What is an ERP?

Learn everything you have ever wanted to know about ERPs — plus why you need one.

An ERP system will manage all aspects of your manufacturing business, including production, planning, purchasing, manufacturing, sales, distribution, accounting, and customer service, from one fully-integrated system. They will help make you more efficient, help you deliver more jobs, and streamline your supply chain — all while lowering costs.

Read on to learn everything you need to know about ERPS, including the most important features for manufacturers, how everyone in your organization will benefit from an ERP, plus why every manufacturer needs one in their shop.

ERPs are the industry gold standard for a reason — nothing streamlines business processes, provides accurate real-time data, and reduces costs better than an ERP system. Below are the top 5 benefits of an ERP system for manufacturers.

1. Real-Time Data

Real-time data has revolutionized the manufacturing industry by changing how shops are managed, and goods are manufactured.

Real-time data provided by ERPs lets you know which of your production processes, machines, work centers, and product lines are operating at high levels of quality and efficiency — and which aren’t — which allows you to make changes quickly and fix any issues before they get out of hand.

Real-time data lets you continually track, control, and fine-tune your shop for maximum efficiency. With it, you can oversee your shop floor schedule, consistently improve product quality, and maintain your equipment to create a higher-performing manufacturing plant.

2. Improved Efficiency

ERPs help increase your shop’s efficiency by streamlining your business processes.

Take a look at Motrec International. Before they used Genius ERP for inventory management, they would close down for three days and spend $400,000 on taking their inventory. With Genius ERP, they now use the automatic and integrated cycle count for their inventory, saving them hundreds of thousands of dollars, increasing the accuracy of their inventory, lowering the amount of stock on hand, and reducing the time spent on purchasing.

ERPs streamline your tasks and business processes so you can do things faster, better, and with more consistency.

3. Better Collaboration

Using one integrated system across your organization — from accounting to engineering to production to shipping — will increase collaboration across your shop.

All your staff can work off of the same centralized shared database, making it easy to share accurate data and information between departments. ERPs break down information silos to create a more open, transparent, and collaborative workplace.

4. Reduced Costs

ERPs reduce operational and administrative costs because they help you better manage every aspect of your shop. From labor costs to supply chain management to your engineering department, an ERP will make you more efficient, lowering your operational costs. For example, ERPs can help you better manage things like long-lead items to prevent costly delays in production.

We just saw how Motrec International saved $400,00 on inventory management costs alone when they started using Genius ERP to track inventory. A recent study by the Aberdeen Group found that an ERP solution could reduce operational costs by 23%, reduce administration costs by 22% and increase on-time deliveries by 24%.

5. Better Analytics

We could write a whole blog post on this topic — in fact, we’ve written more than one — as there is so much to say about how ERPs give you improved business analytics.

In the past, manufacturers needed to comb through numerous spreadsheets and systems to pull out relevant data and then analyze the data to create meaningful reports. Now, the right ERP will not only house all of your data in one place, but will have built-in business intelligence (BI) tools to analyze data and create powerful reports to help you become more effective and productive — and make better decisions about your manufacturing business.

You also don’t need to have a Ph.D. or be a data scientist to understand the data and information ERPs will give you.

A good quality ERP system will have a full range of helpful and easy-to-understand reports. These reports will help you to analyze your operations, see where you need to make improvements, and make it easy to keep on top of your key performance indicators (KPIs).

Armed with the right data, you can set the best direction for the future of your business.

You already know ERPs enhance visibility, improve your business practices, and increase your shop’s efficiency. But how do ERPs actually do all of these things?

ERP (Enterprise Resource Planning) software systems are made up of modules that support the various business functions of your company, giving you high quality software solutions for every department in your organization — all the while increasing integration and connectivity across your operation.

ERP Modules

ERPs are integrated systems that run off of a central database — in real-time — to manage all of your business processes. Functionally, they are broken down into different applications, or modules, each with a unique set of tools focused on a different set of business processes. For example, some common ERP modules are accounting, inventory management, human resources management, and purchasing.

