While an Enterprise Resource Planning (ERP) software system can provide many benefits to a small to mid-size business (SME), business owners often struggle with the decision to purchase a new system because of the costs. They usually have an accounting software package already, and perhaps another software  system in purchasing or the plant, is it really worth the time and cost to upgrade?

A fully integrated ERP system can have benefits far beyond accounting and inventory, it can open doors to more efficient operations and eliminate problems that you might not think were even related.

As companies grow they often develop systems that are based on the skills of the individuals involved rather than with any overall plan, there just isn’t enough time in a day. As the company grows, it eventually reaches a point where they can’t rely on just the memories of key people, systems have to be developed that operate consistently regardless of the people involved. Companies that introduce systems that take them to the next level continue to grow and prosper.

For example, the owner of a machinery manufacturer was struggling with what he thought was a service problem. He had more clients demanding service than he had service techs and he couldn’t justify finding and training new techs. But was service really the issue? It turned out that the company didn’t have any capacity planning capability. When they were chasing new business, they quoted whatever delivery time they thought would get them the order, based on their experience with similar past orders. As long as they only had a couple of major orders on the go at one time, they could keep a lid on things just by memory. When they got busy, people became overwhelmed, small things were overlooked and the system (such as it was) broke down.

With a paper based order entry system, they were behind before they even started. Engineering would be rushed and unable to create a complete bill of materials, but that would be “fixed on the floor as the guys had made something like this before”. Without the bill of materials smaller parts weren’t ordered and put into inventory so there were constant delays as parts had to be brought in, slowing production. Since the owner had to approve significant purchases, there were further delays as he was often on the road or in meetings. As the delays built up, the customer would start screaming, adding more pressure. When the machine was finally built, the testing was rushed and incomplete as the service managers who normally did the testing were in the field (fixing the last delayed project), so the order was rushed out the door with the hope that the service techs would fix any problems on start-up. Since solving problems in the field takes many times longer and costs more than doing it in the shop, there were cost overruns and unhappy customers, and a service problem.

How did an ERP system remedy the situation? By providing capacity planning capabilities, they could predict how a new order would affect the flow so they could plan where they might have to either reschedule assets, add temporary capacity or farm out work. Even if they had to commit to a shorter delivery time to get an order they could at least see the bottlenecks beforehand so they could plan around them. Since they made similar machines with only a few customized features, they could call up previous orders to quickly develop a complete bill of materials to reduce engineering and have all the parts in inventory before they were needed. This was a major improvement as chasing parts was a primary cause of delays on the floor. Since the owner had access to a daily screen of planned purchases on his laptop, he could approve everything in a few minutes per day via remote access, eliminating another delay. With improved planning and inventory management, even multiple projects were completed on schedule, leaving time for testing and debugging in the plant. And with start-ups taking less time, the service techs were able to handle more projects, solving the service problem, which was never really a service problem at all!

If you would like to find out  how we can help your business grow to the next level, contact us today!