One reason for this dilemma is that different companies have different needs. A manufacturing company is different than a company that only sources and distributes finished products. And both have different organizational needs compared to a company that provides only service-oriented products.
Further complicating the issue is a second consideration whereby companies of the same type also have different needs. Manufacturing companies vary in size and product complexity. Service companies vary from those who provide service only versus those that provide service in support of a specific product.
The only constant between the different types of companies and the different sizes is that all are looking for solutions. Each category of solution has different value propositions and different ways of approaching the needs of those seeking their services. And it is critical that companies, especially small and medium sized companies with fewer resources and tighter financial capabilities, identify those that match their needs.
Glossary term: ERP stands for Enterprise Resource Planning.
ERP software brings together many functions within a complex environment to integrate the processes needed to run the entire business. This can include manufacturing, supply chain management, financial functionality, CRM modules, Human Resources, inventory and order processing. The operating systems driving each component can be accessed across the enterprise to improve productivity and company performance to link information about all functional areas and their impact on overall business goals and performance.
ERP systems can lower software costs overall as they standardize the interfaces and programming needed to allow the system to work. The standardized data allows for smoother communication between functional areas and allows a company to “un-silo” its data so that it can be utilized for improved analysis of business performance.
For manufacturing operations within the ERP, opportunity for cost reduction through process improvement, advanced labor planning and better material flow are possible. This is the result of both standardized data across the factory on the production floor but also through coordinating that data with purchasing, scheduling, inventory, finance and even Human Resources.
CRM modules are also common within ERP systems making outreach to customers easier and more data driven. And risk is easier to mitigate as forecasting and planning tools are often built in. This modularity and evolution to cloud-based computing is common with today’s ERP systems and is more often the “go-to” model for small to medium businesses. It allows them to select and pay for only the features that are appropriate for their needs and customize the solution specific to their value propositions. ERP systems are great for ATO, ETO and MTO companies with complex Bills of Material.
One example of a medium-sized company that could benefit from the use of an ERP system would be one that manufacturers electric scooters, such as Bird. In this case, the company is not only the manufacturer but may also have complex negotiations with retailers and distributors, address complex “repair and return” scenarios and provide field service.
With a complex BOM and an extensive portion of their business dedicated to non-manufacturing operations that An ERP system would allow tight integration between manufacturing, CRM, maintenance and finance to manage the complex negotiations with retailers and distributors, address complex “repair and return” scenarios and provide field service. With a complex BOM and an extensive portion of their business dedicated to non-manufacturing operations that An ERP system would allow tight integration between manufacturing, CRM, maintenance and finance to manage the complex .
Glossary Term: MRP stands for Material Requirements Planning
Glossary Term: MRP II stands for Manufacturing Resource Planning
Where ERP systems are designed for integration, planning and management of entire organizations, Material Requirements Planning (ERP) is more manufacturing specific. MRP systems produce detailed schedules while controlling inventory, production and scheduling. An MRP system is more of a push system for inventory and is often deployed by MTS production mode companies that require extensive forecasting to predict consumer demand.
The narrower focus of an MRP system centers on the software helping to answer three questions:
The use of an MRP system helps manage inventory to optimized levels and reduces carrying costs as well as helps plan for optimized lot size and safety stock. The data from the MRP system can be used by other functional areas such as planning and purchasing to drive independent software required to produce schedules or “buy” lists. MRP systems must be tightly controlled for data accuracy as inventory inputs, BOM errors and human error can impact the entire system.
As an expansion to MRP, Materials Resource Planning II (MRP II) systems were developed to fold the scheduling and planning function into the shop floor requirements. This meant that the data was not simply used as a manufacturing function for material flow and shop floor control. Rather, MRP II allows input from purchasing, finance and engineering into the master schedule.
MRP systems track many different variables including material, inventory and shortages. They also track orders against BOM requirements, purchase orders for raw materials and components and other variables such as forecasts, due dates and sales orders. By synchronizing these different variables MRP systems can ensure that production is optimized.
