Your Complete Guide to ERP for the Manufacturing Industry
Selecting the best ERP for the manufacturing industry might sound like a daunting proposition. After all, Enterprise Resource Planning (ERP) software can be complicated, and there are a number of important considerations for manufacturing companies to consider as part of the ERP software solutions selection process.
In this guide, we will give you all the details you need to know about ERP for manufacturing companies, beginning with a general overview. Then we’ll dive into the key benefits of manufacturing ERP software and the most important features that drive those benefits, particularly for companies in the manufacturing industry. Finally, we’ll provide some tips on getting started with the process of selecting the right ERP system for your company.
What is ERP for Manufacturing Companies?
Manufacturing companies have a number of unique business processes and business management requirements that are distinctly different from those of other industries. Material requirements planning, raw materials supply chain management, and manufacturing operations all introduce an added measure of complexity to the software systems used by companies in the manufacturing industry.
ERP for manufacturing came about as a solution to that very complexity. Enterprise resource planning software provides a single, comprehensive way of managing financial accounting, sales, purchasing, material requirements planning (MRP), labor and production processes, supply chain logistics, manufacturing equipment, human resources, and more.
Because everything within an ERP software system is interconnected, you can have a wealth of information at your fingertips, giving you better control over the efficiency and profitability of your manufacturing business.
When you receive a shipment of raw materials, for example, information about the cost, quantity, and origin of those items flows directly to your inventory management system. Later, when you produce subassemblies or finished goods using those raw materials, your manufacturing ERP software can roll up the costs, combine them with labor costs and machine time, and produce an accurate cost for your finished product. That ultimately gives you much better control over the profitability of your manufacturing business.
How is ERP in Manufacturing Different from Other Industries?
There are many ERP software systems on the market. Relatively few of them can truly meet the needs of manufacturing companies, though. Many vendors will claim that they handle manufacturing business processes, but relatively few do it well. Details are important, so it’s important to understand the differences between “plain vanilla ERP software” and robust, purpose-built manufacturing ERP solutions.
Here are a few key highlights that distinguish an ERP system for the manufacturing industry from those that are intended for general-purpose use.
Production: First and foremost, ERP for manufacturing businesses will include flexible functionality for production. This typically incorporates the kinds of features listed below, material requirements planning (MRP) and job costing, but it’s reflected elsewhere throughout the system. For example, the ERP system should allow for the creation of bills of material (BOMs) and subassemblies. It should track labor and machine time, scrap, raw materials inputs, and more. Some manufacturing ERP solutions are designed with process manufacturing in mind, whereas others are better at discrete manufacturing, including make-to-order and make-to-stock. The best ERP for manufacturing industry organizations can do all of these things well.
Material Requirements Planning: MRP is the calculation of your future needs based on actual orders and forecasted volume. On-time delivery often hinges upon having the right raw materials on hand; but it can be costly to have too much inventory sitting on the shelf, unused. MRP helps you to optimize inventory levels, ensuring that your manufacturing business has the raw materials that it needs without tying up too much working capital unnecessarily.
Costing: One of the biggest complaints we hear from manufacturing industry executives is that they lack visibility to which jobs are profitable and which are not. The best manufacturing industry ERP solutions incorporate labor, machine time, raw materials, and scrap into an overall calculation of cost for each production run. This ultimately helps manufacturing companies to operate far more profitably than they otherwise could.
Advanced Inventory Management: Although many businesses manage some kind of inventory, manufacturing companies have some fairly unique requirements. Quality inspections, for example, play a critical role in receiving raw materials as well as in releasing finished goods after production. The best ERP for manufacturing industry companies can handle the intricacies of quality inspections, raw materials to be returned to suppliers, and more. Advanced inventory management also helps manufacturing companies to keep track of the location and cost of work in progress (WIP).
Scheduling: One of the most challenging business processes for manufacturing companies involves scheduling and coordinating the people and equipment needed to get the job done. ERP systems in manufacturing companies provide an easier way of optimizing resources to make sure every job gets done efficiently and is delivered to the customer on time.
Regulatory Compliance: Manufacturing ERP software can also help you with legal and regulatory compliance. In highly regulated industries such as pharmaceuticals or food and beverage, for example, manufacturing companies must label each product with a lot number. They must be able to trace the batch from which raw materials originated, and perform FDA product recalls if necessary. Aerospace and defense manufacturing, likewise, is subject to significant government oversight. Serialization is vitally important, and federal cybersecurity regulations place stringent controls on manufacturing ERP systems operated by government contractors. The best manufacturing industry ERP software will handle all of these business processes for you.
Why Do Manufacturers Need ERP Software?
ERP for manufacturing companies is no longer an optional “nice to have” system. In today’s competitive global economy, it’s essential. Here’s what manufacturing ERP software has to offer:
Stronger Profitability: A manufacturing ERP system helps managers identify which of their jobs and customers are most profitable. It can also help managers to understand which specific factors most strongly impact their profitability. Once you have a clear view as to the cost factors in your manufacturing business processes, you can exercise greater control over your margins.
