ERP IT, Part III Group Micro #2 benefits gained from an ERP system. Their response? For family businesses, an ERP system can play an important part in creating the infra-structure necessary to grow the business, increase profits, and help transition the business from one generation to the next.

ERP Software

ERP IT, Part III

The key reason why ERP plays such an important role in the livelihood and success of every company –no matter the size or the industry- is because of its data generating potential, which intertwines well with a company’s IT department.

To begin, adequate, well-implemented ERP software helps carry out a company’s IT business plan. Planning is a function that provides the most important, single benefit achievable from the use of an ERP Software System. The forecasting tool is a very powerful tool since it has the capability of managing budgets for Material, Labor, Sub-contracted production activities, and other Expense items.  

When working the plan, the needed labor force is known because that information comes from the BOO used to make the predicted parts. The material requirements are also known because they come from the BOM used to make the predicted parts. The same is true for subcontracted processing. Managing expense supplies is easier because of the existence of a predictable production schedule.

ERP software and IT also combine to help a business control inventory, thus an important reason for purchasing an ERP system is to improve inventory accuracy. Inventory accuracy gets better only with dedicated cycle count programs. The top management experts recommend a ninety-five percent inventory accuracy in order to properly manage the internal supply chain.

If a company has a large amount of obsolete inventory on hand, this may mean poor product quality, poor management of demand forecasts, and poor inventory management activities. Examining the amount of obsolete inventory a company creates gives family business owners an idea of how well a product is selling and the effectiveness of a company's inventory management process. Getting rid of excessive obsolete inventory will assist management in focusing on inventory that has more value. Other benefits might be better space utilization, and traffic flow improvements.

Most businesses work at achieving better inventory accuracy with: Inventory cycle count programs, and Bills-of-Material, or BOM, cycle count programs. Cycle count programs work through counting all of the inventory items multiple times yearly and result in saving a business money. Cycle count programs use employees dedicated to this task to manage the process. The process includes counting inventory; finding the root cause for any errors;  changing the computer counts; and working with the action programs to address the reasons for the inaccuracies. Using the same personnel makes cycle counting a more consistent and efficient task.  

Cycle counting the BOMs generates accurate costs for manufactured products. When companies cycle count the BOM, the most frequent reason for inventory inaccuracy is eliminated. An additional benefit is that the production team does not have to shut down activities during the cycle count process.

Scheduling the shop is necessary and ERP IT helps with that task. Improving Bill of Operations, or BOO, accuracy cannot begin until run times are measured. Having accurate runtimes on BOOs reduces the

Continued in ERP IT, Part IV

Written by :

Don Cooper