Manufacturing organizations today are increasingly focused on streamlining their operations to drive profits, increase margins and deliver high quality to customers in a timely fashion. While striving to remain competitive, some manufacturing organizations use every tool imaginable except the one tool that can truly help them: ERP software.
A robust ERP system helps organizations properly integrate and streamline interdependent departments. For most companies, it’s very important. For manufacturers, it’s vital.
Understanding Manufacturing ERP Software
Early attempts at developing an enterprise resource planning system can be traced back to the 1940s with the advent of calculating machines. This effort evolved into an early version of an ERP system in the 1960s through a collaboration between tractor manufacturer J.I. Case and IBM. The challenge at that time was to get a better handle on planning and scheduling materials for complex manufacturing operations. By the 1970s, companies such as JD Edwards, Lawson Software, SAP and Oracle were building ERP systems.
Today, ERP solutions are helping companies in various industries improve efficiency and help managers deliver on the promise of increased profits. Our clients in the manufacturing industry have seen many benefits from implementing enterprise software:
1. ERP Software Integrates Your Supply Chain
Effectively managing the inflow and outflow of materials is vital to any manufacturing organization.
In addition to managing materials, a robust ERP solution can manage a global supply chain that requires an understanding of multiple languages and currencies. Every country does business differently. For example, some countries incorporate a value-added tax while others don’t. Rather than having staff focus on the minutia of manually managing every detail of every transaction, you can implement an ERP system to automate operations. As a result, staff is freed up to focus on higher-value work.
2. ERP Software Improves Production Scheduling
To ensure materials coming into the organization are used when ordered and excess inventory does not accumulate, those materials must be planned into production. Enterprise software not only helps manage the procurement, pricing and payment of raw materials, it also helps manage scheduling of staff as well as machine operation and maintenance to maximize production schedules.
Some of our manufacturing clients use an engineer-to-order process where the order is placed prior to the product being designed, engineered and finished. These organizations benefit from ERP solutions that incorporate just-in-time inventory and an automated ordering system for customers. Depending on the items being produced and supply chain capability, a customer could place a tailored order on Monday and have the final product delivered by Friday – all with little to no waste.
A manufacturing ERP implementation also can help you utilize a just-in sequencing process, where materials are ordered and utilized in a production schedule as they arrive. If your system has serial genealogy functionality, you can trace the location and constituent components of completed goods to build complex products at scale.
The manual intervention and ensuing paperwork would be unmanageable without automation of these processes.
3. ERP Software Improves the Customer Experience
Many enterprise systems allow customers to access a customer portal and inquire about product availability, delivery and price. This data can then be used to dictate production schedules. When a customer can easily place orders and have them quickly delivered, that customer will be more inclined to be loyal to your organization.
We always recommend that our manufacturing clients not allow customers to place orders by phone. Organizations with millions or billions of dollars in revenue and an extensive global supply chain require automation.
4. ERP Software Removes Silos in Your Financial Operations
A manufacturer can be both a customer and a supplier. In these cases, it’s important to implement an integrated system with the modules necessary to manage both sides of the business. When evaluating ERP vendors, look for a system that manages the order-to-cash process for the supplier side, as well as the procure-to-pay process for the customer side. This is especially helpful for organizations that have incorporated a shared services model, where management of customer and supplier functions is managed centrally.
Most suppliers prefer to be paid as quickly as possible, while most customers wish to hold onto their cash for as long as possible. An organization with separate supplier and customer financial operations can be disconnected from this financial philosophy. An ERP system, especially if deployed in a shared services department, can alleviate siloed mentality and integrate decision making.
5. ERP Software Helps You Manage Staff and Other Resources
No manufacturing organization, no matter how much automation is introduced, can adequately function without appropriate staffing. An ERP solution can help with staffing issues, such as scheduling, hourly wages, time off/vacation, skill set, etc.
When managing a particular margin for products being shipped to a customer, a manufacturer with an enterprise system might only schedule certain staff to handle certain production lines. Without an ERP system, an organization might allow any staff at any hourly wage to operate any line, which might throw off and endanger margins, profits and overall staff availability.
ERP is Essential for Manufacturing Operations
During the ERP selection process, manufacturers may be overwhelmed by choices. However, focusing on finding a system that helps you achieve these five benefits is a good place to start. If you’re considering implementing a manufacturing ERP solution, be sure to contact us to help you develop a digital strategy and select the best system to meet your organization’s unique needs.