Rafael Funes
Executive Chairman of LOVIS and President
LOVIS Mexico
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Insight

Rhetoric Shifts from Concern to Awe

Fri, 09/01/2017 - 13:20

The tendency to treat manufacturing as an isolated activity from other departments exists but no business can claim to be cost and resource-efficient without having application integration that reaches beyond manufacturing. While the world is just beginning to understand that the best way to achieve this integration is through an Enterprise Operating System (EOS), LOVIS worked this out over a decade ago and is now battling to iron out bad habits among users of EOS’ ancestors, ERP.

“We created the EOS concept 13 years ago and explained it to clients as a replacement for ERP,” says Rafael Funes, Executive Chairman of LOVIS and President of LOVIS Mexico.

According to research presented by Joseph Rahme Youssef, Gregory Zacharewicz and David Chen at the 25th Institute of Electrical and Electronics Engineers (IEEE) International Conference on Enabling Technologies, an EOS is the path to developing a “smart factory” capable of dealing with rapid changes in market trends. “We believe that the EOS approach presents the best perspective for the future in the context of the internet of Things and Factory of the Future.”

While EOS is beginning to receive sparkling reviews, Funes says the industry is wary of its implementation. “Companies tend to raise one of three main concerns. It is an online real- time solution, it is on the Cloud or they have already paid out for an ERP solution.” Ironically, one of the advantages of an EOS portrayed by Youssef and others in their research is one of the biggest concerns companies have: an online real-time solution. “Most companies are so adapted to the offline ERP model that they have built several mechanisms to cope with it,” the researchers said. Funes says concern regarding Cloud security is a hurdle. while it should not. “We have much higher security standards than some governments,” he says.

For Funes, the third concern related to money already spent on ERP and consultancy services, is something unavoidable. “You cannot consider the money spent on an ERP to be an investment since it does not yield the expected results in terms of return on investment.” According to the LOVIS Institute, with data from Panorama Consulting and LOVIS, a traditional ERP yields an average of 9 percent of the total expected benefits, while LOVIS’ product yields 95 to 96 percent of the expected benefits.

“The return on investment of an ERP project averages 8 percent, while 100 percent return on investment made in the first year of an EOS is delivered that same year. The ROI made in consecutive years is two to one,” says Funes. He adds that the fact that ERP does not yield the expected results is a fault of the model itself.

Youssef and his partners point out that EOS and ERP have similar objectives but their approaches could not be more different. “ERP is a top-down integrated approach, while EOS is a bottom-up federated approach only providing enterprise operating functions that allow various heterogeneous applications from different vendors.” In Funes’ words, LOVIS’ EOS “has a universal, understandable, scalable and configurable enterprise application. It is configured to fulfill client requirements without moving a single line of code.”

An added benefit of LOVIS’ EOS is the time it takes to update the system. “A company typically takes four months to update its ERP and it costs around 60 percent of what was originally paid. For each EOS client, the software update takes around four hours and comes at no cost,” says Funes. LOVIS contributions were recently mentioned in a paper published by the IEEE. “The paper says that EOS can be considered a precursor of Industry 4.0 practices and that our EOS development completely meets the expectations that researchers had of what an operating system should be able to do,” says Funes.

In spite of all the advantages of an EOS, there are few early adopters in Mexico. Funes is confident that after the publication of IEEE’s paper, many companies will come around. “The EOS has been permeating the automotive industry very slowly. We are not planning to target global automakers in the very near future. We are selecting a handful to which we can be genuinely helpful, specifically in operations.” The system is so advanced that it requires carmakers to understand it deeply before deploying it worldwide.