Please note the following is a basic introduction into the benefits of an Integrated ERP / MRP system.
Any prospective user should understand a good ERP system is all encompassing, everything you do will revolve around this system. Therefore, it must be in line with your bespoke system, modifications can be made to ensure you become a more productive enterprise because of bringing on board this type of software.
Prior to looking at the implementation of this type of system you must understand that it is imperative that the procedures are adhered too in a timely manner, Internal audits may seem like overkill to many, however as the driver of a business you must ensure your instructions are adhered too.
Scenario
You are a Kitchen Manufacturer and have installed an ERP system.
Every part you order for your kitchen range must have a unique part number, these are generated and managed by the ERP system, you specify the part number range and the start number, the system will then take control and increment any new part number requested by one.
For each component of each kitchen assembly, you must have created a unique number, for any parts used on more than one assembly, one common part number is used.
You can then set up an assembly for each Kitchen, this would often include all the parts required to assemble the Kitchen, including tooling (fitting jigs), Fixings (each type of fixing would have a unique part number), procedures (instructions on how to assemble the Kitchen), along with any other relevant instructions / drawings etc.
For each order, you would raise an internal works order for the assembly, each part when issued would stipulate the GRN of the part, when issued this would automatically decrement the part from stock.
For every order you place for your kitchen components you must raise a purchase order, this order must stipulate the agreed price and delivery.
When the parts are delivered, each part must be booked in, this can be done quickly with Bar code recognition and complete orders booked in at one time (multiple items). When the item is booked in, each part receives a GRN (goods received note number), this number is unique and will follow the component(s), this will allow you to track when any part has been received and where used. This is referred to as a traceability system.
This seems like a great deal of activity, however, to run an organisation that performs efficiently you need to work in an organised fashion.
Some of the benefits of the above are:
· Quality Control: If you receive a batch of material say fixings that are of a different material then the mating part, when discovered you realise that the interaction of these two different metals will cause a reaction (say early rusting or corrosion), with the ERP you will be able to trace where each part was issued to, remove any existing stock from that batch from stock and return to the supplier for replacement.
Further, any material that has a shelf life, would be automatically flagged for disposal / inspection.
For those larger concerns, especially those interested in ISO9000 approval, there is a whole system that covers non-conformance reports and best quality practices
· Customer service: By having a purchase order system, you can efficiently expedite orders and generate late order reports to ensure the customer is aware of any delays but is also an effective tool in preventing order delays.
· Accounts / Financial control: It is common for the GRN system to require accounts to input the suppliers Invoice number next to the GRN, the GRN would list the cost of the material received and the accounts department would use this to check the invoice is correct and is cleared for payment. In addition, any material that was received in the current month and no invoice received would be used for the accounts accruals to ensure accurate monthly management reports are generated. Further accurate stock holding lists can be generated automatically along with thousands of bespoke reports, providing accurate activity analysis.
· Material Control: It is normal for companies to be required to undertake annual stock takes, these often require the company to “close down” or at least close the warehouse while the stock checks are being undertaken. Most ERP systems offer the option to undertake perpetual inventory checks, these involve a small number of items checked every day and negate the need to close for an annual check. Further benefits include using A,B,C stock analysis systems to check the more expensive stock more frequently than the much lower priced items such as fixings and consumables. This system ensures that any stock anomaly can be identified, investigated, and rectified much earlier.
Further, you have been advised by your fitters that they have to keep delaying work because of the lack of a common low cost fixing, the ERP system allows you to set up Minimum stock levels, re-order points along with a host of other controls that would help to eliminate this problem.
· History: It is also a fundamental ERP service to provide full quotation history and activity history to assist with decisions made during the procurement process. The normal method of control is that each part number has the preferred supplied and alternative approved companies.
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