Enterprise resource planning can help organise inventory, prepare for customer demand and improve productivity.
From better inventory management and productivity, to improving quality and lead times, companies with manufacturing operations are constantly looking for ways to improve efficiency. However, this requires coordination across the entire enterprise, from back office to production.
Without achieving synchronisation across all operations, manufacturers cannot effectively manage fluctuations in demand, increasing competition, and supply chain issues.
Although many manufacturing companies already have multiple software’s installed to manage their operations, relying on several vendors for different processes can become extremely costly.
Fortunately, there is an alternative that allows all processes to be operated through a single, streamlined solution that listens to your business’ unique needs. With this in mind, here are six ways enterprise resource planning (ERP) software can revolutionise your manufacturing process.
Optimise Inventory Management
There are two sides to inventory management – materials and product inventory.
Materials management is the process that foes into ensuring an organisation has the appropriate materials to complete the manufacturing process; whereas product inventory includes the products that are produced through the manufacturing process and how they’re transported to customers.
However, if these two equations aren’t synchronised, difficulties might arise with having the appropriate materials at the right time and product levels being incorrect or insufficient to satisfy orders.
By implementing ERP software, processes such as billing of materials, tracking materials and inventory management can be updated automatically – for smaller manufacturers, these are most likely updated manually through spreadsheets; which are prone to human error.
Introducing an ERP system can help reduce these human errors and automate inventory requirements so that materials always arrive when needed, instead of taking up space your business can’t spare.
Prepare for Customer Demand
When data is tracked manually and historically, it’s difficult to tell what levels of inventory are necessary from one term to another. The business can make an educated guess based on previous data, but this doesn’t account for current changes in the market.
With an estimation about customer trends, it doesn’t account for deviations in customer history, for example, if one of your business’ top clients, foes out of business and you’re working on an estimated guess, the results will be costly.
With a manufacturing ERP system, it will alert your business to these significant changes in customer demand, both from previous data and real-time. This makes it much easier for accurate future customer demands.
Refine Human Resources
Refining human resource operations with training and attendance tracking can also have a positive impact on your business operations. By integrating human resource management and your ERP system, your business can automate many of the paper-based admin tasks facing your HR department.
This will allow HR to focus on the development of your business workforce, which results in a huge win for saving time and optimising human resources.
A good human resource management system can be crucial to maintaining a lean workforce who, on a daily basis, respond to many challenges. Your business will be rewarded with employees who are more committed, inventive and productive.
Streamline Collaboration with Customers and Suppliers
ERP can optimise business processes and drastically improve response times. This will improve virtual communication across the supply chain and internal communication between unrelated departments. This can have a positive impact on collaborating across your business.
These close collaborations with partners can mean that specific challenges are met in a timely fashion.
With a quick response to change, it can ultimately improve your customer relationship, which is just one of the ways ERP software can impact as a continuous business improvement tool. By finding important information with satisfaction, your business will be more prompt in leveraging development opportunities.
If a process is definable and repeatable, then chances are it’s better off automated.
ERP systems such as Pegasus Opera 3 integrates quality control and manufacturing management – purchase invoices matched against goods, job profits can be assessed and stock control managed all from one place; creating a streamlined, cost-effective manufacturing solution.
The time saved through automation can then be reinvested into your business for other projects that are more pressing.
Improve Employee Productivity
Businesses that still try to run their manufacturing by using manual processes are more likely to have high labour costs. The same can be said, however, for some lean manufacturers too. Even in a lean environment, these indirect labour costs can be a potential problem.
A great ERP system can help businesses improve these processes and efficiencies so less labour time is required to complete the same amount of work. Additionally, an ERP that can automate manual process, freeing up more labour hours that can be reinvested into higher return activities.
In the past, ERP software was a system many manufacturers wanted to make their everyday processes more efficient.
To stay competitive, however, manufacturers need to now invest time and money into ERP software to optimise inventories, be aware of customer demands, automate processes and more. It’s only with these capabilities that a manufacturer can streamline processes and stay in competition.
However, something else that could be putting you off investing in an ERP system could be the fact that people aren’t 100% sure how they can save money when it appears that there is such a large upfront cost to begin with.
It’s a question many small or expanding businesses ask and what it really boils down to is this: how do I know if my business really needs an ERP system – and, more importantly, will it be worth the cost?
ERP systems aren’t a light investment choice to make. Whether you need one depends on your business – something for another blog post! Whether it will be worth the cost is another matter entirely. Improving business performance is a top cited reason by those looking to invest in an ERP system for the first time according to a 2015 survey by Panorama Consulting.
But how do you calculate whether an ERP system is worth the investment?
Return on investment – in practical terms.
The real consideration to any business looking to implement an ERP system is the return on investment. To calculate this, you need to establish what your current issues and goals are and then quantify what improvements to functions in support of those goals are.
