How ERP helps for Manufacturing Industry?

This age is called the Information age. Data is becoming increasingly important in everyday life and business is no exception. For an organization to succeed, real-time information required to make informed decisions. 

This is where Enterprise Resource Planning (ERP) comes into play. Enterprise resource planning (ERP) is a software that integrates different business functions under one platform to boost interoperability and share real-time data in a standardized format. From HR to Finance, Production to Customer Service, Environment and Occupational Safety, all the departments are interconnected with the seam-less flow of real-time data. Let’s deep dive to see how ERP has shaped the manufacturing industry and what the future holds.

Throughout the 1990s, across industries, most of the large companies started implementing ERP, helping them in presales to order-entry, from forecasting, inventory planning to invoicing customers. In ERP, businesses saw the potential to improve efficiency, operations, and customer service. Most importantly. Companies could have a shorter lead time giving them a competitive advantage. Companies around the world invested some $300 billion in ERP during the decade[i]. 

Read more about What is EPR?

During the late 1990s, small and medium-sized companies witnessed large companies’ business improvements and soon wanted to replicate the same for their business. However, these companies had a different scale and infrastructure as compared to large companies. So, ERP vendors started focusing and building new ERP systems for small and medium-sized companies and industry-related ERP solutions. This helped the companies to stay competitive. Companies also understood the benefit of linking their systems with other companies in the supply chain. This real-time exchange of information helps in better collaboration with suppliers, vendors, carriers, and other trading partners. 

ERP systems evolved accordingly. ERP systems not only integrate with other internal enterprise applications, but also with e-commerce, and even with the ERP of suppliers and customers. These interconnected systems are known as extended enterprise systems.

ERP has helped transform businesses across industries in many ways. Few of them are;

1. Savings on Operating Cost
2. Improved visibility due to centralized enterprise-wide data 
3. Helped in mitigating risk with adhering to regulatory compliance
4. Businesses have become nimbler due to real-time data access
5. Business functions with improved collaborations
6. An ERP integrates the global workforce and streamlines processes across multiple locations
7. 95% of companies improve some or all their processes after their ERP implementation[ii].

Challenges and Solutions for the Manufacturing Industry

In manufacturing, the importance and the challenge of an efficient supply chain can never be understated. Apart from the supply chain below are a few of the challenges faced and their solutions offered by the ERP for the manufacturing industry.

1. Real-Time Information 

With rapidly changing market needs manufactures need to be agile to respond. Having real-time information helps in staying agile. Real-time information is needed almost in every business function. With real-time sales information, forecasting can be done more accurately thereby reducing production cost. Without real-time information shipment tracking for product or materials is unthinkable. With real-time data, leadership can be up-to-date on financials. 

ERP linking all the business modules creating a seam-less flow of information makes it possible for this real-time information to reach the appropriate business function. Quick decisions and actions can be taken thereby saving cost and/or helping business grow. 

2. Flexibility

ERP solutions should have the flexibility to adapt irrespective of an industry or a product. For example, manufacturing industry is different from service industry. 

 Even with manufacturing industry, an automobile manufacturing facility will be very different from an electronic device manufacturing facility. 

Gone are the days when one-size- fits all products and solutions were developed. These days custom made solutions and products are the norm. Witnessing this change, almost all the ERP vendors have industry-specific solutions. These solutions deal with industry-specific best practices, risk, regulatory and compliance needs. An industry-specific ERP offers greater visibility, control and increases planning capabilities. It increases resource optimization and utilization. 

3. Inventory Management

Inaccurate inventory can lead to many challenges, delays in order fulfilment, lost inventory, inefficient use of available space, year-end write-offs to name a few. 

Few scenarios show how the company can lose its competitive edge. Like no inventory of the top-selling product or incorrect forecasting leading to excessive inventory. 

Properly managed warehouses will always have good inventory management practices.

ERP solutions have dedicated warehouse and inventory management modules specially created to cater to such issues. From MRP to scheduling and forecasting, all our included in the ERP modules. 

4. Analytics

ERP generates a massive amount of data as it touches every business function. This data can be used to understand patterns and recognize more growth opportunities. 

Historical sales data can help understand the popularity of products. It can identify any trends for a region or how sales happen in different seasons. By studying customer payment behavior, it can show predict customer payments.

Historical data also helps in analyzing the vendors and suppliers. With delivery times and patterns, organizations can understand their reliability on them.

Accurate forecasting and estimate of production are possible with such analytics.

5. Environment and Safety

Occupational Safety, Industrial waste, and hygiene now have become of paramount importance. Not only governments but all the stakeholders and the consumers are looking for environmentally sustainable businesses. Mitigating such environment and safety risk has become the norm. 

ERP modules take care of such regulatory and compliance needs. Assessing the hazards and the risk, following the health protocols, waste management, incident management are few of the highlights of solutions offered by ERP.

6. Emerging Technologies

With fierce competition gaining a competitive edge is becoming increasingly difficult. Businesses are exploring many emerging technologies to stay competitive. Emerging technologies like Cloud Computing, Internet of Things, Artificial Intelligence can integrate with ERP. For the manufacturing industry, the data generated with these technologies gives a detailed insight into the opportunities to explore and help in the machines’ proactive maintenance. 

ERP has come a long way. Gone are the days when the need for an ERP and its reliability were debatable. It has become an integral and essential part of almost all organizations. ERP has helped organizations across industries to reduce costs and to improve operational efficiency. ERP being flexible supports a growing business and the creation of new processes. It helps an organization with the best practices of the industry. The future looks promising as organizations are looking forward to having new emerging technologies integrated with their ERP, thus giving them a much-needed competitive advantage. 

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