How much money can manufacturers make in an hour? It depends ….
How long does it take to perform each task in a workflow? Are machines working the entire time employees are on the floor? Are parts on hand when they’re needed?
These are all factors of efficiency. Idle machines and workers are expensive because the company is accruing overhead costs, without product or profit to cover it. Manufacturers need efficiency to lower costs and drive profitability, so every minute you gain is a huge win.
There are myriad factors affecting efficiency — which means there are just as many ways to improve operations. Let’s focus on three big wins: bill of materials (BOM), work in progress (WIP) and routing, and tracking/inventory replenishment.
To increase production and lower overhead, manufacturers need visibility into their processes, resources and costs. With an enterprise resource planning (ERP) system such as Oracle NetSuite, you can manage each of these levers for maximum efficiency.
Bill of materials (BOM)
The first way to save time and money is to define all the inventory components for a single assembly (e.g., manufacturing fees and raw materials), plus those required for a particular work order. Then, put assembly instructions into a BOM with the assemblies and work orders.
If you’re using ERP tool, everything can be tracked in real time. As work orders are fulfilled, inventory counts are automatically reduced. And inventory costs can connect to the general ledger to help you track the actual components and quantities that went into a product — and stay on budget.
Work in progress (WIP) and routing
Accurately tracking WIP can save a ton of time, especially if you have a high volume of work orders. Use an ERP to capture operational setup and run times, calculate the cost of finished goods, backflush material and labor, and record operational costs.
Once the data is all in one place, it’s easier to find cost-saving opportunities in production and procurement, streamline operations and decrease inventory holding costs.
You can also create detailed routings in an ERP, including scheduling parameters. You can track production times by operation to monitor floor performance and set accurate completion quantities and times. Some ERP tools automatically adjust operation start and end times based on previous workflows to keep schedules up to date. With reliable and timely information, it’s easier to optimize lead times and decrease costs.
Tracking inventory and replenishment
Manufacturers need to reorder inventory at the right time to keep stock at preferred levels. With an ERP, work orders drive the demand for components, which makes it simple to stay on top of inventory requirements. Reordering can be automated based historical or seasonal data on assemblies and finished goods and supply-to-stock timelines.
An ERP stores the history for every product assembly, so you can see and track each component. You can use that information to reuse existing inventory more efficiently, even undoing builds and reusing components.
Advanced manufacturing modules
ERPs like NetSuite have advanced modules to help you plan and manage quality, too. The data you collect to manage BOM and WIP can be applied toward costing, rough-cut capacity planning and finite production scheduling. Some ERPs capture data in real time on the floor using tablets or scanners.
What data does your organization need? Before you choose or customize an ERP, figure out which capabilities will materially benefit the organization, so you don’t pay for features that will never be used. Remember, you can add modules and capabilities over time, once your processes and results are dialed in. And you don’t have to break the bank to run more efficiently.
How Wipfli can help
Efficiency has a snowball effect on other parts of the business. As uptime and production increase, lead times and fulfillment rates improve — and so does customer satisfaction. Manufacturers can also lower inventory and distribution costs, since they’re only carrying what they need, when they need it.
One of the biggest challenges to efficiency is managing change and setting employee expectations. Work with an experienced team like Wipfli to pick an ERP solution and give users the training and support they need to navigate change. Ultimately, your tools should help employees and the company “do more with less”— as in less effort, frustration and waste. Let’s get to work.