Manufacturers can stay competitive in their fields by squeezing as much profit out of manufacturing processes as is possible. Some of those costs are direct and fixed, such as labor and supply costs. Manufacturers have less control over certain other indirect costs, such as manufacturing equipment depreciation and facility overhead costs.
Inventory control costs lie somewhere between these two extremes, but most estimates suggest that inventory costs account for as much as 25 percent of total production costs in a manufacturing facility. Controlling those costs is generally a function of tracking inventory and supplies throughout a manufacturing operation.
Most manufacturing companies are now using manufacturing ERP systems to track and trace inventory throughout their manufacturing operations. For example, the Italian electronic components manufacturer, BAMES Group, adapted its ERP software to track defective products. When the company’s quality control or customer service units identify a defect in any product, that information is immediately fed back into the ERP system and the company’s manufacturing managers can change designs or production to reduce or eliminate the risk of future defects.
BAMES also used its manufacturing ERP system to unify databases from different manufacturing processes to better identify where its products were shipped and installed. If a customer identifies a defect or problem with any product, the company uses the unified database to locate similar products and to change manufacturing processes to remediate problems with any assemblies or components.
The benefits of a manufacturing ERP system go well beyond identification and remediation of defects. Using ERP to automate the tracking of manufacturing operations allows production teams to:
- reduce lead times and to allocate supply inventory more efficiently as product orders are communicated directly into production teams
- increase order fulfillment projections and improve customer experiences by matching manufacturing times more closely with distribution and shipping schedules
- improve regulatory compliance for products affected by variable regulations, as regulatory matters can be incorporated directly into an ERP system
Likewise, manufacturing managers will appreciate manufacturing ERP system information that enables them to:
- improve manufacturing schedules to minimize tooling changeovers, thus reducing production costs
- reduce scrap and increasing throughput
- enhance order fulfillment transparency by allowing both internal manufacturing teams as well as the customers themselves access to information about fulfillment of their product orders at all stages of a manufacturing process, from order placement through shipping
Technology improvements will continue to make manufacturing ERP systems an important tool for tracking inventory through manufacturing processes. Bar code readers are already automating data entry processes that had previously required manual data entry. With improved bar code and GPS tracking, the progression of inventory through a value-added manufacturing process can be followed with pinpoint timing and accuracy. Finished products can be similarly tracked from the end of a production line through to delivery and installation at a customer’s location.
This tracking capability further adds to management’s ability to plan future production runs and product or design changes. Manufacturing ERP systems give managers insights into how much time is consumed by a production run, how resources are consumed during a run, when supply orders should be made to optimize pricing and delivery, and how changes in production lines can affect quality and efficiency in manufacturing. They also give operations personnel more flexibility to respond to changes in orders as they happen, without introducing substantial delays into production schedules. As more data is fed into a system, planning and forecasts become more accurate and reliable, and both operations and profitability see substantial improvements.