While all the modules will have a consistent look and feel about them, each individual module will include the specific functionalities required to address a particular business need. For example, an ERP accounting module will consist of a full-suite accounting software package.

The beauty of an ERP solution is that not only will each of your departments have access to best-in-class software tailored to their specific needs, but also — because the modules are grounded within the same system — information can flow freely between modules, connecting your entire organization.

Real-time data and connectivity facilitates information flow between all business functions, improves your shop’s performance, and allows you to make better, more informed decisions about your business.

Another great thing about ERP modules is that you can create a customized ERP solution tailored directly to your business’s needs.

When you purchase and implement an ERP system, you can choose which ERP modules you want and need to efficiently and effectively run your business. For instance, if you are a custom manufacturing shop that does many engineer-to-order jobs, you can choose to implement a Product Engineering Module designed specifically for these types of shops. Or, if you do a lot of service jobs, you can select a Field Services Module that makes it easy to manage service jobs and other fieldwork.

ERPs offer amazing flexibility to create the exact software system your organization needs to improve every aspect of your operations.

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Of course, choosing the right ERP modules is up to you and your business needs, but below are the most common ERP modules for manufacturers:

Human Resource Management Module

An HR management module will allow you to manage all of your HR needs, including tasks like payroll and tracking employee time cards.

One of the most significant advantages of using an employee management module within an ERP system is that it helps manufacturers know their actual costs by understanding how many person-hours a job takes. With this type of integrated software, you will automatically distribute your HR costs to jobs. This allows you to quickly break down your employee’s hours to accurately calculate your production costs — giving you a greater understanding of your true job costs.

Inventory Management Module

An integrated inventory management module will let you track your inventory needs, control your costs, and replenish stock based on actual demand.

ERP inventory management software lets you keep tabs on your inventory down to the serial number. For every item in your inventory, you will always know how many are reserved for a job, how many are available, how many are currently in production, and how many are on order — to avoid production interruptions and eliminate surprise material shortages.

Good ERP inventory management systems will also include multi-warehouse and multi-location functions, letting you keep track of inventory across your operation, no matter how many locations you have.

Supply Chain Management Module

ERP supply chain management lets you manage your supplier and vendor relationships in a system that is synced with all of your projects and your inventory. This allows you to improve relationships with your vendors, streamline purchasing processes, as well as ensure that you always have the right materials on hand.

ERP systems let you manage all your interactions with vendors in a single system — including quote requests, purchase orders, receiving, and invoicing — to better control costs. You can easily evaluate vendors on several factors like on-time delivery, quality, and cost, guaranteeing that you always choose the right supplier for every job (and ensure raw materials are always on hand).

Finance and Accounting Module

Good manufacturing ERP systems will include a full-featured, multi-company, multi-currency accounting and financial management system that is easy to use — and ensures that your accounting department is in sync with the rest of your business.

Real-time data and fully customizable dashboards allow you to easily manage your accounting and financial management operations from one place. Using a single system that is fully integrated from quote to payment eliminates the need to operate and maintain parallel systems. With all financials in a single database, accounting staff won’t spend hours cross-referencing, re-entering, or reconciling data manually — and will have more time to focus on delivering critical reports and other vital tasks.

Customer Relationship Management (CRM) Module

A CRM is an indispensable tool for managing the sales process for manufacturers.

CRM modules incorporate many features that make managing the selling process easier, including a personalized sales dashboard for handling customer information, leads, and opportunities, as well as marketing automation tools to create marketing campaigns and mass emails. A CRM is also a valuable tool for managing the relationship you have with your current customers. More information about your customers can help you communicate more regularly and effectively with them, which will lead to a stronger relationship — and increased loyalty. 

An ERP helps CEOs and senior executives make better strategic business decisions by supplying them with comprehensive, timely, and reliable internal data. A good ERP allows senior management to leverage hundreds of built-in metrics, KPIs, and reports to improve their team’s performance and move their business forward.

