Cloud-based MES/ERP--No longer an oxymoron
Putting your MES or ERP system in the cloud may be more secure and reliable than your on-premises systems.
- Getting in on the ground floor
- Cost isn’t the only reason to choose the cloud
- Caveats to consider
- Is the cloud real time enough?
- Cloud applications from MES to ERP
But times have changed. Today, your IT department is swamped with internal headaches keeping equipment up and running and free of viruses, and you’re lucky if you have a control engineer on staff. As a result, you probably outsource most of your control system design and maintenance, so why not look into cloud-based opportunities?
Obviously, cloud-based systems aren’t necessarily a panacea for all software ills, but Internet technology has come a long way in the last 10 years—and since I wrote a Tech Update entitled, “Software as a Service,” that appeared in the January 2010 issue of FE. For short-staffed, small- and medium-sized processors, cloud-based MES and ERP systems can allow them to use the same tools only the “big boys” can afford and free up a one-person IT/controls department.
As a preface to the rest of this article, cloud-based ERP applications are often available in many different architectures, and pricing structures will probably vary from one to another provider, so you will want to ask suppliers about their offerings. For example, one supplier offers its ERP in three formats: SaaS (software as a service), IaaS (infrastructure as a service) or PaaS (a cloud-based platform as a service), the last of which can run on Microsoft’s Azure or Amazon’s Web Services. Its SaaS product is a monthly subscription-based ERP delivered via the cloud and has a rental option on only the hardware; the user is responsible for the purchase, licensing and maintenance of the software. With the cloud-based PaaS option, users run the ERP on a third-party host system (e.g., Microsoft Azure) and are responsible for an upfront license cost and annual software maintenance payment.
“The primary advantage of cloud-based solutions is the lower entry cost,” says Andrew Waycott, COO and CTO of Factora, a manufacturing consulting firm and provider of MES software. “Enterprise-class MES and ERP systems have an extremely high capital expenditure [CAPEX] requirement to purchase the software, hardware and consulting services just to get started. On the other hand, cloud-based solutions turn the software and hardware costs into an operating expenditure [OPEX] cost. This allows projects to be evaluated based on their direct ROI potential much more so than a traditional on-premise project can be.”
“Vendors are responsible for maintaining both the hardware and the software, not the user,” says Scott McMaster, SYSPRO-US national sales manager. Vendors also provide the backups, system monitoring and user support. “Transferring all this responsibility elsewhere allows companies to reduce the size of their IT support organizations and free up resources for other activities that can’t be outsourced.”
“In many manufacturing companies today, there is very limited IT support staff,” adds Waycott. “Cloud-based solutions eliminate the need for in-house knowledge of the various technologies required in the data center and move that responsibility to the cloud solution provider.”
“It’s like having ‘IT on demand’ rather than at the other end of a phone line or a four-hour flight away,” says Khris Kammer, Rockwell Automation information partner and competency manager. “The vendor not only supports the applications, it also updates them without being onsite. This reduces the risk of data loss since cloud-based storage is usually distributed and redundant.”
Maybe you have a reliable MES or ERP system in house and competent people to keep it running. So you wonder, why chance your data to a third-party in the cloud? Not so many years ago, you would have questioned the cloud’s reliability, accessibility and security. For many processors, these concerns have been resolved. That is, the cloud may be more reliable and accessible than processors’ on-premises systems—and more secure to boot.
“The biggest reliability issue we hear about is disaster recovery,” says Jack Payne, Aptean vice president of solution consulting. “Processors are concerned about what happens if they have a disaster in their facility or data center. Since the data is their intellectual property [IP], how do they safeguard it?” Many of these processors see cloud-based systems as an option for disaster recovery and believe professional hosting centers will probably give them more reliability and uptime than hosting on their own premises, according to Payne.
For example, what if your power goes out? Is your on-premise ERP protected, and does it have current, not scrambled, data? A Hicksville, NY-based meat processor lost power on several occasions, according to Joe Scioscia, VAI (Vormittag Associates Inc.) vice president of sales. In each instance, the processor experienced no ERP disruption, since its cloud-based system functioned throughout the power disruptions.
