ERP Makes Manufacturers Stronger Than Ever
When it comes to enterprise software, particularly systems that are integral to your business operations (like CRM and ERP), we always advise businesses to plan ahead—especially when your plan involves profit and the processes that you need to drive it. But how can businesses plan to reduce variation in manufacturing capacity and production on the shop floor during a time when consumer purchasing is highly unpredictable?
A manufacturer who can closely align their production with demand, and accurately plan that demand into the future, will find that they can reduce inventory, save on waste and drive profits better than ever. ERP software gives businesses the tools to do just that. Read on to discover how ERP can expand your production capability.
Reduce Losses Due to Production Variation
Reliability is critical in today’s increasingly unpredictable business environment. The recalls for automobiles and consumer durables has become a concern to many businesses and should be a reminder that no industry is immune to an audit. Aside from preventative quality measures enforced by ERP systems, manufacturers also need to run production data each quarter to monitor gains and losses and the nature of such occurrences.
How should organizations approach planning their manufacturing capacity when today’s volatile market makes compliance and forecasting more challenging? It all starts with your production lines. You need to wholly understand which lines should be highly automated and simplified, handled mainly by machines and ERP system oversight, and which need rigorous, complex and supportive manual engineering. Manual engineering processes are most at risk for falling out of compliance with a buyer, so they should really be prioritized for only the most necessary lines. This may also decrease demand for higher marginalized lines if expenditures are harnessing specialized machine skills to adopt these economies of scale over more consistent ones. What’s worse, quality losses and rejected products significantly impact variable costs, such as labor and materials.
Moreover, when your ERP is implemented, re-implemented, or upgraded, focus the improvements on areas where your losses were/are the greatest. These areas can involve processes where variation is likely to occur, high-risk lines that require rigorous human oversight and involvement or special engineering that may tie up manufacturing capacity. You can look to a cost/benefit function to weigh the reduction in production variation losses or gains against current costs. This added benefit will also foster a more reliable supply chain. All are changes you should be looking to make as you move into another year of ERP strategy.
Cut Downtime Loss
Without fail, reducing downtime loss yields generous results, and helps your business become a truly lean manufacturer. Sometimes users feel as if the system may be working against them, when in actuality the system’s functionality hasn’t been set up with the specific needs of their job in mind. When software does not work for an employee, they will simply reject it, harming the value of your expensive product even further. After all, empty software isn’t going to be doing you any good.
Consequently, in the early phases of any enterprise software implementation, it should be the job of the company’s project manager to integrate user needs into the very structure of the system. Provide use cases for every single role and function you expect the ERP to support. Show your employees how they can benefit from the implementation and they will want to use it—simple as that. A good change management plan will work wonders for your implementation, every time.
Reduce Minor Steps in the System
With the right processes in place, manufacturers can detect and adjust minor production stops and hesitations. Minor production stops can be short as five minutes, yet over a period of a week can amount to significant disruptions in enterprise efficiencies. These can be key areas of waste costing your business money. A question a project manager should always inquire about is how production phenomena or losses become more transparent, and how your ERP can work towards monitoring and flagging these small areas of loss so that you can work on stopping the leak. One such way is custom mapping of such processes to custom dashboards, which can then be modified by specific users to monitor minor stops and production faults within their role. This enables users to promptly report and fix errors.
Establish Priorities to Prevent Loss
Your organization’s ERP users should be clear about business process models around job costing, and then be able to create capabilities to expose the cost of downtime. Downtime analysis can then be used to establish priorities in a financial context. Once you know where your greatest leaks are, you will then know where you need to dedicate those resources. The added capability will allow your firm to invest in efficiencies and extract extremities and production processes that lead to underutilized capacity over time.
Furthermore, it’s highly important that you have a sophisticated understanding of labor and material costs, as the acquisition of these elements of production are most associated with the bottom line, with extraneous downtime according additional costs to margins. It’s equally important to address these kinds of material costs, which are eaten up throughout production and can cause significant losses over time. An ERP system can be an excellent tool in tracking material costs and how they fluctuate over time. Run these reports periodically, so you know how certain seasons, distributors and deals can affect your bottom line. Excellence in systems operations, from inside an ERP’s TQM and Production Management modules, focuses on leaning out these inefficiencies, helping to optimize the priorities that notify key decision makers of areas of flaw or major waste prior to production.
Whether you’re planning a new implementation, an upgrade or are just sticking with your current system, continuous improvement needs to be your focus—are you currently doing everything you can to reduce waste within your business? Is your ERP software working with these lean principles, or against it? ERP and its focus on detailed data management and analysis can seem like a burden, but that data exists so that you can really drill-down on the areas that need work and automate all of the processes that can be automated. Accurate demand planning and full manufacturing capacity are possible, but it’s going to require some work.
Interested in how ERP software can be deployed or integrated into your environment to increase manufacturing capacity and prevent revenue loss? Datix is an Epicor Platinum Partner, making us premier experts in ERP projects for manufacturing success. Contact Datix’s Epicor implementation and business process modeling experts today.