Whether you are new to lean manufacturing or looking to invest in a new ERP, this guide will help you become better informed to make the right decision for your business.
With the technology landscape becoming more competitive every year, choosing the right ERP solution for your business can be daunting. For lean manufacturers, running an efficient business is fundamental, and implementing the right ERP for your business can make all the difference to your business’s success and growth.
There are hundreds of products on the market, so manufacturers must be educated on choosing the right solution to fit the exact organizational needs, goals, and scalability potential. Before diving into the main content of this guide, some manufacturing businesses may ask themselves, “Why do I need ERP software?”
Oracle NetSuite conducted market research to review 60 critical ERP statistics. Here are a few stats that stand out the most regarding manufacturing companies:
- Manufacturing companies are the #1 user of ERP software
- Manufacturers represent the largest portion (47%) of companies looking to purchase ERP software
- 40% of manufacturing companies stated they had better functionality when they implemented an ERP system
- An IDC survey found that of small businesses with 50-99 employees, 58% supported the investment in cloud and hosted solutions
In this guide, we will go over the following topics to help you become better informed on lean manufacturing, and how to choose the right ERP solution:
- What is ERP?
- Different types of ERP
- Benefits of implementing an ERP
- What is lean manufacturing
- Manufacturing ERP considerations
- How to choose the best ERP manufacturing
What is ERP software?
For the manufacturing sector, enterprise resource planning (ERP) is used for managing, planning, and essentially carrying out the operations of a business to boost the manufacturing process. With so many new ERP software options available, it is designed to offer flexibility, scalability, and the option to integrate all business operations in one place, to improve workflows and add efficiency.
A few of the many reasons companies choose an ERP system are because it’s cost-effective, reduces errors and wastage, and saves time.
ERP system functionality
An ERP system is created to collaborate and integrate various processes in an efficient manufacturing organization. Teams can save time by controlling processes in one platform. You gain visibility and control into order generation, sourcing, procurement, production, accounting, warehouse management, and all the logistics till the final delivery of the product is complete.
An ERP system allows manufacturing companies to centralize and gain visibility into their production line, enabling them to build a more productive and cost-effective business model, make better decisions, and design better strategies.
For instance, having inventory management functions linked to accounting gives business leaders the ability to see how inventory levels and purchasing trends are impacting their cash flow. Even greater operational transparency and efficiency occurs when all systems, like ecommerce and shipping, are integrated and data is flowing from and to each operation within the business.
Types of ERP Systems
There are three different types of ERP systems that can be implemented with different model options.
- On-premises ERP is implemented locally, or onsite, in the servers on the organization’s premises. It can be hosted on the company’s own computer and servers for full access, control, support, and ownership, once implemented
- Hybrid ERP is when cloud-based, and on-premises ERP system solutions are combined. This model provides ERP users the flexibility to migrate between both models
- Cloud-based ERP is deployed by an organization accessing and storing data on any device with an internet connection, usually through a subscription purchase
Cloud-based ERP is the most modern ERP used in the market today. It’s offered as a Software-as-a-service (SaaS) in the form of purchase modules. A company can purchase models per the organization’s needs, instead of buying a whole package.
Benefits of implementing an ERP
ERPs can provide real–time visibility, integration, and administration access across business operations. Using an ERP software, manufacturing companies can manage all facility operations and processes from procurement to payroll.
Some of the main benefits of an ERP system for manufacturing companies are:
- ERP systems boost the efficiency, flexibility, performance, scalability, and productivity of an organization
- ERP automation capabilities reduce repetitive tasks, manual work, errors, and wastage, which saves companies valuable time and money
- Real-time visibility and transparency enable companies to make better decisions and collaborate more effectively
- Cloud-based ERP specifically offers top-notch security to keep companies’ data safe and secure
- The right-fitting ERP will ensure the smooth running of operations and communication throughout the supply chain process, from suppliers to the end customer
The benefits are endless for implementing the right ERP system for your company. Later in this guide, we will learn how to choose the best ERP system and what questions you should consider before purchasing.
Now that we know about ERP and its benefits, let’s pivot to lean manufacturing and how they work together to provide the best solution and work process for your company.
What is lean manufacturing?
Lean manufacturing is a process that eliminates waste in all forms, by focusing the business’s processes on the finished product and customer experience. A lean method will increase productivity and decrease expenses, making it a smart and efficient approach for manufacturing companies.
The first step is implementing an ERP system to start moving to a lean manufacturing process. Lean manufacturing and ERP do not have to be kept separate. Implementing an ERP can serve as the core of your enterprise, which will manage your workflows and provide real-time insight into demand.
When looking to implement lean techniques into your process, there is a five-step thought process for guiding the implementation.
- Identify value
- Map the value stream
- Create flow
- Establish pull
- Seek perfection
To learn more about the five lean principles, check out this in-depth resource about the process.
If you want to improve your business’s bottom line, lean manufacturing should be something of interest. Adding that it provides a competitive advantage by increasing efficiency, enhancing customer experience, and reducing waste, which leads to increased revenue and profitability.
Manufacturing ERP considerations
When shopping for an ERP system, every solution will offer similar functionality. Still, the goal is to find the solution that fits your current business needs and can scale with your business. Here are some of the top ERP manufacturing features, functionalities, and benefits that should be considered:
- Inventory management features: These will provide real-time visibility on location, inventory availability, and status of required products or materials. Also, before any issues arise, you can identify any shortages and supply requirements
- Automation capabilities: All organizational functions should be in one place. The best manufacturing ERP systems will provide automation of functions, like billing, work orders, production planning, inventory updates, and more
- Improved customer service: Your customer information can be connected to all data, from your manufacturing operations through a CRM system and integrations in your ERP software. This can give you insights into customer activities to keep up with customers throughout the buying journey
How to choose the best ERP manufacturing software
As noted in the above sections, hundreds of ERP software options are available. Your decision should be based on whether the appropriate solution and model will be effective and integrate with your existing business-management software.
While some ERP solutions are very good at general functions, your business may require software specific to your manufacturing needs and processes. Choosing a solution provider specific to the manufacturing industry can develop the right solutions to improve your organization’s efficiency.
ERP software implementation is costly and time-consuming. Consider the most needed functions or processes where you want to reduce long-term costs and increase efficiency, and you should be able to find the best model that fits your business. Choosing the right ERP seems daunting, but it doesn’t have to be when you are prepared, informed, and ready to invest in the best software to fit your business needs for long-term success.