I am always on the lookout for good information regarding manufacturing that is unbiased towards any particular software package.  I think that most companies looking for information and solutions need to understand their business and how other companies in the same industry handle specific challenges.     Nick Castellina with the Aberdeen Group has provided some very good whitepapers that are specific to manufacturing.   I have written an article about a previous whitepaper titled:  “To ERP or Not to ERP In Manufacturing, It Isn’t Even a Question” by Nick and Kevin Prouty of the Aberdeen Group which is full of facts based on real manufacturing companies and how ERP has improved business operations and reduced costs.    I was pleased to see a new publication “ERP in the Process Industries, Functional Ingredients to Create a Good Mix” published in February 2013.

If your business is in process manufacturing and distribution or even mixed mode, this paper is a good educational read for business owners, operations managers, and even sales managers.   Process manufacturers include food, beverage, chemical, paint, pharmaceuticals, industrial cleaners, cosmetics, and coatings.    Unlike most discrete manufacturers, process manufacturers have to deal with a greater unpredictable demand as well as changing regulatory or safety requirements. Process manufacturers are more likely to lot track for obvious reasons and need the ability to do this in a manner that does not cause chaos in the production process or the front office handling a lot recall.  Raw materials often have a shelf-life, need special handling such as curing or refrigeration.   Having an ERP system in place that is set up correctly and USED correctly can make many of these challenges easy to manage.

The Aberdeen Group used five key performance criteria to distinguish Leaders from Followers.  This criteria is based on a 2012 ERP Benchmark Survey and is listed in the table below.  These Key Performance Indicators or KPIs were used because every manufacturer should be measuring them and good results indicate a successful ERP implementation and a strong manufacturing operation.    Aberdeen surveyed 112 process manufacturers for this study and the key point is that all companies surveyed with an ERP system had improvements in inventory accuracy and levels, production scheduling, and on-time shipments.

I was not surprised to see that this study also shows the module most important to a process manufacturer was Purchasing with Material Requirements Planning or MRP as second.  Having the raw materials in place at the right time is critical to any manufacturer, but in particular the process manufacturer.  They can’t make a batch of finished goods without an ingredient unless it is something that can be easily added later.  It isn’t like building a bike that you can build but leave off a screw until a shipment arrives.

If your business does not have a good purchasing and inventory module that your staff trusts, then you are wasting a lot of labor and probably materials too.  I know this is basic manufacturing 101, however in the sales process I visit prospects not yet on our Dynamics GP solution and nearly every company has inventory on spreadsheets because they don’t trust their database or they don’t have the right ERP package.  The staff also walks around manually looking for inventory prior to scheduling production just to be sure they can eyeball the raw materials.  What a time waster.  If you do have a database and it is incorrect, there are many reasons this can happen; based on my experiences here are a few:

1. Poor receiving and production operations – the dock staff and data entry for receiving and production must be trained, have a good attention to detail, and good at their job or fired.
2. Database is corrupt - inexperienced staff using the administrator password to make changes to the back-end table data rather than fixing on through the front-end.   Bad news…unless you are an expert and know what you are doing, like our Dynamics GP consultants.
3. Program is so heavily customized - system is not designed properly so that making a change in one place creates duplicate entries in the master files.  I just talked to a prospect that has this problem now with a home-grown system.  Although Dynamics GP is customizable, we have found very little business requirements that are not met with add-on or ISV products.  CIS also has done some breadbox customizations, but no large customizations.
4. Your ERP system is designed for discrete manufacturing -  many process manufacturers make the mistake of buying a discrete ERP system that does not understand how to convert pounds to gallons or density so you lose inventory due to system error.
5. Theft -   in some cases inventory is off due to theft which of course can cause changes to inventory and an ERP system does not have cameras to watch your staff.  However, Dynamics GP does have tight security controls so that an employee can’t steal your cash, formulas or other sensitive information.

The study also confirms  that alerts for non-compliance are a key challenge for process manufacturers. Automatic work flow is needed if certain criteria are not met.  This is another challenge that Dynamics GP meets head-on.  For example, we all know that margins are razor thin and if you allow your sales team to discount too heavily you can lose money on a deal.  Setting up a hold and alert email to a manager or management on an order that is below a certain profit margin could reduce or eliminate the risk of losing money.  Perhaps there is a raw material that the company can never be out of without the risk of sending home production.  Setting up an alert to send an email to the purchasing, operations, and production manager that inventory has reached a certain level would certainly wake up the team.

Real-time visibility into inventory levels, sales orders, accounts receivable, purchasing status and more should be in place in this day and age of affordable ERP systems such as Dynamics GP.  Businesses that have separate accounting and production systems with no integration spend too much labor on duplicate data entry and reconciliation.  I do understand that manufacturing companies should try and keep things simple and with the right software and implementation team this can be accomplished.

Custom Information Services or CIS is a Microsoft Dynamics GP Partner in North Texas.   If you would like more information on our product and service offerings for manufacturers, please contact me through email at nphillippi@customis.com or by phone at 817-640-0016 x 109.

Source:  http://www.customis.com/resources/library/7509-RA-enterprise-resource-planning.pdf
Thanks to the great research by Nick Castellina, Kevin Prouty and The Aberdeen Group a Harte-Hanks Company.

June 10, 2013 by Custom Information Services (CIS)

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Tags: Business Alerts, cis, custom information services, dynamics gp partner north texas, Manufacturing Solutions, process manufacturing erp, Texas Microsoft Partner
Posted in About Microsoft Dynamics GP, Accounting Software Research, Dynamics ERP for Manufacturing, ERP Software Information, ISV/Add On Products | 1 Comment »

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