By Dianna Brodine, managing editor
The American Mold Builder
Enterprise Resource Planning (ERP) systems help manufacturing companies track inventory, schedule production, estimate potential order costs and meet quality expectations – but, only if the ERP systems are correctly utilized. When the software contains accurate and complete data, there can be a significant return in efficiency and accuracy seen throughout the organization, from the front office to the production floor.
What should ERP software do for you?
Provide accurate estimates for quoting purposes
Pricing pressures from OEMs are no secret. The need to squeeze every spare penny from production costs has impacted each element of the supply chain, and moldmakers are no exception. ERP systems show their full advantage during the estimate and quoting process.
“The ability to estimate potential costs and to determine a fair selling price can make the difference between winning business and winning profitable business,” explained Paul Ventura, vice president of marketing, Shoptech Software, “but shops often use a summary of labor and machine costs, with some material costs thrown in.”
The data captured by ERP software ensures quoting activity takes into account all expenses of a business. Material and labor costs are only a part of overall costs; in actuality, indirect expenses such as machinery costs, building overhead, administrative salaries and employee benefits need to be accounted for, too. Each job won should pay a portion of those expenses or it may become difficult to keep the lights on. “Accurate estimating and quoting processes are critical to tooling businesses, especially if they don’t do a lot of repeat work,” Ventura continued. “By creating a detailed routing process, every step required to build that mold will be captured, and that’s critical these days because of the competitive nature of the industry.”
Once the estimate is complete and the job has been won, the system can be utilized to track actual costs against the estimate, giving the company the ability to see exactly how much each order is providing in profit. In addition, the detailed process routers that were built to create the estimate now become steps to be completed on the production floor.
Allow realistic shop scheduling and job status data
Busy tool shops have multiple jobs competing for the same resources – same skilled technicians, same machines, same tight timelines. Customers want to know job status, and management needs to track resource time. ERP systems can simplify those requests, without multiple trips to the shop floor or moving cards around on a pegboard.
“Shop management software provides the same visual benefi ts of a scheduling board, but with the real-time accuracy and speed of a computer,” Ventura explained. “However, it’s one of the most difficult things for many of our customers because they’re dealing with ‘guesstimates’ instead of accurate data.”
ERP software requires discipline so each and every job on the floor is routed and reported. Accuracy isn’t ensured unless it’s simple to collect and enter the information needed to track time and expenses to each particular job, and Ventura acknowledged the simplest implementations are those in which the shops already are manually organized. “If their manual processes are smooth from the front office to the back office to the shop floor, they have a better chance of getting an ERP system off the ground quickly,” he said.
However, giving options to those implementing a new ERP system has led to success, even for those new to data tracking. As an example, Shoptech offers a variety of data collection tools, including traditional PCs, data collection clocks with barcoding and Microsoft Surface tablets. “These shops require fl exibility and ease of use,” said Ventura. “If it isn’t easy, they won’t use it, so ERP systems have to be created with that in mind. ERP software is a tool for the floor, just like the tool that goes into the machine.”
Integrate quality management into daily operations
An ERP system simplifies analysis of data for each job moving through the facility. It helps to pinpoint bottlenecks where time and money may be wasted and also tracks material and labor usage. In time, the data can be used to correlate molds returned for rework or repair with those wastes, providing the opportunity to improve processes.
In addition, some ERP systems can assist with the documentation required for the quality certifications that are increasingly necessary to win bids. “Shoptech has an integrated rapid documentation system that actually creates a shop’s quality management document,” explained Ventura. “It tracks nonconformances, corrective actions and feedback and can handle a number of diff erent standards.”
What benefits does a well-implemented ERP system provide?
ERP systems are more than a convenient place to store data. If used properly, an ERP system can alleviate some of the frequent headaches found in most mold shops.
Set clear customer expectations
The estimating function should be more than a standard price for work performed. As Ventura explained in a blog post for Shoptech’s website:
Shops can contain some of the unpredictability of the mold building process by being very detailed during the quoting process. Try to think about all of the complexities that could arise with the job. What’s the acceptable turnaround time? Which materials will you keep in stock? Which do you need advance notice to order? What types of jobs may the order have that require extra setup? By clarifying and detailing all of these items in the estimate, you can set up a framework for how you and the client can work together. The customer will have reasonable expectations, which means they should know that you can’t just turn some jobs around on a dime.
Improve customer service
“Many shops view service as a responsive action,” said Ventura. “When the customer has a question or needs help, then shop personnel respond accordingly. While that might be sufficient service, it’s not excellent service.”
ERP software allows mold building facilities to interact with their customers more frequently by simplifying the processes required to fi nd accurate data. Instead of walking through the shop floor to discover the status of a build, the system can provide that information and an employee can call the customer with a proactive update – all in the same amount of time originally required to respond to a customer inquiry.
Find the business that fits
There’s a lot of business advice about how to fire the customers that are taking up too much time and energy without returning an adequate profit margin for the extra effort. It would be simpler, however, to find the right customers from the start.
While ERP software can’t point out customers with personality quirks that cause stress, it can show the jobs that aren’t a fit for a tool shop’s current production schedule. The mold builder may choose to bid on the job anyway, but will know to charge a premium. “What if you are quoting a job that’s right in your wheelhouse and will require very little setup or transition time?” asked Ventura. “Shouldn’t the margins on that be less than the margins on a job that could require a lot of prep work?”
Questions for ERP vendors
When selecting an ERP system, start with a few questions to determine if the software has been built to work with the pace and variables inherent in mold building facilities.
1. Is it easy to use? The most skilled mold building technicians may not have a comfort level with data entry processes. “The interface of the software system – more so than features – needs to be easy to use because the skillsets of the users vary so much,” said Ventura. “It can’t look like the front of the space shuttle.”
2. What methods are provided for accessing and entering information? Tool shop employees rarely sit in front of a computer screen, so data needs to be entered and reports accessed wherever the employee is, whether shop floor or front office. Is a desktop computer required? Are mobile apps available? Can barcode technology be utilized?
3. How long will it take to implement? Mold builders cannot afford to be distracted for an extended period of time by new software implementation. “Smaller shops just don’t have the available resources to dedicate full-time to the implementation,” Ventura stated. “In these cases, the role of the software vendor is critical to a successful implementation. Are there small steps that can be taken, rather than requiring full-scale implementation immediately? The vendor needs to work with the shop to decide what makes sense in each instance.”
4. What training is provided? The employee or owner who purchased the ERP system rarely is the person who will be using it on a day-to-day basis. Without adequate training, thousands of dollars will have been spent on a system employees neither understand or have a desire to use. What support is provided during implementation? After?
An ERP system can simplify common procedures, remove the burden of manual processes and ensure profit margins, but only if used consistently and correctly. In many cases, the deciding factor between success and failure is commitment – commitment from management and shop floor personnel to choose the correct software, secure adequate training and plan for the time and energy needed to implement the system. Choosing the correct system, however, is the primary task.
“There are a lot of good systems out there, but not all software will fit the business,” cautioned Ventura. “When shop owners check the references provided by the ERP provider, those references should be people who do business the same way as the shop owner, in similar types or sizes of businesses. And, I always recommend using your own shop data when running through a demonstration with the software company. By making sure the ERP program fits your business, you’ll solve problems before they happen.”
Thank you to Paul Ventura, vice president of marketing, Shoptech Software (www.shoptech.com).