ERP for Manufacturing
Since March 2020, the world has convulsed under the strain of a pandemic, the attempts to mitigate it, civil unrest, and countless personal tragedies that have touched all. Manufacturing used to quietly keep our stores, homes, and businesses well stocked with a wide assortment of goods. In recent years, Amazon set expectations for almost instant home-delivery of anything. Now manufacturers everywhere feel the heat of sudden demand swings, supply chain constraints, an unreliable workforce, swiftly inflating costs, and unhappy consumers looking at bare shelves and long waits for backorders.
In 2022, manufacturers will continue to face the challenges of supply chain issues, rising material costs, and labor shortages. However, those prepared with a well-implemented ERP system as part of their data-driven strategy will be able to adjust as conditions change rapidly and not only remain profitable but be able to capitalize on unexpected opportunities.
“As 2022 gets underway, Omicron is sweeping the nation, and the number of people not showing up for work is causing disruptions in every segment of life.”
Using ERP to Mitigate Supply Chain Disruptions
As 2022 gets underway, Omicron is sweeping the nation, and the number of people not showing up for work is causing disruptions in every segment of life. Before COVID, an optimal supply chain was lean, with minimal inventory and JIT (just-in-time delivery). Today it’s imperative to have contingency planning.
How to Use Your ERP to Better Manage Inventory and Supply Chain Issues
Stock Levels: Set the safety stock levels, best-estimate lead times, and desired order quantities for all stocked items. Use “Forecast” orders so the system can tell how much material will be needed. Run the MRP or Advanced Planning and Scheduling daily. Stay on top of what needs to be ordered or made for stock.
Date Fields: Initially, fill out all date fields with your best estimates. Then use ERP’s alternative due date fields for all sales orders, purchase orders, and work orders for the best scheduling and planning predictions. (The alternative date fields for planning should help you see predicted delivery dates vs. promised due dates.)
Inventory Management: It’s critical that you manage all inventory better in 2022. If you are not doing so, use the “Bin” or “Location” features of your system to track the physical location of inventory. Be strict on rules about inventory movements – if the part moves physically, it must move in the system. Review all your inventory transactions for accuracy, including PO receipts, issuing material to jobs, bin-to-bin transfers, and shipping. Do cycle counts. For example, Epicor has excellent online training videos to get you started on cycle counts in their Prophet 21 system.
Keep Up with Rising Costs to Estimate Better
Review costs and make sure your system is up-to-date in the cost fields that calculate 2022’s profit. Some of these include:
- Overhead costs assigned to Work Centers/Machines
- Employee costs that go into the jobs
- Inventory costs
For inventory costs, you need to know not only the average cost (or a recently updated standard cost) of your materials but what it costs to replace those items. Systems like Global Shop Solutions have a field called “Alternate Cost” on the inventory part, which is used to calculate Bill of Materials cost estimates. Your actual costs on parts stay the same, but what you use to estimate jobs is based on replacement value.
Standardize your RFQ process so that you can get quotes from more vendors quickly.
Don’t forget transportation costs, which may be a significant factor this year.
Adjust Pricing More Often in a Rising Cost Market
If your company never implemented the Estimating and Quoting portion of your ERP, now is the time to do it. It’s more critical than ever not to rely on the old methods of pricing manufactured parts. For example, using an hourly rate like $150/hour may miss many other factors. ERP systems like JobBOSS² have a more detailed dive into costs quotes, so the estimates are better, and most importantly, easy to compare to actual costs when the job is finished.
Review costs, adjust pricing more often. Decide on a tipping point for price increases if you have standard products. If publishing prices is a painful process, iron out a better way to do it since you may be raising prices several times this year. In 2022, it’s all about being nimble.
Optimize the Labor of Employees Who Do Come to Work
In 2022, manufacturers will start their days counting who showed up. Stay on top of your local job market and average wages – companies are planning higher wage increases in 2022 than in previous years. When employees come to work, put them on the highest-value tasks for your company.
Use the ERP company’s best training tools for cross-training your employees on how to do the ERP tasks that keep your system real-time. Review clocking in and out of jobs, checking labor records for accuracy each day, material issuing procedures, and your ERP system’s shipping process.
Create easy, intuitive work instructions that are a click away in your ERP system. Everyone should quickly pull up precisely what they need to do their job with minimal to no instruction from another employee.
If the employee can work from home, set them up to do it well. Manufacturers have long hesitated to allow non-production employees to work from home. In 2022, forget the old bias and establish policies and procedures for your purchasing manager, engineers, sales, and other non-production staff to work from home. This year might be the time to switch to a cloud-hosted EnR’s ERP version. Most ERP systems now have cloud options and can take on the role of keeping your ERP up 99.99% of the time. Many offer SaaS models to flex the number of users and down depending on your staffing levels.
Increase Automation with Industry 4.0 Technology to Combat Labor Shortages
And last but not least, move forward with projects to increase efficiency. You can make more products with fewer people; you just need the right technologies. If possible, dedicate one or more engineers to focus exclusively on automating. Think of your ERP system as the hub and the automation projects as the spokes. Almost everything will touch your ERP, so work closely with your ERP software provider to implement changes that are also automated.
ERP for Manufacturing Companies : Ask Your ERP Company to Check on Your Use of their System
Ask your ERP company to review your use of their products. They should tell you if you are utilizing it to its fullest potential or not. Your ERP system should be an asset, like a vehicle that can take your company places. If you have not gotten it out of first gear, then get the training you need to get it moving. You may need to re-implement portions of it, but it will be worth it. A properly set up ERP system should be a manufacturing company’s most valuable asset in 2022, no matter how turbulent the year ahead may be.