Fundamentals of Manufacturing ERP

By Chris Shaul

What is Manufacturing ERP?

Manufacturing ERP (Enterprise Resource Planning) software is a much more complicated system than standard ERP systems. Before we talk about software though we need to understand that Manufacturing ERP also consists of the business processes that it takes to run a manufacturing operation. Unlike distribution or service businesses, there is a complete set of processes that enable the create of value from raw materials. These materials are supported by a supply chain which also needs to be managed.

Setting the software aside, there are inventory processes, shop floor processes, design processes, procurement processes, quality control measures and processes, and order management processes that need to be properly managed in the manufacturing ERP system. Many people have tried to solve the issues related to all of these processes by applying a new software solution to manage the process and have failed.

A blend of people, technology and process factors needs to be evaluated and optimized. If any of these three areas are missing or weak then the overall manufacturing process will not succeed. What will make you successful is improving the processes before you apply a manufacturing ERP software solution.

When evaluating Manufacturing ERP software, it is important that the functional requirements for each of the three factors needs to be evaluated. How will the people be managed and evaluated in the Manufacturing ERP system? How will controls on the machinery and other technology be managed in the manufacturing ERP system? How will the technology enable efficient operations?

A trend in manufacturing over the last decade has been to apply lean manufacturing principles. Essentially, you want to remove waste from a process before automating it. If you do not, you will make the inefficiencies operate faster, creating more in-balances in supply and demand. It really doesn’t matter what you produce in terms of products, or what you utilize as your input raw materials. Lean principles balance out your supply and demand and in doing so, create better throughput. With the advent of Lean Manufacturing principles, many ERP software systems have incorporated a lean thinking into their systems.

Using a combination of Lean principles and common sense, you can work at creating operational efficiencies that will help when you apply any manufacturing ERP software system to help manage the business processes. Bottom line: don’t automate a mess.

Manufacturing ERP Software

Looking at Manufacturing ERP Software, you need to evaluate how well it manages the manufacturing business functions (such as creating purchase orders, the business processes (such as managing the demand planning process), and how well it manages the data (as in providing efficient access and ease of reporting). That being said, all systems typically have a set of financial modules, a collection of inventory modules, manufacturing modules, and sales and order modules. These various modules each have certain functionalities that help you run the core business.

The differentiation between these various systems is in how well they accommodate the niche business that you are in. If you are a process manufacturer making blends then there is a certain set of Manufacturing ERP systems that work best for you. If you are a machine shop, then another class of Manufacturing ERP solutions work for you. If you are a complex or project based manufacturer, then you will look for different software than others. The good news is that there are ERP vendors that specialize in these different niche areas and others.

Understanding the class of software you want to evaluate is key to creating a short list of vendors. Keep in mind that there is a class of ERP software that fits in as a generalist niche solution. In other words, these software do all aspects of manufacturing fairly well, but do not have a specialty in any certain industry. Often these manufacturing ERP solutions will rely on their value added reseller chain to create add-on modules to fit certain industries. For example, there may be a generalist solution that has a set of 3rd party modules (written in the native tool-set) that provides the process manufacturing functionality.

Things to look for in Manufacturing ERP solutions

When you evaluate Manufacturing ERP software, it can seem overwhelming. There are hundreds of manufacturing ERP software vendors all looking to be the next system at your company. If you step back and look at the industry that you belong to and evaluate the systems based on those that are successful in your industry, you will have taken the first step.

Second, you need to look at those systems that support all areas of your business. If you have unusual requirements make the vendor demonstrate how they will handle these unique functions. Many vendors claim to support various business processes, but when you make them show them in detail, there will be a clear distinction between those that can and those that only think they can handle your requirements.

