- November 2, 2020
Enterprise resource planning (ERP) software helps manufacturers improve productivity and provides a clear view of an entire operation
It’s true, traditional ERP systems have earned a bit of a bad reputation. Generic systems of the past were heavily focused on accounting, tedious to implement and use and not designed for smaller job shops. But over the years, manufacturing-specific systems have evolved and there are now intuitive options for tracking and controlling multiple process operations.
Many small and medium-sized manufacturers have maintained a hyper focus on improving production efficiency and throughput, investing in automation and new technology regularly. But even in such companies, there are still management and operational practices that could be greatly affecting productivity, inventory, estimating and all of the inputs associated with creating a finished good—all elements streamlined by a modern ERP.
For decades businesses have operated with multiple software systems across different departments, using spreadsheets to track business operations, and even still manually producing quotes, sales orders and production orders. According to Steve Bassaw, product manager for Syspro Canada, this creates silos of information and is one of the biggest challenges in the metalworking industry.
“I like to start with the upstream supply chain and sales process. A lot of these companies are still quoting manually—it consumes resources and can take a long time.” says Bassaw. “Similarly, moving downstream, the quote needs to be turned into a sales order, then a work order, and then turned into something that triggers the purchasing process, especially if specialty materials are needed.” As this quote branches off to other departments there are multiple opportunities for input errors and other problems.
When Syspro approaches a potential client, it conducts a full business process review. Bassaw wants to know what paperwork flows through the departments. How do quotes end up as sales orders and how that information is being input and tracked? “It’s an opportunity to revisit your business processes and make them better before aligning those processes with a software,” he says.
“A good ERP company is not just software, it’s a business advisor,” says Bassaw. “Before saying one word about software, they will look at your business process and identify areas that could be cleaned up and where you can achieve more efficiencies.”
When the quoting process is more efficient and systematic, anyone can turn out quotes, making the process faster, which can be a competitive advantage. Work orders will also have better visibility of production costs. “With an ERP, you actually know how much time a process takes and the cost of the materials used versus what you anticipated the costs were based on the quote. Maybe the quote stated a product required $100 of material. But when you actually look at the work order it took 10 hours of labour and $120 worth of material,” says Bassaw.
If a product took more materials and time than expected, the business is losing profit. But if it took less, the quote is inflated, potentially costing the business contracts. Having visibility of such variances also allows management to identify and investigate other bottlenecks such as mechanical issues, raw material quality, and operator performance.
Having the right materials at the right time is vital, and modern ERP systems can forecast which materials are needed and when. Inventory is essentially money—ifyou have too much inventory, it affects cash flow and requires expensive square footage to store it. If there isn’t enough, you’re wasting time and money on idle labour and machines.
“Our ERP footprint extends further into the manufacturing core. It’s really aimed at helping customers gain control of their operations and provide critical data that’s on the shop floor,” says Michael Hart, PLEX’s director of product strategy for manufacturing. “One of our customers suffered from an ERP system that wasn’t user-friendly and it was difficult to access the data they needed to make those critical business decisions. With our system they were able to reduce their inventory by 25 per cent, increase their on-time delivery, while achieving their highest parts per million (PPM) rate of 176. And those benefits are increasing their profitability.”
“It all starts with how we get our hands on the data that will help businesses make critical decisions in real time and accurately to help drive that business,” continues Hart.
Most ERPs also offer lot-tracking options, which give production facilities greater control and visibility of the materials used. By tracking material lots, you can easily identify quality issues and variances between different suppliers. “The ability to see the genealogy and traceability of what went into a particular part or what was included in a bill of materials is extremely important. It’s also important for any auditing associated to a particular part. You can see when you received a particular lot of material and if there was a problem with it, you can find that information in seconds rather than hours or days,” says Hart.
If there is a quality issue with a specific material, it can be flagged in the system. Hart says that the automation control mechanisms put in place will send out an alert if someone tries to load that flagged material, or it can alert management if it’s been used so the company can put that product on hold. “It’s this quick self-correcting type of solution that can not only help you contain it, but notify the appropriate people.”
Implementing these systems doesn’t have to be daunting. It’s truly just a matter of inputting good data. “Obviously bad data in is bad data out,” says Hart. “When we look at implementation, we’re really looking at transforming our customers. It’s really important to error-proof their processes, while still providing traceability on a platform that’s connected by design.”
The ERP world tends not to use the word “customizable,” preferring “configurable” because the systems can be configured to fit most processes and production flows, and they’ve become incredibly user-friendly. For the shop floor, operators can have a touch screen to simply indicate the start and stop of a job, or drill into a bill of materials and adjust it on the fly.
“It’s important…to make sure what we do is actually empowering the operator. Whether it’s scheduling, purchasing, or inventory trace that’s being pushed down to the operator, they have it all at their fingertips,” says Hart. “With a single touch screen, operators can handle job shifting, understand what quality checks are needed, record production and so on.”
Data from shop floor automation can also be integrated into an ERP solution. “We can take data from machines and feed that into the ERP. It’s a separate project with each customer because they often have machines from different manufacturers. We just need to know what information they want to collect and why,” says Bassaw.
Now that ERP solutions have become more user-friendly and designed for manufacturing processes, the cost benefits and efficiencies are undeniable. With a simple tap of a screen or click of a mouse, real time data and traceability can not only help companies greatly improve processes, but also pivot business and operations quickly to remain competitive. SMT