ERP, CRM, and Artificial Intelligence (AI)

I recently did deep dives (no pun intended) into Sikich’s Industry Pulse Survey from the latest quarter of 2023 as well as a recent survey conducted by Manufacturing Dive, which was conducted in partnership with Sikich. These surveys explored how industrial manufacturers are using enterprise technology to bolster their operations. I was particularly struck by some of the data points that came out of both Surveys relative to ERP and CRM projects juxtaposed against some of the responses from IT Executives regarding the promise of Artificial Intelligence (AI) technologies.

According to the Industry Pulse Survey:

• Of 200 successful tech enhancement projects in the last 3 years, only 16% and 13% upgraded ERP and CRM systems, respectively.
• 16% of respondents said their ERP system was over 20 years old.
• 11% of respondents said they did not even currently have an ERP system.
• Only one third of respondents said their current ERP system was implemented within the last 10 years.

And as the promise of Artificial Intelligence (AI) gains prominence, respondents to both Surveys highlighted AI as having great potential to streamline and make more efficient back-office operations.

• 39% and 34% of Executive respondents in the Pulse Survey believed that Marketing and Customer Service, respectively, would benefit from AI capabilities.
• In the Manufacturing Dive/Sikich Survey, specifically relative to Marketing and Customer Service, 48% of Executive respondents were most interested in applying AI to predictive analytics and 55% saw opportunity in machine learning for demand forecasting.

When Should Manufacturers Invest in AI?

A key take-away from the responses and data provided in the surveys—and one pointed out in Dive Manufacturing’s summation—is that 60% of respondents claimed the top benefit organizations hope to achieve when considering a new or expanded ERP platform is the ability to leverage AI capabilities. This, along with improved user experience (50%) and improved integration across applications (50%), were the most common benefits cited for ERP investments.

The fact that 16% of respondents said their ERP platforms were over 20 years old and that a significant number of respondents (11%) confessed to having no ERP platform at all highlighted the challenges many firms will have in monetizing the benefits that AI technologies can provide. The results of these surveys confirmed my strongly held belief that investments in AI can be premature without robust and foundational ERP and CRM solutions in place.

The efficacy of AI capabilities depends on accurate and reliable source data from these systems. Without immediate, accurate, and meaningful information reflecting customer characteristics, transaction history, inventory levels, order backlog, supplier profiles, and a host of other data points that robust ERP and CRM systems provide, AI systems will be unable to recognize patterns, predict outcomes and provide recommendations and judgements. Robust ERP and CRM platforms are the foundation upon which manufacturing firms must build AI capabilities.

Immediate Benefits of ERP and AI

I once had in my organization a multi-location, $130m Division of a large, decentralized manufacturing firm that ran on what could generously be described as a set of obsolete, non-integrated “ERP systems.” This Division used an extrusion-based process manufacturing technique to make multiple variations of a common packaging product sold to customers with similar packaging needs. By all accounts, those running the business at all operational levels recognized it for the “simple business” that it was, with the VP/General Manager often saying that the business could be effectively run using QuickBooks.

Although the management team was satisfied with status quo capabilities at that time, ongoing reliability and support of the obsolete system posed too much of a risk to the business. We subsequently implemented Microsoft Dynamics’ cloud-based ERP platform. Although satisfied with the risk mitigation and simplified support this platform provided, the real eye-opener for the management team was the tremendously enhanced level of insight into daily operations that a world-class ERP platform could provide.

The concept of AI had yet to be introduced into the industry-wide digital transformation conversation at that time. We saw the opportunity to build CRM capabilities around our ERP implementation, but AI was not a factor in developing our business case. But in hindsight, we had positioned the business with a solid foundation of business rules, integrated business processes, and data collection and management capabilities to enable some level of AI capabilities as the technology evolved.

Not all businesses are presented with immediate opportunities to exploit AI within their business models. As AI technology evolves and becomes more readily available for both large and small businesses alike, having robust and mature ERP and CRM foundations in place will enable opportunities to quickly exploit AI capabilities as they develop.