Common Manufacturing Problems that ERP Solves
- Are you having trouble getting proper information about your business?
- Are you struggling to maintain optimum inventory?
- Are you finding it difficult to lower operation costs?
Manufacturing companies face these and numerous problems in day to day operations. Some problems may vary slightly from industry to industry, but there are some common challenges faced by manufacturing companies across verticals & industries. In this blog, we are going to discuss how manufacturing companies can leverage ERP Software to improve internal processes and overcome common manufacturing problems for achieving continuous improvement in business.
Common Manufacturing Problems/Challenges
#1. Lack of Proper Data/Information
#2. Integration of Operations & Locations
#3. Maintaining Optimum Inventory
#4. Ensuring Optimum Utilization of Resources
#5. Increasing Employee Productivity
#6. Controlling Costs
#7. Ensuring On-Time Delivery
#8. Industry-Specific Reporting
How ERP Solves Common Manufacturing Problems/Challenges?
1. Lack of Proper Data / Information
When you rely on manual data collection processes for your manufacturing business, you are most likely to face the following problems
• Lot of time spent in manual data preparation, along with the possibility of human errors
• Delay in recording information, since no mechanism to record/capture data instantly
• Records are never up-to-date, accurate, discrepancy in data across departments
• Creating reports is very time-consuming because of the need to reconcile & validate data
How ERP Solves Problem of Lack of Proper Data/Information
• ERP software gathers data across all business processes in digital formats.
• ERP provides mobile apps & features to incorporate real-time updates.
• ERP ensures, up-to-date & consistent information is available across the organization.
• ERP stores data in a central location and provides easy access anytime from anywhere
This ensures that the right information is available to the right people at the right time to make the right decisions.
2. Integration of Operations, Locations
Some manufacturing companies are spread across locations and work on disparate systems. This results in data being present in silos and lack of proper information flow and poor coordination among departments and locations. Companies cannot implement standard processes across the organization.
How ERP Integrates Operations / Locations
ERP software integrates all important processes of an organization such as planning, production, purchasing, inventory, sales, marketing, finance, human resources, and gathers data from various departments, locations, business verticals.
Manufacturing companies have complete visibility into all processes and the entire business. Manufacturers can now implement companywide policies, define standard works flow, describe rules & guidelines for almost every activity in the organization.
3. Ensuring Proper Inventory Control
Manufacturing companies must ensure optimum inventory levels to ensure continuous production. However, without an ERP software, manufacturers do not have complete visibility of inventory in the production line, inventory present in warehouses at different locations, inventory in transit, and so on. This results in situations of overstocking or stock outs and affects production as well as production costs.
How ERP helps to achieve Optimum Inventory management
ERP enables defining and implement standard inventory management practices and processes across the company. You can define lead time, reorder points, safety stock, and set up alerts & notifications for approvals & authorizations, for inventory purchase. You will have real-time, accurate knowledge of inventory & items in stock across an organization. ERP Software also provides a variety of inventory management reports to understand trends and take corrective measures to ensure that manufacturers can maintain optimum inventory, reduce inventory-related costs, and improve profits.
4. Ensuring Optimum Utilization of Resources
Manufacturing companies must aim to make optimum utilization of resources to achieve cost-effective production. ERP software stores important information about plant, machinery & equipment in the organization. ERP defines specific conditions and triggers alerts for maintenance, routine checks, servicing, inspection, and maintenance. This ensures plant, machinery & equipment are in excellent conditions for producing maximum output.
ERP also provides reports such as Capacity Utilization Report, Overall Equipment Efficiency reports, Machine Downtime reports. All these provide insights on whether the utilization is up to the mark or not and take corrective measures.
5. Low Employee Productivity
Employee productivity & efficiency directly impacts the functioning of the organization Without an ERP software, employees spend a lot of time carrying out routine activities, data entry, paperwork, statutory compliance, follow up for approvals & authorizations, generating reports, reconciliation, and so on. They cannot focus on value-added tasks.
How ERP helps to improve employee productivity
• ERP reduces paperwork & manual work by digitizing & automating routine tasks
• ERP provides alerts, notifications to improve communication & coordination
• ERP provides e-Approvals via email that speeds up the process & reduces cycle time.
• ERP makes Reporting Easy & Fast, saving a significant amount of time of Employees
ERP saves significant time & efforts of employees. They can use this time fruitfully to focus on improving supplier relations, identify cost-saving alternatives, improving customer service, and so on.
6. Controlling Costs / Reducing Costs
Profitability is the ultimate objective of any business. Controlling costs or reducing costs is the best way of achieving profitability. E.g. If a manufacturing company can lower the manufacturing cost of an item from Rs. 100 per unit to Rs. 90 per unit, it will significantly improve the profit.
Without an ERP software, it will take a whole lot of effort to keep a close watch on various costs incurred for raw materials, purchases, procurement, inventory maintenance, etc. It will also be difficult to observe trends and identify problem areas.
How ERP helps cost controlling & reducing costs
ERP enables companies to define standard processes for procurement, inventory management, and more. This enables companies to save operational costs, which ultimately impact the profitability of the business.
Moreover, ERP provides real-time, in-depth reports for various costs incurred by the company. With ERP you can generate reports such as Cost of Production, Cost of Overheads, Departmental Expenses, Cost of Materials, Work in Progress (WIP), etc.
This helps to keep a close watch on the expenses and analyze the trends/pattern of expenses. Managers can verify whether expenses are according to estimates or exceed the estimations and accordingly take steps for corrective measures.
7. Supply Chain & On-Time Delivery
ERP software helps to ensure a robust supply chain mechanism that ensures the right product, to the right place, in the right quantity with the right quality, at the right price. ERP helps companies to establish material requirement practices, establish long term supply contracts, negotiate prices, maintain just enough inventory, set up workflows and rules for warehouse management, arrange inventory appropriately to speed up production, ensure quality standards with routine checks & inspections. All this ensures a robust supply chain and enables manufacturing companies to deliver products to customers on time.
8. Industry Specific Reporting
ERP enables one to define manufacturing KPIs Key Performance Indicators for every function of the organization. Thus you can monitor operations closely and recognize which operations are performing well and identify areas of improvement. ERP also provides reports at specified intervals for performance review & course correction. You can use the reports generated from ERP to compare how your company is performing against the prevalent industry standards.
ERP software helps streamline and automate business processes. It integrates operations and helps to implement effective policies and procedures to achieve Financial & Business discipline. All this helps overcome problems faced by manufacturing companies. ERP helps to achieve operational excellence and gain a competitive edge.