Production is a complex set of interdependent items and processes that work together. With manufacturing getting increasingly competitive and with margins reducing, manufacturers are looking at ways to improve efficiency and productivity while reducing costs. Implementing ERP to ensure established methodologies and practices are followed can significantly improve productivity and efficiencies, while reducing waste, manufacturing errors and unplanned downtime This directly influences costs and manufacturers will benefit from the cost reduction as a result.
Production ERP applies digital technologies to a manufacturing company’s production processes which gathers data throughout these processes. The data is stored and organized centrally, which gives users real-time access to required information. With real-time visibility, up-to-date information is available on the status of processes and resources, which allows a company to respond quickly to changes. Embracing production ERP can result in improved efficiency in manufacturing operations, real-time access to production data, shop floor visibility and inventory accuracy.
Reducing costs
Getting costs under control helps to ensure a good return on capital investment and that factory equipment is operating at optimal profitability. Managers want to understand as much about costs as possible. The high-impact areas that they can control are production and inventory.
Reducing costs in production
The significant cost items are labor and machinery. Therefore, management requires visibility over the shop floor and its related costs. Labor and machinery costs need to be tracked closely so that the shop floor runs efficiently, and resources are used effectively. However many manufacturing plants have little visibility into how these items are consumed in typical plant operations.
Reducing costs in inventory
Managing material costs requires information about procurement activities and how long materials stay in inventory before they are used in production to generate revenue. This requires access to what and how buyers make purchasing decisions, and the cost of inventory in the warehouse.
How Production ERP helps in reducing costs
An automated Bill-of-Materials (BOM) in a production ERP keeps an up-to-date record of the items needed to make a product. By understanding the product specifications, the costs can be monitored and the BOM can be adjusted to use materials that are more efficient in terms of waste. Waste is a cost, so by employing certain materials instead of others, waste can be reduced.
A production ERP system can manage inventory better by improving inventory turnover. This frees up working capital which helps to improve cash flow.
By integrating inventory with sales and manufacturing, inventory reduction is possible, by 20% or more. This results in lower warehousing costs.
Production ERP systems provides MRP that integrates with the BOM. Material requirements planning (MRP) is a system used to calculate and manage of the procurement of raw materials and components used to make a product. Employing an MRP can help to lower materials costs in production by promoting just-in-time procurement instead of keeping too much in stock.
With MRP-generated insights, better-informed decisions can be made regarding production, purchasing, and inventory, leading to increased operational efficiency and profitability.
Streamline production
To streamline production requires information about the various processes on the shop floor. BOM also records the processes needed to make a product.
Integrating BOMs with orders enables jobs to be scheduled and the allocation of labor and machines to those jobs. This can help streamline production in various areas.
- Reduction in rush jobs
- Ability to schedule machine maintenance without comprising production
- Improved factory throughput as machine set-ups can be improved
- Reduced overtime as priority jobs can be scheduled accordingly
How Production ERP helps streamline production
The support that production ERP software affords to the production and factory floor functions can improve manufacturing practices. It provides the information for better resource and capacity planning.
The value of MRP as part of a production ERP system is that it can automatically get updates from sales orders. This provides a faster response to changing demand and avoids production delays and inventory stockouts.
A Manufacturing Operations Management (MOM) system is an important part of production ERP. A MOM solution can make a significant contribution.
- Publish an accurate plan and see whether the plan was achieved or not.
- Collect information on the amount of downtime and understand the reasons why.
- Monitor the speed of production operations.
- Track defects, analyse them for likely causes and address those causes.
- Create an optimal production schedule to increase output
Other Production ERP benefits
A major benefit of a production ERP system is the ability to automate different operations within a business. Business processes can be automated to improve workflow, and information can flow automatically between different areas of the business.
Examples of benefits of production ERP
- As a result of the structure and daily scheduling created by a MOM, a manufacturer transformed production from running a week behind to consistently being on schedule.
- A food manufacturer used a production ERP to standardize business processes across its four business units to ensure processes are consistently followed. The company enhanced efficiencies, reduced errors and improved turnaround times.
- A manufacturer had complex production processes and limited reporting capabilities. Using a production ERP allowed the company to automate production processes, gain real-time visibility into its operations, and improve inventory accuracy and management.
- With a production ERP, a manufacturer saw its operational processes improve, from order intake to the production floor, and finished goods.
With the increase of information that a production ERP solution can provide, manufacturers can streamline operations and reduce costs. This allows companies to create smart manufacturing processes that are optimized, reliable, and agile. Companies that adopt a production ERP will enable smart workflows and seamless interactions among humans and machines, and employees will use data to create information to help plan and optimize many aspects of their work.
