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ERP’s Place in Manufacturing

A man checking inventory in a warehouse

What is ERP for a manufacturer?

ERP, Enterprise Resource Planning, is best regarded as an integrated software solution that addresses all back office operations for transacting, management and analysis. What does this mean for Manufacturers?

Let’s take a stab: ERP software provides a means to plan and execute all inventory movements to better fulfill customer demand with purchase, warehouse transfer and manufacturing orders such that customer fulfillment service improves with greater profit returned and less inventory investment needed. Not perfect but seems close.

What kinds of Manufacturers should benefit from an ERP?

These days virtually any manufacturer should expect a good return from their ERP investment whether they are:

  • Project Manufacturing where making something is managed as a full scale project with many departments collaborating such as project managers, technical sales staff, estimators, engineers, material planners and buyers, production control, cost accounting, and billing.
  • Discrete Manufacturing, where manufacturing operations and bills of material (BOMs) are already defined. Making something is more a matter of the shop floor following those instructions. Engineering disciplines handled the definition. Demand Management, Production Control and Materials Management handle the planning. Shop floor, warehouse and procurement handle the execution. Things are made in distinct quantities, perhaps as individual batches and perhaps repetitively. There may be a scrap allowance on BOMs.
  • Process manufacturing, where the manufacturing is more of a continuous, automated process, perhaps with liquids or particulate flowing in pipes from one transformation process to another. Often product is made with simultaneous production of potentially saleable coproducts or waste byproducts. Formulae (rather than Bills) are more estimates and there may be yield/shrink expectations throughout the manufacturing process.
  • Lean Manufacturing where a combination of lean work cells use highly characterized work instructions (derived from Value Stream Mapping and Continuous Improvement) and well-presented materials in such a way that material movement more resembles a predictable flow of product mix. A lot size of one unit is an objective. Visual signals trigger material movements designed to quickly adapt to changing demand and product mixes with the need for dedicated material planners. Lean manufacturing would ideally be monitored by Lean (Value Stream) Accounting where profitability is measured against a collection of similar products rather than for batches of each product, simplifying and improving accounting for overheads.
  • Or any combination of these.

Products for the above may be Engineered-to-order, Made-to-order from purchased materials, Configured-to-order from stocked subassemblies, or made to stock.

Read more about how enVista works with Microsoft Dynamics AX to implement ERP solutions.

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