9 manufacturing ERP modules to look for in your next ERP
Manufacturers of all kinds use ERP systems. The ERP industry began with MRP (manufacturing requirements planning) and grew to its current state where we now have enterprise requirements planning.
Manufacturing, however, is a very broad subject. Process manufacturing can range from a bakery that produces daily batches of bread and cakes to a petroleum refinery that produces gasoline and other products running all day, every day for months without stopping.
Discrete manufacturing also can range from one company that produces a single engineered-to-order product to another that produces items in long runs that each has a single serial number.
We will look here at modules that apply to any business, and somewhere the application applies but has significant differences in use between industries.
Operations and production management
Operations management is the heart of a manufacturer. Products must be made that work for the customers and meet their needs. Those products must be ready based on a schedule so they arrive when the customer wants a delivery. People and material components or ingredients need to be delivered so that operations can achieve the schedule. Financial management is connected too so that cash to pay the suppliers and employees is available at the right time.
A discrete manufacturer will use a bill of materials to break out all the component parts required for production. Those materials are assembled over time based on a routing or bill of operations, and eventually, they become a finished product.
A process manufacturer mixes ingredients based on a recipe. Combining those ingredients often follows equipment and the capabilities of the machinery but there are steps that must be followed to get the desired finished products. There can be different grades of product at the end where ”grade A” yield goes to certain customers and lower grades to other customers.
All manufacturers use and maintain inventory. Inventory often is the single greatest value asset for a manufacturer and it must be controlled and used optimally. They purchase materials based on forecasts or unique order requirements. Perfect inventory moves continuously until the product is completed but perfect inventory is an elusive goal. Management of inventory is necessary for both process and discrete manufacturers.
Inventory not in motion is a waste to be controlled. Inventory can become obsolete when customer demands evolve or when better materials become available. Control of obsolete and excess inventory is a constant effort. Good inventory control allows a manufacturer to dispose of unneeded inventory while it still has some value avoiding the need to scrap material with no value.
Any unnecessary material movement is also a waste. Inventory control requires that materials be kept where they can be moved to and from production with the least effort. Slotting is the term used to describe keeping materials in the optimum location.
Purchasing and supply chain management
Manufacturing runs on inventory and purchasing is at the core. This module starts with sales order and forecast demands. Then it moves from the product parent demands to the individual component demands to support those products. Next, it schedules those demands based on the production schedule and alerts the supply chain manager when the time is right to place a purchase order on a supplier.
The same module helps that manager watch that order until it arrives on the receiving dock, providing alerts as needed to prompt necessary follow up actions. It also tracks and records all the transactions. Purchasing management systems track incoming material through complex flows. An order might be placed with a distributor who, in turn, places an order on a foreign producer. That order moves from a factory in one country to another factory in another country for completion. It moves onto a ship and to port in the country where the manufacturer operates. It still needs to process through customs and transport showing up at receiving at the time needed.
Manufacturers who outsource production use purchasing management tools as well. The outsource producer needs to maintain inventory, and purchasing needs to know it is on hand or available when needed. Often components are consigned to that producer – physically moved and stored at the producer’s site while still owned by the manufacturer. The producer uses jobs or work orders within their shop and the manufacturer should track progress toward completion and return of the finished work so that the order can be checked and delivered to the customer who is waiting. That outsource producer must follow prescribed processes and quality standards and purchasing management allows that within ERP.
Sales and order management
Customers place orders for products they need. Those customer purchase orders become sales orders at the manufacturer. ERP signals operations to schedule work and purchasing to order component materials needed to fulfill those customer demands. ERP also alerts sales management informing them if the order is on schedule providing an opportunity to alert the customer when there is any risk. ERP records all the transactions required with links to the sales order demand. This allows for intelligent reporting.
Sales orders can be exact repeats of previous orders or they can be unique, quoted items ordered on a one-time basis.
People produce the products all manufacturers sell. The human resources module in ERP supports those people. ERP helps by controlling the payroll rates and benefit packages each employee earns. Management knows when an employee is due for an appraisal or raise, and the new pay rate can be immediately used to calculate payroll costs. The HR module works with the quality module tracking what training and certifications an employee needs to perform their current work or to become eligible for a promotion. Workers who fall behind in their certifications cannot be scheduled for work in the production scheduling module.
HR modules are where management uses future employee characteristics as a model helping locate and hire employees with the skills that will be required tomorrow.
Customer relationship management
Your ERP includes a customer relationship module or CRM. This module provides tools to track every communication between a manufacturer and a customer. Those communications can be verbal by telephone or in-person. They can be simply advertising materials sent by mail or digitally, and any other form. A phone conversation might begin with a simple, “How are things today?” and continue through several follow ups to a quote and sales order.
An outbound email is part of a promotion campaign. CRM records the date and time the message was sent and to whom. CRM then follows that message as it is opened and read, and possibly forwarded to others within the same or a different organization. CRM tracks the results of the campaign within a customer or prospect organization. CRM also tracks the overall results of the campaign.
Supplier relationship management
SRM or supplier relationship management comes as a part of your ERP. This module is where we track requests for quotations from suppliers, and keep a rating of those quotes to enable better quote management in the future.
SRM is also an important part of a manufacturer’s quality assurance system. The manufacturer requires suppliers to maintain quality standards and international certifications. Those certifications and standards are kept in SRM and alerts come whenever updates are needed.
BI or business intelligence is a key module for any manufacturer. ERP systems track every transaction in any module. The time and date, and who entered the transaction are recorded. These transactions make up the audit trail, which is a necessary part of management control systems.
ERP also runs on configurations and setup records within each module. These might be simple defaults for specific transactions. The configuration for a make to order business will establish links to sales orders as a default. A make to stock manufacturer, on the other hand, will have those defaults linked to inventory replenishment forecasts.
BI allows users to use any data table in the ERP and link to any other table, while applying filters, so that reports and dashboards that focus users and management toward actions and decisions chosen to move the business toward the goals that business set. That data can be displayed in spreadsheets or charts as needed.
BI might show a top executive the orders booked within the last hour. BI can also let a worker on the shop floor know which job they should start next with confidence that one is already optimized to meet customer demands.
The engineering module has an important role for manufacturers. Engineering is where bills of material and routings are recorded for use in production. Engineers ensure the ERP matches the documentation system and formally accepted drawings and other specifications. Engineering control over ERP allows operations to perform work with confidence the results will meet customer expectations, and any other compliance requirements.
Equipment breaks down and requires maintenance over time. Certain suppliers might be temporarily out of stock of certain material components. The engineering module allows engineers to develop alternate routings and bills of material that meet compliance demands when the usual processes are not available. One common use of this feature is an alternate routing when a shop resource is at capacity. Another resource might be available, but it runs slower, and the alternate routing allows production managers to schedule certain work on the alternate so that all customer demands are met.
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