The worldwide market for manufacturing Enterprise Resource Planning (ERP) software is valued at $7.3B in 2016, growing to $7.9B in 2018, attaining a compound annual growth rate of 2.5%. Cloud-based ERP systems are the fastest growing segment, projected to reach a 5.5% growth rate per year through 2018 according to International Data Corporation.
Why do organizations need and use Manufacturing ERP software?
- Improve inventory management and costs
- Increase the efficiency of shop floor operations and get more done
- Improve inbound supplier quality and measure how that improves production efficiency
- Use supplier data to improve supplier selection and evaluate their performance to goals
- Gain new customers by providing more complete, accurate quotes and delivery dates
- Improve overall product quality
- Find out which areas of manufacturing operations need attention before a problem occurs
- Increase production capacity with existing machines and staff as part of capacity planning
- Update production schedules in real-time instead of only a few times a month
- Measure Overall Equipment Effectiveness (OEE)
- Increase the level of compliance through automated reporting
- Increase customer satisfaction by meeting delivery dates
- Reduce order errors by building the right product & delivering on schedule
Manufacturing ERP Requirements Checklist
Manufacturing ERP Vendors
Start with your company’s goals and objectives, and take into account any future businesses your company plans on launching in the next five years when starting your search for a Manufacturing ERP system. It’s important to choose one that can scale with your business needs as you grow. Many companies are moving into early new businesses today and are looking for a Manufacturing ERP system that can keep pace and scale with their expansion goals.
Bottom line: When you are selecting a Manufacturing ERP provider, think of them more as a partner in building your business first and a software vendor second. Evaluating each with this mindset will lead to a good fit with your current and future needs.
Key Features To Consider When Evaluating Manufacturing ERP Software Options
Integrated Financial Reporting
Activity on the production floor needs to be translated into financial results, making integrated financial reporting the most important feature in a Manufacturing ERP system., Being able to track how changes in production planning, scheduling and the continual improvements in workflows translate into costs savings and additional revenue are a must-have in any Manufacturing ERP system. Look for ERP systems that have job costing, advanced cost allocations, integration Accounts Payable, Accounts Receivable, Payroll, bank reconciliation and fixed asset accounting. The best ERP systems will support these foundational features while providing financial reporting that captures how improvements on the production floor translate into reduced costs, higher quality and increased revenue. The majority of Manufacturing ERP systems today support General Ledger (GL), fixed assets, cost- and accrual accounting-based workflows, budgeting and project accounting, often all integrated to a common system of record or database.
Broad Base Manufacturing Resource Planning Support
At a minimum, a Manufacturing ERP system needs to include support Requirements Planning, Master Production Schedule (MPS), Capacity Planning, Bill of Materials, Shop Floor Control and Project Management. Taken together these functional areas of a Manufacturing ERP system make it possible to operate a production center efficiently, tracking performance back to financial reporting. Advanced ERP systems have these modules integrated into a common database or system of record. Requirements Planning is essential for creating and tracking production and inventory control plans while taking into account material requirements, lead times, and dependencies in supply chain visibility and supplier delivery performance.
A Proven Manufacturing Execution System
Every Manufacturing ERP system will either have the workflows included that provide Manufacturing Execution Systems (MES) support or have entirely different applications or modules for this area. MES manages the daily scheduling on the production floor, taking into account MPS workflows and Bill of Materials requirements, factoring in the skill sets of machine operators’ skill sets. Best-in-class MES can take all these factors into account and drastically reduce the time required to produce a given product. Also, MES supports production and labor tracking, module or work cell performance, Overall Equipment Effectiveness (OEE) and material optimizations. These modules or features also support manufacturing analytics and can provide insights into how an overall production center is running, when integrated into MPS systems and workflows.
Supply Chain Management That Scales To Your Needs
Suppliers and the supply chains they comprise are the most important relationships to any manufacturer. In evaluating Manufacturing ERP systems, be sure to look for vendors that support demand planning, logistics and transportation management, procurement and sourcing, quality management, supply chain planning and execution drop shipments. Additional features you’ll need include warehouse management (often larger ERP vendors have this as a stand-alone module), distributed order management, enhanced purchase order management, sales & operations planning, asset management and compliance management. Going with a single manufacturing ERP vendor for this and other areas of your IT strategy will provide a single system of record to capture, report and plan using the modules mentioned. Manufacturers can gain a competitive advantage over time by having insights into each of these areas about competitors.
