How integrating AI and ERP will transform manufacturing
As Artificial Intelligence (AI) evolves beyond mere hype, its potential to revolutionise how technology is used in manufacturing is exciting and strategically important. The AI era marks a significant transformation that will help elevate Australian manufacturing companies by driving efficiencies and giving them a competitive edge.
While AI in manufacturing is still in its evolutionary phase, its potential uses, when integrated with an established technology for the sector, like Enterprise Resource Planning (ERP) systems, is a strategic imperative that should be considered.
As AI and ERP evolve in the manufacturing sector, companies that are proactive in adopting these advanced technologies are poised to achieve long-term growth and success, reaping the benefits of being at the forefront of this transformative wave.
Australian Government support
The Australian Government sees the potential of AI in manufacturing. In 2023, it asked for industry experts to explore AI's ability into advancing the Australian manufacturing sector. The Australian Institute for Machine Learning's 2023 report – Developing Advanced Manufacturing in Australia, said that AI will improve the capability of manufacturing processes, improving the precision and consistency of high-quality products. Broadly, AI presents enormous opportunities for Australia, potentially increasing productivity by 40 per cent and adding up to $315 billion to the national economy by 2028.
Why integrate AI with ERP?
Originally designed as a manufacturing organisation's backbone, ERP systems coordinate and manage business processes across various departments, from sales to shop floor production planning and scheduling. When integrated with AI, it offers a range of additional benefits, including eliminating unnecessary complexity and friction and facilitating easy data extraction from systems for data-driven decision-making.
ERP with AI can identify inefficient processes and propose solutions to cut costs and enhance efficiency. AI also enables predictive diagnostics, thereby minimising resource waste. AI can empower ERP systems to think, learn and make decisions, a role that was once exclusive to humans.
The current state of AI and ERP
Today, ERP systems harness cognitive AI to process documents like purchase orders and invoices quickly and accurately. Predictive AI optimises inventory and purchase data, balancing critical components and predicting order times.
It also evaluates socioeconomic, supply chain, and supplier data to identify at-risk suppliers. These AI applications help ERP systems anticipate problems and suggest optimisations, enhancing efficiency. The future inclusion of generative AI will further enhance these existing capabilities, but this area is still evolving.
Generative AI and ERP
Generative AI is also far from a passing trend. The best-known example is OpenAI's ChatGPT. Generative AI is poised to become a standard feature in ERP platforms, a clear testament to its significance and future impact. It's a technology that is here to stay and will shape modern ERP systems, making its integration a strategic imperative for manufacturing companies.
This is because with its capacity to learn from vast datasets, Generative AI will uncover intricate patterns. Its ability to generate new content based on natural language requests, such as images, videos, text, audio and computer code, is revolutionary for this sector. For example, it could handle a complex purchase order with a fabricated metals company for a major construction project. This task would otherwise require substantial time and cost in external consulting fees from a project management company.
Generative AI is set to revolutionise user interactions with ERP systems, making them more natural and intuitive. McKinsey has said, "Gen AI can unlock untapped productivity during production, leveraging root cause analysis to predict failures and reduce defects, and draft easy-to-follow dynamic work instructions. It can also augment operator stations by offering live, AI-supported troubleshooting and operating guidelines."
Generative AI should be of particular interest to the manufacturing sector. For just one example of how transformative it could be, as IBM noted, AI will significantly help to make the digital twin promise a reality, which will have a significant role in supporting manufacturing in the future.
How Predictive AI fits in
In conjunction with predictive AI, Generative AI-powered ERP systems can analyse vast data sets to offer actionable insights. They reveal patterns and trends, allowing informed decisions on production schedules and resource allocation. They can also identify market opportunities by analysing market data, customer feedback, and competitor products and accelerating research and development.
Predictive AI forecasts future demand, enabling accurate production planning and resource alignment to meet customer needs without overproduction. Generative AI can summarise thousands of purchase orders, provide this information to predictive AI and generate forecasts for product demand over the next six months.
It will help reduce overstocking and stockouts, minimise storage costs and ensure timely order fulfilment. It can also provide real-time insights into orders, shipments and inventory, helping manufacturers quickly address bottlenecks for smooth operations and timely deliveries.
Predictive AI can analyse data from machinery and equipment to predict potential failures before they occur. This capability will allow manufacturers to schedule maintenance during non-peak hours, reducing downtime and extending the lifespan of their equipment.
Conclusion
Despite generative AI's impressive potential, it's important to remember that we are still in the early stages of its adoption. AI promises significant benefits for those willing to explore its potential. This technological advancement and transformative wave is predicted to be a game-changer for Australian manufacturers.
