Is your biggest manufacturing constraint your ERP system?

Recognizing and overcoming manufacturing constraints is one of the main jobs of running any manufacturing operation. You have your standard:Blog_02.18.19

  • Materials constraints
  • Equipment constraints
  • Labor constraints
  • And the list goes on…we’re only at the tip of the iceberg.

But what about your ERP system? Is it the constraint that’s holding you back? How do you know? Here are 7 signs that your ERP system might be the biggest constraint of all.

1. You don’t have real-time visibility into your operations.

Looking in the rear view mirror is a dangerous way to drive – and a risky way to run your manufacturing business. If you are still using after-the-fact reports to see “how things are going” you are missing opportunities to adapt to current conditions. Not only can powerful business analytics tools provide insight in real-time, but low-cost Internet of Things (IoT) devices can automatically recognize variables and take actions like replenishing inventory and scheduling maintenance – without human intervention. The more visibility you have, the more flexibility you create. Having visibility into your supply chain can help you reduce inventory costs and reduce the risk of having materials shortages.

2. You’re still using an infinite capacity planning model.

If you are still using an MRP system for planning, you’re likely also still using infinite capacity planning. The obvious problem, of course, is that you have constraints. Your work centers are not ready to accept tasks at any moment. Tasks must be prioritized and queued up for production. Many companies work around this issue by having a separate scheduling system – but why? Modern ERP systems like Microsoft Dynamics 365 for Operations have demand planning, production scheduling – and a host of other features – all in one system. Any changes are reflected throughout the manufacturing process.

3. Your sales process and manufacturing processes are disconnected.

Your customers are the reason you are in business. Missing delivery dates can cost you your reputation – and future business. When the sales order processing system and the manufacturing resource management system are disconnected, you risk running into all sorts of issues. Sales may think that materials are on-hand, but in reality they’ve been committed to another customer order. Linking Sales Orders with Manufacturing BOMs eliminates duplication of effort and makes it clear what is available-to-promise. Orders can be broken into digestible chunks for production. Inventory levels stay balanced.

4. You keep missing your demand forecasts.

Demand forecasting is a tricky process – and a high priority for most manufacturing companies. Too much inventory creates risk and unnecessary inventory holding costs. Too little inventory is a missed revenue opportunity. Your ERP system should allow you to combine and adjust your demand planning process using multiple variables – like sales order history, seasonality and other factors.

5. Buffer inventory isn’t automatically replenished.

“Take one, make one” is the ideal scenario for replenishing buffer inventory – but it isn’t always possible. What should be possible however is to identify a targeted stock level for your buffer inventory. Then, when that inventory is drawn down below its reorder point, the replenishment process is triggered with a kanban or pull signal to build more, but only enough to replace what was used.

6. Your inventory mix & leveling is problematic.

Too much. Too little. Wrong inventory. If inventory mixing and leveling is an ongoing issue, it needs to be addressed. Our very own Phil Coy wrote an excellent blog series about Manufacturing Production Scheduling that includes best practices for inventory mixing and inventory leveling. Definitely worth a read!

7. You are over reliant on Excel spreadsheets.

Microsoft Excel is a beautiful piece of software. It can perform all kinds of functions. However, it can also be easily lost, written-over and is not intended to be a database or a work around for tasks that could and should be done within your main ERP system. Having too much data in Excel is a sure sign your ERP system is your biggest constraint.

Author:  Doug Bulla, VP-Business Development

Other articles you might be interested in:

Production Scheduling – 7 Lean Principles
Production Scheduling – Schedule at One Point
The Difference Between Field Service & Connected Field Service