Manufacturing Analytics And Reporting
One of the fastest-moving areas of innovation in Manufacturing ERP systems today is the intuitive design of current and next-generation manufacturing analytics and reporting.Having the option of selecting visualizations from a wide variety of potential formats to see how supplier quality is impacting overall production performance is now possible. Advanced analytics and reporting can also now track how production efficiency impacts revenue potential now in the future. For the first time it’s possible to see how sales forecasts directly impact production scheduling on the factory floor and how those decisions impact sales and profits. Predictive analytics based on manufacturing data is revolutionizing production centers globally today and this area continues to change quickly. Be sure to benchmark vendors of interest on this feature.
Product Lifecycle Management
The faster the product lifecycles of a given manufacturer, the more important it is to have an excellent Product Lifecycle Management (PLM) system. PLM systems orchestrate all aspects of designing, developing, production, selling, servicing and redesigning products. Rapid product lifecycles across many manufacturing industries are making PLM systems a must-have to stay competitive in increasingly turbulent, fast-moving markets. Key modules or features in PLM include project management to the production floor and process level; distributed quality management and tracks inbound inspection through finished good quality audits; Product Data Management (PDM); Bill of Materials integration across financial reporting systems including costing and production planning; and support for change management programs. Additional key modules are cost tracking, document management, and services tracking and reporting.
Expertise In Your Area of Manufacturing
Given how broad manufacturing is, it’s imperative to find manufacturing ERP vendors with references in your specific industry. Be sure to ask for contact information at vendors’ customer references and contact them. Ideally it’s a good idea to go and visit as well to see how the ERP system is helping to run the entire production operation. When interviewing the customer references provided by the manufacturing ERP vendors you’re interested in working with, be sure to ask how close or far off the initial professional services costs were to what was charged and if the initial implementation goals were met or not.
The four key advantages of implementing a Manufacturing ERP system in your company are listed below:
Advantages of Manufacturing ERP Systems
Gain Accounting Visibility From the Shop Floor To The Top Floor
The most significant benefit of having a Manufacturing ERP system is the visibility it provides into how shop-floor operations impact financial results. Tracking MPS, MES, supply chain, quality and production scheduling decisions’ impact on financial performance is possible when the financial and production applications are part of an integrated system. Also, being able to track how customer ship dates are managed and the impact on when they pay and Accounts Receivables close is also essential for keeping down the Days Sales Outstanding (DSO) of any manufacturing business. A good Manufacturing ERP system will have a strong set of financial reporting applications or features that integrate across all of production operations, extending to Customer Relationship Management (CRM) modules or integration points.
Improved Capacity Planning And Scheduling
Getting beyond Microsoft Excel spreadsheets to plan production capacity and keep schedules current is the goal of many manufacturers who install their first ERP system. Advanced manufacturers often use ERP workflows to balance capacity planning and scheduling based on forecasts and orders. Balancing inbound customer demand and meeting order shipments dates makes capacity planning and scheduling a must-have in any Manufacturing ERP system. Also, the latest generation of ERP systems has analytics and business intelligence capability that makes it possible to track and predict capacity planning and scheduling improvements over time.
Greater Pricing Accuracy and Profitability
By integrating cost-based and accrual-based accounting workflows into the core areas of a Manufacturing ERP system, it’s possible to see exactly how pricing decisions impact long-term profits and the ability to compete. Often manufacturers have limited if any visibility into how pricing is impacting their ability to produce, yet with an integrated manufacturing ERP system this becomes possible thanks to the single system of record used for creating the system. In the past, many manufacturers tried to tie back supplier selection and quality to pricing and profitability and ended up having to make a few assumptions at best. Now with integrated manufacturing ERP systems, this level of financial reporting and more is now possible to any size manufacturing business.
Improve supplier quality and delivery performance
Too often quality gets isolated in its area of the manufacturing or production floor. What’s needed in all manufacturing company is an enterprise-wide view of quality so that each department can see how its decisions impact overall quality and compliance performance. An integrated manufacturing ERP system makes it possible to gain insights into quality and compliance and then propagate that knowledge and information across all departments, making quality a shared goal instead of just one department. Best-in-class manufacturing ERP systems have the ability to deliver these insights and galvanize a company around shared quality goals.
