News & Updates

Production – the Achilles Heel of ERP

More and more of today’s manufacturing companies are becoming reliant on ERP (Enterprise Resource Planning) systems to coordinate and control their operational activities. On the face of it there are very attractive reasons for going down the ERP route. Benefits include a single system to support rather than several small and different systems; a single applications architecture with limited interfaces; and access to management information unavailable across a mix of applications. In principle more integration should mean lower costs.

The investment to implement such ERP systems in terms of direct cost and personnel time is significant, often running into hundreds of thousands or even millions of dollars. The real costs and impacts are understandably not played up by the ERP Vendors and ERP implementation effort is always greater than expected. It is unheard of for an organization to have implemented ERP ahead of schedule and under budget.

Once operational, most companies appear to be reasonably content with their ERP on the surface. However, bubbling under is the concern over what has become known as ‘unaccountable losses’. Mention this taboo phrase to any CFO and it sends a shiver down their spine. These losses usually arise from the inability of the system to access and use critical production floor data in real-time.

ERP in Manufacturing

The Manufacturing Sector (Food & Beverage, Plastic & Chemical, Pharmaceutical etc) is a classic example where lack of accurate real-time data is a serious problem. In such fast moving ever-changing environments keeping the finger on the pulse is critical. Consider a company manufacturing their products from pre-defined formulations (or known as Bills of Materials, recipes). ERP systems normally work on preset targets for the batches and all their calculations assume that during the process these targets are met – precisely. Under normal circumstances they have no real-time data to contradict otherwise. For instance, if a recipe make-up calls for a target weight of say 100 lb for an ingredient or commodity, the system assumes that 100 lb is used; the inventory is downgraded by this amount and costings calculated accordingly. However, what happens if the amount used is outside the target as is typically the case?  If the process relies on manual ingredient addition, more inventory rather than less is usually added.

This may or may not be critical to the product quality itself, but it is detrimental to accurate inventory management. In parallel, if a batch is scrapped through inaccurate additions, there may be no mechanism for bringing this to the attention of the ERP system. The first time management may be aware of these ‘target excursions’ is when inventory checks are done and the inevitable inventory inconsistencies come to light. By then it’s usually too late to carry out any meaningful analysis to find out what went wrong and the ‘unaccountable losses’ become ‘expensive reality’.

SG Systems Gateway

SG Systems has recognized and addressed this shortcoming with their V5 software suite, in conjunction with their operator workstations, already has a proven track record in bridging the gap between the factory floor and ERP. Acting as a thin client server to programs such as SAP, Oracle, Syspro, Dynamics (and many more ERP systems) their solution brings a measure – control – improve ethos to the overall process, from receiving to product shipping. V5 is the result of extensive research together with many years of practical experience and as SG Systems explains “In many ERP applications we investigate, it is as though there is a thick fog permeating across the factory floor keeping critical data away from the ERP systems”.

Unfortunately, most ERP vendors don’t fully appreciate or understand the practical issues of key processes such as weighing and batching, especially in fast moving processing environments. Of all measured parameters on the factory floor, weighing provides the most useful and crucial data throughout the process and yet in practice we find it is significantly under-utilized. Real time data is essential and V5 ensures such data is instantly available to the ERP system so that it can react to actual information rather than targets. V5 brings true integration that continually fine tunes operational equipment efficiency. The ‘improve’ factor in V5 allows processes to be optimized exactly where and when it’s needed, making full use of dynamic data. This approach is highly effective in improving productivity, optimizing raw material usage and minimizing wastage – all important, if not obvious, factors in ensuring ongoing profitability and, above all, customer satisfaction. Traceability in line with legislation is an integral part of the V5 concept.

Financial Justification

Studies over many years prove the implementation of V5 to be self financing.  The Return on Investment occurs over a period of months by reducing unaccountable losses and tightening up the production floor batching and control operations, virtually eliminating scrap, overage and reworked batches.  A downloadable worksheet is available here which highlights the key areas for financial justification.