ERP Benefits for CEOs

1. Better Decision Making

Arguably, the most significant factor in making decisions is having access to the right data.

Your business strategy needs to be driven by clear, comprehensive, and timely information to remain competitive and viable as a small- to mid-sized manufacturer. With the marketplace constantly in flux, the price of raw goods sky rocketing, and ever-changing developments in trade policy and within the manufacturing industry itself, you need an ERP system to help you move your organization forward.

A good ERP gives you access to crucial real-time data to help you make better strategic decisions. An ERP will let you access, aggregate, and analyze data to help you understand your business better to make more informed decisions, create a more efficient shop, and be confident that the path you have chosen is the right one for your business.

2. Improved Cost Savings

At the end of the day, keeping more money in the company coffers is the goal. Though ERPs may seem like a costly investment upfront, they will help you save money in the long term.

ERPs help your business become more efficient, which translates to more money in your pocket. ERPs help you streamline your organization and processes, meaning better supply chain management and inventory control, as well as lower labor costs — which all translate into greater profits for your company.

3. Enhanced Customer Experience

Keeping customers happy is the most important thing you can do to ensure repeat business.

If your customers like what you are doing, they are more likely to stay loyal — and recommend you to other businesses. Even though your customers will never directly interact with your ERP system, it is a vital tool in creating better customer experiences.

As your ERP helps you to streamline and make your business more efficient, you will offer more fair and consistent pricing, deliver a more consistent product, improve your service levels and delivery standards, as well as increase your customer service response times. All of this adds up to more satisfied customers. Happy customers will reward you by placing bigger orders — more often — leading to more business for you.

Accountants will benefit from an ERP by using integrated data to streamline all of their accounting processes. ERPs will speed up all accounting and financial management processes, not only saving you time (and money) but also giving you the financial data you need to make faster and better decisions about your business.

Often accountants will be the first group within your company to push for an ERP system as they know the benefits of integration and the advantages of using a single system to manage all business functions. With an ERP, they know that they can say goodbye to paper-based invoices and sales orders, multiple spreadsheets, and disparate accounting systems — improving accuracy and efficiency.

With all financials in a single database, accounting staff knows they will no longer have to spend hours cross-referencing and re-entering information, rekeying numbers, or reconciling data manually. An ERP system lets your accounting staff be more productive and have more time to focus on delivering critical reports and other key tasks without delays and frustration.

Accounting Software — and More

An ERP system includes all of the critical features of an accounting software package in one place — accounts receivable, accounts payable, payroll, and trial balances. It can handle all the activities your accounting department needs to take care of, like billing, sales orders, purchase orders, the general ledger, timesheets, expenses, and electronic payments.

Having all your accounting and financial information in the same place will save your accounting department time, let them better manage critical accounting tasks, and do big jobs faster — like close out a month in almost half the time it used to take.

But an ERP will do more.

An ERP will allow your accounting department to create better, quicker, more accurate, more specific, and more timely financial reports.

ERPs also connect your accounting department to all of the departments and divisions of your company, allowing important financial data to flow seamlessly throughout your organization, which will improve your accounting department’s ability to produce detailed and accurate financial reporting — and help you better understand which business lines and projects are profitable.

Armed with the accurate information and reports that your accounting department can give you, you will be able to make faster and more accurate decisions that affect the operations of your company.

ERP Benefits for Accountants

1. Manage all of your accounting needs in a single system

An ERP system that is fully integrated allows you to run your entire operation, including your accounting and finance departments, from a single system.

Using one system saves you time by eliminating the need to cross-reference and re-enter the same data into multiple systems and spreadsheets. A fully integrated system increases the accuracy of your accounting and financial reports by eradicating upload errors, input errors, and potential timing errors. You will also save the money you currently spend on maintaining and upgrading multiple systems.

A fully integrated ERP system lets your accounting staff work from a single customizable dashboard that includes all the information they need. You will be able to manage and keep tabs on various projects, accounts, and functions from a single screen, and always have a real-time snapshot of the KPIs and tasks that are important to you.

