Why Your Facility Needs an ERP System
Conquer Disconnects and Supply Chain Woes With an ERP for Manufacturing
Disruptions to the supply chain are rampant and impacting businesses across industries with shortages affecting a spectrum of products. The origin point sits with manufacturing companies responsible for making the products – and product parts – that are in such high demand. If your production, materials, planning, and procurement teams are feeling this strain, it’s time for an ERP system for manufacturing.
What is an ERP for Manufacturing?
Enterprise Resource Planning (ERP) is a system that centralizes business processes to a single location, providing real-time visibility into all operations – including the supply chain.
An ERP system is ideal for manufacturing because it is capable of tracking many moving parts from costs and materials to people. While ERP systems do require a high level of customization and continuous management to ensure the right information is kept up-to-date in the system, when it is used properly it can have an enormous positive impact on operations.
ERP systems have evolved over time, but today’s solutions comprise numerous, critical components, including but not limited to:
- Financial management
- Project management
- Operational reporting
- Procurement management
- HR and payroll
- Field service management
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Looking Inward to Combat External Supply Chain Disruptions
These are unique times – the COVID-19 pandemic has driven up demand for all kinds of products while simultaneously causing labor shortages, increased overseas production costs, materials shortages, and shipping and customs delays – among other issues. These challenges have led to supply chain shortages that are putting serious strain on manufacturing facilities.
Adding to these issues are the challenges of remote working coupled with oftentimes legacy software systems that make internal processes more difficult.
In this uncertain and disrupted manufacturing environment, companies are starting to look inward to address these problems with updated technology solutions – like an ERP system. In fact, manufacturers make up 34% of overall ERP buyers and users, and that number has only been climbing since the start of the pandemic.
Specifically, more manufacturing firms increased their use of cloud-based ERP during the pandemic and turned toward cloud-based applications and workloads in response to remote working and a need to remove some of the infrastructure risks that come with on-prem solutions.
Quantifying the Impact of Enterprise Resource Planning
Also on the minds of manufacturers during the pandemic is continuing (or enhancing) customer relationships. More than ever, it has become critical to find ways of maintaining the types of in-person connections that were possible pre-pandemic in remote settings. Recently, with supply chain disruptions, a new set of adjustments has become necessary in order to compensate.
Addressing internal processes and solutions has become the go-to path to continued success.
Addressing Top Manufacturing Concerns with ERP
In this continuously uncertain landscape, there are several overarching concerns manufacturing facilities are dealing with. If any of these sound familiar, we’ll explain how an ERP system can address them.
What are our material needs? What will demand look like in the future so we can be prepared? What do the lead times look like for current and future orders?
What materials do we have, and what do we need to meet our current and future product demands? How can we accurately track our finished goods?
How can we ensure additional costs we may be encountering during production aren’t greater than our profits? How can we manage the impact of fluctuating material and shipping costs?
How can we ensure the maximum amount of uptime of our people and equipment?
How can we maintain excellent customer relationships even in the case of unavoidable or unanticipated delays?
How can we maintain seamless, connected operations across our facility from the back office to the front office to the floor?
These concerns exist in the manufacturing industry with or without a pandemic or a disrupted supply chain, making an ERP system essential for conducting business in general.
Next, we’ll explain how a manufacturing ERP can enable your facility to take on these challenges and keep business moving amid fluctuating and uncertain external conditions.
Mastering Forecasting in a Disrupted Supply Chain With ERP
In a manufacturing environment, ERP systems allow you to get a firm handle on your current and future material needs by providing essential forecasting capabilities.
The primary struggle occurring with the supply chain right now for manufacturers is the surge in demand across the board for materials coupled with a lack of consistent supply of those materials. Pre-pandemic, if your facility needed a certain type of plastic for your line of products, you could access it easily because there was an expected and predictable level of supply and demand. Now, there is increased demand for everything, and supply is being hampered by a variety of factors from shipping delays to workforce shortages.
This scenario makes forecasting imperative. ERP systems for manufacturing allow you to:
- Forecast your material needs: The ERP system is able to calculate material needs based on current orders that have been placed.
- Forecast your future material needs: The ERP system is able to calculate expected material needs by analyzing past product demand and estimated future demand. When inputted correctly and consistently, demand data in your ERP system can provide valuable insight into future forecasting.
- Factor in lead times: The ERP system can calculate material demand and production timelines based on past and current order data.
- Strategically manage your own material supplies: The ERP system can calculate the materials needed for production so you can accurately balance inventory costs with production timelines.
Forecasting is essential for your production planners and procurement teams to ensure there are enough materials to meet product demand, and enough lead time to meet production timelines. You’ll see below that the forecasting capability of a manufacturing ERP plays a role in just about every other function of your operations.
Managing and Maintaining Inventory
Inventory management using a manufacturing ERP goes hand-in-hand with forecasting capabilities.
ERP systems will help you manage your raw material inventory, so you always know the amount of material you need to meet production demand. Your ERP will also help you track and control your finished goods inventory.
Inventory management both pre- and post-production is critical for tracking costs and mitigating the impacts of supply chain disruptions that affect production timelines.