How to Evaluate Manufacturing ERP Systems
Selecting a Manufacturing ERP system for your company needs to reflect how different your production operations are from any other manufacturing business. Knowing which Manufacturing ERP providers excel in your industry will help to gain greater insight and context into who needs to be on your short list. There are over 250 Manufacturing ERP providers selling systems today. Fortunately, SelectHub is here to help.
What’s wrong with how you are managing manufacturing operations today?
- What manual workarounds are you relying on today to get work done that your Manufacturing g ERP system needs to automate?
- Are you relying on Microsoft Excel to handle production planning and scheduling?
- Is your existing financial reporting system integrated with production and inventory control systems so you can see how manufacturing decisions impact profitability?
- If you have a Manufacturing ERP solution in place, ask yourself why you are looking to make a change.
- Who uses the current Manufacturing ERP system?
- Which departments are everyday users, and which are only using your Manufacturing ERP system occasionally?
- What are your Manufacturing ERP system’s users trying to achieve by using the solution, and how well can they carry out their goals?
- Is the system not cost-effective for your current users? Are you paying too much in monthly or annual fees for unused features?
- Is the Manufacturing ERP system too difficult to use today? Is it challenging to learn?
- Was the Manufacturing ERP system designed when your company had a different business model than it does today?
- What’s the information and insight you need to run your business that your existing Manufacturing ERP system doesn’t provide today?
- Does your existing Manufacturing ERP system support analytics and business intelligence (BI) reporting?
What kind of Manufacturing ERP system will you need?
- What manufacturing workflows aren’t being addressed by your current Manufacturing ERP system today?
- Does your Manufacturing ERP system support quality management and compliance reporting company-wide or just in the quality department?
- How much time does your company spend on generating compliance reporting?
- What workflows and production processes most differentiate your company and make it unique?
- Define the five production processes that most need improvement in your business today
- How complex are your existing products and are there plans to add more configurable, customizable products in the future?
- What’s the typical lead time for your company to produce its most common and most complex product? How can this be improved?
- Is inventory management and control automated or manually-based right now?
- Is it possible to close the General Ledger and financial reporting every month?
How will the Manufacturing ERP system perform once deployed?
- Is your company considering an on-premise or cloud-based Manufacturing ERP system?
- Who will be responsible for keeping the Manufacturing ERP system up-to-date and be its administrator?
- What devices will the Manufacturing ERP system need to run on throughout your company?
- Are you considering having the Manufacturing ERP system accessible from the production floor to share Bill of Materials (BOM) across manufacturing teams?
- How customizable do you need the individual screens, applications, and platforms to be to support your business?
- Will the Manufacturing ERP system be able to manage the wide variety of data reports needed to run your business today? How about in a year from now?
- Can the Manufacturing ERP system generate reports that are easily comprehensible for executives of your organization?
- How will the Manufacturing ERP system integrate with your current technology?
- How well will it replace the functionalities of any existing ERP systems you have?
- What support or training will the vendor provide during and after installation?
Manufacturing ERP Software Provider Needs Assessment / Requirements Gathering
Every business has a unique set of needs, so the first step in a software selection project is to create a checklist of what your company needs most from a Manufacturing ERP system. There are hundreds of criteria to choose from, but the framework can be broken up into five main categories:
Financial and Operations Reporting From The Shop Floor To The Top Floor
Being able to track how production and manufacturing decisions impact the overall financial performance of a company is critical to staying profitable and growing. The most important needs assessment item manufacturing companies need to look at is how each Manufacturing ERP vendor is providing financial reporting and analysis from the shop or production floor to the top floor. This involves taking the massive amount of data generated on the production floor daily, interpreting it and then generating financial metrics and key performance indicators (KPIs) that reflect the financial health of a manufacturing business. Specific features to look for in this area include Accounts Payable, Accounts Receivable, General Ledger, order entry, job costing, and support for credit card processing, support for multicurrency if your company is operating in multiple regions, and consolidated financial reporting. Also the financial reporting aspects of any Manufacturing ERP system needs to support EFT direct deposit, Payroll, Document Management, Fixed Asset Accounting and support for compliance and quality management support across workflows.