Another advantage of a fully integrated ERP system is the choice it gives you.

Love your current payroll system? An ERP system allows you to use external systems where they are advantageous as they can be easily integrated into your main ERP.

In this way, you can create a system that is tailored exactly to how you work. Without an integrated system, there is no choice. All processes must be completed externally by disparate systems, eliminating the ability to create the perfect integrated accounting system for your team.

2. Increase productivity and improve insights into your business

Many of your accounting and financial tasks can be automated entirely with an ERP. Instead of your staff spending almost half of their work hours on data entry, they will have more time and energy to focus on other tasks, such as creating detailed financial reports.

Access to real-time data from across your organization allows your accounting team to track financials better than ever before. You will have greater visibility into your company’s finances, including giving you the information you need to assess which business lines and projects are profitable and which need to be improved.

3. Accurate job costing

Job costing is one of the biggest ways your accounting and finance team adds value to your organization. Job costing is essential to your accounting team to properly prepare income statements — but it is also of major importance to your organization and your bottom line.

Precise job costing not only tells you how much each job you take on costs you, but it also helps you identify where you can become more efficient and save on costs. This can help you improve profit margins (or savings that you pass on to your customers in terms of lower prices).

A fully integrated ERP system lets you trace job costs throughout the production process and gather information on costs, such as the allocation of costs per employee wage rate/work center rate. Having this information at your fingertips lets you drill down on costs, so you always know your exact job costs — and can make quicker and better-informed decisions about how to make your business more efficient.

An ERP will give production managers all the tools they need to plan, execute, and complete complex manufacturing jobs. By streamlining manufacturing processes and giving valuable real-time feedback, ERPs allow production managers to optimize productivity, reduce costs, and enhance efficiencies.

High-mix, low-volume manufacturing is highly complicated and involves managing multiple processes simultaneously. An ERP empowers production managers to oversee all manufacturing processes from within one system, create a more streamlined and efficient shop, and, most importantly, it allows you to deliver unique and customized products to your customers.

ERP Benefits for Production Managers

‍Production Managers have a lot they need to balance—resources, labor, machine time, plant flow, and shop capacity, just to name a few—to get a job completed and shipped out the door. ERPs created for custom manufacturers make it easier for production managers to balance multiple jobs and competing priorities and ensure that your shop is always functioning at maximum capacity.

Real-time data provides production managers with the feedback they need to manage project milestones, and a connected and integrated system streamlines manufacturing processes — and facilitates collaboration between departments. An ERP will make you more organized and streamline your business operations, which will help you both increase efficiency and lower your costs.

An ERP makes purchasing easier for manufacturers by automating everyday purchasing tasks and providing accurate real-time data to ensure that you always have the right amount of stock on hand.

Purchasing is a complicated task, especially in custom or ETO (engineer-to-order) manufacturing environments. Unlike in more standardized manufacturing environments, raw materials and parts aren’t required consistently or straightforwardly in custom shops. Coupled with the need to procure items with long lead times — that often need to be ordered before the product has been fully designed and engineered — purchasing in ETO environments is stressful.

An ERP can alleviate the problem by streamlining the purchasing process through automating purchasing processes, providing accurate checklists of items to be procured, automatically monitoring inventory levels, and managing vendor relationships.

ERP Benefits for Purchasers

1. Streamlined purchasing processes

Think about the time and effort that go into purchasing: creating tracking numbers, filing orders, checking inventory, making a purchase history, coordinating with suppliers, and so on.

ERPs make purchasing easier by automating these tasks and providing accurate real-time data. An ERP is always managing your inventory levels in the background of everything you do, so you will always know what stock you have on hand and what needs to be ordered to complete a job. Most ERPs also let you create a PO with one click — saving you time.

ERPs keep track of which parts are required for which jobs, keeping you organized. A good manufacturing ERP — like Genius ERP — also includes an automatic reorder function. This feature alerts you when stock is running low and tells you it’s time to place an order — or even better, you can set it to automatically place an order for you.

