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Enterprise Resource Planning (ERP) is a software system that helps businesses manage their operations by integrating all key business functions such as finance, human resources, supply chain management, and customer relationship management into a single system. ERP software implementation in organizations can reduce inventory costs by 25% – 30% and raw material costs by around 15%. In 2021, the global ERP software market was worth $50.44 billion and is expected to be worth $117.68 billion by 2030, with a CAGR of 9.87% from 2021 to 2030. In the manufacturing industry, ERP has emerged as a game-changer to help businesses thrive in complex and competitive environments. To learn more about the potential benefits of ERP in manufacturing industry and how it can transform the industry, keep reading the article below!

1. What is an ERP System in Manufacturing?

Manufacturing ERP refers to Enterprise Resource Planning (ERP) software utilized by manufacturing companies to manage and integrate their core business processes. It serves as a central database for information related to product planning, production, inventory management, and delivery. An ERP system allows manufacturers to streamline their operations and improve efficiency by providing real-time data and insights into their business processes.

ERP in Manufacturing

An ERP system allows manufacturers to streamline their operations and improve efficiency by providing real-time data and insights into their business processes.

2. How can ERP help Manufacturing Industry?

The benefits of implementing an ERP system in manufacturing include:

  • Improved efficiency: With a centralized system, manufacturers can streamline their operations and automate many processes, reducing the time and effort required to perform routine tasks.
  • Better decision-making: ERP systems provide real-time data and insights into business operations, enabling manufacturers to make informed decisions quickly. 
  • Enhanced productivity: When integrating ERP in the Manufacturing Industry, it helps track inventory levels, production schedules, and resource utilization in real-time, which helps increase productivity.
  • Increased visibility: ERP development provides a holistic view of all business operations, enabling manufacturers to identify issues and opportunities quickly.
  • Improved customer service: With an ERP system, manufacturers can track customer orders and inventory levels, enabling them to respond to customer demands quickly and accurately.
  • Better financial management: ERP systems enable manufacturers to track financial transactions and manage budgets effectively, reducing errors and improving financial reporting.
  • Compliance and regulatory adherence: ERP systems can help manufacturers meet regulatory compliance requirements, reducing the risk of fines and legal action. 

3. Top Considerations before Applying ERP in Manufacturing

a. Cloud-based or on-premise ERP system

ERP pricing can be influenced by various factors, including the chosen implementation model. Typically, there are two types of ERP software: cloud-based and on-premise.

Cloud-based ERP systems are hosted by third-party providers, offering users the convenience of accessing the software from any device with an internet connection. This flexibility enables manufacturers to promptly address production demands. Moreover, maintenance and upkeep responsibilities are handled by third-party providers, reducing the burden on manufacturing companies. However, some may harbor concerns about data safety in the cloud. Nonetheless, taking data security best practices, such as encryption, multifactor authentication, and backups, among others, into account can serve as an excellent preventative measure against data breaches.

In contrast, on-premise software boasts a nearly impeccable level of security. On-premise ERP systems are installed directly onto a manufacturer’s hardware, allowing greater data security control. This ensures that only authorized personnel have access to sensitive information and lowers the risk of a security breach. However, on-premise ERP systems tend to be less flexible, take more time to implement, and place the responsibility for software maintenance on the manufacturing companies.

Cloud-based or on-premise ERP system

Cloud-based or on-premise ERP system

b. Modules to include in your ERP software

In the realm of manufacturing operations, there exist various intricacies that require specific ERP modules to derive maximum value from their implementation. It is impractical to generalize module selection for such a diverse industry; however, certain ERP modules are crucial to any manufacturing niche:

  • The Quality Management module plays an integral role in automatically conducting and documenting quality checks on materials and current work orders. This not only ensures that the final product is of high quality but also saves time and effort in manually conducting these checks.
  • The Serial Tracking module ensures reliable and optimized product traceability management. This helps in tracking the entire manufacturing process, identifying potential issues, and making improvements to increase efficiency.
  • The Bill of Materials (BOM) module enables efficient planning, revision control, demand forecasting, and product lifecycle planning. With BOM, manufacturers can better understand the materials required to make a product and their associated costs, allowing them to optimize production processes and increase profitability.
  • The Order Management module streamlines sales management, procurement, and shipments. With this module, manufacturers can manage orders efficiently, monitor order statuses, and optimize shipping processes.
  • The Warehouse Management module is indispensable to keep track of materials, controlling inventory, and optimizing the distribution process. With this module, manufacturers can efficiently manage their inventory and track their movement, reducing the risk of stockouts and increasing overall efficiency.

c. Which business systems need to integrate with Manufacturing ERP

Normally, there are 5 ERP integrations in the Manufacturing industry:

  • IoT systems: By utilizing IoT sensors, manufacturers can continuously gather and analyze data from various sources such as shop floors, warehouses, and distribution centers. This allows them to gain valuable insights into their production processes and increase visibility into their operations.
  • E-commerce systems: Connecting ERP with e-commerce platforms will help manufacturing organizations improve their inventory management practices and avoid stockouts. This integration can also help them monitor customer demands and make informed decisions about product offerings and pricing.
  • Human Resources systems: Manufacturing also often integrates the ERP system with the Human Resources system, to streamline onboarding and training processes, hence increasing employee productivity and reducing training costs.
  • Business intelligence systems: Integrating ERP with business intelligence systems can enhance reporting capabilities and provide new insights for discovering business opportunities. Data centralization provided by ERP can help organizations to better analyze and interpret data, enabling them to make more informed decisions and improve business performance.
  • Manufacturing execution systems (MES): These systems can help orchestrate processes on the factory floor and improve product visibility. This integration can lead to increased operational efficiency, reduced waste, and improved product quality.

4. Final Thoughts: Choosing your Trusted ERP Providers

In conclusion, ERP systems have shown tremendous potential in the manufacturing industry. Companies that invest in ERP systems will likely gain a competitive advantage in the market and achieve long-term success.

Want to adopt ERP solutions for your manufacturing? Leave us a message and we’ll reply as soon as possible. Our services cover a wide range of needs from platform migration to the development of custom modules to staff training. SotaTek ensures that our clients get the most out of their ERP integration and that their specific business requirements are met. Our main goal is to help you achieve maximum return on investment with ERP implementation.

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