An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance and human resources. Because it is so versatile, ERPs are often used in manufacturing, and this includes enhancing the ability to develop innovative solutions and scaling manufacturing with technology. In short, ERP systems make it much easier to expand business growth and remove production limitations.
Before implementing ERP, it’s important to understand how it works. The reason ERP software can work for a wide number of industries is because it integrates a broad spectrum of functions into a single, cohesive system. In essence, it streamlines information and processes across the whole organization through the power of a shared database.
A shared database allows many functions to be accessed by different departments. The information is accurate because it is shared in real time. For instance, a salesperson in the sales department may be looking at the figures to help close a deal while an accountant in the finance department might be viewing those same figures at the same time to evaluate the balance sheet. Drawing from the same database, they are both looking at up-to-date figures.
Without ERP, each department would be maintaining separate databases and spreadsheets. If they needed to generate reports, the data on different databases would have to be manually merged. ERP allows employees from any department to view a dashboard to quickly grasp key performance metrics important to their particular work. The ability to visualize data makes it easier to comprehend and act on quickly.
Manufacturing ERP Software
Manufacturing ERP, as the name implies, is ERP that has been customized to fit the specific needs of manufacturers. It does this by improving both company management functions and production functions. Company executives appreciate its ability to increases collaboration and cut costs while production divisions benefit from improved visibility, efficiency, quality control, and on-time delivery.
- Collaboration: An organization needs to share its manufacturing information internally and externally. Internally, workers need to know about the status of various processes in a production line. Externally, business partners, suppliers, and distributors need to access information that relates to their specific role. Since ERP tracks all relevant data, it enhances both internal and external communication.
- Cost effective: The costs for any project can often exceed budget restraints. Scope creep is due to inaccurate estimates or because of wasteful use of time, labor, or materials. When things are not going smoothly in a production process, workers may have to work overtime to make up for delays. Mistakes made because of inaccurate data may also mean that rework is necessary. These inefficiencies increase payroll expenses. Other sources of added cost may be ordering excess inventory, shrinkage due to poor tracking of parts, and overproduction of goods due to inaccurate demand planning. Since ERP, makes it easier to forecast based on accurate numbers, many sources of excessive spending are factored out.
- Visibility: Since all divisions of an organization can access, view, and track every aspect of the production process, all manufacturing work is based on consistent information sharing of accurate information in real time. Everyone is literally on the same page because all reports are based on a shared database. So finance, purchasing, production, and engineering have comprehensive visibility. It’s easy for all departments to monitor cost of goods, inventory, quality control, and production status. Additionally, everyone is always abreast of any changes in plans and designs.
- Efficiency: Efficiency is a natural byproduct of the ability to track a supply chain activity from beginning to end. Detailed tracking is usually almost impossible without ERP. Corrective action can be quickly taken if problems arise in the manufacturing process that force one to deviate from the plan, production, or delivery of goods.
- Quality control: Since no manufacturing process is perfect, problems in the flow of production results in product defects. Because of detailed tracking, it is easy to pinpoint the cause of defective end products and take the necessary steps to identify what went wrong and where in the production process it occurred.
- Delivery: On time delivery becomes a matter of course when production processes are visible, efficient, and monitored for quality.
Better Business, Higher Revenues
ERP helps a manufacturing company improve every phase of its business. When a company consistently produces high quality goods, customers are satisfied, which in turn creates repeat business, increases referrals, and boosts revenues.