ERP: Uniting Manufacturing and Inventory in Lean Times

Updated: May 06, 2009

It may not be the sexiest use of a hot technology, but helping companies align manufacturing and inventory processes is one of the most critical applications of ERP (Enterprise Resource Planning) . In fact, according to Aberdeen Group, ERP systems and their MRP (Material Requirements Planning) predecessors have been around for almost three decades. But never before has there been such a need for ERP, as more businesses respond to the economic downturn by attempting to reduce waste and establishing "lean" manufacturing practices.

"ERP systems have their heritage in manufacturing, so they're really designed to optimize inventory," says Paul Hamerman, a research analyst with Forrester Research.

The Perks

So how does it work? By providing real-time data regarding inventory information and the production process, an ERP system delivers numerous benefits including:

  • Cost reductions through efficient inventory management
  • Detailed reports on business-critical inventory information
  • Improved decision-making based on real-time information
  • Reduction in stock on hand with fast access to inventory information
  • Streamlined production process with established goals
  • Elimination of waste in the manufacturing process
  • Accelerated production cycles

Yet one of the greatest perks of ERP is in its capacity to help companies in demand-planning. Without the necessary real-time information, many companies are forced to maintain large, costly inventories based on projected future sales or supply-chain contingencies. However, an ERP system can cull information from customer requests, sales figures and inventory level to determine the real need for raw materials and production levels.

"ERP can provide you with better demand-planning tools that help ensure you're taking a more just-in-time approach to purchasing raw materials and components rather than having to stockpile because you can't predict your demand," says Eric Kimberling, president of Panorama Consulting Group in Denver.

Hamerman agrees: "ERP can be a closed-loop system that controls the production capabilities based on demand and capacity."

A Solid Foundation

In addition to being able to accurately predict future demand, an ERP system can also serve as a foundation for many other business planning activities, such as purchasing, financial planning, managing resources, logistics planning, even customer satisfaction. Suddenly, manufacturing department heads need no longer depend on Microsoft Excel spreadsheets to determine work flow. Rather, ERP allows them to base their decisions on real-time information, as well as tweak production planning in accordance with economic fluctuations.

Here are just a handful of ERP solutions with a manufacturing component:

Epicor Manufacturing: Epicor lets companies plan, schedule, execute and monitor the entire manufacturing business. From raw materials to final product, the tool provides increased flexibility and agility.

Sage Pro: Designed to automate input measurements and calculate production outputs, Sage Pro delivers the accuracy required to achieve the quick-turn adjustments so critical to staying ahead of the competition and to growing profit margins. The solution can synchronize manufacturing with purchasing, sales and receivables, and accounting.

SAP Manufacturing: This solution helps coordinate operations with partners and suppliers to improve production performance across the manufacturing network. The solution also delivers real-time visibility into plant and enterprise operations to detect and resolve exceptions and performance-deviation in real time.

Featured Research
  • The Future of ERP

    Today's business decisions are data-driven and the difference between success and failure can be boiled down to utilizing the correct data. Now more than ever, companies have access to not only robust data but consumable data as well, through Enterprise Resource Planning (ERP) software. more

  • Top ERP Trends of 2017

    No matter the size, success or industry in which you do business, data is vital. Because of this, data-driven technologies such as Enterprise Resource Planning (ERP) systems are becoming more important for the streamlining of quantitative data and gaining/analyzing key insights. Even better, as of 2017, ERP tools aren’t only for enterprise companies in the manufacturing and distribution sectors—they’re for everyone. But that’s not the only keynote change that’s taken place this year … Download our latest guide to see what else is happening with ERP! more

  • Making a Business Case for ERP

    Are you in the market for an ERP solution but hesitant to purchase due to the potential financial risks associated with implementing such a tool? While costs may seem prohibitive, and make it difficult to get stakeholders on board, an ERP system can add SIGNIFICANT value to your organization, regardless of what industry you are in. more

  • CIO eGuide

    Data is becoming increasingly important in business. As a result, more and more organizations are becoming attractive targets for hackers. Data breaches caused by stolen credentials are on the rise. You need smarter tools to protect your organization against the monetary and reputational damage caused by a data breach. This guide will explain how Okta Adaptive Multifactor Authentication (MFA) provides the security that IT needs, while also providing the simplicity end users want. more

  • Building Secure Multifactor Authentication

    As threats to password security have increased in recent years, multi-factor authentication (MFA) has rapidly gained adoption as a method for increasing the assurance of authentication for consumer and enterprise web and mobile applications. more