How ERP systems help SMEs overcome operational challenges

Small to medium manufacturing businesses face several operational challenged. In this article we look at the common types of operational challenges and how and ERP system can overcome them.

May 23, 2022

Businesses in today's digital world are under tremendous pressure to stay competitive and earn a profit. One of the ways to face this pressure is to streamline internal operations either by increasing productivity or automating secondary tasks. To achieve their goals and follow business trends, they invest in software solutions that can automate critical processes, help to make better business decisions, increase productivity and deliver competitive advantage.

Lots of manufacturing businesses (over 300 employees) use Enterprise Resource Planning (ERP) software to run their operations. However, this resource is not as well-known amongst SMEs (under300 employees). ERP software is a suite of integrated applications that handle various business functions such as inventory management, project tracking and integration, ordering/purchasing, and accounting to name a few.

In this article, we will explore some of the most common operational challenges in manufacturing businesses and how ERP systems can help overcome them.

Types of operational challenges in manufacturing businesses

Lack of visibility into processes

Many manufacturing companies have multiple departments performing different functions such as purchasing, finance, sales, marketing, etc. Each department has its workflow, and they operate independently from each other with little or no communication between them. This leads to a lack of visibility, which results in poor decision making and increased costs due to errors. Even when communication is good, it takes time to enquire and understand the message.

An ERP software system is a central system for business information. With open and transparent data, everyone has access to and can view the same data.

What type of information is essential to increase productivity?

  • Customer and supplier contact information and summaries
  • Quote details and prices
  • Jobs status
  • Scheduling activity and accurate lead times
  • Machine or personnel capacity 
  • Inventory levels and future forecasts
  • Customer payment history

Inventory Management

Inventory management is a significant challenge when there is no clear way to track the inventory and ensure you have sufficient stock levels. 

With an ERP system, you would be able to track your inventory from the time it enters the system until it leaves the warehouse. Helping you avoid any loss or damage to the stock.

You can set minimum stock levels, when these are not met or forecasted to create insufficient levels. Reminders and automatic purchase orders can be created.

You can create reports and gain insight into stock items' performance for purchasing and storage decisions.

High stock levels

Manufacturing companies often have high levels of inventory because they run on lean production principles, which require low inventory levels for efficiency purposes. Running just-in-time manufacturing can be manual and highly time-consuming without an ERP for automatic supply chain management and purchasing. 

Inventory Tracking

It becomes difficult for you to keep track of each location's stock level and maintain consistency across all sites if you are running multiple locations. You will not be able to know what products need reordering if they run out at one location while they have surplus stock with another location. An ERP system can help in this case by giving you real-time updates on each location's stock levels to plan accordingly without having any significant hiccups in operations due to a lack of inventory.

Poor quality control

Manufacturing companies need to maintain high-quality standards at all times. Otherwise, they risk losing their customers. A major reason for poor quality control is the absence of a standardised process for each employee task. With an ERP system in place, all departments work according to standard processes, making it easier for managers to spot deviations from the norm and take corrective action before problems escalate.

Inability to react quickly enough to market changes

Today's customers have high expectations, and they want their products delivered on time and in good condition. If a manufacturer cannot meet the expectations, it will lose the customer base. For instance, if there is a supply chain disruption and your business is impacted, you may lose your customer base.

In this example, an ERP would have a supplier database with details for the products or categories they supply. Instead of allowing a production delay or manually reaching out to all of them. ERP systems allow bulk emailing directly from the system, using email templates designed to request quotes and lead times.

Inability to track production

Being able to track production effectively is a common operation challenge for small businesses. Without production scheduling, tracking and insight, you cannot:

  • See capacity for the future and forward plan
  • Provide customers with accurate lead times
  • Assign personnel and minimise down-town of machines
  • Report on production performance 

ERPs include production control features that allow you to schedule work to meet deadlines and expected completion dates. Send works orders so that personnel can accept job details and assign work in progress time. Report on the total time taken compared to quoted times to ensure accurate expected profit figures. 

Slow response times due to manual data entry and lack of automation features

Slow responses don't help customer relations. However, rapid and accurate responses are a competitive advantage and create loyal customers with repeat work.

Slow response rates usually are due to:

Lack of reliable information

Without the correct information in an easy to find location, employees cannot provide accurate responses quickly. An ERP system stores all your data in one place. Accessing and sharing this information can take seconds and emailed directly from the system. You can even decide what users can see with visibility controls.

Lack of reliable information

With an ERP software system, the data is live, and trusting the data has been entered correctly, information is reliable and up-to-date.

Final thoughts

Don't let complex ERP systems scare you away from ERPs. These business management software systems are not difficult to use. They help you save time, money and energy by automating your supply chain, controlling cost, planning production and inventory, managing finance and analysing your business trends. Small manufacturing companies cannot afford to do all these operational tasks manually. We recommend all small manufacturing enterprises invest in an ERP system to help them automate their operations across the business and ensure they run smoothly.

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