Industry leading manufacturing companies tend to use their ERP systems more extensively throughout their organizations, and they also achieve better results than their competitors. Here’s an overview of the ERP modules that leading manufacturers are using, and the improved performance they achieve as a result.
Purchasing
Nearly 90 percent of industry leaders use their ERP system’s purchasing module, while only 75 percent of industry laggards use it, according to a 2014 Aberdeen Group report. Purchasing is a key module because it helps control expenditures, but even more important, it provides data for purchase analysis.
When the purchasing team can see the annual or quarterly expenditures for certain commodities, it allows them to place orders more strategically and to negotiate from a position of strength. The resulting cost savings help to improve margin and overall profitability.
Inventory Control
According to that same Aberdeen Group report, about 10 percent more leaders than followers use their ERP systems’ inventory control modules. Not coincidentally, leaders also have more accurate inventory records (97 percent accuracy) than followers (87 percent accuracy).
Inventory accuracy is one of the single biggest predictors of manufacturing industry success. Accurate inventory records affect everything from meeting shipment dates promised to customers to keeping the plant running with the right parts on hand.
Meeting customer dates makes customers happier and more likely to buy again, resulting in increased revenue. Keeping the plant running increases efficiency and keeps costs low and throughput high. It eliminates wasted time paying workers idled for lack of materials and time spent on fruitless searches for missing components. In addition, inaccurate records increase the need for safety stock, which increases cost for additional storage space and material handling. Inventory accuracy is well worth the time it takes to achieve.
MRP
MRP helps with long range planning. It can help to achieve better pricing by allowing companies to negotiate annual contracts for high volume items. Long lead items can be ordered in ample time to ensure industry-acceptable lead times when MRP calculates the net requirements. In addition, when companies know they have the material requirements covered with on hand and open orders, they feel more comfortable reducing safety stock. MRP can also help with promise dates on customer orders, since CSRs can see when the next planned order should be ready.
Running MRP helps reduce the cost of inventory by reducing storage space, safety stock and handling requirements. It also helps to keep costs low when buying parts because it facilitates long-range contracts. MRP can help improve operational efficiency and equipment utilization by reducing stock outs and component shortages. MRP also reduces the need for expediting charges or premium freight.
Master Production Scheduling
Master production scheduling is one of the most underrated parts of an ERP system. Although only slightly more than half of industry leaders use master production scheduling, those who do use it reap enormous benefits.
Master production scheduling helps companies to balance supply and demand, smoothing out production to prevent peaks and troughs due to seasonality or lumpy demand. This helps to cut back on unplanned overtime, which in turn helps keep costs low.
Master production scheduling can also help to predict the need for long range, non-product items such as new plants, new equipment, more people, new tooling or other items. This improved visibility helps to ensure better operational efficiency. Master production scheduling helps to ensure that production plans mesh with revenue plans and production capabilities, and as such it is an essential part of sales and operations planning. S&OP is an almost universal practice in industry leading companies.
There are many ERP modules that can have a profound effect on operational results, although these are a few of the most important.