Data security is another issue. “Historically, companies were a little hesitant to move some applications to the cloud due to security concerns,” says Mike Edgett, Infor industry & solutions strategy director. “For example, companies didn’t want their recipes or customer data in the cloud. Frankly, this isn’t a cloud-based issue, but a fundamental IT security issue. Both on-premise and cloud solutions can have security breaches if they’re not designed properly. If you look at the stories in the news related to security breaches, they are just as likely to be at a company’s in-house system as a third-party cloud.”
Attitudes about cloud security are changing. Waycott relates a story about one of his clients: “A couple of years ago, the customer told me, ‘We will never put our data in the cloud. We can’t afford the risk of having our IP exposed to our competition.’ Flash forward a couple of years, and the conversation is quite different: ‘We are starting to realize we are not as good at protecting our own data as we thought. Cloud-based companies are experts in security. We will never have the in-house expertise to protect ourselves against hackers the way these companies can.’”
Are external users such as suppliers and customers a threat to a processor’s data security? Not likely. Both customers and suppliers have their own private portals they enter through password security. And, they have access only to their own data and other specific data in the internal database, just as an Amazon or bank customer accesses a portal to check order status or an account balance, explains Aptean’s Payne. The processor’s ERP or MES is protected through firewalls that filter data into and out of the ERP system. So, customers and buyers remain outside the core application and database.
Cloud-based ERP systems have higher security models to better protect data from tampering, internally and externally, says Scioscia. “They also provide better traceability, because the software can be kept up-to-date and in compliance with regulatory requirements since the providers [update systems] more quickly on behalf of their customers. In addition, with cloud-based ERP, users need less technical staff.”
“Scalability is a major benefit of cloud solutions,” says Oliver Gruner, ICONICS business development director. “If your business is projected to experience rapid growth, cloud deployment is a great way to keep up with it. Time to procure IT resources and equipment can also be a factor and a reason to choose a cloud solution. But costs have to be compared carefully. Since cloud solutions scale well, you can start with a low IT cost. However, a full-scale cloud solution that runs 24/7 can be expensive. You have to understand the options when it comes to cost.”
With all these pluses, it’s hard to imagine many minuses, but McMaster doesn’t see FDA-regulated or other federally regulated organizations gravitating to cloud-based solutions for at least one reason: “A big issue is the multi-tenancy aspects of cloud-based solutions whereby an update made on the host site updates all users. This creates problems for federally regulated companies with standard operational procedures [SOPs] that must regulate and validate the update process to ensure the update conforms to SOPs.”
What is a tenant? A tenant is any application—inside or outside the enterprise—that needs its own secure and exclusive virtual computing environment. This environment can include all or select areas of enterprise architecture, from storage to user interface. All interactive applications (or tenants) have to be multi-user in nature, according to the Computerworld article, “Multi-tenancy in the cloud: Why it matters.”1
For example, an application that processes accounts payable within a private cloud is a tenant. The same is true for a global marketing application that publishes an e-newsletter to a public cloud. Both applications have the same tenancy requirements, regardless of whether they have internal or external co-tenants. Therefore, multi-tenancy is the key common attribute of both public and private clouds, and it applies to all three layers of them: IaaS, PaaS and SaaS.2
“The fact that [processors] are regulated shouldn’t necessarily affect whether a company moves its IT solutions to the cloud,” says Infor’s Edgett. “Granted, some companies, if they require FDA validation, will likely require a single-tenant instance, but the cloud can still be a viable option for them.”
McMaster sees less flexibility with cloud applications. “Compared with traditional on-premises and hosted applications, cloud-based solutions typically offer a limited range of configuration options. That makes cloud options most appropriate for companies that use highly standardized business processes in areas like sales, purchasing and accounts receivable. So far, vendors of cloud-based ERP systems have not caught up with the advanced functionality of traditional on-premises and hosted ERP offerings.”
A short answer to this question: It depends on how close to the process the MES or ERP must operate. As a rule of thumb, the closer an application is to the process, the more real-time response/connectivity is required. “It is possible to get a big enough ‘pipe’ to allow near real-time updates on the cloud. But, of course, this comes at a price,” says ICONICS’ Gruner. “Consequently, you must carefully weigh all the pros and cons and do what makes sense for you and your business.”
