By Alain Albert
There comes a time in any manufacturer’s journey where the factory he or she gave birth to grows to become an unwieldy, out-of-control, tangled mess.
Where it once was so easy for one person to know what inventory was in stock, who was working on what project and which customer had paid their bills, there now is only missed deadlines, declining productivity and more people seemingly in control of nothing at all.
At this point, nobody would be faulted for thinking that the solution might lie in a sophisticated computer software that could manage all aspects of their business and control the everyday minutiae of a production environment with the precision and efficiency that computer algorithms are well-known for. A sort of digital factory overlord is what we might yearn for.
This software that purports to be the savior of the small manufacturer growing too fast for their own sanity has a name or rather an acronym; ERP which stands for “Enterprise Resource Planning” which doesn’t say much so let’s go back a few decades.
In the 1960s, MRP (Material Resource Planning) was developed to supply the American space program and it eventually branched off to be used by the manufacturing industry. Black and Decker was the first manufacturer to use MRP to make sure that there was enough inventory of raw materials on hand for production and also that there were enough finished goods in inventory for customer orders. By 1975, 700 companies were using this high-tech management software.
In the 1980s, with the introduction of personal computers and a growing threat from Japanese manufacturing efficiency resulting from Lean Manufacturing, MRP evolved to become Manufacturing Resource Planning. Now, MRP version 2 was able to do more than just manage inventories. Manufacturers could schedule production resources based on machine capacity and worker availability. As MRP continued to evolve, it started incorporating applications for managing other components of the manufacturing value chain such as sales and accounting. MRP became ERP (Enterprise Resource Planning) to better describe the role it played in the management of all the departments of an organization.
If you are running your company using several different software systems to manage the various aspects of your business right now and lots of resources are wasted on double entries, erroneous data, missing information and if your sales and customer relations are suffering, then perhaps you are a good candidate for ERP.
Remember that ERP is not a substitute for proper business processes. If you don’t currently have robust business processes in place, then you need to go back to the basics and work on these processes first.
At the heart, ERP is a suite of many distinct softwares that share a common database, and it receives input from all areas of an organization, analyzes this data and presents it back to the users in a useful way. The software still needs you to capture the data and perform actions based on the calculations.
Most of the processes that are essential to running a business have their respective software module in a modern ERP. Here are a few examples:
• Marketing: Marketing Automation, Email Marketing, Events, Surveys, Social Media
• Communications: Discussion Boards, Forums, eSignature • Human Resources: Recruitment, Employees, Fleet, Leaves, Appraisals, Reviews
• Manufacturing: BOM, MRP, PLM, Equipment, Quality, PMMS • Operations: Inventory, Timesheets, Projects, Purchase, Helpdesk
• Finance: Accounting, Invoicing, Expenses
• Sales: CRM, Point of Sale, Sales, Subscriptions
• Website: Website Builder, eCommerce, Blogs, Forum, Slides, Live chat, Appointments
While this class of software sounds like a must-have for any manufacturing operation, a great deal of caution must be exercised. Implementing and administering an ERP system is not easy and will require a great deal of resources and time.
I have personally seen many companies who have successfully implemented ERP and who have benefited immensely from the exercise but there are also some who, for many reasons, weren’t so lucky and the implementation failed miserably.
Implementing an ERP solution is a process that will take you a minimum of several months and up to a couple of years. You need to be ready and committed to making this happen.
Here are some of the elements that can help in a successful ERP implementation:
• The typical wood manufacturing company ready for implementing ERP has annual revenues in the range of 3 to 5 million dollars and up, and employs at least 15 to 20 people.
• Do your homework, evaluate your needs diligently, hire an experienced consultant to guide you and expect to spend a great deal of time on the planning stage.
• Name a champion for this project and give them a budget, clear goals and the authority to make tough decisions.
• Make sure your existing processes are working properly and that the data that is available is clean and relevant. ERP requires a great deal of data, business intelligence and input from various sources within the company.
• Commit to training your staff. ERP is likely to be very different from the way everyone is used to working now, and proper training is always the best way to get
everyone up to snuff quickly. Given lots of planning and hard work, most ERP implementations are successful and result in more efficient business processes and more consistent and accurate data being available in real time to users. At the very least, it paves the way to improved productivity through a more streamlined purchasing and scheduling process. Customer service will improve, and simpler reporting will become the norm which leads to better communication and more profits.
For the rest of us manufacturers out there who are still too small or simply hesitant to invest in yet more complex software requiring more data collection, more reporting, and bar coding, there is a lot of work that can be done in preparation for or as an alternative to ERP. Lean Manufacturing is a good example and while the two can certainly co-exist, mixing them together requires a good amount of balance and restraint because both aim to achieve the same goal using two opposing approaches. ERP is a top down approach based on forecasting, collecting, and managing inventories, while Lean favors worker-led initiatives pulling flow from actual customer orders with no or very little inventory on the floor.
In both cases, after expending wads of cash, buckets of sweat and a great deal of time, you can expect to come out the other end a shiny, efficient and profitable, new manufacturer.