Manufacturing

Streamline processes and minimize inventory-carrying costs for producing goods from raw materials.

4 ways an integrated ERP system improves supply chain performance

Manufacturers in today's global markets are experiencing dramatically reduced margins coupled with rising customer expectations. Being a successful supply chain partner for your customers demands up-to-the-minute information visibility. You need information on everything from supply chain inventories, to production planning and shop-floor scheduling, to the increasingly robust set of data collected on customer demographics and order preferences. The ability of manufacturers to collect, analyze, and share this information has become a basic operating requirement for global supply chain operations.

An integrated enterprise resource planning (ERP) system can help manufacturers achieve the efficient and effective use of their manufacturing assets and provide customers with the visibility they need. In addition, an ERP system can provide a powerful opportunity for many manufacturers to gain critical insight and competitive advantage by taking them beyond simply managing internal business processes. You can find valuable information at the edge of the company—along those boundaries and interaction points that occur between the manufacturer and its customers and suppliers.

Savvy manufacturers have recognized the benefits of investing in integrated ERP systems, realizing that it enables them to fulfill their mission: to provide a platform that enables effective response to the changing supply chain with reduced long-term information technology (IT) costs.

Here are four ways an integrated ERP system can help improve supply chain performance. After reading this article, contact Microsoft to learn how an ERP system might work for your organization.

  1. Develop better customer insight and interaction

    To build long-term relationships with customers today, you need to listen to and understand them. This requires that you maintain a holistic view of those customers. You can obtain such a broad-spectrum view from a variety of data sources, including your supply chain systems; sales and marketing; customer service and field service systems; internal database information; and knowledge gathered from unstructured interaction with customers.

    This integrated view—which an ERP system helps provide—can enable manufacturers to look beyond tactical order fulfillment and gain a better understanding of customer wishes for customized products and services—which can help the company differentiate its offerings and increase profits. It can also lead to insight and answers to questions such as: What are the buying patterns? Are we driving larger orders to customers? What does our pipeline look like? Are we seeing demand increases or downturns that we must react to?

  2. Achieve global visibility in a demand-driven supply chain

    It's critical in an age of tight cost management that manufacturers optimize inventory investment and continue to provide excellent customer service. To do so, manufacturers need to know where inventory is throughout the entire supply chain—which is information an ERP system can help to provide. Knowing when and where inventory is needed enables manufacturers to develop the best plan for production and resupply in critical customer relationships—building only what is required for shipments.

    Beyond having the right data for internal operations, manufacturers must also be able to provide customers with visibility into inventory and product availability. In a demand-driven world, real-time intelligence—not nightly batch updates—is required to make timely and effective decisions. This now means systems must be open to the new ways of working—including mobile and radio frequency identification (RFID) technologies and support for tracing and other regulatory compliance requirements. The right ERP system can help meet your needs in all these areas.

  3. Lean manufacturing, global sourcing, and supplier integration

    Managing to the lowest possible manufactured cost is essential. This means applying lean manufacturing practices and connecting to the best suppliers on a global basis.

    Today, lean operations are driving an increase in speed and response time for all supply chain participants. Unfortunately for most manufacturers, the new lean business processes are not supported by their legacy systems and must be implemented as manual processes, which can defeat the information visibility crucial to state-of–the-art supply chains.

    Locating the best suppliers requires a comprehensive supplier database that enables a manufacturer to recognize where new opportunities for lower costs exist—such as suppliers in emerging countries. This means that manufacturers must have real-time connections to suppliers to respond to changing production demands. Once identified, these new suppliers must be brought on board quickly and cost effectively with the ability to share—and respond to—real-time demand and production data, including new product designs and critical engineering changes. The current generation of integrated ERP systems includes the processes and capabilities to help ensure lean operation, including the need for real-time production data exchange with suppliers.

  4. Managing for higher performance

    Executives know that measurement and performance are inextricably linked. Whole new metrics, key performance indicators (KPIs), and benchmarks can give advance warning of problems managers may face in their operations. The real power of these metrics comes when managers can quickly access real-time data that reflects the global domain of their operations. Done well, performance analytics can make manufacturers significantly more agile—an important consideration in today’s very lean supply chains.

    However, measuring performance is often far too difficult in the world of disparate legacy systems, the result being that most companies do not currently have a standardized and automated performance analysis capability to manage for higher performance.

    Integrated ERP systems today include business analytics that enable executives to standardize metrics across the organization and monitor production and profitability. In fact, ERP systems can provide actionable information to employees at all levels of the organization and make it accessible through their familiar desktop tools, bringing speed and quality to their decision making.

By integrating data, standardizing processes, and opening up visibility to the global supply chain, an integrated ERP system can offer manufacturers a fast path to reduced cost structures, increased speed, and improved transparency that can improve customer satisfaction and company profitability. The bottom line: Today's ERP systems have become an operating platform that can scale and deal with the global competition that is in every manufacturer's future.

Author

David Caruso
David Caruso is the founder and Principal of David Caruso & Associates, Inc, a consulting firm specializing in manufacturing, supply chain, and technology strategy. Before starting his own firm, David was senior vice president and director of research at AMR Research, and he has held several senior management positions in the ERP and supply chain software community. David has more than 30 years of industry experience, and he focuses his current research on analyzing the business value of IT and the effective use of technology to support the profitable growth of his clients.

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