Manufacturers Bleed Money in Three Big ERP – Related Ways

Having been through several Enterprise Resource Planning (ERP) software implementations, I can say that manufacturers spend a ton of money on putting them in place. The license fees and set up costs are astronomical, as well as the time-cost of allocating staff resources to assist with the installation. Given the significant investment made, I still see manufacturers who, time and time again, do not use the software to its full potential.

One of the main driving forces behind implementing an ERP is the magic number cruncher - known as Material Requirements Planning (MRP). It goes by many names depending on which software system you implement... names such as advanced scheduler or planning module. The purpose of MRP is to keep a manufacturer informed on what they need to order regarding supplies, raw materials, or even what they need to build concerning sub-components of an item.

MRP needs proper inputs to function, all of which seem to be common sense:

  1. The master schedule, or what work and when the work will be performed by, consisting of known customer orders and sales forecasts.
  2. The Bill of Materials (BOM) record, a list of components and supplies that are required to manufacture each item.
  3. The inventory record, an account of what items, supplies, and parts are on-hand and on-order, as well as the associated supplier lead times.

It makes absolute sense that a manufacturer should have accurate and reliable data on the three activities above.

That, however, is not the general case.

It is more likely that the ERP system is used as a glorified customer order database and the work schedule is managed by being reactive rather than proactive. A common symptom is that a "million" Excel spreadsheets exist which track BOMs, schedules, and inventories rather than using the software - which cost the manufacturer lots and lots of money.

♦ Manufacturers become victims of their success and put off implementing change because they are already profitable.

The inefficient use of their software often leads to lower profits and a “whatever it takes” attitude. They achieve excellent customer service by expediting everything. The cost of expedited shipping on both receiving supplies and shipments to customers is a metric that can be used to illustrate how reactive versus proactive a manufacturer is.

By implementing a process that ensures minimum performance requirements (95% accuracy for the above three items), manufacturers can gain higher profits and a more proactive environment. Their employees will surely thank them for making their job easier and owners will enjoy higher profits.

Manufacturers can combat this by auditing how well they are using their ERP software against those minimum performance requirements.

  • How do you schedule work?
  • How do you manage the BOM and measure its accuracy?
  • How do you track inventory and ensure the correctness of the data?

These are questions we typically ask of clients during a software consultation. After consultation, we help our clients purchase, custom-write, and implement new software or we help them to use their existing software to its full potential. We are vendor neutral, meaning we don’t cater to any one ERP company. We work towards the goals of our client with whichever software vendors fits their needs best.

Interested in identifying your bleeds?

Sit down with our consultants for a free, one-hour consultation.

Contact us to get started.

Call 315-738-6016 or fill out our form.

[recaptcha size:compact]

Written by Jason Covey, President

Jason Covey - ConsultantJason A. Covey, a BS and MS in Computer Science from RIT, has over 17 years of programming and manufacturing consulting experience, Jason has worked with a variety of clients within global and local manufacturing, as well as other industries, such as finance and insurance. He specializes in lean methodologies within manufacturing and utilizes techniques such as personnel interviews, user interface mock-ups, and gemba walks during the consulting process.

Jason is president and senior software developer at CoveyCS, a 17-employee software firm located in Utica, NY that works with manufacturers to increase quality and production capacity by using in-depth business analysis and integrated software solutions, including the customizable workflow platform, Iterrex. Jason is an Adjunct Instructor of Computer Science at Mohawk Valley Community College in Utica, NY.

What is Manufacturing Software Consulting? 

Manufacturing software consulting helps your business determine the unique software requirements of a manufacturer’s business and production process, fitting existing processes to industry best practices. Consulting takes place before software integration or implementation to mold the software to your specific process requirements.