Integrated Master Production Schedules And Execution System
Being able to track how individual orders are progressing through production, seeing how variations in order quantity and complexity impact production costs and efficiencies and modifying the relative resource loads by each production cell are all possible when Master Production Schedules and Manufacturing Execution Systems (MES) weren’t integrated well if at all. This led to a significant amount of manual work to compensate for the two systems not being integrated with each other. The result was production systems that often didn’t have the latest build plans or work instructions, or the latest production scheduling information down to the cell level in time to staff them with the best possible teams. Today the best-in-class Manufacturing ERP systems have these two workflows integrated and based on a common database, further making data integration and reporting more streamlined and accurate.
Advanced, Flexible Role-based Workflow Designs
Role-based workflows are the new normal in Manufacturing ERP systems with many providing templates and guides for getting started. This is especially useful for manufacturers who are transitioning from legacy, home-grown ERP systems to the latest generation of Manufacturing ERP systems and platforms. Being able to define and implement entirely new products into production, having quality assurance checkpoints throughout the process, and creating alerts and notifications unique to the processes most important to production is all possible with role-based workflow design. In advanced Manufacturing ERP systems there is often support for Business Process Management (BPM), advanced mobile devices support and company-wide social collaboration and communication.
Intuitive, Easily Learned And Customized User Interfaces
Manufacturing ERP systems must be easy to use and configure to operators on the production floor, yet agile and intuitive enough to summarize metrics and KPIs to the senior management level. For operators, there’s the need to have work instructions clearly and graphically communicated so each step in the production process is clear and attainable. For senior management the need for dashboards that scale to support current and future analytics, business intelligence and key financial metrics are also essential. As ERP vendors across all industries strive to improve the user experience and user interfaces of their applications, Manufacturing ERP system providers have the added challenge of making the individualized screen by application match the unique information needs of each person using a given system. With the continued adoption of cloud platforms, this is becoming increasingly common to find in Manufacturing ERP systems as browser-based app designs allow for faster customization overall.
Exploring Implementation Options
Cloud-based ERP systems are the fastest growing segment of the global Manufacturing ERP market today. IDC predicts that the worldwide market for manufacturing Enterprise Resource Planning (ERP) software is valued at $7.3B in 2016, growing to $7.9B in 2018, attaining a compound annual growth rate of 2.5%. Cloud-based ERP systems are the fastest growing segment, projected to reach a 5.5% growth rate per year through 2018 according to International Data Corporation.
Implementing cloud-based Manufacturing ERP systems are relatively simple and straightforward and include educating users about how they can best use the system to do their jobs. They are also more easily customized to the unique needs production teams and better at aligning to complex workflows in manufacturing organizations compared to their legacy on-premise counterparts. Integrating cloud-based ERP systems with third party legacy systems are where implementation options including Application Programmer Interfaces (API) become a priority. Often cloud-based ERP providers will rely on third-party services firms to also provide integration software and support. Evaluate Manufacturing ERP providers’ expertise in integrating cloud-based platforms with on-premise legacy systems. It’s a good idea to find out the extent of integration expertise at the operating system, server, database integration and support for legacy ERP systems as well.
Questions to Ask During Manufacturing ERP Demos
Please provide an overview of how I can track what’s going on in manufacturing daily and how it impacts our financial statements.
The most important criteria for evaluating any ERP provider is whether they have previous experience with your industry’s specific requirements and unique needs. Be sure to ask for examples of customers who are live today using their software to solve comparable industry challenges. If at all possible, go and visit customer references and walk the factory floor to see how their specific implementation of a Manufacturing ERP system is performing. Also ask to see how the technicians working on the shop floor use the workflows and screens to complete tasks and move products on to the next cell or area of production. Based on all of these activities a vendor should be able to produce a workflow that reflects how their customers are using their systems to streamline shop floor activity and reflect those gains on the financial statements of the company itself. All of these workflows should also be auditable and reflect transaction history over time.
Can you provide an example of discrete, mixed mode and Engineer-To-Order (ETO) workflows all within the same manufacturing location?