Given current supply chain issues, ERP systems can be set up to predict raw material shortages, so you can adjust for potential delays. Going back to our example of the specific type of plastic you need for your products, your ERP will signal if you don’t have enough of that plastic in your inventory to meet necessary production levels. When used correctly, your ERP will alert you to the shortage with enough lead time that you can take steps to mitigate production delays.
Similarly, your ERP can also tell you if the part you ordered and are expecting to come in on a certain timeline is delayed. For many manufacturing facilities right now, these delays due to supply chain disruptions can be as long as a month or more, so identifying the delay early helps you consider alternate options.
Profits and Expenses: Cost Management With Your Manufacturing ERP
An ERP for manufacturing provides forecasting capabilities for material inventory and production timelines.
However, your ERP is also critical for forecasting profits. You want to be sure you continue to make money, especially amid the challenges of disrupted supply chains. Your ERP will help you keep track of the costs your facility is spending on raw materials and production, and the profits you’re making from product sales. If you’re on track to lose money due to rising material costs or delayed production timelines, you’ll be alerted with enough lead time to take action.
Additionally, we’d be remiss not to mention the reality that your costs are always changing based on material prices and shipping or customs charges. Prices fluctuate for many reasons with or without a pandemic or supply chain disruption, but your ERP system can adjust for these price changes based on the cost data you input. If that piece of plastic you need is used in several different product lines and the price suddenly goes up, your ERP will explode out that price increase to show how it impacts all of the products using that plastic material.
Increasing Uptime in Your Manufacturing Facility With ERP
At a high level, your manufacturing ERP system will help reduce downtime in your facility because it essentially streamlines your manufacturing processes.
When you can forecast material inventory, stick to production timelines, understand level of demand and manage your lead times, your equipment will be running more purposefully and consistently.
Furthermore, because a manufacturing ERP connects all areas of your facility and creates process visibility among teams, you can avoid situations where equipment is scheduled for use but is actually unavailable or undergoing repair. These blips in communication can lead to internal delays that impact your entire production timeline.
Maintain Excellent Customer Relationships, Even During Unexpected Delays
By now, we’re clear on the challenges the pandemic and the supply chain disruptions are causing for manufacturing facilities. We also know there are going to be delays within your own facility, whether due to labor shortages, equipment downtime, or other issues, that can impact production.
So how can you maintain good customer relationships if you’re struggling to meet production timelines?
You guessed it – ERP. Because ERP systems can accurately forecast your current inventory, and measure it against demand and any material shortages, you’re able to know ahead of time if meeting production deadlines isn’t possible and take steps to mitigate it.
Plus, you can use your manufacturing ERP on Salesforce, which allows for integration with your Salesforce Customer Relationship Management platform. Beyond being able to deliver updates on production delays in a timely fashion, you can also easily access all customer information in one place.
Using your ERP and CRM together allows you to automate customer services like payment notifications for existing customers, which is valuable information when dealing with fluctuating production timelines.
Alerting your customers to delays ahead of time, and demonstrating an effort to adjust or accommodate their needs based on these delays will help maintain good relationships – and your reputation.
Connected Operations – the Ultimate Goal of Onboarding an ERP System for Manufacturing
Are your production teams communicating with your procurement teams? Are your planning and scheduling teams informed of what’s taking place on the floor? Often, personnel is siloed across an organization, but ERP consolidates information from all departments into a single source of truth, making accurate, real-time data accessible to everyone who needs it.
Where manufacturing is concerned, production teams need to have a plan that tells them when processes need to be run and in what quantities.
Your ERP ensures this information comes together seamlessly, so all teams are informed and can operate productively.
Other operational benefits of a manufacturing ERP include:
- Reducing errors often caused by incorrect or outdated data
- Keeping projects on track with accurate information and forecasting
- Bringing formerly disparate data sources together to eliminate inconsistencies
- Automating data and analysis to ensure greater accuracy over manual processes
Building a Seamless Customer Experience Through a Unified Digital Business
Connecting teams and information on a single platform is really a nirvana scenario for manufacturing facilities. It ensures that you have accurate information driving production timelines and that you can take steps to mitigate delays. When everyone in your facility is aware of production status, productivity increases and customer relationships improve.
Playing Your Part in Keeping Your ERP System Up-to-Date
If you’re using your ERP system correctly, it should accurately perform all of the aforementioned capabilities.
If you take good care of your car and provide the necessary maintenance when it’s due or, ideally, beforehand, it should run smoothly and have few issues. Like your car, your ERP system will work well and do what you want it to do if you keep it updated and well maintained. Of course, there can be issues you don’t anticipate (like if a rock hits your windshield), but otherwise, you will enjoy optimal performance with minimal interruption.
And the more well-maintained your ERP system, the better positioned your manufacturing facility will be to mitigate against the challenges of the COVID-19 pandemic and supply chain disruptions.
The advantages of adopting an ERP system, especially one that integrates with your Customer Relationship Management platform, are putting manufacturing facilities in control, even when external conditions are a bit out of control.
When used correctly, modern ERP systems can edge you ahead of the competition with a higher level of operational intelligence that allows you to perform better, respond to unanticipated changes with agility and flexibility, and deliver more quality customer experiences.
Contact us today to schedule a demo and learn more about how you can leverage ERP on the Salesforce cloud platform to streamline your operations and put your customers at the center of everything you do.