Manufacturing is a business sector that involves a lot of moving pieces — literally. It’s a unique industry because any tiny mistake can have huge effects on how processes are conducted downstream. The purpose of ERP for manufacturing companies is to alleviate these issues by automating and consolidating workflows and tasks. In order to fully answer the question of “what is ERP manufacturing?”, we first need to explain and define ERP as the basis for the solutions that make up manufacturing ERP software.
What Is ERP?
Before we get into the specific tools and benefits of ERP manufacturing systems, it’s important to discuss and define what enterprise resource planning software is as a whole. ERP solutions are a way to consolidate data and workflows into one unified system. Its main benefit is the de-siloing of data. One of the benefits of this data hub is that new insights can be generated through the interconnectivity of systems. For example, you might be able to track how shipping time affects a customer’s likelihood to purchase goods or services from your business on a repeat basis. This would be possible through the integration of CRM software and distribution modules.
In addition to the centralization of data, ERP systems also assist in the automation of various business tasks. By connecting different departments and workflows, day-to-day tasks can be streamlined through elements such as automated file transfer and push notifications. The specific features that you connect and include in your ERP solution are personalizable and dependent on your business needs. This is especially beneficial because you don’t have to waste time or money on features that aren’t relevant to your business.
What is ERP Manufacturing?
ERP got its start as manufacturing software and therefore contains a lot of modules that are relevant to the manufacturing and distribution industries. However, manufacturing ERP software didn’t always function as it does today. Manufacturing ERP came into existence in the 1990s as an offshoot of MRP or material requirements planning software. You might have heard of MRP while conducting your software research, as it is still an active and viable option in today’s industry.
The big difference between ERP and MRP is scope. MRP is solely focused on manufacturing tools, whereas ERP is more widely applicable to business functions that aren’t related to the manufacturing or distribution process. For example, ERP software often contains tools for operations such as accounting, customer relationship management and project management. Manufacturing ERP modules are integrated with back-office tools to generate data and reflect information across workflows. For example, if you order two units of lumber, an integrated ERP might take that information and automatically record it in your accounting program. On the other hand, MRP software solely focuses on manufacturing processes and therefore is less integrated than an ERP suite.
What Are Benefits of Manufacturing ERP?
We’ve briefly mentioned some of the benefits of manufacturing ERP in the above sections, but it’s crucial that you have a full understanding of how manufacturing ERP can boost your business. Here are some of the common perks associated with manufacturing ERP modules.
Manufacturing ERP can allow your employees to see how progress is occurring across the supply chain. Most ERP systems contain some sort of data visualization feature that allows staff to quickly take a peek at data and gain actionable insights. For example, you might have a visualization that shows which materials are in transit to your distribution center.
Having data accessible in one location is a key benefit of ERP manufacturing software. With centralized data, one can easily analyze information across departments and workflows to form a more holistic view of a company.
ERP manufacturing tools often provide automation of specific tasks. This automation can streamline business processes by performing tasks such as automating the ordering of materials based on inventory levels. When less human resources are spent on tasks that have the potential to be automated, your employees get more time to work on other business processes.
Reduced opportunity for human error
Reduced human error is another benefit associated with ERP automation. Human error is unfortunately incredibly prevalent and can negatively impact businesses. By removing tasks such as manual data entry from the equation, you can ensure that fewer mistakes are being made internally and that data integrity is high.
Ultimately, ERP is meant to make business processes easier and faster so that you can retain and obtain customers. For example, you might see speedier shipping times with an ERP manufacturing program. Improved service leads to happier customers and can boost customer retention.
What Is ERP Manufacturing Used For?
Now that you are aware of some of the benefits associated with ERP manufacturing systems, we can examine some of the specific tools that are available. It should be noted that the availability of these functions varies from vendor to vendor, so take note of any features that specifically stand out to you.
A popular feature of supply chain management software is demand planning. This feature uses internal and external data and events to create an efficient fulfillment schedule. The goal of a demand planning tool is to reduce the amount of excess stock on hand while also maintaining the ability to fulfill orders on time.
Warehouse management tools contain a variety of features. For example, if your product has an expiration date, the warehouse management system could keep track of when those dates were approaching so that you could discount that product in an attempt to generate revenue and reduce waste. This tool may also improve the traceability of products and reduce the likelihood of errors associated with shipping and handling.
If you get audited, you will be glad that you had quality management functionality on your side. This tool can keep track of audit trails, trace lot and serial numbers and keep track of certificates of conformance among various other tasks.
