Orders are up, business is booming, and your manufacturing operation is expanding. The growth of your company is exciting, but expansion can present many new challenges. As your operation gets bigger, you will probably need to investigate potential upgrades for your systems.
Some Signs that Your Accounting Program Needs an Upgrade include:
- You are still using many manual processes and Excel spreadsheets
- Your team is spending tons of time completing menial tasks in accounting
- Certain advanced facets of manufacturing are impossible with your current systems, such as work order planning, scheduling, costing, and reporting; barcode inventory, COGS, etc.
- You lack visibility into your finances
- Inventory management is challenging and you either find yourself running out of material or overstocking your supplies, tying up cash. Does this sound familiar… “how can we have so much inventory in the warehouse and yet we never have the right materials for production?”
- Invoicing takes too long, slowing cash flow
If you are experiencing a few of these signs, it’s time to seriously think about moving to an Enterprise Resource Planning (ERP) system. An ERP system will allow your business to integrate and manage many key business processes in real-time, increasing productivity and reducing redundancies. Upgrading to an ERP will unlock many benefits and ultimately allow you to move your business to the next level.
Benefits of ERP Systems to Manufacturers
An ERP allows for a holistic view of your operation. This enables you to review all available information to make informed decisions. With a thorough understanding of your business situation, you can more make more strategic decisions. “The only way to avoid disruption is if the information is flowing as fast inside your company, as it’s going outside your company. Because if it’s going faster outside your company, and a competitor responds faster than you do, you’re gone.”
Dan Holme, director of product marketing for Yammer, SharePoint, OneDrive, and Stream
Efficiency in Data Automation
With an ERP, you no longer tie up resources in manual accounting and data entry. System information is updated in real-time across the business. The same data can be transferred throughout multiple layers of the operation. Costly mistakes are eliminated by reducing the need for multiple steps in data entry, saving you time and money.
An ERP forces a business to operate in a standard manner. The processes are clear and replicable and as a result, you depend less on a single person and the “tribal knowledge” they have developed over years of work. When processes are standardized, they can be better optimized.
Ability to Optimize Across the Operation
ERP software reaches almost every part of a business. Because of this, it helps you understand where inefficiencies occur across your value stream (akin to a form of value stream mapping). The centralization and standardization of data is extremely valuable for cross-departmental collaboration.
With an ERP system in place, you will gain much better control over your supply chain. An ERP allows you to forecast demand, manage inventory levels, and improve procurement, resulting in the right inventory at the right time. Better control over your supply chain leads to better cash flow for the business and increased profitability.
Easier Regulatory Compliance
ERP systems use best practice finance processes which makes compliance easier. The data is secure and validated across your platform, and an ERP has many built-in financial reports that can be generated automatically. These features can save you a ton of time and hassle in meeting financial reporting requirements.
Ability to Scale the Business
With more growth, your operation will likely get more complex, and you don’t want your software holding you back. A good ERP will facilitate the expansion of your business by adding functionality – new processes, new customers, or new products for example. It will also be flexible to adapt your changing needs as a business. Software scales up better than people do.
Implementing an ERP System
As you decide to implement an ERP solution, planning appropriately is key. Briefly, here are some things you will need to consider:
Budget – Though the benefits are great, ERPs range widely in price. Be clear on the costs associated with an ERP purchase. The biggest variable here is consulting costs.
Resources – Like any major project, if your company and the ERP vendor do not commit the proper resources to an ERP implementation, it will struggle and potentially fail. Appoint an experienced project lead.
Change Management – Your standard practices will be changing with the ERP. Are your employees open to this change, and is there a plan to proactively address their concerns?
On Premise vs. Cloud Solution – You will need to determine if your network infrastructure can support ERP, or if you want to pursue a cloud architecture. Both have their advantages and drawbacks.
Vendor Selection – The selection of a vendor is extremely important. Does the vendor have experience in your industry and with the challenges you face? Service and support will be crucial both early on and in the years to come, so a local vendor almost always has an advantage. Do not simply pick the cheapest option.
As your manufacturing operation grows, there comes a time to enhance your systems to support that growth. With the implementation of an ERP system, the doors are open to successfully transform your business but careful consideration and planning must be done to ensure success.
To learn whether your business is ready to upgrade from your accounting package, the list of things you’ll need to consider and best practices.