In situations where there are no constraints on bandwidth and redundant circuits, MES cloud-based software can be deployed and deliver real-time performance, says VAI’s Scioscia. However, other factors need to be taken into account, such as availability to reliable, high-speed carrier-grade circuits since broadband usually is not sufficient or reliable enough. This access is a typically a function of geography, population density and government regulations.
“One thing to consider is the reliability and speed of networks [including the Internet], which have increased exponentially over recent years,” says Rockwell’s Kammer. “Some [applications] that once could only be [run] on premise can now be distributed. That said, there are still applications that usually exist at the plant level, or even the area/equipment level. These applications require real-time data acquisition and response, such as the checkweigher-based rejection of consumer packages or inline quality sampling and response. To be effective, these applications must have high-speed bidirectional communications with control equipment.”
“While MES systems are typically more real time than ERP solutions, they are usually not time sensitive enough to make this a key element of the cloud-based vs. on-premises decision,” observes Factora’s Waycott. “Real time is largely a question of latency. If your plant floor personnel must react to a situation within seconds or a minute of its occurrence, a cloud-based solution will probably not meet this requirement. However, in these instances, an on-premises MES may not be the right choice either; the solution should be at the SCADA layer. Different companies have different opinions as to where certain functions should fall within the Purdue model of enterprise reference architecture. For instance, with cloud-based MES systems, the key is to ensure anything ‘real time’ is housed in layer 2.”
“Cloud-based MES solutions ensure control over change management and standard operating procedure adherence,” says Rachel Trombetta, chief architect commercial solutions, GE Intelligent Platforms Software. MES solutions offer the same advantages as ERP cloud solutions. However, recipe management and control, which are unique to FDA/USDA, are more easily maintained in cloud solutions. Operational control (routing, operations, activities, quality data) also lends itself to cloud-based solutions, and historians are now being used in the cloud. But SCADA systems are best kept on premise server platforms due to the sensitivity of real-time information, according to Trombetta.
A cloud-based MES can capture data from processes and provide off-line analytics on thousands of process points. For example, at The Food Company, a European branded goods company in the grocery sector, each high-speed production line handles 5,000 tons of food products per year. The processor contracted with Factora to optimize its processing lines with an off-line analysis. From this analysis, a subset of control loops critical to profit, or profit loops, was identified, and the specifications (limits) were created for them. Real-time dashboards now are used to communicate to operators when they are running within limits, and a KPI reporting system used for the management system provides visibility into the impact on cost when running outside these limits.
This MES cloud-based analytics approach is saving The Food Company around 5 percent in raw material costs and offers greater confidence and visibility to run the process, reducing risk and making change easier. According to Waycott, one of the challenges of this project was accessing the necessary data in standalone, often outdated or nonexistent control or network systems. Moving from a semi-manual system to a real-time center-lining MES was a huge cultural change and a major challenge. Following a successful proof of concept, The Food Company is rolling out the solution to a total of 10 lines.
According to GE’s Trombetta, control systems, local historians, LIMS and other real-time quality systems should sit on premises and communicate with cloud-based MES and ERP systems. In some cases, these modules can be contained in an appliance or controller that allows mapping from control systems with local storage and forwarding of historian data in the event of network latency. The Food Company application is a good example of handling real-time data and connecting it to cloud-based MES.
What applications can be recommended for the cloud? Many processors keep real-time process control data on premises and, for their own reasons, elect to send some of it to cloud-based systems for historical and analytical purposes. This is typically known as a hybrid on-premise/cloud system. Gruner reports several of his company’s clients use cloud-based ICONICS Hyper Historian for Microsoft Azure to store important data collected from process control and data acquisition systems.
Having the right applications and a short implementation time are key reasons that Old Mill Kettle Corn (OMKC) chose the Plex Manufacturing Cloud to upgrade quickly from an old management system. According to Jason Prater, Plex vice president of development, McKee Foods Corporation approached OMKC with a distribution offer the company couldn’t refuse.
