They say all publicity is good publicity. The same is not true of systems for operating a manufacturing business.
What worked when your company was small can be costing you in obvious and less obvious ways now that you have more orders and people; your products are more complicated and lead times and margins have shrunk.
How can you tell your business has outgrown whatever traditional small business accounting or home-grown spreadsheet system you’ve been using? How can you tell when it is time to rein in the chaos and replace it with informed control?
If there is a formula, it would be when error, inefficiency and lost opportunity costs exceed the cost of implementing a new system. This can be challenging to estimate. In all events, you’ll want to understand the practical possibilites—what you could be doing, seeing and saving if you had a good manufacturing system?
An enterprise resources planning (ERP) solution does just what it says: helps you plan to be successful. The right system integrates your operations from estimation to production to shipping to finances. It allows you to see what’s happening and make informed choices about actions.
The question that keeps you awake at night
Will the cost and effort to implement a new system produce gains or just more work? Do you have the technical expertise to implement an ERP?
Here are the areas you can evaluate.
- While you look for inefficiencies that cost money or limit throughput(and consider whether these can be fixed with a few procedural adjustments or more help is needed) remember to think about the gains.
- I always ask what problems companies hope to fix and to gain with an ERP. This clarifies goals and highlights key requirements.
- The right ERP company will guide—not limit—you as your business transitions and grows.
We will proceed step by step, beginning with sales issues and then moving on to the production floor.
Issue 1: Salesperson Pricing Inconsistencies and Turnaround Time
Without sales, there is no business.
Is your pricing inconsistent because your systems don’t capture all costs? Too deeply discounted? Too high in some cases because the costs are inaccurate?
What if quoting takes too long because you have complex products? Make-to-order products can have hundreds, thousands or even millions of options. Is your entire sales force dependent on one or two people who “know” how to estimate?
If the answer is ‘yes’, you specifically want to consider an ERP that supports with a product configurator and standardized pricing. This will enable you to track margins and sales efficiency and gain sales with quick turnaround on quotes. This also helps ensure consistency between quotes regardless of the salesperson or client.
Issue 2: Handling Customer Change Requests
We live in a world where the customer is always right.
When a key customer asks to adjust an order, how much effort is needed to accommodate that request?
The chaos involved in modifying the order, or canceling and creating a new one, tracking it down on the floor to stop production, and determining the cost of the adjustment, there’s usually an excess of lost time. It’s a common disruption with additional costs not easy to capture manually.
Can your current system help make this process efficient—or even help you determine whether customers who make frequent change requests are worth maintaining?
If not, and change orders are frequent, it may be time to look for an ERP that supports production pullbacks and monitors total job costs that include remakes and change requests. Before they agree to the change, the right system will instantly show office staff if an order is in production. This information changes how adjustments are handled and supports asking for change fees when an item is already in production.
Streamlining for change orders reduces the interruption this practice has on your business. It’s another instance where chaos can become business as usual.
Issue 3: Inability to Forecast Production Backlog
Lots of orders are good, right? Except when it costs you customers because you promised and then missed delivery deadlines and don’t know it until it’s too late.
This is what happens with inadequate systems.
How do you appropriately set customer expectations before accepting an order? How can you level production to even out the workload? How do you see what adjustments you can make to accelerate production?
You achieve this with the right system. For instance, an ERP that can auto-calculate delivery date based on production product standards. And that re-calculates to a further date when capacity has been met. And that can balance production.
Imagine providing achievable and accurate delivery dates without the salesperson calling the production manager to make a commitment to the customer. When this call happens, the salesperson and production manager are interrupting workflow to manage an exception.
You can significantly reduce these lead-time interruptions with accurate production forecasts.
Issue 4: Production Floor Chaos
When a business is small, manual tools can be enough. Microsoft Excel. Marker boards. A copy of the sales order. A CAD drawing. These can be enough to run production.
As your business grows, it becomes less manageable. The place is bigger. There are more orders. More people. Maybe more products and more options. The chaos is bigger.
Is quality going down? Do you spend valuable time looking for a single unit the customer needs now? Do you lose material and remake it only to end up with material that needs to be scrapped or stored for later use?
Whether the quantity being released to the floor is increasing, the complexity and uniqueness of the products pose quality issues, or there are frequent mistakes by new employees, it impacts your business.
You need new tools to streamline the extra throughput. A manufacturing ERP.
If unit production takes more than a day and a variety of workstations, consider an ERP that supports barcode scanning with track and trace capabilities. You also want the capability to level load production so workers have consistent hours. And you want people accountable for their throughput based on scan history.
All this and much more can be accomplished by implementing an ERP with a manufacturing focus.
Issue 5: Inability to Monitor Quality
In manufacturing, returns can be common. Quality keeps clients, reduces rework, and increases throughput from the same resources.
Can you identify root quality causes and address them? Are your trusted skilled workers retiring and new teams need training? Are you looking to get ISO 9001 certified?
Then you want to track quality to the order or unit level.
A common and important tracking consideration is whether data collection effort is worth the interruption to the process. Requiring scanning of product throughout the plant floor and documenting rejects will likely create inefficiencies when trying to get orders out the door.
However, consider the effort in fixing a problem that made it to the customer or has been installed. This includes investigating the issues, picking up rejected material, rushing remakes, and returning delivery to the client.
When this occurs weekly or even daily, it’s time to implement a solution that helps you make it right the first time. Invest in an ERP that supports barcode scanning, lot tracking, employee scanning, and standardized rejection codes.
Tracking quality and preventive documentation methods can reduce or nearly eliminate returns, increase client satisfaction, and make room for more business. Again, this is an area where you can bring order to chaos.
Time to Take Action
If you are struggling with one or more of these issues, consider a manufacturing-focused ERP.
Identify the issues associated with your business as a result of increased sales and production. Evaluate if these issues can be addressed with simple changes in processes or if their gravity call for the more integrated benefits achieved with an ERP that fits your manufacturing needs.
Your core business is manufacturing. Look for manufacturing ERPs with the flexibility to accommodate your products and processes. Ask potential ERP providers how they started their business and how did it grow. This provides insight into how well they understand your business and can reduce customization and overall maintenance costs.
How do you know your business would benefit? Compare the limitations and chaos you’re living with now versus what is consistently possible with the right ERP solution.
Ryan Anderson is the ERP Director at Fenetech, Inc., which is the creator of the leading ERP software solution for manufacturing of complex and mass customized products. Fenetech, Inc. has been a Manufacturing Works member since 2018. This blog was originally posted on the Q2S website.