ERP For Manufacturing: Importance, Features, and Benefits

The manufacturing sector is undergoing a massive digital transformation with the emergence of IoT and Industry 4.0 technologies. From production to payroll management, technology-based solutions are transforming every manufacturing function. One of these solutions is Enterprise Resource Planning or ERP.

ERP in manufacturing plays an important role by integrating various business functions under one umbrella. Today, we will discuss the importance, benefits, and features of ERP implementation in the manufacturing industry.

Why do Manufacturing Companies Need ERP?

Be it a small-sized manufacturer or a global manufacturing company, they can benefit greatly from the manufacturing module in an ERP solution.

ERP tools are perfect for any manufacturing company. ERP manages and integrates processes including manufacturing, procurement, supply chain, and distribution.

In addition to improving production efficiency, manufacturing ERP solutions provide 360-degree visibility into daily operations. Effectively, ERP for manufacturing acts as the single “source of truth” providing the most up-to-date information to any department or business process. With increased visibility, business stakeholders can coordinate and collaborate more efficiently.

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Main Features of Creating an ERP System

The ERP solution consists of several manufacturing ERP modules with functionality to improve business functions. Following are some of the main features of ERP for manufacturing companies:

1. Manufacturing Module

The manufacturing module is a key component of any manufacturing ERP system. Starting from materials requirements planning (MRP), ERP solutions have evolved to add more manufacturing related modules such as production management and manufacturing execution systems.

The manufacturing module allows manufacturers to plan their production schedules by ensuring the availability of raw materials and production machines. These modules also improve manufacturing processes by tracking output against estimates. They also provide a real-time view of manufacturing operations by capturing data about in-process and finished products.

2. Inventory Management

Every manufacturer needs a healthy stock of inventory to produce their products on time. With an inventory management ERP module, manufacturers can have complete control over available inventory and raw materials. Additionally, just-in-time and MRP help manufacturers streamline their inventory purchasing.

3. Automatic Process

With ERP-based automation, manufacturers can automate their manual processes and reduce human efforts and errors. With manufacturing ERP, companies can automate various processes such as sales invoicing, procurement, and HR functions.

4. Quality Control

Poor product quality can be detrimental to any manufacturing company. With quality control, manufacturers can ensure that their finished products meet quality standards and regulations. For its part, ERP tools can monitor the quality of the manufacturing process from start to finish.

5. Accounting and Finance

Apart from the manufacturing module in ERP, the accounting module helps manufacturers to track their financial transactions and accounts. Effectively, this feature allows manufacturers to increase their profits and reduce their business expenses. Through integration, accounting managers can also allocate the right budget for procurement of raw materials, labor and transportation.

6. Supply Chain and Distribution

Inefficient supply and distribution chains can delay production and delivery of finished products. ERP solutions' supply chain management features track the real-time movement of goods and supplies throughout the supply chain. This includes suppliers, manufacturers, distributors, retailers, and end customers. Additionally, this module allows manufacturers to easily manage products and/or materials for refund or replacement.

How ERP Can Improve Manufacturing?

Next, let's discuss the main benefits of ERP for the manufacturing industry.

Main Benefits of Creating an ERP System

Following are some of the key benefits of ERP in the manufacturing domain:

1. Increase Productivity

Through its integrated approach, manufacturing ERP solutions provide a centralized solution to optimize available resources. With an effective ERP solution, manufacturers have real-time information that can help in making better decisions. This can increase productivity in the long term.

2. Eliminates Process “silos”

Without ERP integration, every manufacturing process works as an individual silo. Process silos create an “invisible wall” between business functions, resulting in uncoordinated efforts and inefficiency. ERP eliminates process silos by providing visibility across all manufacturing operations and processes.

3. Reduce Business Costs

With ERP-based automation, manufacturers can automate their manual processes and reduce human efforts and errors. With manufacturing ERP, companies can automate various processes such as sales invoicing, procurement, and HR functions.

4. Improve Forecasting and Reporting

Manufacturing companies often face critical situations where there is a sudden increase or decrease in demand for a product. With real-time ERP data, manufacturers can forecast demand by understanding market trends and factors. Manufacturers can produce accurate forecasts and reports based on historical data and trends.

Which ERP system is best for manufacturing? Now, let's see how manufacturing companies should choose the best ERP tool.

Choosing the Right Manufacturing ERP Tool

Manufacturing ERP solutions mainly consist of custom ERPs and off-the-shelf ERPs. The right ERP solution is one that suits the manufacturing company's business needs.

For example, based on how they are used, ERP solutions can be categorized as:

• Local ERP solutions are implemented on your local system. This provides complete control and ownership over the ERP implementation. On the flip side, on-premise ERP is expensive to operate and has limited scalability for business growth.
• Cloud-based ERP offers more flexibility and scalability than on-premises ERP. It is run and maintained on an external cloud platform, hence more cost effective.
• Hybrid ERP menggabungkan ERP lokal dan cloud. Ini membantu produsen memanfaatkan yang terbaik dari kedua dunia. 

For example, every manufacturer needs a Finance and Accounting module to track their financial transactions and generate real-time accounting reports. For companies with a growing customer base, customer relationship management or CRM modules are critical to retaining and growing their customer base. Likewise, every product manufacturer requires

Conclusion

The manufacturing industry must continue to digitize its operations to adapt to the changing business environment. Manufacturing ERP solutions like SAP enable manufacturers to achieve operational agility and process efficiency. For general manufacturers, ERP solutions such as SAP Business One can reduce their operational costs while providing increased productivity.

Are you looking for a reliable ERP implementation partner for your manufacturing company? We can help. Contact us with your questions and business details today.

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