MRP systems are less extensive than ERP and focus mainly on the manufacturing and inventory components required to keep the factory moving. And example of this would be a small or medium sized manufacturer producing a high volume or commodified product with a simple BOM structure such as facial tissue or diapers, like Huggies.
This company would not have an extensive field service or contracted service footprint, nor would it have a complex “repair and return” requirement as all production is consumable.
In this scenario, a less complex BOM and consistent volume requirements based on past sales history allow the company to utilize an MRP system to accurately answer the three key questions above. It allows managers to generate material requirements and plan capacity for a predictable production level.
Glossary Term: SAP, or Systems Applications and Products, is an ERP system that requires special mention because it is a brand name of a system that is the biggest within the field of offerings.
Along the way, SAP has differentiated its core products to include different packages for predominately large enterprises. They have also developed packages that are oriented toward one aspect more than another, such as finance oriented packages.
SAP also has an extensive HR functionality that allows companies to more closely monitor time and attendance, staffing and other HR functions. SAP is traditionally an on-site software that's not necessarily built for scale in a new cloud world. SAP is also modular and can cover all aspects of business management, but is really meant for the Fortune 100 manufacturers.
SAP is not necessarily a type of software like ERP, MRP, or APS, but is a vendor that does ERP. *Shameless plug*: If you need to integrate SAP to a robust scheduling system, learn more here: WorkClout Integrations
As an ERP system, SAP has the same value propositions as other ERP systems. However, an example of a company that may prefer this system would be an international candy maker with factories in several countries.
The familiarity of the system across the industry and its extensive availability worldwide would mean ease of use and less complications due to language barriers. With multiple locations around the globe, such a company would require that changes be across the board and seamless.
Glossary Term: Advanced Planning & Scheduling (APS) software is a type of software that serves as a decision support mechanism for logistics and manufacturing processes.
It uses both short and long-term planning horizons to optimize planning activities. It can analyze supply and demand as well as capacity, order position and logistics, providing the best schedule and plan to achieve optimal performance for each.
This software can be highly valuable to companies such as distributors or those with extremely long-tailed supply chains stretching across the globe and with highly variable lead times for various components or finished goods.
APS systems have advanced planning algorithms and can even determine issues such as critical customers to support in situations of product shortage. By providing planning analytics, APS systems are dynamic and allow different scenarios based on short and long-term plans. APS software works well because it can work well with an existing ERP or MRP, acting as the aggregate on top of those systems.
An example of a company that would benefit from an APS system would be a distributorship of small electronic kitchen appliances and have little or no manufacturing and assembly. Distributorships such as these rely on long lead times, complex supply chain legs, long term production contract manufacturing and holiday seasonality to compete. An APS system can provide strategic and tactical plans based on its capabilities.
Just as there are different types of companies, all with different needs, the solutions will vary as to the type of software required to maximize its benefits. In many cases, a company may require, or may choose to utilize, a combination of these systems. Many ERP systems have MRP functionality. Likewise, a manufacturing company may have extremely simple and straightforward financial requirements and few engineering and design needs so that the combination of an MRP system and an APS system meet that company’s specific value requirements adequately.
APS systems may also be used in conjunction with ERP and SAP systems as these systems may not have capability to manage customer requirements and preferences across multi-site locations and geographies.
Combinations may also be based on approach as well. Both MRP and ERP systems are transactional while APS systems allow strategic as well as tactical planning. And an APS system, with its decision support mechanisms ranging from present to optimal would significantly improve MRP and ERP systems whose decision support usually consists of present to past relationships.
An APS is absolutely necessary to take in consideration time and constraints and has the highest impact on manufacturing output.
Every company looks for the best solution for its business model. But by understanding the type of business, the scale and growth prospects and by assessing needs relative to what is offered by the various software packages available, each company can make a customized and informed decision.
If you're interested in WorkClout's Scheduling system, book a demo to see it work with your workflow here: schedule a demo