2. Optimized supplier relationships

Managing relationships with suppliers is one of the biggest tasks a purchasing department must do. An ERP can help you create better relationships and streamline vendor communications.

With an ERP, you can create a robust supplier database — essential to all manufacturers that order multiple parts from multiple suppliers. From names and addresses to parts and materials offered, plus tax identification data, your ERP collects and organizes all this supplier information into one database. You will always be confident that you have the correct information about your suppliers, making it easier to submit requests and orders.

Using an ERP to handle your supplier communications will also streamline the process: By using a purchasing portal that is fully integrated with your current jobs and existing inventory, you can make simultaneous pricing inquiries for multiple items to multiple suppliers — and receive prices from suppliers without having to re-enter any information.

An ERP will also increase the negotiating power of your purchasing department by aggregating POs to give you more power to negotiate with vendors and ultimately save money.

3. Improved supply chain management

ERPs streamline and automate purchasing tasks, not only helping you to increase productivity — but also improving your overall supply chain management.

Supply chain management has been a thorn in the side of many, if not all, manufacturers over the last couple of years. Interruptions and delays have become the new normal, making procuring goods very difficult at this time. ERPs act as a “one-stop-shop” and provide manufacturers with a holistic, consolidated view of their entire supply chain, allowing manufacturers to make better-informed purchasing and procurement decisions.

ERPs help manufacturers improve their supply chain management in many ways, including:

• Integration of internal business processes;
• Enhancement of information flow among different departments inside the company;
• Better inventory management;
• Improvement of the company’s relationships and collaboration with outsourcing suppliers, customers, and supply chain partners;
• Streamlining purchasing processes;
• Increasing a manufacturer’s ability to evaluate vendors;
• And efficiently manage complex supply chain networks.

Your sales team will benefit from the integration, organization, and tools an ERP provides — but most importantly, it will help your salespeople close more deals. ERPs — especially those with integrated CRM systems — are vital to improving sales performance to increase your profits.

Why Do Manufacturers Need a CRM?

CRM stands for Customer Relationship Management and is a software tool that helps manufacturers organize their interactions with potential and current customers. CRMs are robust tools that track customer information and manage sales processes.

What a CRM can help you do:

• Track customers and their order history
• Identify business opportunities and new sales leads
• Streamline the sales process and reduce repetitive work
• Facilitate better support for current customers

Integration

A CRM that integrates directly with your ERP system will be a massive advantage for a manufacturing company.

Manufacturers rely on their ERP system to drive all aspects of their operations, so having a CRM that is integrated with your ERP system — allowing you to exchange data and information — will save time and make your sales team more efficient.

A connected CRM means you save time by not having to duplicate information between your two systems, for example, by automatically moving lead and customer data directly into your accounting module. A CRM that is integrated with your ERP also gives your sales team access to all the data in your ERP, such as price lists, historical data, past deals, and other tools that will help your sales team do their jobs quicker and with more accuracy.

ERP Benefits for Sales

1. Better Sales Performance

A CRM centralizes all of your sales information in one place, meaning your sales team will be able to manage all accounts, leads, opportunities, and communications within one system — meaning no more missed deals or opportunities because information got lost in the shuffle.

Well-documented information about a lead helps build trust and respect, which improves communication and the chances of closing a deal with a new client.

The bottom line is that a more organized sales team and a better-managed sales pipeline will lead to increased close rates and improved profits for your company.

2. Increased Customer Satisfaction

A CRM isn’t just a valuable tool just for potential customers; it’s also a useful tool for managing your relationship with your current clients.

Armed with more information about your customers, you can communicate more regularly and effectively with them, which will lead to a stronger relationship. You will also be able to quickly and efficiently respond to customer inquiries about current orders, improving customer service levels.

When customer support is strong and the customer relationship is well nurtured, a customer will tend to report higher degrees of satisfaction and heightened loyalty — which translates into more repeat business for you.

Engineers need an ERP system with unique needs in mind, including creating and managing Bills of Materials (BOMs), routing steps, and work instructions. Engineers also need an ERP that allows for the seamless integration of a CAD system with the ERP.

