If you’re one of the many manufacturers out there still using an accounting system like QuickBooks to track your production and distribution, you may consider switching to a manufacturing ERP system.
Why? Because even accounting systems packaged as ERPs — like QuickBooks Enterprise –lack industry-specific functionalities that are key to driving growth and efficiency for manufacturers.
What does an ERP have that QuickBooks doesn’t?
Master data management.
In other words, an ERP gives you a clear view into your organization by integrating key business information and processes so you can make data-driven decisions.
According to Technology Evaluation Centers (TEC), the top three benefits gained from ERP are:
- Reduced process times
- Increased collaboration
- Centralized enterprise-wide data
In this post, we will explain how implementing a properly customized ERP provides manufacturers with more immediate and long-term value than an accounting system. You’ll learn how it can help reduce costs, improve your ability to scale, and mitigate risk so you can keep up with the competition.
How a Manufacturing ERP System Does More Than QuickBooks
We have acknowledged the elephant in the room. There are still manufacturers out there who use QuickBooks or paper systems to track their products and operations. If you’re one of them, think about some of the business pains you have been experiencing.
Are any of these pains related to your organization’s daily processes, systems, or data?
Most likely, the answer is yes.
According to the Aberdeen Group, firms that lack ERP software experience:
- Redundant data
- Unaligned business systems
- Inability to track business processes in real time
Yes, you can customize lists, items types, categories, and classifications in QuickBooks. But at the end of the day, it’s just an accounting system. It understands transactions, invoices, payables, receivables, etc., but cannot capture data around the journey of your inventory or the progress of your workflow processes. Your visibility is limited, which means so is the information you use to make business decisions.
So, what features are included in a manufacturing ERP system, but not in an accounting system?
An ERP can track information around product engineering, changes, production, and delivery from the time the parts reach the facility, to the distribution of the finished products to your customer. It also has a built-in document management platform to manage revisions and change controls in real time, so what you see on the shop floor is the same as what you see on your mobile device during an executive meeting.
Here are a few things you can do with an ERP that you can’t do with QuickBooks:
- Generate bills of materials and their corresponding manufacturing routing
As a manufacturer, you’re generally focused on mitigating risk around system errors and business process failures, which is much more difficult and time-consuming to do without an ERP in place. But, reducing risk isn’t the only reason manufacturers find value in deploying an ERP solution. The next section will break down how adopting an ERP solution can improve business operations from the top down.
What You Can Do With a Manufacturing ERP System
Manufacturers are the number one consumers of ERP systems. Most of these firms experienced scalability, integration, and flexibility limitations that drove them to make a switch. A successful ERP implementation will benefit the organization from the top down in the following ways.
Provide Data Insights for Faster, Smarter Executive Decisions
An ERP can provide accurate data reports your leadership team can leverage to identify key business insights and harness opportunities for improvement. Small businesses reported that by implementing an ERP software, they reduced the time it takes to make decisions by 36%.
When tied with a manufacturing system, an ERP can help you track your orders and their progress, find your chokepoints, and recognize opportunities to reduce costs and manage risk. SMB owners actually prefer using ERPs over standalone solutions because of their ability to provide real-time visibility into their data by 48% compared to the 6% visibility without an ERP.
Report on Data That Matters to YOU
An ERP works to speak the language of your business by tracking your unique business-critical data and processes, such as:
- Units of inventory
- Bin locations
- Warehouse workflow processes
- Production progress and checkpoints
- Maintenance schedules
- Custom workflow and data elements
- Service requests for customer equipment
From this data, your firm’s leadership team, management, and departments can improve the management of production processes and make data-driven decisions that drive results.
Identify Shifts in Customer Behaviors
Most ERPs have CRM tools that track customer data. When you combine this information with the data captured around orders, deliveries, returns, service requests, and so on, an ERP provides key insights into customer behavior and needs that your executive team can use to make more strategic decisions for the business.