Thirdly, you should evaluate the standard functions, but do not spend too much time on those things. Being able to cut a check or create a debit memo are pretty standard these days. Rather, have the vendor spend time showing you how they will handle your unique Return Merchandise process or your specialized Quality Management requirements. There is a consulting joke about the fact that “you as a customer are unique just like everyone else.” This is both true and false at the same time. Every business thinks it is unique on the whole. But the reality is that you probably do a majority of the things that most other businesses do. However, there is probably 20 percent of the things you do that make you special and make you successful. You want to make sure that these are the things that you drill down on with the vendors to ensure that you can continue to be special in those areas.

What if you cannot make a decision on a Manufacturing ERP solution?

We know how hard it is to try and make a software selection on your own, but if you want to really be successful and choose the perfect fit software for your organization, you will need to find the right guidelines to help you be successful.

These methods are simple to pick up and they don’t take a lot of learning. You can read how to do it in our free report on ERP Selection, the ERP Software Buyers Guide.

Don’t worry, it is not impossible. Learn more ways on How to Have a Successful Selection Project by clicking on the link.

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ERP Manufacturing Software

ERP Manufacturing Software is a specific category of ERP Software and one that can be confusing. There a multitude of ERP Manufacturing Software vendors in the market, but which one is the best one for you? The simple answer is that there may be several. There are at least four key factors that need to be examined when selecting ERP manufacturing software.

The first is the industry you are working in. Are you a process manufacturer, such as paint or chemicals? Or, are you a discrete manufacturer making specific parts? More specifically, do you make repetitive parts, or are the parts make to order? Are you a job shop environment, estimating and making parts to order? Or are you a project based manufacturer, that similar to a job shop estimates and makes parts to order, but because of a complex process or a lengthy time for manufacturing makes parts as part of an overall project? There are specific software types for each of these manufacturing industries. The key to honing in on the specific manufacturing ERP solution is to know your industry type and then examine software that serves that industry.

Which leads us to the second point, the ERP manufacturing software’s legacy. Where did this software evolve from? What industry did it originally serve and what industries were added. A software that was built around a particular industry usually has that industries best practices built into the software functionality. When the software expands to other industries, it doesn’t always fit the best practices of that secondary industry as well. And many softwares become “jack of all trades, but master of none.” Look into where the ERP software evolved from.

Once you understand the legacy of the ERP manufacturing software, you need to look at its process functionality. This means that you should have some specific case examples of your process and have the vendor demonstrate that there ERP software can handle your process flow. You do not need to do some extensive flowcharting and spend months on the design. Simply understand the flow of orders in your plant and have the system replicate that flow for you, using your data. The vendor should be able to show you this in a “scripted demonstration”. Have them prove to you that it can handle the task at hand.

Lastly, make sure that your ERP manufacturing software vendor has a good fit to your requirements. There are a lot of requirements that a manufacturing software must address, but drill down on the specific requirements that make your organization unique. Is it the way that you account for your inventory? Is it the uniqueness of the bill-of-material structures? Is it a certain process that you employee to produce parts? Give the vendor a listing of your key requirements and using the process demonstration approach have them show you that they can handle these requirements.

There are a lot of factors that you need to consider when selecting an ERP Manufacturing software system. Keep in mind that every software is unique in its approach. They say that they conform to APICS standards, but exactly how they get there is often different. Ensure that you apply enough planning and due diligence to your selection process to extract the deep and sometimes difficult answers to your questions from the ERP vendors. Most of all, keep in mind that there is a lot of smoke and mirrors around the demonstration of ERP software and you need to watch the details for the truth.

A step by step guide to lean manufacturing

THERE is clearly confusion between Lean, Agile, 6 Sigma, TQM, etc. But what falls under the Lean umbrella and how do you get there? And how do we avoid initiative overload?

The term Lean suggests no fat or a minimum level of fat and applying this to business would imply minimum levels of waste. This suggests that to become lean we must remove waste from the business processes to leave just that activity that adds value. Whilst this would appear logical, actually understanding that which is of value versus that which is not, and then applying this to all aspects of a business is difficult. And often the answers do not lie within the grasp of management running the business, but with people who are closest to the process and better placed to see the value and waste. Read More:A step by step guide to lean manufacturing