Systematic thinking: Even small shops need an ERP system

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The steel comes in late, the shop’s overloaded, due dates are regularly missed and the last quote was blown because no one has a clue about actual operating costs. These are just a few of the daily problems encountered by shops that manage their businesses through Excel spreadsheets and low-cost accounting software. There is a better way.

Manufacturers have used MRP (Material Requirements Planning) software to manage supply and demand since the days of mainframe computers and paper punch cards. MRP compares production requirements against available inventory to make planning recommendations. The software has since evolved into an integrated, all-encompassing suite of business software known as ERP (Enterprise Resource Planning).

ERP manages everything from quoting parts to receiving cash, paying bills and ordering material. A typical ERP cycle begins by entering a customer purchase order into the system. Credit limits are verified and an order acknowledgment is returned to the customer. From there, the ERP system checks for available inventory and creates a job suggestion to make the product if needed. This triggers ERP to look for raw material, netting off available stocks and creating purchase order suggestions when materials are short. ERP also analyzes manufacturing times and recommends due dates for jobs and purchase orders accordingly.

Once the job is released to the floor, scheduling and inventory control take over. Materials are issued to the job or back-flushed from inventory, if desired. Job costs are accumulated and the schedule is constantly updated as operators clock in to jobs for setup and production operations. Some systems collect inspection information and allow for scrap or rework to be performed. When the job is completed it is sent to inventory or shipped directly to the customer. An invoice is generated, cash is collected, and the vendors and employees get paid.

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