Enterprise resource planning (ERP) software is a suite of applications that a business can use to collect, store, manage and interpret data from many business activities, including: product planning; manufacturing; sales and marketing; inventory management shipping and payment.
Interestingly, in its early days of inception, ERP was originally developed to meet the needs of manufacturing organisations, but its scope has grown to give executive teams visibility of the performance of the business across all of its primary functions.
The question is, is ERP still fit for purpose for manufacturing, or has it lost touch with its roots?
To be useful, any dedicated factory system should at the least support the measurement and analysis of the primary manufacturing KPIs.
Many ERP systems claim to enable KPI metrics for manufacturing, but the question is to what depth and how well they do it? To give actionable insight, any dedicated system must be capable of extracting data at an appropriate level of granularity. The aim is to provide insight that will enable the Production Manager to make decisions that will improve each metric from its standard.
For example, an ERP system may claim to track overall labour effectiveness (OLE), but does it know about shift patterns in detail? Is it capable of distinguishing between different plant and processes on the factory floor? Typically, ERP systems will aggregate such data. That may be a perfectly acceptable level of granularity for the Finance Director, but the Production Manager will struggle to understand who is underperforming, at what times, and when performing which processes. Without this level of detail it’s an impossible task to pinpoint the exact issue so that management can take steps to improve the situation.
Depth and breadth
Another key question is whether your ERP covers the breadth of issues and data related to the manufacturing environment. For example, as well as tracking the top manufacturing KPIs such as asset and labour performance, it should also be able to report on issues such as customer complaints, quality, tooling and safety. In our experience, ERP systems don’t typically cover this broad set of metrics and are incapable of considering all of these aspects concurrently and understanding the trends between them.
Analysis and reporting
For ease of analysis, ideally you will be able to use the same environment to analyse the data as that used for its collection. By unifying data collection and reporting, operators get feedback on plant performance without training in reporting tools. Because manufacturers’ needs have become more specialised, ERP systems often turn to third-party platforms to perform the required analysis and reporting, to the detriment of the usability of the system. This approach can limit the availability of data, because the reporting systems may sit with the accountants rather than on the shop floor.
Control and deployment
The effectiveness of your manufacturing systems will be significantly affected by the ability of your Production Manager to have a say in how they are setup, customised and refined over time. Often, however, the decisions that affect the deployment and customisation of your company ERP are taken by finance and IT teams – whose priorities and focus may well be very different from those running the manufacturing operations.
The analysts’ view
According to ERP market analysts Panorama Consulting Solutions, in its 2014 Manufacturing ERP Report, it states:
While the manufacturing industry is similar to other industries in terms of vendor market share and implementation duration, manufacturing ERP implementations are more likely to go over budget, cost more and have a higher cost-to-revenue ratio. Even though manufacturing firms tend to implement fewer modules than organizations in other industries, the cost of manufacturing ERP implementations is still significantly higher. The complexity of manufacturing processes and the level of customization and integration required often lead to higher implementation costs.
Manufacturing firms implementing ERP software also experience low benefits realization and long payback periods. Although ERP software was originally designed for the manufacturing industry, manufacturing firms have no clear advantage over other industries when it comes to realizing business benefits and realizing an attractive return on investment.
Whilst it is our opinion that ERP systems are not ideally suited for the rigours of data collection and analysis on the factory floor, they have an important role to play, especially in planning and maintaining good financial controls.
ERPs can perform best when are provided with real-time information from the shop-floor. MESTEC’s dedicated factory solutions interface with ERP platforms to improve the quality of the data that they use at the enterprise level without compromising the information used to drive improvement on the shop-floor.
We offer our manufacturing system ‘as a service’ for a low monthly fee based on the number of touch terminals you need. Whereas ERP systems take around 19 months to deploy, typically, we can get a factory up and running within a week.
Get in touch today to better understand how we can deploy our dedicated factory systems to complement your investment in ERP.
You might also find these posts useful:
- 6 essential KPIs for world-class factory performance
- Six root causes of poor labour productivity
- Five must-have features for your next shop floor data collection system
- How to turn small batch manufacturing from problem to opportunity
- Five reasons why your manufacturing KPIs fail
- Essential features for Advanced Planning and Scheduling (APS)