A few weeks ago, I was on a plane back from one of the capitol cities in Southeast Asia after visiting one of the major Electronic Manufacturing Services (EMS) company there.    I started pondering on the various engagements with EMS companies in the region that I has over the past 18 months on their ERP transformation, and I noticed a few common threads that all these customers are facing, and their challenges in transforming their ERP.   The EMS industry is not new to me – I have been engaged with the EMS industry with SAP since 1994, with the EMS players in Singapore and in Taiwan, of which, some have become global giants in the industry. That was back in the days of SAP R/3.  I’ve witnessed firsthand the remarkable transformation of the Electronic Manufacturing Services (EMS) landscape in Southeast Asia. It’s a story etched in my memory, not just for its sheer pace of growth, but also for the unique choices these companies made along the way.

Back in the late 1990s and early 2000s, the buzzword in every EMS boardroom was “SAP.” Faced with the burgeoning demand for complex electronics, these nimble companies went all-in on the robust ERP platform. Yes, the costs were hefty, but the potential for streamlined operations and centralized data management was too alluring to resist. Remember, back then, we were talking about millions, sometimes tens of millions, in investments – a testament to the audacious faith these companies had in technology as a driver of growth.

This wasn’t just about blind adoption. The EMS industry, ever the champion of agility, demanded a system that could bend to its specific needs.

• Growth at any cost: Back then, growth was king. Orders flew in, margins were healthy, and competition was fierce. Agility was paramount, and SAP, with its robust core and industry-specific modules, promised a single source of truth for managing complex operations. It streamlined processes, improved visibility, and gave that much-needed edge. Cost? Secondary.
• Customization craze: But these weren’t cookie-cutter implementations. EMS companies craved uniqueness. They heavily customized SAP, tailoring it to their specific workflows and quirks. This “best-of-breed” approach, integrating best-in-class applications for specific functions, seemed like the ultimate solution. Consultants were kept busy, building intricate integrations and bespoke reports.

Fast forward to today, and the picture looks different. While the customized SAP systems still hum along, the underlying technology is pushing two decades old. The gleaming innovations of S/4HANA – the real-time data integration, the predictive capabilities, the AI-powered insights – remain tantalizingly out of reach. This disconnect between the customized past and the innovative present is creating a critical bottleneck.

The high-customization approach, once a badge of honor, is now a double-edged sword. Upgrading to S/4HANA becomes a herculean task, entangled in the spaghetti code of past modifications. The “best-of-breed” architecture, once a symbol of flexibility, now translates to complex integration issues and data silos.   I have a customer that implemented SAP ECC as the core ERP and a leading supply chain software for their planning functions.   The cycle time from getting the demand plan from SAP to the supply chain software for planning, and back into SAP was more than 48 hours.  Managing impact of the changes in the plan in SAP took another 2-3 days. Real-time visibility across the supply chain? A distant dream. Predictive insights to optimize production? Not even on the horizon.

This isn’t just about missed opportunities; it’s about the very future of these EMS giants. In an industry where margins are razor-thin and competition is global, the ability to adapt and innovate is paramount. S/4HANA isn’t just a technological upgrade; it’s a paradigm shift. It’s about embracing a clean-core ERP, one that fosters seamless data exchange, real-time visibility, and AI-powered decision-making.

Imagine this: a production line that adjusts to real-time material availability, a supply chain that anticipates disruptions before they occur, a production and sales team armed with instant gross margin analysis for any product and any analysis segments. This is the power of S/4HANA, a platform that not only connects the dots but predicts the future.

The journey won’t be easy. Deconstructing the customized legacy and adopting a clean-core approach will require courage and commitment. But the rewards are undeniable. The agility, the efficiency, the innovation – these are the cornerstones of future success in the EMS world.

And let’s not forget the cherry on top: AI. S/4HANA isn’t just about streamlining the present; it’s about harnessing the power of artificial intelligence to shape the future. Imagine production lines optimized by machine learning algorithms, predictive maintenance preventing costly downtime, and automated robots streamlining logistics. This is the future that beckons, and S/4HANA on the cloud holds the key.

For the EMS players in Southeast Asia,  the time has come to stand at the crossroads. One path leads to a future of stagnation, clinging to the familiar but outdated. The other path leads to a world of boundless possibilities, powered by the latest in technological innovation. The choice is yours. But remember, the future belongs to those who embrace it, not resist it.

Let’s embark on this journey together, and rewrite the next chapter of the Southeast Asian EMS story – a story not just of growth, but of transformation, driven by the power of S/4HANA and the boundless potential of AI.