by Mike Wagner
Many manufacturers implement an Enterprise Resource Planning (ERP) system to streamline their established operations and manage inventory, sales orders, purchasing, production lines, shipping, routing, billing and a host of other functions. Those organizations that truly want to leverage an ERP’s capabilities, however, are extending its reach back to the engineering and design phases and using it as a tool for innovative product development.
When engineers are concepting a new design or seeking ways to improve existing products, the inclination is to have an approach that doesn’t limit boundaries so that ideas can flow freely. Some may consider the data contained in an ERP to be restrictive. However, the insights gathered from each component of a production line, capacity or the supply chain, for example, can reveal design improvement opportunities that might otherwise go untapped.
When a design revision occurs, many areas of a production facility are impacted, and a great deal of coordination among departments needs to happen in order for the transition to go smoothly. Here are ways engineers can leverage the exhaustive data contained within a modern ERP system to work with various departments and ensure their designs or revisions can be fully supported and implemented as smoothly as possible.
Purchasing and Billing
Consider that a food manufacturer wants to change an ingredient on its frozen pizza to improve flavor and reduce its supply chain costs. The formulators who developed the new ingredient list need to understand the resulting implications of the change.
The purchasing department not only needs to determine when to place a new order; it also needs to establish when orders placed through a previous vendor need to stop. Acquiring a new vendor involves getting them set up in the billing system as well as possible reference and credit checks and payment terms. These steps take time. An additional consideration is the potential severing of a vendor relationship that provided ingredients in the past. Are there contractual agreements or penalties that need to be fulfilled prior to making the switch? If some ingredients are still secured through a previous vendor, will those costs be impacted as a result of the change? And will the billing department need to review and revise customer invoices to reflect adjusted pricing?
An ERP system can give a big-picture view of all these touchpoints to aid purchasing and billing to work together with engineering to make sound decisions.
Purchasing will also need to work with inventory managers to determine proper timing. The warehousing requirements to adopt a new design or product conversion is a major consideration, and inventory specialists must be able to accommodate any new parts or components. Space is limited, so having a grasp on available warehouse space to house additional parts is critical. Just as important is avoiding too much overlap or potential shortages between when an old part runs out and when a new part needs to be available. Tracking and SKUs need to be set up, and new Bills of Materials (BOMs) and routes must be implemented.
Other implications in inventory also must be considered. In the case of the pizza manufacturer, inventory will likely need to manage expiration dates, refrigeration capacity, temperature controls and even FDA compliance regulations. One simple design or ingredient change to a product will greatly impact inventory controls, and an ERP system can help coordinate each aspect and make engineers aware of potential issues.
The production line may be most noticeably impacted by a design change and requires accurate information to smoothly transition into a new process. Even a small change can mean significant disruption to a production line. Machines may need to be recalibrated or retooled. New BOMs and routing will need to be determined along with potential variations of each based on quantities. Additional workers and training may need to be scheduled.
Other factors can also affect production. For example, wait times for how long a product or component may need to sit on a machine before moving to the next production phase may vary depending on adjusted cool down periods or set up times. Transit times may increase if a part needs to be routed to another machine or facility for completion. The amount of fixed scrap or waste may vary depending on a new set up or newly introduced component, impacting order quantities, purchasing, disposal, and inventory. And for large-scale changes or new product introductions, new equipment may be needed, resulting in a potentially major capital expenditure to an organization.
An ERP system gives manufacturers the ability to structure routing and depict an accurate representation of what is happening to a product as it moves throughout the organization. It also provides functionality that allows engineers to see what other products could be affected by a change. Understanding all the factors that affect production allows operators to optimize operational efficiencies and provide accurate Capable to Promise calculations.
Sales and Marketing
Any new product launch or improvement presents an opportunity for increased promotional efforts. Will new packaging be required? Maybe “new and improved” branding? If so, marketing will need to produce artwork and coordinate with the packaging provider. If packaging is done in-house, capacity and timing needs to be considered as well as any equipment requirements to accommodate the new design. If outsourced, negotiations and coordination with a vendor need to take place.
A campaign to launch a new or improved product into the marketplace can take months of planning and involve website updates, social media initiatives, trade show displays, email campaigns and more. Sales also may need to be equipped with promotional materials and need to stay informed with real-time insights into new price structures, production timelines, and product availability in order to keep customers informed of delivery dates and to generate KPIs based on different versions, as well as analyze service costs.
When sales and marketing are aligned with engineering, purchasing, inventory, and production through the insights provided in an ERP, they can accurately determine when the new product will be available and be assured their efforts are perfectly synchronized.
Design for Manufacturability
Data contained within an ERP system span every department and can serve as an invaluable tool for engineers in the product development phase. Equipping engineers and designers with as much operational data as possible allows them to design for manufacturability and use the information to create better products, serve the overall organization for the greater good, and understand how feasible their potential changes are and how they may impact other departments.
ERP workflow software elements can trigger different areas of an organization to review how engineering change orders impact them so movement from one process to the next can be facilitated smoothly and with the least disruption possible.
It’s imperative for every department in an organization, including the engineers, to see an accurate picture of how even a simple adjustment can impact other areas, and these insights can easily be gained through a robust ERP system.