A well-integrated ERP allows for more informed reporting that can help you track fluctuations in current order management, production, shipping, inventory, etc. You can use this information to answer questions such as:
- Which products are most profitable?
- Which customers are purchasing these products?
- Why do they prefer these products over the alternative?
Your ERP should reveal the answers to these questions and enable you to forecast customer demand and preferences more accurately.
Control and Track Changes
Another feature you get with an ERP (but not with QuickBooks) is the ability to engineer revision control for changes to bills and materials, documents, workorders, and quotes. You can customize your ERP to have the following functionalities.
Efficiently Diagnose Production Issues
If a customer has an issue with a product, an ERP can quickly pull the product version and the specific components and processes used for its production. This allows the customer service and engineering team to diagnose the issue and provide replacement parts to repair the product.
Quickly Identify How Revisions Will Impact Finished Products
As customer feedback warrants changes to product engineering, changes to bills of materials and production will follow. Another function of an ERP is its ability to highlight where and how a part is used to determine what finished products will be affected by changes to the engineering master. This feature saves the engineering team a significant amount of time and reduces the risk of unforeseen consequences when implementing revisions.
Streamline Quality Control & Automate Documentation
If you’re subject to strict quality control requirements such as ISO-certifications or quality control requirements, you likely have to keep complete documentation of the history of approvals and associated workflows. An ERP with a properly configured engineering change module can automate and streamline this process to provide complete visibility into your audit trail of changes. This makes it easier and more efficient to achieve and maintain compliant quality control.
Consolidate Systems for Scalable Process Management & Training
Many manufacturers rely on a hodgepodge of business systems that have been pieced together to hold the place of an ERP.
While these methods may have worked for some time, they are often not scalable and pose a greater risk for inaccurate data and production errors. An ERP makes it easier to manage the manufacturing process because it eliminates the need for the ad-hoc systems and disconnected processes often invented internally to keep things running.
For example, for growing manufacturers – especially those completing M&As — it’s common for multiple business units to design various, but similar widgets for managing manufacturing and supporting processes. When there is a role change or a manager leaves, it’s challenging to train a new employee on processes their predecessor invented based on their personal preferences.
An ERP consolidates and automates these workarounds into one standardized system for the organization to rely on. As a result, employees are able to be more efficient, productive, and proactive. There’s no longer a separate system for receiving orders, manufacturing, inventory, accounting, and distribution. All parties involved in each step of the process use the same system, have access to the same data source and leave less room for error as a result.
Stay Ahead of Production Line Problems
An ERP solves issues with the production line queue and flow by taking the data from tasking at the line of production and feeding it back up to management, or the executive team. This allows the system to alert staff when problems like limited supply, backlogged orders, potential defects, customer service issues, or reaching production capacity are brewing.
The ERP gives you a framework to start tracking all of your critical data together and ties it back to units and dollars and steps in the process
Ready to Move on From QuickBooks and to an ERP?
Whether you’re using QuickBooks, or an existing ERP system, you should be continuously evaluating how your current solution provides value and where it fails to work with your business to improve results.
As you grow, your manufacturing requirements will change, and your technology and processes must be able to scale along the way. While an ERP provides the potential for a best-fit solution, customizing the solution around your unique processes and data elements is crucial for achieving the expected ROI.
Read our blog to learn more about why ERP’s value depends on how well it’s customized to fit your needs.
We have worked with a number of manufacturing companies who have successfully implemented an ERP. It’s not a quick and easy process, but with the proper planning and resources, it doesn’t have to get in the way of your business. The first step is understanding your specific needs and selecting the best-fit ERP solution for your organization.
Technology R&D is a critical piece of the Design principle in our Framework for Successful IT. At Aldridge, we work with our clients to understand their vision for the future and are continually exploring new technologies they can leverage for a competitive edge.
Are you ready to move on from QuickBooks and onto an ERP? Schedule time with an Aldridge representative to talk about your options and learn more about your next steps.