ERP for Manufacturing: Considerations and Recommendations

Enterprise Resource Planning (ERP) software has the power to connect many parts of a manufacturing operation to achieve goals such as increasing efficiency, reducing the number of independent systems, or streamlining operations. By eliminating the redundancy of multiple systems and creating a central, company-wide information repository, ERP can improve an organization’s productivity and profitability.

At the same time, realizing these benefits requires buyers to implement software across the company, which can be a complex task. For example, the finance department must install new financial and accounting modules, manufacturing may need to update its systems, the existing CRM system may be replaced with the ERP vendor’s software, and so on.

As you can imagine, replacing all these systems can be time-consuming, expensive, and disruptive. The challenge for manufacturers considering an ERP system is to weigh prospective benefits against the cost and hassle of implementation, training, and ongoing support.

Integration is the underlying strength of ERP software. By cultivating a single view of company data, the organization can substantially improve information flow, data consistency, and collaboration across department boundaries.

When evaluating ERP, manufacturers should consider several key attributes that generally define  ERP software:

• The system is integrated across departments and business functions, and offers real-time data updates to users.
• ERP generally uses a single, common database across the enterprise, to facilitate data consistency and uniformity in all departments.
• All modules in the ERP suite should use a common user interface, which simplifies training and eases change management.

These attributes of ERP software reflect the importance of integration and sharing information across the enterprise. Without ERP, automated data exchange across departments can be limited, redundant data entry may be required, and reporting inconsistencies are often a problem. An ERP system allows information to flow freely across departmental boundaries, which simplifies reporting and improves decision-making.

I asked Roman Bukary, who runs manufacturing industries marketing for cloud-based ERP vendor, NetSuite, to explain the benefits that ERP brings to manufacturers:

“Modern ERP delivers a foundation for manufacturers to run their business from customer orders all the way to manufacturing production..from orders to cash. 

"The best ERP solutions do much more than just provide “dumb” process steps, because it enables manufacturers’ profitable growth through integrated financials, reporting, management, inventory tracking, and asset utilization.

"Customization and encapsulation of best practices is another significant benefit of ERP for manufacturers. The best software incorporates the manufacturer’s own data along with industry metrics such as SCOR or ISM, as well as potentially vendor’s aggregate industry knowledge.

"Yet another important feature of ERP is the ability to merge customer insights with a 360-degree view of the business, to ensure that changes in customer buying patterns intelligently propagate through the entire enterprise and alter manufacturing production schedules and inventory levels.

"Finally, the very best ERP ensures clear alignment between strategy and execution – translating tactical goals into specific business actions that support the organization’s strategic intent.”

Roman suggests several points for manufacturers to consider when evaluating ERP systems:

• Focus on operations. Be sure the ERP software is capable of handling all your business processes and important operations. Integrated inventory, work orders, and forecasting are key elements to consider.
• Look for profitability. After covering operations, the next step is managing pricing, cash, demand, inventory, and the other elements that lead to profit.
• Build in manufacturing efficiency. Achieving profitability requires manufacturing control, such as MRP and demand planning.
• Enhance customer service. Integrated CRM, fulfillment, and so on can help increase customer retention, leading to a virtuous cycle of sales, operations, delivery, and profitability.
• Plan strategically. The single view of data in ERP should provide more complete, timely, and accurate reporting than ever before. This becomes the lever for improving operations, leading to higher customer satisfaction and profitability.
• Establish early organizational alignment around goals, requirements, and capabilities. Conduct periodic reviews to ensure the ERP technology continues to meet those needs.

Achieving these benefits often requires an extensive implementation process. Frequently, this involves changing and improving your processes, which can be a source of temporary disruption to the company. Implementation can involve risk of delay and cost overruns, particularly for large companies, which explains why some buyers criticize ERP as potentially expensive and difficult to deploy.

ERP software is a major capital purchase for any organization. To maximize that investment, consider these five points:

1. Buying software is only the first step. Consider the total cost of ownership, which includes implementation, training, business process change, and so on.
2. Business case is all-important. Successful enterprise software deployments always begin with a solid business case. Implementation success depends on understanding why you are installing software and what results you hope you achieve in the end.
3. Match the software purchase to your organization’s business goals. Your business case, information needs, processes, and workflow should drive the software purchase decision.
4. Implementation involves more than technology. Success depends on managing the organizational change and business transformation aspects of implementation. Improving processes is one great reason to implement ERP, but you must be ready for the changes it brings.
5. Change management is critical. ERP, by its nature, touches many departments across the organization, changing some jobs and perhaps eliminating others. These changes can be disconcerting, confusing, and potentially disruptive. Be aware that change is a natural part of the ERP process and plan accordingly.

Depending on how your organization handles the product selection and implementation, ERP can be either a great benefit or a difficult nightmare. Plan the deployment right, get qualified assistance from third-party consultants, and manage the project carefully. Those are key ingredients in achieving ERP success.