Without a consultation, we can’t help you establish or quantify these at this stage. However, we can give you a clearer picture of how an ERP system works to save money across the most common areas that are assisted by streamlined and automated functions: operating costs, admin costs, inventory costs, obsolete inventory and cycle time.
- Making allocation of work more efficient: an ERP system provides overall visibility of jobs and resources, instead of looking at these by department or function only.
- Manufacturing and material planning: ERP solutions can provide a single view of the allocation of materials and resources for production planning. Normally manufacturing businesses struggle to gain an overview of materials and resources or they need to look at three different systems to establish the current state of play.
- Process performance: without an ERP system there will be processes in place that may not be working but there will be no visibility of this.
- All customer information in one place on one customer record: usually accounts, services and CRM all hold information but there is no link between them without an ERP system in place. This can double, treble or even quadruple the amount of time taken to get the information and the number of admin staff needed.
- No chasing paperwork, with all jobs recorded in real-time: without ERP software, job data is typically recorded on sheets and entered into a service system managed by the service department. However, all of this then needs to be re-entered for invoicing purposes – leading to wasted time, lost paperwork and frustrated staff who can think of much better ways of spending their time.
- Real-time view of data to answer customer queries: usually in businesses that haven’t made the move to ERP, the customer services operator would have to route through numerous systems or data sources to answer simple customer queries. With the information in once place, time spent dealing with customers is reduced – meaning higher profits and happier customers.
- Simple report mechanism, all in one place: without ERP getting reports for management, service meetings and accounts etc. will be laborious as you have to go into one system and then cross reference this with another to establish issues and trends.
- Ease of scheduling and employee management for both processes and HR: without enterprise software in place, employee information will be sat in various systems and scheduling, jobs and holidays etc. will be on different systems that don’t join up. So, your service department may have the employee booked in for jobs because they couldn’t see that HR have marked the employee away as on holiday.
- Real-time reporting and dashboards providing up to the minute analysis of the business or department: typically in businesses without real-time reporting, teams can spend hours at the end of the week gathering information, much of which is a few weeks out of date.
- Triggers and alerts to highlight exceptions: without this, management only know about operational difficulties after they have accumulated to become a major risk to the business.
- Project overviews and statuses: management that make do without this only get a view of true project costs after the project is completed and hours of manual data collation has taken place.
- Employee information and performance: without an ERP system, it is difficult for management to get a full understanding of their workforce, efficiency and training requirements. Everything is in different systems, meaning that information can slip through the net, or take too long to collate.
- Reduces over and under stocking: without ERP solutions, the business may have a view of stock holding but will find it difficult to differentiate between good and bad stock, allocated stock and repaired stock.
- Allows for the forecasting of stock requirement: without this there will be no predictive analytics that look at seasonal trends, year-on-year figures or other variants that affect predictive stock ordering.
- Reports on wastage, returns, swap outs, replacements and items to be returned to the manufacturer: this is very important if you don;t want to be left with a warehouse black hole, with no understanding of the stock that is in it and whether it needs writing off, repairing or returning to the manufacturer.
- Gives location visibility for picking, etc: most businesses without an enterprise system in place can waste hours searching for stock.
- Provides stock valuation: without this the business would not have a full understanding of its stock position and how the value of their stock holding reflects on the business as a whole – reflecting on warehousing costs and cash flow.
Calculating the costs and time savings
Interviewing your staff in each department can assist in establishing how much time they feel they waste when they encounter any of the above issues. However, sometimes what your employees say and what they do in reality are very different. You need to be confident that you are asking the right questions and making the right observations.
A good ERP partner can guide you here, by listening to the requirements o the business and often taking you a few steps back to look at the ideal situation, not just what you think is possible based on pre-conceived ideas. They should listen to all the stakeholders and employees and offer suggestions based on their experience of implementing systems in different markets. From there, a good ERP partner can build a picture of the best solution and its design and present you with a written document as part of your proposal.
With this, you should be able to assess the return on investment based on what can be achieved and the likely costs. It’s important to remember that every company’s needs and likely return on investment is different.
One final thought – its not just the software
However, in order to ensure a successful ERP implementation, you need to avoid these five business factors:
- setting unrealistic expectations at the outset
- not managing organisational change
- not including key stakeholders in the implementation
- poor project management
- not addressing business benefits
The ability to adapt quickly to the changing demands of your business are also key and an agile approach is now deemed the gold standard. That’s why we believe in lifetime application management of your ERP implementation, to ensure that it truly reflects your business needs both now and in the future.
For more information regarding ERP systems, take a look here, or to book a free demo and consultation with one of our Business Software Specialists to see how we can help you help your business, contact us here or call us on 0191 500 8150.
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