Manufacturers are continually striving to create new projects into products, taking the unique and differentiated customized product configurations and turning them into product lines. At the same time, manufacturers need to support mixed-mode manufacturing strategies, all from the same plant floor. Ask to see workflows that provide for mixed mode and highly customized or Engineer-To-Order (ETO) production sequences using standard and non-standard inventory items. This will tell you how well the ERP vendor(s) you are speaking with can scale across multiple manufacturing processes and strategies.
How quickly can a new product be defined in your ERP system from the Bill of Materials level through work instructions?
For many manufacturers competing in complex, fast-moving markets, they need to quickly create new Bill of Materials (BOM) and define workflows to the work instruction level. The greater the compliance in a given industry, for example aerospace and defense, the more important this becomes. Ask to see how this workflow is handled for make-to-stock, mixed mode and highly customized ETO-based products. In addition to finding out if the vendor(s) you’re speaking with can handle this level of unified workflow for defining products, it will also help to see how well the BOM functions are integrated across the entire production floor. While many ERP vendors are capable of doing this, it’s interesting to see how easy or difficult the overall process is. Only by seeing a demo and asking these questions will that come out.
How can the manufacturing teams make use of the ERP system?
There are many uses of ERP information across the manufacturing floor of a business. Look to see if the ERP providers you are evaluating mention Bill of Materials (BOM) management, quality ratings by suppliers, inventory position by part, production scheduling, manufacturing execution system (MES) support and backlog management.
Why do sales teams need to have reports from the Manufacturing ERP system?
Sales can easily run reports to find out which customers’ orders shipped, are in backlog and which are just getting done by production. Having this information at their fingertips give them the ability to serve customers more effectively, while upselling new products and services. In advanced Manufacturing ERP systems, sales management can see what pricing programs are working the best and also collaborate with marketing on new selling strategies, immediately seeing what’s working or not.
Will it grow with my business?
If you’re investing in an ERP solution, you don’t want it to be obsolete in a year. Plan to implement software that will last at least ten years. ERP should be scalable. Find out what the limitations are on the scale and reporting capability of your system so you can make an adequate decision about whether the software is right for you.
Leading Manufacturing ERP Vendors
There are over 250 ERP providers serving over a dozen sub-industries in discrete, mix-mode and process manufacturing industries. Leading vendors include the following:
Epicor ERP—Epicor ERP is designed to operate either as an on-premise or cloud-based manufacturing ERP system. The company has a long history in retailing and complex manufacturing and their product designs emphasis on ease of use with streamlined user interfaces and intuitive collaboration workflows.
IQMS – One of the most advanced providers of Manufacturing ERP systems, IQMS’ product strategy integrates Enterprise Resource Planning (ERP) And Manufacturing Execution System (MES) applications into a unified system of record that enables manufacturers to support new and emerging workflows. EnterpriseIQ is the company’s leading product and is widely used in small, medium- and enterprise-size manufacturing operations.
Microsoft Dynamics NAV – Formerly Microsoft Dynamics Navision, Microsoft NAV has established itself as a leader in small and midsize manufacturing. What’s unique about the product is its ease of use and support for complex manufacturing processes. What’s significant about this product is the greater control it provides over supply chain planning and execution and integration of production and financial data. Microsoft Dynamics NAV is also known for its rapid deployment timeframes as well.
Plex Systems – The undisputed Cloud ERP leader, Plex powers modern manufacturing with the first ERP cloud built from the plant floor up. There are over 600 companies running their manufacturing operations on the Plex Manufacturing Cloud today. The Plex Manufacturing Cloud has proven its ability to automate manufacturing from the shop floor to the top floor. The Plex Manufacturing Cloud is designed to connect suppliers, optimize materials ordering and management, and integrate with accounting and business systems to deliver manufacturing intelligence across any size production operation.
SAP Business One – Designed specifically for the needs small and midsized manufacturing companies, SAP Business One excels at role-based access to critical data, applications, and analytical tools. SAP also excels at managing the complex processes of procurement, manufacturing execution, service, sales, finance, and HR. SAP is one of the most trusted and proven ERP providers worldwide.
Choosing a Manufacturing ERP system provider is a task that should be given serious consideration. This Manufacturing ERP system comparison is meant to be used as a starting point to guide IT professionals who are tasked with making this decision.