Why Manufacturers Should Invest in ERP Software and Technology
Posted Tuesday, November 22, 2011 by Peter Kelly
Most manufacturers are very concerned with operations and place less emphasis on the finance or accounting operations. They understand where their money is made: on the plant floor. However, this thought process can often lead to much less attention being paid to how much time clerks are spending entering data and how much time is spent finding and adjusting inventory. I have seen a lot of companies doing it wrong with lots of inefficiencies and a lot of companies that are operating right!
A friend of mine is in sales and project management for a company that works with manufacturers - building conveyors, blenders, grinders, etc. for primarily the food industry. We often joke that he gets the deals before I do because even though the software I represent takes the order and prints the invoice, software does not mix the raw materials and make the finished good. Owners invest in what is going to give them the most immediate return on investment. I do think companies often miss the return on investment that they can get from having accurate inventory quantities and increasing their inventory turns by having the right raw materials on hand. Having a purchasing agent that is buying too much or too little can cost companies lots of money. I am not blaming the purchasing agent. If they don’t have the right tools in place
to notify them when materials need to be purchased based on lead times, min/max, demand or a forecast then they don’t know when or what to purchase. There is nothing worse than having a large order that needs to go out the door by the end of the week and not having the raw material or containers in stock to complete the order. You can end up paying extra for freight costs to get the material delivered or you have to pay a premium since your cheaper vendor is out of stock or too far to ship in time.
If you overbuy then you also have several risks: inventory costs for items sitting on the shelf, or perhaps items have a shelf life. I went to an industry association meeting awhile agoand the presenter talked about a coatings company buying three 55 gallon containers of water based paint that they only used about a gallon of a month. Of course the paint went bad and could not be reformulated. The explanation was that
they got a better price on buying 55 gallon containers, three at a time. However in this case they actually paid for more material than they needed and nearly all of it had to be scrapped. How much did that cost this coatings company?
MRP Consulting has become the largest Dynamics GP Manufacturing partner in North America. We have worked with over 600 companies Worldwide and are available for a 1-day onsite visit in which we will map out your current processes and measure them again your current systems. Sometimes a “tune-up” is all that is needed to keep your business running as it should. We can all agree that having the right software will not only improve internal processes and productivity, but will also improve customer relationships.
Give us a call today.