Production/manufacturing is perhaps the most challenging economic area
that requires automation and support from an integrated system. If sales and distribution processes do not differ greatly from one company to another, when it comes to production companies, even in the same branch, manufacturing processes can be very specific and require usually a specific approach. It can be inferred that an ERP implementation in a production company is a challenge for any implementation consultant.
There are three types of manufacturing that dictate production methods that need to be adopted: unique manufacturing, mass manufacturing and repetitive production.
In all cases, managers give great importance to reducing production costs and complying with the agreed delivery dates.
“The need for accurate information in all production stages is felt more than ever, due to fierce competition today, where the price often makes the difference. Knowing the costs in any stage of the production process helps optimize the consumption of raw materials and reduces the time spent on every operation. This two aspects can support a competitive price policy.”– said Pavel Cristian Gabriel, Director of Research and Development at Alfa Software.
Here are some steps that can help companies optimize their production processes:
1. Knowing customer needs, integrating their requirements in the company’s ERP system and in the production process
To maintain long-term relationships with customers, we need to know their needs. We can get information about our customers relying on multiple channels: sales and marketing, service and support and other unstructured information. Most of the manufacturing companies have the departments mentioned above, whose activities have to be integrated with the company’s manufacturing processes. An effective ERP integration offers production data that can influence the offering process: for example: raw materials / materials needed in manufacturing / substitutes (existing stock and order quantities from suppliers, equipment, etc). Clients offers can rely on cost estimates, that can be made based on the production technology. It is clear that integrated information provided by an ERP can help understand and respect the clients`needs (term of execution, amounts and details), can differentiate the company from its competitors and grow its profits.
2. Defining the production technology, understanding the significance of production orders; predefined scenarios
Production technology is definded as a combination of methods, processes, operations made or applied on raw materials and data in order to produce an industrial or commercial product. Manufacturing technology in ASiS has multiple levels which include operations and equipment and help get estimated cost scenarios. A technology tree summarises quantities of materials or substitutes, and prices (that vary depending on the provider). ASiS calculates direct and indirect costs including a profit margin within the cost & technology scenarios.
As for the significance of the concept of “order”, it differs depending on the type of the product. It’s basically a big difference, for example, between mass production compared to producing different articles, in smaller amounts, with various changes required by customers.
In the case of mass production, for example, every order can be defined in the ERP system as a product and thereforeat a production report is available at any time.
3. Planning, tracking and monitoring human resources and other production capacities
The Gantt chart is the right tool to view machinery occupancy, orders or availability of human resources. In fact, an interactive Gantt chart is a tool that helps the company to act quickly and react effectively when it comes to changes in the production plan; it focuses on the resources currently available and anticipates future capabilities. Thus the company’s resources are used to maximum and processes are accelerated. Gantt chart favors elimination of production downtime by optimization of machine occupancy. And when it comes to monitoring human resources, reporting production accomplishments is also a component of the production process that ensures its effectiveness. From a tablet or by scanning the barcode for operations, reporting accomplishments is done in order to announce management of the stages products are in the factory and motivate workforce by interconnecting monthly remuneration to those achievements.
4. Reducing rejected products and non-compliant ones
The objective of reducing production costs should not affect in any way the quality of products. Thus, optimization of consumption creates major positive effects, which spread to the whole process of value creation developed within the company (eg reducing losses of raw materials in storage processes, reduced scrap, reduced defects in terms of after-sales service costs). Reducing scrap and non-compliant products is usually done through control management in the production process. ASiS can manage non-compliant products returning for improvements / changes on the production line. The application can also manage quality control during the production process differently depending on customer requirements.
5. Calculation of production costs
The production cost is an essential criteria in the decision making of producing a new item. Only through a more exact estimate of production costs and sale prices one can appreciate if revenues exceed expenses and if the rate of return is acceptable.
The production cost is also a reference indicator of the level of economic efficiency. Tracking the real level of production costs enables knowledge about inputs and efficiency of consumption, compared to forecasts or consumption levels achieved by competitors.
In ASiS, costs are calculated automaticallyusing needed data from other applications. Production costs include both the direct and indirect costs of production.
Planning, tracking and monitoring the manufacturing resources, determination of “bottlenecks” that can occur throughout the process, and calculation of production costs are important features for a company with production activity.