success.

"Enterprise resource planning systems, especially ERP manufacturing software, help companies by providing visibility into every function across many departments," Garrehy wrote. "The modular nature of ERP systems lets firms implement only those modules that meet their requirements, allowing for seamless integration of company processes and workflows, improved tracking, security and lower costs all around."

Why cloud ERP software is the top choice
ERP solutions can bring a lot of benefits to the table, especially for companies that have embraced nearshoring. But, as CFO.com contributor Jay Deakins recently noted, not all ERP solutions are the same. In particular, businesses that are using legacy ERP platforms built and implemented during a time when nearshoring and other new trends were not in existence may find that ERP does not live up to the hype for them. A bloated and inflexible on-premises system is likely not going to be able to serve as the central hub and command console that companies need.

In order to have a system that best guarantees the effectiveness of a nearshoring initiative, companies should turn to cloud ERP software. As opposed to legacy on-premises options, cloud ERP software offers a number of key benefits:

  • Cloud solutions for business are inherently flexible and scalable, meaning they are able to easily grow with the company. New employees or new locations can be intertwined in the solution in minutes, not months. Plus, no matter where someone is, he or she can easily access and update information with cloud ERP.
  • Since many major cloud ERP platforms are available on a per month, per usage basis, it is often a far more cost effective option that on on-premises solutions that are obtained via set contracts.
  • Unlike legacy options, cloud ERP software is typically built with new technology like smartphones and tablets in mind, or else it can be easily customized to work well with just about any new software or hardware option available. These solutions are critical to manufacturers today, and this functionality ensures that their data is a key part of the ERP platform.
  • Furthermore, cloud ERP software functionality can be simply customized depending on who is using the solution and what they need out of it. Features like automated data entry and personalized dashboards help everyone get exactly what they need out of ERP at all times.

"It is essential to reshoring to offer a better and more reliable way to plan and execute critical manufacturing tasks, deliver essential information to all parts of the organization and facilitate timely and informed business decision making," Garrehy wrote. "By providing manufacturers and distributors with the control and visibility they need, manufacturing cloud ERP empowers its users to raise the total performance of their manufacturing, distribution and supply chain operations. That is the tool being used by flourishing organizations to create opportunity for growth through successful reshoring."

Retro isn't just for fashionistas, as it's increasingly for manufacturers too. Businesses are hearkening back to decades of yore by having more and more factories located within the United States. Such a move can bring a number of key benefits, but only if it comes in conjunction with the use of cloud ERP software.

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