Better Scheduling: For manufacturing companies, optimizing production workflows is critically important. When people or machinery are idle, your company is missing out on potential profits. Shop floor scheduling enables manufacturing companies to get the most possible value out of the resources they have.
Lower Costs and Increased Efficiency: ERP for manufacturing also reduces costs by eliminating manual processes. If your manufacturing operations involve any paper-based business processes or manually keyed data, then there’s a good chance that ERP software can help you eliminate wasted effort. Manufacturing ERP can help you reduce scrap, prevent spoilage of perishable inventory, and minimize defects.
Simpler Compliance: Legal and regulatory compliance place increasingly onerous burdens on manufacturing companies. Generally, these requirements exist for very good reasons, but they can undoubtedly be hard to comply with. The best manufacturing ERP software systems incorporate features that simplify and streamline compliance processes.
Better Visibility to Information: One of the most important reasons for investing in a modern manufacturing ERP system is that it gives managers access to information in real time. Today’s powerful business analytics provide real time information about profitability, costs, and expenses as they occur. That helps you to make better, more informed decisions every day.
Top Features for ERP in Manufacturing
To maximize the benefits you get from your manufacturing ERP software, look for some of the following features:
MRP: As noted previously, MRP is all about having the right raw materials on hand at the right time. By looking at pending orders and forecasted sales, MRP calculates the quantities of finished goods required, then breaks those down into their constituent parts based on BOMs and required subassemblies. Next, MRP looks to the lead times for each of the required inputs and proposes purchases to be made to fulfill those needs. As companies strive to run lean manufacturing operations, optimization of inventory levels is critical. MRP helps to achieve that, without compromising the availability of vital raw materials.
Shop Floor Automation: Manufacturing control systems have come a long way in recent years, providing higher levels of efficiency in manufacturing operations. By integrating manufacturing ERP software with machinery and controls, you can gain greater visibility into what is working well and what is not. Mobile applications extend the reach of your manufacturing ERP system to make important operational information directly available to employees on the production line.
Supply Chain Management (SCM): As global supply chains come under stress, effective management of incoming product is more important than ever. The best manufacturing ERP solutions help you to manage and evaluate vendors, and provide online portals to handle vendor inquiries and collaboration.
Service Management: Many manufacturing companies are extending their post-sales service offerings to provide field service or depot repair. Very often, this constitutes a new revenue stream for manufacturing companies as many are focusing more on service-based business models.
Serial & Lot/Batch Tracking: As noted previously, many industries require manufacturers to track serial numbers, lot numbers, and batches. If your company relies on these features, make sure you choose a manufacturing ERP system that can support those needs.
Business Intelligence: ERP for manufacturing industry provides you with clear visibility to your data, including real time information about profitability, costs, and expenses as they occur. Better decisions start with good, timely information.
How Can ERP Systems Benefit Manufacturing Companies?
For manufacturing companies, a modern ERP system can make a huge difference. Here’s how:
Better Visibility to Cost and Profit: Accurate information and strong business intelligence tools give managers greater control.
Improved On-time Delivery: Efficient production scheduling, MRP, and inventory control help to ensure that every job gets done on time.
More Efficient Operations: Manufacturing ERP helps to eliminate manual effort, prevent waste, and root out inefficiencies.
Simpler Compliance: Streamlined compliance for regulated industries and strong cybersecurity features save time, increase accuracy, and speed audits when they occur.
How to Choose the Right ERP Software for Manufacturing
Selecting the best manufacturing ERP system for your company is not as difficult as it might seem. Here are some things you should consider as you begin the process:
Cost and ROI: Manufacturing ERP system costs can vary widely, – but so do the benefits. Look for a manufacturing ERP system that can deliver high value for the money. Weigh the benefits with the initial cost of the software and implementation services.
Features: Focus on the most important requirements for your manufacturing company. Identify the specific needs that drive your business processes. Consider looking at industry-specific offerings that enable you to get started quickly and achieve a rapid ROI.
Reputation: Look for companies that understand manufacturing thoroughly, and have a proven track record in your industry.
Security: Review manufacturing ERP vendors and look for those that adhere to the highest standards for cybersecurity. Ask for industry audits and certifications to back up claims.
Scalability: Look for software that can grow as your business expands. How well will it accommodate change? Will it handle the volume you hope to achieve as you achieve your growth objectives?
Need Help Selecting an ERP system?
If you would like to sit down with Synergy’s team of manufacturing ERP experts, we would love to speak with you about your goals and objectives. We have deep experience in manufacturing ERP systems, including manufacturing industry expertise in aerospace & defense, industrial equipment & machinery, high tech & electronics, automotive, energy, medical device manufacturing, food & beverage, chemicals, and more.
We encourage you to meet with the Synergy Resources team and discuss your manufacturing ERP needs in detail. What specific benefits are you looking for from an ERP system? What unique challenges is your business facing? How might ERP software help your manufacturing business grow, operate more efficiently, and increase overall profitability? To begin that conversation, please reach out to the experts at Synergy Resources. Our goal is to first understand your business, then identify the right manufacturing ERP solution to fit your needs.