Is reshoring a viable option for U.S. manufacturers? A review of fresh data from SYSPRO

Profile picture for user brianssommer By Brian Sommer November 11, 2020
Summary:
The pandemic's supply chain uncertainty has ignited a reshoring debate in many regions, including the U.S. Here's my review of surprising manufacturing data from SYSPRO. SYSPRO also shared data on work-from-home trends, and their own cloud transition.

Business man considers question mark with arrows © Jirsak - shutterstock
(© Jirsak - shutterstock)

Recently, SYSPRO did something few ERP vendors do: original research. Some of their pandemic-impact results aren't surprising but some (like in manufacturing) are definitely impactful. The company also announced a new cloud version of their solution, too. Here's the update and a look ahead for 2021.

A few weeks ago, SYSPRO provided an analyst briefing.  Coincidental with a new release and cloud solution announcements, SYSPRO also shared results from a study they recently completed.

SYSPRO is a well-established global provider of ERP software. They've been in business over 42 years and offer solutions in over 65 countries. They serve several verticals such as: Industrial Machinery & Equipment, Fabricated Metals, Electronics, Food & Beverage, Plastics & Rubber, Automotive Components, and, Packaging.

The shift SYSPRO saw

In its business resiliency research results, SYSPRO's respondents reported a number of impacts triggered by the recent pandemic. These included:

  • 23% reported a loss of customers
  • 37% lacked appropriate planning tools
  • 36% saw business continuity impacts

They also found that 46% needed insights to respond well during the pandemic and that 29% faced challenges re: availability and accessibility to (manual or on-premises) systems.  As others have also noted, cloud systems shone through the pandemic while on-premises solutions were often problematic for users.

Manufacturing

SYSPRO also probed the effect of the pandemic on certain sectors. To begin, let's look at the manufacturing sector and how the pandemic has affected it.  In August this year, I wrote:

U.S. manufacturers could not be as flexible as some of their offshore competitors. In an eye-opening piece in MIT Technology Review (see "Un-Made in America" in the latest issue), you see how many American manufacturers couldn't spin up their old plants if those plants even still existed. The article reminds us of how much U.S. manufacturing capacity has been lost the last several decades and why this made it so difficult for firms to respond to new market needs. It's a sobering read that lays out the enormity of our fragile value chains and manufacturing capacity.

Logistics Management has a great companion piece called Is it time to reshore manufacturing?. This paragraph sets up the piece well:

Over the past 25 years, globalization, lean manufacturing, improved inventory control, and customer service have revolutionized supply chains. And as supply chains have become global and more tightly stretched, the consequences of supply chain failure have grown exponentially.

SYSPRO's study indicated that 42% of manufacturers will re-shore manufacturing operations. This is a big but not a surprising number as many firms got burned due to critical part shortages, closed suppliers, closed borders, etc. Sourcing halfway around the world may save money but the risks are significant. This re-calibration of supply chains will likely trigger new investments in plant, equipment AND systems. 

My own clients are reporting interest in these initiatives. They want new, highly automated factories that utilize all of the newest technologies (e.g., AI and big data powered preventative maintenance solutions). Once designed, they want to connect, digitally, everything in the value chain (not just supply chain). In other words, they want a digital fingerprint to follow every step of the process from raw materials sourcing to post-customer-purchase product support. These deals are not old school ERP ‘package-ectomies' where one old solution is popped out and a slightly newer one is then implemented. 

A reshoring or near-shoring surge could benefit many ERP vendors, not just SYSPRO. Will it happen right away? The answer is that the changes should start occurring soon for the most impacted firms and keep growing for years to come. 

Additionally, the move to Industry 4.0 (aka Factory of the Future) will also drive new deal flow. This uptake driver is not necessarily a slam dunk for all ERP vendors as many vendors lack either the breadth/depth in their solutions (e.g., pre-built integrations to critical machine tools, pre-built anomaly detection tools, pre-built analytical applications, etc.) and only have a tool kit. Some ERP vendors lack the implementation partners to install these novel solutions. Wiring up machine tools and analyzing sensor data is a different animal from creating journal entries for a general ledger. 

SYSPRO - Industry 4.0 graphic
(via SYSPRO)

The Work From Home (WFH) phenomena

SYSPRO's study showed that WFH is here to stay. The stats below tell the story well:

SYSPRO - work from home stats
(via SYSPRO)

SYSPRO has offered on-premises and hosted versions of its solutions for most of its existence. SYSPRO's new CloudERP will launch in Q1 2021. It will feature both a multi-tenant and multi-instance capability. In describing this capability SYSPRO executives stated the solution will be "multi-tenant architecture with solution isolation." We need to get more information on this as it sounds like it offers multi-tenancy to all legal entities within a customer's corporate structure but the application code and data are separate from one customer to another.  Prospective buyers should request clarity on this as it may be different from other hosted, single-tenant, or multi-tenant offerings on the market today.

SYSPRO CloudERP is definitely different from prior on-premises and hosted versions of SYSPRO (see below). This newest offering has SYSPRO or its partners providing most everything from software instantiation, application tuning, application maintenance, etc. while the customer need only care about data entry, reporting, etc.  

SYSPRO and "as a Service"

The Marketing team at SYSPRO must have had some spare time on their hands during this pandemic. We saw them brand "My SaaS - My ‘Solution' as a Service".  The key thing is their substitution of ‘Software' for ‘Solution'. I get it - they are now trying to sell a more complete offering.

This completeness comes in three fronts. First, they are focused on getting partners to build more product extensions via their platform and make their software even more industry relevant. Second, they want customers to exercise easier and frequent adaptations of the product through easy personalized services. And, third, they are also upping their game in implementations, too. There's a focus on quality, timely implementations by partners who are incented to create superior, long-term customer relationships. This was explained via the "Delivery as a Service" phrase.

All SaaS vendors should make these priorities.

My take

I seem to do an annual writeup on SYSPRO (e.g., here's my SYSPRO piece from the Summer of 2019). You can do a Google search and see the evolution of the company and product line from these pieces in Diginomica and ZDNet. And, this has got me thinking as to what I really want to hear from them next year. Here are my top of mind requests:

  • The product has a lot of vertical prowess but can SYSPRO show me some of its implementation partners that can single-handedly do a large-scale global/multi-country deployment?   Ditto for some great two-tier ERP customer case studies!
  • I'd like some briefing time oriented around reviewing the add-on, complementary products that work with SYSPRO's 2021 Cloud products. Likewise, I like to see some net-new products built by third parties exclusively for the SYSPRO platform.   Bonus points for products built with SYSPRO's SDK (solution development kit).
  • Can we see 2-3 working applications using big data, anomaly detection and algorithm/ML tools that customers are now subscribing?
  • What is SYSPRO doing to drive out-sized growth?

Readers, now you know what to look forward to next year….