The engineering department, especially within ETO (engineer-to-order) and custom manufacturing environments, is one of the most critical departments in a manufacturing shop.  Highly customized work means a lot of engineering time is needed on every order that passes through these shops.

But all too often, ERP systems leave engineers out and don’t include the features they need to efficiently get their jobs done or integrate them better with the rest of your departments.

In a typical shop, transferring BOMs out of a CAD system and into an ERP may take up to 20% of total engineering time. Engineers are tasked with hunting down and reentering information into multiple systems. This not only wastes valuable time and increases the chance for human error, but it also decreases the productivity and efficiency of the engineering department because instead of focusing on more productive tasks, engineers are doing data entry.

ERP Benefits for Engineers

ERP systems have many benefits for engineers as they can speed up job progress, save engineering time, increase communication between departments, and improve engineering and manufacturing processes.

Many ERPs, even those designed for the manufacturing industry, all too often leave the engineering department out of the loop. Most manufacturing ERPs will connect many departments and functions in a shop — accounting, purchasing, scheduling, and inventory management, to name a few. But, the engineering department, which plays a key role in the designing, engineering, and manufacturing a product, is left out.

Including and integrating the engineering department into the ERP system, and by extension, the rest of the organization, has many benefits and allows for the sharing of vital information between departments and even with customers:

Sales:

• Define cost to share with sales
• Define compatible options with sales

Production/Purchasing:

• Deliver a BOM with routing steps and work instructions
• Share the progress of designs/concurrent engineering
• Track milestones and feedback on achievements
• Make and track revisions

Accounting:

• Share and allocate R&D and project-specific time

Customers:

• Share drawings and estimates for approval (customer design reviews)
• Share project progress

CAD Integration

One of the engineering department’s most cumbersome and detailed tasks is creating the BOM. Many manufacturing ERPs will require the engineering department to painstakingly take a CAD model, make a list of all the needed parts, and then create the BOM, along with the routing steps and work instructions. To get this information synced up with the rest of the ERP, it must also be re-keyed into the ERP system.

Inefficient, to say the least.

The best manufacturing ERP systems will do this for you by connecting your CAD software to your ERP. This saves you all the above steps and lets your ERP interact directly with your CAD software.

ERP systems built to work with CAD software can automatically extract and create a BOM from the designs, drawings, and models your engineering department makes in CAD—which saves your engineers time and streamlines purchasing, requisitioning, and manufacturing processes.

Your engineers or drafting technicians will no longer need to waste hours manually creating BOMs. You can be assured that fewer errors will be made and that your BOMs will be connected to vital systems like inventory management—meaning it’s easier for you to know what parts are needed and what components must be ordered to get a job built and out the door.

During the design phase, while your engineering department is still busy at work designing and engineering a new product, your procurement team can have access to the BOM to see what critical long-lead items are needed. In this way, you can place the order early on, giving you time to get your hands on these parts before production begins.

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ERPs are one of the most effective business tools out there for manufacturers.

Manufacturers not only need an integrated solution that can help them manage their business processes, but they also need a powerful tool to analyze their data and help them make better decisions for their business. ERPs touch on and  improve every aspect of a manufacturing business  — making ERPs critical to your manufacturing business.

With an ERP, your operation will run more smoothly, you will make more informed business decisions, and you will reduce overall operational costs.

Advantages of using an ERP in your manufacturing business:

• Connect and integrate all departments within your organization
• Easily share data between divisions to streamline processes
• Reduce inventory costs
• Increase throughput by automating processes
• Use accurate data and reports to track progress, productivity, and performance
• Deliver more jobs on time
• Eliminate purchasing errors
• Create consistent infrastructure, so all business activities have the same look and feel
• Increase user-adoption rates through common user experience and design
• Reduce risk through improved data integrity and financial controls
• Lower operational costs
• Improve job costing
• Simplify accounting processes by integrating the department with the rest of your organization

In short, ERPs do it all.

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