Overcoming the Top 5 Manufacturing Business Challenges with ERP


Few industries have been left unscathed by the break-neck pace of change that has defined the 21st century. Businesses have had to find ways in which they are able to future-proof themselves by constantly evolving to meet the changing needs of customers and partners.

Manufacturers, for example, have significant considerations when it comes to their business processes. In order to compete in the global supply chain, manufacturers are subjected to changing regulations, shifting procurement policies and unstable availability of resources.

Thankfully, there has also been an evolution in software, and more and more manufacturers are relying on ERP systems to ease the burden of these challenges. In our complicated new world, an effective ERP system offers structure and the ability to provide business executives with instant insights to make better data-driven decisions. These informed decisions allow manufacturers to extract maximum value from both their factory investment and their workforce.

Let’s take a look at how ERP can solve the following common manufacturing headaches:

1 – Cost Fluctuations

One of the biggest challenges for manufacturers that has arisen out of an unpredictable climate, is figuring out how to remain profitable with fluctuating raw material costs and margins.

An ERP system solves this problem by, firstly, giving businesses integrated visibility into accounting, distribution and manufacturing operations. Through this, they will be able to easily identify and track cost elements and target areas of waste for improvement.

Secondly, an ERP system allows users to automate labour-intensive and time-consuming processes.

Thirdly, ERP enables an evaluation of detailed actual-versus-expected costs, as well as targets for cost savings and continuous improvement programs.

2 – Cash Flow Prediction

Running an effective manufacturing business, or any business for that matter, requires accurate forecasts of cash flow. Not only to keep the lights on, but also to see if and when it is feasible to expand operations. There are several tools in ERP software that can help with this.

For example, Accounts Receivable forecasts reflect how different customers pay on different terms and includes information, such as the average number of days each customer takes to pay.

Accounts Payable is another tool that provides invaluable information. Accounts Payable not only records invoiced purchases, it also flags special supplier terms, unapproved invoices, and purchase receipts not yet invoiced by suppliers.

3 – Managing Imports

As the world becomes more globalized, manufacturers are importing their raw materials from various locations, both local and international. Although this widens the pool of resources available to manufacturers, it can also become overwhelming and difficult to manage.

An ERP system offers several ways to assist in the management of raw materials. A Blanket Purchase Order facility enables specified pricing for an agreed quantity of product. Tools such as Requirements Planning and Factory Scheduling allow manufacturers to achieve the required service levels by implementing LEAN principles.

The software also allows manufacturers to hedge against unpredictable supply of long=lead-time items using minimum and safety stock levels.

4 – Time to Market

Improving time to market is a sure fire way for manufacturers to gain a competitive advantage.

ERP, by its very nature, works to improve how fast products are produced. For example, customer design data, such as drawings and CAD specifications, may be easily imported to speed up an otherwise time-consuming process.

It also features Factory Scheduling which allows for accurate quotes of lead times and delivery dates based on capacity and existing loads. And, an Engineering Change Control (ECC) function enables manufacturers to apply control and uniformity over design-to-market processes.

5 – Staying Informed

One of the biggest challenges in this increasingly connected world is strategic positioning based on better information.

ERP tackles this by offering constantly updated self-service reports and highly visual access to key performance data that keeps management informed, without draining resources. Financial Ratios provide an at-a-glance assessment of the financial health of the business, allowing for real-time monitoring to enable effective decision making.

There are also forecasting modules that provide tools to track and evaluate forecasts and can assist in producing the best possible outcome with minimum error.

Overall, the presence of an ERP system can set manufacturers apart in an increasingly competitive environment and provide invaluable business insights to meet the changing needs of customers and partners.

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