Successful manufacturing operations are complex affairs.
The actual production of the goods in question is just one piece of the puzzle, which also includes critical aspects like supply chain management, inventory control, sales and production forecasting, quality control, staffing, and preventative maintenance.
Each aspect is, as you might have guessed, intimately connected.
If you don’t have your supply chain in order, it can have a huge negative impact on inventory or quality levels, as can improper attention to machine maintenance.
Manufacturing companies need something that ties all of this together and makes it easy to manage each discipline in its broader context.
That something is known as a manufacturing ERP (enterprise resource planning) solution.
In this article, we’re going to dive into the details of ERPs for manufacturing. We’ll explain what they are, what features and benefits they provide to manufacturers, and common challenges you might come up against when putting your first one in place.
What are manufacturing ERP systems?
Manufacturing ERP systems are a specialized category of software designed specifically to help manufacturing enterprises better plan and manage the various resources that go into producing a product.
They are complex solutions, spanning everything from production forecasting and planning to supply chain and inventory management and even aspects of quality control.
Many even go as far as to incorporate client-facing portals to handle order management, integrating the sales and revenue aspects directly into production management.
Think of the ERP as the hub for all things manufacturing.
It might not be the only software tool you use — you might, for example, wish to invest in an accounts payable automation solution for more advanced financial management — but all other tools should integrate with the ERP, which acts as the central hub in your software stack.
What benefits do ERP softwares offer to manufacturers?
Given the broad range of critical business functions they support, it's not surprising that manufacturing ERPs can be quite expensive tools, very often reaching into the six figures annually.
With that being the case, it's worth understanding what kind of ROI you’re getting.
Here are four important benefits a good ERP software solution offers manufacturers.
1. Improved operational efficiency
A robust ERP solution (when set up and used correctly) can drive some serious operational efficiencies.
Consider, for example, the enhanced visibility into the maintenance requirements of your factory machinery.
By maintaining routine servicing and quickly resolving any faults, you’ll reduce production delays and keep output on track.
2. Enhanced visibility into production processes
A decent manufacturing ERP system can provide a window into how well current processes are working and where they might need some fine-tuning.
For instance, you can track where delays pop up most regularly in the production process, and tackle the root cause with a relevant solution, be it a new machine, additional employee training, or a change in supplier.
Some of the more advanced solutions even go as far as to provide AI-driven insights and recommendations.
3. Better resource allocation
With an effectively utilized ERP, manufacturers have more control over where they use resources, human or otherwise.
Many mundane and repetitive tasks — like collecting and reporting on production data — can be automated, allowing your employees to spend more time on the important strategic work that drives more revenue.
4. Reduced costs
All of these benefits, from a better understanding of where resources are needed to greater visibility over supply chains and production processes, boil down to one core benefit:
Sure, you might be shelling out several thousands a month for the ERP system itself, but by taking full advantage of the powerful features it offers, from deep inventory and production analytics to quality control measures, you’ll save more than you spend.
What features do manufacturing ERP systems offer?
So, what can you expect to see from your manufacturing ERP right out of the box?
Here are a few of the most common (and most important) features that ERP systems offer.
Real-time data analytics
One of the most regularly accessed parts of the manufacturing ERP is the reporting suite.
A quality ERP provides deep insights that fuel decision-making. You’ll be able to see reports in real-time, such as:
- Gross margin and operating margin
- Production timelines by category
- Order volume growth
- Machine downtime
Production forecasting
In addition to retroactive reporting, the best ERPs also provide forward-looking insights in the form of forecasts.
You’ll be able to monitor, for example, how much completed inventory you can produce in the next month, adjusting speed and resource allocation as required to meet production requirements.
Or you can support sales efforts by looking at production forecasts the other way around, asking, “How long will it take for us to produce a large potential order for our customer?”
Inventory management
Inventory management goes beyond knowing how many finished widgets you’ve got on the shelf, ready to sell to your customers.
Your ERP will help you track levels of raw materials, provide alerts when replenishments are required, and track how quickly WIP (work-in-progress) inventory moves through the production pipeline.
Quality control
Quality control and assurance is another important component of enterprise resource planning.
Depending on the type of product you manufacture and your ERP’s capabilities, some QC checks may be able to be automated, with reports and alerts being surfaced if quality requirements are unmet.
Alternatively, you can set up human-led quality checks and submit and store them in your ERP for later analysis.
Supply chain management
Supply chain management — from vendor selection and management to ordering and receiving raw materials — is critical for meeting production goals, something which the best ERP solutions support.
Integration and connectivity
Manufacturing ERP systems, as capable as they are, can’t do everything.
For example, you’ll still likely want to have a financial reporting platform, CRM solution, and payroll software as part of your tech stack.
But the best ERPs plug and play with these tools with native integrations and the option to create custom connections between specialized tools.
Common challenges in implementing a manufacturing ERP software
Data migration
Effective data migration is one of the biggest challenges manufacturers face when implementing ERP systems.
Ensuring all data is ported over and that accuracy is maintained are two key concerns.
The solution here is to first develop a clear and comprehensive data migration strategy, covering data cleansing and deduplication, validation, categorization, and testing.
It's also a good practice to retain backups of old data sources for future reference if required.
User adoption
Your second big problem is onboarding all of your users and driving adoption across departments.
Change is difficult, and many employees, especially those who’ve been working at the organization for a long time, may be resistant to adopting new processes and software workflows.
A solid change management strategy is key here.
Foster a culture of communication and problem-solving. Ask for feedback, provide training opportunities, and transition slowly into using the full scale of your ERP’s capabilities to avoid overwhelming employees.
Budget and scalability
As we mentioned earlier, high-quality manufacturing ERPs can be costly tools.
This can mean that many of the best-in-class tools are out of reach for small and medium-sized businesses, and many turn to basic tools that don’t support their needs as they grow.
When choosing a manufacturing ERP as an small-medium business, it's important to consider both budget and scalability.
Look for a tool that offers a tiered pricing model, allowing you to access basic features at an affordable price, then scale up to more advanced functionality (and a higher price point) as business growth requires and affords it.
Ongoing maintenance
Finally, big and far-reaching software systems, such as the manufacturing ERP, require careful attention and maintenance.
While they might not need physical maintenance like the machines on your factory floor, ERPs do need ongoing attention, such as:
- Reviewing and restructuring automation recipes
- Cleansing and deduplicating data
- Data backups
- Software updates and patches
- Security management and audits
This can create another cost center that was previously unanticipated.
How BILL can help with enterprise resource planning
Manufacturing ERPs are broad, powerful platforms with a number of seriously helpful features for streamlining production, reducing costs, and managing supply chains and inventory.
While the best ERPs step into the financial world with revenue and profit margin reporting, they are best used when integrated with a robust financial automation solution.
BILL can help you balance core business processes by automating accounts payable and receivable processes, and improve financial insights with spend and expense management solutions. Learn more about how BILL can save you time and help you build your business.