Optimizing and keeping track of your product and material inventory is the meat and potatoes of your business. This tool may contain functions such as serialized inventory control, detailed transaction logs and cost standardization.
Shipping and distribution
This feature is incredibly important because it supports the stage in which customers become involved in the manufacturing process. For example, if you ship icing tips to a cake decorator a day later than projected, the customer may be unable to make that special princess birthday cake for her daughter’s birthday. This negatively impacts a customer’s perception of your business and may even lead to a bad word of mouth. Some functions that may be included in a shipping and distribution tool are the ability to respond instantly to customer delivery status requests and the ability to track shipments in real time.
The labeling function can automatically print labels as products move across the supply chain. This feature may also support printing of tags that contain information such as special characters and barcodes while also making it easier for users to select different label sizes or layouts.
Factors to Consider Before Implementation
There are some aspects to keep in mind before taking the plunge on an ERP solution. Factors such as cost, deployment method and vendor experience should all be taken into consideration when selecting a vendor. Here are some of the elements that you will want to look at when you’re searching for the best ERP software for you.
Developing a software budget is essential to a successful implementation project. It’s no secret that ERP software can be expensive, so making sure that you can afford a system that includes all of the components that you need for your specific business is essential.
Depending on the current software that you use, you might prefer either on-premise or cloud-based ERP software. There are pros and cons to each of these methods. For example, on-premise ERP software has a higher installation cost than cloud-based ERP. Many vendors are beginning to offer both deployment methods, but this element should still be a factor when you’re considering vendors.
Vendor industry experience
When looking at ERP manufacturing vendors, you should inquire about how much experience the vendor has in your specific industry. Because ERP has such a wide variety of functions available, you will likely prefer to go with a vendor that has dedicated experience in the manufacturing or distribution industry. If a software company does not have much experience in your industry, it might be best to move along to the next option.
Different ERP vendors are more well-suited to different company sizes. In addition to asking vendors about industry experience, you should also inquire about what size of businesses they typically work with. ERP software for small businesses wouldn’t work for an enterprise, for example. You should also note whether the scalability of an ERP solution aligns with your projected company growth.
Another essential factor to consider is whether or not training is included with an ERP manufacturing system. Training is usually a separate cost that you will need to account for in your software budget, but it’s important to note whether training is conducted by vendor staff or if you will need to hire an independent ERP consultant.
IT resource allocation
Making sure that all of your employees are on-board is essential to a successful implementation. This is especially true in regards to your IT department. Because your IT staff will be a general point of contact for your employees in regards to implementation challenges and questions, it’s crucial that they are knowledgeable about a new ERP product. Additionally, you should make sure that there are IT resources available before, during and after implementation to improve the likelihood of a smooth transition. A 2018 research study from Panorama Consulting found that 66% of surveyed companies experienced operational disruption when implementing their ERP.
How Do I Know if It’s Time to Implement Manufacturing ERP?
ERP manufacturing tools are incredibly beneficial to businesses. However, it’s essential to first determine whether it applies to your specific company and whether or not there is potential for a high ROI. It might be time to implement manufacturing ERP if your business is growing steadily and you are noticing that business processes are moving more slowly due to an increase in elements such as sales and inventory. Enterprise resource planning software might also be beneficial if you have noticed human error affecting user experience.
If your company relies heavily on manufacturing and you have not yet automated any tasks, ERP might be a good solution because it can free up employee time to work on other projects. You might wish to speak to employees in your manufacturing or distribution departments to learn how much of their day is spent on tasks that have the potential to be automated. If this is a high ratio, then your business would have a high likelihood of increasing productivity through ERP.
ERP software could also benefit your company if user error is prevalent in your manufacturing processes. As mentioned in the above sections, user-generated mistakes are a huge issue in company productivity, so if you have noticed its existence in your business, it might be time to consider automating functions that have a high probability of human error.
ERP manufacturing tools are incredibly beneficial to businesses that are looking to streamline the manufacturing and distribution processes. ERP’s integration with back-office tools, centralization of data and automation of workflows make it a highly sought-after tool with a high probability of ROI. ERP tools vary from vendor to vendor, so it’s essential to make sure that the provider you go with offers all of the functionality that you need to succeed. Luckily, ERP software is rooted in manufacturing, so there are plenty of systems available for companies with significant manufacturing or distribution components.
Why do you think ERP is a useful tool for companies in the manufacturing or distribution industries? Sound off in the comments below!