How An ERP Can Help You Grow Your Job Shop
Sep 30, 2016
By: Mark Stevens
Manufacturing
Some of the job shops we talk with are using somewhat outdated enterprise resource planning (ERP) systems to manage their operations; others take more of a “homegrown” approach to managing their businesses, using Excel and other programs to piece together analysis and reports.
But all job shops have one thing in common: they’re focused on growth and the steps needed to achieve it.
What kind of equipment do we need in order to improve quality and reduce costs? What markets could we get into and how do we go about it? How can we add value to what we do (and profit from it)? These are the questions they’re asking, and when we suggest the first step should be a new ERP system, its value is sometimes unclear to them.
An ERP system, just like a new piece of capital equipment, is a tool that can grow your business. A piece of equipment turns out products and products are your livelihood, but without the right ERP system you probably won’t have the insights you need to take full advantage of that equipment. Without it you may not know how to improve your estimate-to-order conversion rate, how to optimize staff utilization, how to ensure full compliance with regulations, how to make order processing more efficient – and dozens of other factors that influence your success. To optimize your operations, you need a deep, 360-degree view of the inner workings of your business – and that’s what an ERP system does for you.
An ERP system monitors and interprets vast amounts of data about your supply chain, procurement, inventory, customer service, finance, production, human resources and others, integrates it and turns that data into actionable intelligence. Only with this kind of intelligence can you pursue new markets confidently, knowing you’re making the most informed and insightful decisions.
What Can You Get from an ERP?
With a cloud-based ERP like NetSuite, along with the expertise of a consultant that has vast experience with the manufacturing industry and job shops, you can:
- Track metrics for everything from the cost of materials to the value streams of individual production units
- Generate real-time reports spanning the full range of relevant operations for everyone from your finance team to supervisors and workers
- Track parts and materials availability, costs and quality from both primary and secondary suppliers
- Measure productivity and efficiency of equipment and workers, production bottlenecks and other variables
- Manage and balance inventory levels on orders and forecasts, even for lean/JIT operations
- Manage orders and match with inventories and production, and optimize packaging and shipping
- Ensure the satisfaction of both distributors and end buyers
What kind of improvements could you see by implementing an ERP for your job shop? Here’s an example of what you might expect (Source: SL Associates, 2014):
|
Category
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KPI
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Results
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Business Visibility
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360° Visibility & Actionable Insights
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Increased 70%-90%
|
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Financial Management
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Revenue Recognition
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Improved 45%-65%
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Compliance Support
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Improved 25%-45%
|
|
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Audit Time
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Reduced 30%-40%
|
|
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Reporting Time & Resources
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Reduced 70%-90%
|
|
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Time to Close Books
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Reduced 75%-90%
|
|
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Accounting Staff Productivity
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Improved 30%-50%
|
|
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General Ledger Consolidation
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Reduced 75%-95%
|
|
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Manufacturing Visibility & Performance
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Staff Utilization
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Improved 10%-25%
|
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Inventory Carrying Costs as a Percent of Revenue
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Reduced 2%-5%
|
|
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Obsolete Inventory Carrying Costs
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Reduced 60%-80%
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|
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Production Efficiency
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Reduced 50%-80%
|
|
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Sales & Marketing
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Sales Pipeline & Productivity
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Improved 40%-60%
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Order Processing Efficiency
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Improved 45%-75%
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|
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IT Management
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IT Support Resource Costs
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Reduced 50-70%
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Cost to Purchase and Maintain Servers
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Reduced 100%
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|
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Business Continuity / Disaster Recovers Costs
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Reduced 35%-55%
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The bottom line is this: An ERP is about capturing new market share and building your business just as much as a new piece of equipment is. In fact, for that new equipment to do you the most good, you need an ERP system to help you take advantage of it.
If growth is what you want, look at an ERP system to help you make the right decisions to get there.
Is an ERP right for your job shop? Reach out to one of Wipfli’s manufacturing experts and we’ll help you evaluate its potential.
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