It may be the cloud's toughest challenge to date, but the manufacturing industry, with its strict safety standards and stringent demands for real-time systems response, is well on its way to a complete embrace of SaaS.
One of the companies that helped push SaaS into the manufacturing industry's mainstream is Auburn Hills, Mich.-based Plex Systems. Plex, a 17-year-old manufacturing or enterprise resource planning (ERP) systems firm, switched to the SaaS delivery model in 2000. Just to put that in context: SaaS CRM pioneer Salesforce.com launched its business a year earlier. One can only imagine how tough it was to convince skittish manufacturers to switch to SaaS back in 2000 when SaaS was not that well understood.
"Many in the industry did not think it was possible because our servers are sitting here in Michigan and the plant is in China or Texas or elsewhere," Mark Symonds, president and CEO of Plex, told us. "People just assume that you can't have near real-time connectivity to operate those machines, but in fact it is the case."
The industry's main concerns were centered on real-time response time. Manufacturing makes demands on computer systems that other industries don't. The shop floor or the assembly line can be a strictly-programmed and dangerous place, so there are highly regulated safety standards.
System delays that would go completely unnoticed in most industries could result in wastage and huge financial losses in the manufacturing industry. Delays could also result in worker injuries or worse. In cases of extreme emergency, the line must be shut down automatically for worker safety and to mitigate losses, so real-time response is a critical priority.
The assembly line communicates with back-office systems and the cloud via small dedicated computers called programmable logic controllers (PLCs). The PLCs monitor a range of critical conditions and sensors on the production line. Since the round-trip from the PLC to the cloud-based server is longer than the back-office trip, many assumed the cloud's latency would eliminate SaaS as a communications option on the shop floor. That proved untrue.
"There is some latency, but it's very little. If something happens, there is an instant feedback loop where sub-second response is still acceptable," Jim Shepherd, vice president of strategy of Plex, told us. "We're capturing the event as it occurs. In any other industry, this would be considered real-time."
Most of the activity that affects a manufacturer's bottom line occurs on the shop floor, so the shop floor is the information hub of any manufacturer's computer system. The overall goal of any ERP system is to capture all of the information on the assembly line and make sure that information is instantly available to the entire company.
"Scrapping a batch of material gets recorded in the system immediately. That way, customer service knows that they are not going to make a shipment to a customer that day, and purchasing knows they have to buy replacement material," said Symonds.
Plex began as a manufacturing software program inside a manufacturing company. The software was spun out as its own separate business in 1995. The company transferred its business to the cloud in 2000. Along with legacy software giants such as Oracle and SAP, and mid-tier companies such as Epicor, Plex is emerging as a central player in the SaaS-based ERP market.
Plex and other SaaS ERP systems and services suppliers are in a good spot. They have overcome many of the manufacturing industry's timing reservations. The rest seems relatively easy. SaaS-based systems are far less expensive and cumbersome than back-office systems. That makes a big difference to the manufacturing industry, which, after many years of decline, is making a comeback on the world stage as a major low-cost competitor. Manufacturing's success or failure has always been about timing, and SaaS-based ERP seems to be on time.