ERP in Process Manufacturing: A Data Revolution

A key benefit of ERP for process manufacturers is the standardization and centralization of business data. This not only reduces organizational redundancy, it aligns the business around a common version of reality. Because the concept of master data is new to many companies, it is sometimes seen as additional work, instead of less work.

Death to Duplication

The reduction in redundancy occurs as a result of multiple functional areas not having to keep up parallel versions of the same data in different legacy systems. For instance, the supply chain team within a process manufacturer almost certainly maintains a bill of material structure used to create internal manufacturing work orders, forecasts, and to plan capacity. Cost accounting needs to know the same things, but is likely to keep their own separate bill of materials with different naming conventions in the cost system. It is possible that there is a production scheduling tool that utilizes yet another stand alone bill of materials. Generally, development or engineering owns a spec sheet system that details what a product is, and all of the components that go into it. Merchandising might have a specially written variation of the bill of materials for replenishing sample materials. All of these different bills of materials are essentially the same information, yet they are all uniquely different as well, and they all require independent resources to update and maintain them. This phenomena occurs in a variety of data categories and a variety of job functions throughout a typical process manufacturing business. It does take some amount of organizational discipline to capture this benefit, because having only one source of master data eliminates a fraction of many peoples’ jobs, while appearing to be new and additional work for the person who is maintaining the data in ERP.

Find One Version of the Truth

Aligning the business around a common version of reality cascades naturally from only having one version of the truth: one bill of material, one recipe, one standard cost, one forecast. Determining what the right “one” is can be an argumentative process within an ERP implementation; in the long run it is more efficient to simply decide who owns any given data and administer it as a benevolent dictatorship. The reason is that every functional area has a different agenda, and wants the math slanted toward their agenda. Supply chain wants liberal conversion factors on bills of materials so they don’t run short; cost accounting wants conservative conversion factors so that standard costs are as low as possible. A common version of reality pays even more dividends in standardizing the naming conventions people use to describe products and materials.

The recognition of data consistency’s benefit for a process manufacturer grows over time, as users of ERP notice problems have just quietly disappeared. Do not be surprised if eventually, the importance of data control is recognized as a strategic issue, and administered on the corporate level.

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Tom Stephenson

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Tom Stephenson