OMKC knew it was time to move from spreadsheets and manual processes to an automated method of managing quality, inventory, supply chain, communications and almost every other aspect of its operations. Since the processor needed to focus all its resources on fulfilling new contracts rather than running new back-office systems, it chose Plex’s cloud-based ERP solution. Following a three-month implementation, OMKC was using the Plex Manufacturing Cloud across all areas of its processing enterprise. The management team now has complete visibility into operations and plant data, which it is using to drive profitability. The system also allows OMKC the flexibility to expand and/or scale down dynamically to meet customer demand.
In another case, the SAP Business by Design cloud-based solution helped pull together loose ends from around the world for specialty tea manufacturer, Zhena’s Gypsy Tea. The company was experiencing a growth rate well over 200 percent, and its Quickbooks and Excel software could no longer keep up with the business, let alone provide and document information from suppliers around the world. With some help from SAP Gold Partner, Navigator Business Solutions, the tea company became one of the early adopters of the SAP cloud-based ERP system and can now monitor suppliers from around the world and track batches and orders.
Paula Muesse, Zhena’s COO and CFO, says she has processed purchase orders while travelling on an airplane using the cloud-based system. Being a relatively small company, Zhena’s couldn’t tie up its resources in an extensive IT department and the costs associated with maintaining servers. The cloud-based system gives the company the reach of enterprise software without the fixed costs of a data center. It also has given Zhena’s credibility with investors by demonstrating the company is prepared to handle more growth. In addition, the system has brought greater visibility into ingredient sourcing. Most importantly, the system offers the flexibility for scaling the system to match the growth of the company, provides real-time analytics to make split-second decisions and allows a more predictable cost structure.
Dominion Liquid Technologies (DLT) got its start in 2009 by acquiring Flavor Systems International, a specialist manufacturer of coffee syrup. It didn’t take President and CEO Charlie Cain long to realize significant change would have to occur to create a successful business. However, the company had limited revenues, limited manufacturing capabilities and not enough people to get the job done in the required way.
“In the beginning, our main challenge was limited capital,” explains Cain. “I knew right away that the software we were using to manage the business was suboptimal. It was very clear that a new ERP solution would help us build a more efficient business, reduce waste and grow rapidly while delivering quality products through every production run.”
As a busy contract manufacturer, DLT needs to juggle customers’ hugely diverse needs, test ingredients and recipes, manage production schedules and third parties, ensure products are shipped correctly to protect finely tuned margins and adhere to stringent quality targets.
Balancing growth with quality means everyone on the DLT team must be focused on customers’ needs and product excellence rather than managing on-premises ERP and maintaining an IT infrastructure. “Historically, different teams within the manufacturing process worked in silos, making information sharing slow, clumsy and error prone,” recalls Cain. “It was extremely difficult for us to get accurate, reliable data on things such as inventory levels and expiration dates. We needed a system that could give us real-time information, so we could make better, informed decisions. We knew this was vital to the growth of our bottom line.”
Cain called on Revolution Group to evaluate a number of ERP solutions and then deploy the technology so the management team could be more confident in their decision-making across all aspects of the business. Cain stressed that the management team wanted to be agile, not an IT manager, and the company did not want to incur a huge capital outlay.
The DLT team was enthusiastic about the real-time nature of the Plex Manufacturing Cloud ERP system, especially its traceability, quality and inventory control capabilities. A visit to Plex’s annual user conference and discussions with other users further confirmed the company’s selection.
Revolution Group finalized the Plex Manufacturing Cloud deployment in just six months, streamlining operations across the board. For example, technicians can now share data from pre-operational checks, and the new quality control process means the QC assurance team can always ensure specifications are met. From a business perspective, the management team can evaluate downtime and line productivity and identify different kinds of scrap, which has led to a significant margin improvement.
“Our people have well and truly bought into Plex because, quite simply, the previous system did not perform to our standards and created a lot of unnecessary work,” says Cain. “Interdepartmental communication has improved tremendously, and the system has had a spectacular effect on the efficiency of our production floor. Plex has not only brought our business up to date, it has given our customers an even greater level of security and satisfaction.”
For more information:
1. “Multi-tenancy in the cloud: Why it matters,” Computerworld, Streedhar Kajeepeta, April 12, 2010 (Accessed 1 April 2015 from http://www.computerworld.com/article/2517005/data-center/multi-tenancy-in-the-cloud—why-it-matters.html).